India’s textile sector could be poised for significant growth as disruptions in competing markets open up new opportunities for Indian exporters, according to a recent report by JM Financial.
Bangladesh, which once a dominant player in global textile supply chains, is facing political instability and supply chain disruptions. Meanwhile, rising operational costs in Vietnam is also proving to be a concern. These challenges could drive global retailers to increasingly turn to India as a reliable alternative.
The report highlights that India’s market share in apparel exports to the US and UK has grown steadily, reaching 7 percent and 6 percent, respectively, in 2024, up from 6 percent and 5 percent in 2023.
Better demand, Better margins
Indian players like Gokaldas Exports and Indocount expect relatively better demand in 2H compared to 1H due to a possible renewed appetite for buying from retailers on the back of the festival season and now that the global inventory de-stocking cycle has now come to an end, according to the report.
The elevated freight costs due to peak season shipments and the Red Sea issue are expected to cool off in the coming months, which will aid margins for Indian players.
The recently signed UK-India Free Trade Agreement (FTA), could also be beneficial to Indian exporters.
In the US, India’s market share in cotton sheet imports rose to 61 percent in 2024, up from 59 percent last year, despite a slight dip in September and challenges like the Red Sea crisis, and supply chain and logistics issues. Overall, US retailers are seeing a mixed demand sentiment. For example, Walmart raised its full-year revenue guidance to 4.8 percent-5.1 percent. On the other hand, competitors like Nike and Target faced softer consumer demand.
Another benefit to Indian textile manufacturers could be the stabilising of prices. According to the report, earlier in 2024, cotton and yarn prices peaked due to supply chain disruptions, higher demand, or market uncertainties. However, by November 2024, prices normalized, with cotton priced at Rs 151 per kg and yarn at Rs 232 per kg. The report notes that the spread between Indian and Chinese cotton prices has also narrowed significantly.
Mixed trends for global retailers
According to the report, global retailers reported mixed inventory trends during their latest earnings calls. Walmart on the back of strong Q3 2024 results, raised its full-year revenue guidance to 4.8%-5.1% from 3.75%-4.75%. While Target and Nike expect continued demand softness, TJX remains optimistic about home textiles. Overall, the report sees that global demand is expected to see a slight boost driven by the ongoing holiday season.
Boost for Indian stocks
Indian textile stocks have been gaining on the back of expected growth in demand. On December 9, stocks of Gokaldas, Trident, Indo Count and Welspun gained nearly 14 percent through the day with Gokaldas closing 6 percent higher, Trident closing 10 percent higher, Indo Count closing nearly 15 percent higher and Welspun closing 5 percent higher at the end of trading for the day.
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