Category: YARNS
Country: India
Region: South Asia
Yarn exports account for about 30% of the industry’s total revenue, with China alone making up nearly half of that share.
By Dhirendra Kumar
5th May 2025, 07:46 PM IST
New Delhi: India’s cotton yarn industry is poised for a stronger performance this fiscal, with revenue expected to grow by 7–9%, a notable rise from the modest 2–4% growth seen in FY25.
The recovery is expected to be volume-led, supported by a moderate rise in yarn prices, improving export demand—particularly from China—and stable cotton availability in the domestic market.
According to Crisil Ratings, the sector’s operating margins, which had bounced back last fiscal, are likely to improve further by 50–100 basis points in FY26. This is driven by steady cotton yarn spreads and improved availability of cotton, backed by significant procurement by the Cotton Corporation of India (CCI). A basis point is a hundredth of a percentage point.
An analysis of 70 major cotton yarn spinners—which collectively contribute 35–40% of the sector’s revenue—shows that the key boost this year will come from a rebound in exports to China. Yarn exports account for about 30% of the industry’s total revenue, with China alone making up nearly half of that share. Exports to China had dipped last fiscal due to a bumper domestic cotton crop there, leading to a 5–7% decline in India’s overall yarn exports, as per the report.
However, exports are projected to rise by 9–11% this fiscal as China’s cotton production stabilizes and its demand for imported yarn picks up, it said.
“This is likely to benefit Indian spinners as they will leverage steady domestic cotton production in the current cotton season and regain their market share,” said Gautam Shahi, director at Crisil Ratings.
“Moreover, India's position in textile exports to the US remains competitive given the higher tariff on China, which will support 6–8% revenue growth for downstream industries such as home textiles and garments.”
On the supply side, CCI’s aggressive cotton procurement during the current cotton season is expected to ensure steady availability and reduce inventory losses. This, in turn, is set to further improve margins and profitability for spinners after last year’s recovery of 100–150 basis points, as per the report.
Improved performance is also expected to reflect in the credit profile of spinners. “Driven by improved operating performance, credit profiles, which showed signs of recovery last fiscal, will remain stable this fiscal,” said Pranav Shandil, associate director at Crisil Ratings. He further noted that capital expenditure will remain limited to select players, and working capital requirements will stay moderate due to lower inventory holding, reducing the need for additional borrowing.
The interest coverage ratio is expected to rise 4.5–5 times in FY26 from around 4–4.5 times last year, while gearing is projected to remain stable at 0.55–0.6 times, it said.
However, the outlook is not without risks. Any shift in tariffs imposed on India or its competitors, rising inflation, or a potential slowdown in demand from key markets like the US could impact export momentum. Additionally, any adverse change in domestic cotton prices relative to international levels will remain a factor to watch in the months ahead.
“The Indian cotton yarn spinning industry faced a prolonged downturn over the last two and a half years, which led to a sharp fall in Ebitda margins and the closure of 8 to 10% of installed spindles, mainly older machines. New investments also came to a halt during this period. However, the resulting correction in capacity has helped improve the supply-demand balance. Demand has picked up in 60 to 70% of product categories, with yarn exports remaining stable at 9 to 10 crore kilograms per month, said Prabhu Dhamodharan, convenor of the Indian Texpreneurs Federation (ITF).
Ebitda, or earnings before interest, taxes, depreciation and amortization, is a measure of profitability.
“While the industry is hopeful of a more stable FY 2025–26, margins remain under pressure due to a higher raw material cost-to-sales ratio compared to the period before the cotton import duty was imposed. We continue to urge the government to remove this duty to support sustained recovery and long-term competitiveness,” said Dhamodharan.
According to data from the commerce ministry, India’s exports of cotton yarn have shown a steady upward trend over the past three financial years, reflecting resilience in global demand and India's competitive position. In FY25, cotton yarn exports rose to $12.04 billion, up 3.1% from $11.68 billion in FY24, which itself had grown by nearly 6.8% from $10.94 billion in FY23.
This consistent growth highlights sustained demand from key export destinations such as China, Bangladesh and Vietnam. The uptick is also supported by better domestic cotton availability, policy interventions, and a recovery in global textile consumption.
Courtesy: livemint.com
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