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Informist, Monday, May. 5, 2025

MUMBAI – A rebound in exports and favourable domestic demand are expected to lift the revenue of India's cotton yarn industry 7-9% in 2025-26 (Apr-Mar), against a modest 2-4% growth in the previous fiscal year, according to CRISIL Ratings. The growth will primarily be due to an uptick in volumes and a modest increase in yarn prices, it said.

Significant procurement by Cotton Corp. of India in the cotton season last year will ensure steady availability, minimising inventory losses and boosting the profitability of spinners by 50-100 basis points this financial year, after a recovery of 100-150 bps in FY25, CRISIL Ratings said.

Meanwhile, after witnessing a recovery in the last fiscal year, operating margins are expected to expand by 50-100 bps in FY26, owing to stable cotton yarn spreads and better availability of cotton through Cotton Corp. of India, the release said.

"Driven by improved operating performance, credit profiles, which showed signs of recovery last fiscal, will remain stable this fiscal," said Pranav Shandil, associate director of CRISIL Ratings. 

In terms of exports, which account for 30% of the industry's revenue, China makes up for 14%. In FY25, India's yarn exports to China declined on account of significantly high production in China, which resulted in 5-7% contraction in India's total cotton yarn exports, it said. 

In FY26, yarn exports are likely to rise 9-11% as exports to China recover, driven by normalisation of cotton production in that country. "This is likely to benefit Indian spinners as they will leverage steady domestic cotton production in current cotton season and regain their market share. Moreover, India's position in textile exports to US remains competitive given the higher tariff on China, (key competing nation in home textile exports), which is expected to support the 6-8% revenue growth for downstream industries (home textiles and readymade garments) this fiscal," said Gautam Shahi, director, CRISIL Ratings.

Meanwhile, capex for cotton yarn spinners will remain moderate, with only select players undertaking capital expenditure, which will limit the need for significant debt addition, said Shandil. Additionally, steady cotton availability will lead to lower inventory holding, reducing the requirement for significant incremental working capital financing, he said.

"As a result, interest coverage ratio of spinners is expected to improve to 4.5-5 times this fiscal from 4-4.5 times in fiscal 2025. Gearing is expected to remain stable at 0.55-6 time, like last fiscal," according to the release.  End

Reported by Taniva Singha Roy

Edited by Avishek Dutta

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