Indian home textile exporters weave their way out of downturn

Increased in WFH has resulted in higher consumptions of home textiles, which is helping in limiting the de-growth of the segment to 10-12% during this financial year as compared to the overall textile sector that is likely to de-grow by 30-35% .

Crisil Ratings Senior Director Anuj Sethi said, "Export order flow has improved significantly beginning with the second quarter of the current fiscal due to reopening of departmental stores and pent-up demand."

He added that with people spending more time at home, including for work, drastically lower socialising opportunities, and sharper focus on health and hygiene, demand for home textile products will continue to grow.

Demand is expected to stay strong in the third quarter as well due to the festive season, when these retailers launch large-scale programmes, he added.

He also added that home textile manufacturers, who derive a larger part of their revenue domestically, are affected more than exporters due to extensive lockdowns in India and gradual opening of many retail outlets, leading to slower recovery.

The lockdown had a limited impact on retailers of essentials as these operated through the pandemic. However, sales at departmental stores suffered heavily in the March-May period as some retailers also underwent restructuring, leading to permanent store closures. Additionally, manufacturing was impacted due to plant shutdowns for 30-45 days.

This will lead to moderation in the operating margin of home textile exporters by 200 basis points to 12-13 per cent from 15 per cent seen over the past two fiscals. With sufficient capacity available, investments in capacity addition are expected to be moderate this fiscal.

Also, lower inventory requirements owing to continued soft cotton prices in the coming season will keep working capital requirements stable, and hence debt levels under control, he added.