India’s apparel exports earnings are expected to recover by 8 per cent to Rs 28,150 crore in FY2025 from Rs 26,000 crore in FY2024. As per the rating agency ICRA, this recovery will be fueled by a replenishment of stock in the US and the EU regions, coupled with the advantage of a low base.
Retail apparel brands in the US and the EU are anticipated to clear their high inventory backlog and place orders for the Summer 2024 season in the first half of FY2025. As per ICRA, the industry outlook is expected to remain stable during this period despite certain challenges.
Priyesh Ruparelia, Vice President & Co-Group Head, Corporate Sector Ratings, ICRA, highlights, apparel exports are expected to recover in FY2025 as exporters replenish stocks in the US and the EU. These benefits will be passed on to the consumers despite cost rationalisation in raw materials in FY2024.
Government initiatives like the Production Linked Incentive (PLI) schemes, PM Mitra parks, proposed Free Trade Agreements (FTAs), are also expected to foster growth in apparel export revenues.
In April 2022, out of 64 applicants for the PLI 1.0 scheme, 56 fulfilled mandatory criteria and received approval letters. Additionally, twelve applications are currently under evaluation. Investments totaling approximately Rs. 2,119 crore were made by 30 selected applicants until September 2023. These schemes, along with PM Mega Integrated Textile Region and Apparel (MITRA), are poised to enhance India's position in the global apparel trade.
Despite a 22 per cent in US apparel imports, clothing store sales in the US and the EU grew by 4 per cent Y-o-Y in CY2023, notes ICRA. The operating margins of apparel companies grew at a moderate rate of 9.8-10 per cent in FY 24 compared to 11.3 per cent in FY2023, primarily due to weaker performance in 9M FY2024 and volume contractions.
In FY2025, profitability of these companies is expected to remain unaffected despite lower cotton yarn prices, weak demand, stability in export incentives and economies of scale in FY2025.
