The Indian cotton textile sector which has not been doing too well for the past few years, could now see stability in current financial year. The sector would maintain an overall stable outlook led by stable spinning margins in the cotton yarn segment, range-bound cotton prices and favorable domestic and export demand.
However, the outlook for cotton yarn exporters is negative due to a slowdown in demand for yarn, particularly from China, leading to softer yarn realisations and lower capacity utilization. Unfavorable cotton-polyester staple fiber spreads have hurt substitution demand for synthetic fibers and synthetic yarn. Lower export competitiveness of Indian synthetic yarn also contributes to the subdued outlook as import and central excise duty continue on man-made fibers.
Last year, EBITDA margins for textile firms were affected after a 20 per cent decline in cotton prices. As a result inventory held by textile firms too saw lower profit margins. In the current financial year the margins could recover in the range of 10 to 13 per cent. Pakistan and Bangladesh are one of the biggest players in the textile sector. Currently, India has a small share in the global textile trade but is well positioned to gain from weak input prices and growing demand for apparels.