Earnings and Ebitda margins of Indian textile and apparel exporters will be hit in the near term following the rupee's appreciation against the dollar and weak apparel imports from traditional markets like the US and the UK. Ebitda margins are expected to erode around 150 basis points year-on-year in the fourth quarter ended March 2017.

Ebitda margin -- earnings before interest, tax, depreciation and amortisation divided by total revenue -- is a gauge of a company’s operating profitability. A stronger rupee is likely to have an adverse impact on export volumes and earnings since fresh orders will reduce competitiveness. Realisations are expected to shrink by three to five per cent in the near term and impact profitability of companies across the textile value chain.

The unabated strengthening of the rupee vis a vis the dollar in the current calendar year has increased the challenges of the textile and apparel industry. Export realisations may be dented due to the strong rupee. Over 70 per cent of India’s textile and apparel exports are dollar denominated. Export-oriented apparel manufacturers with unhedged receivable positions will be hurt the most due to their geographically concentrated (US and Europe) earnings profile, low market share and restricted bargaining power with their global clients.