Indian home textile industry being one of the direct beneficiaries of Covid-19 outbreak was also one of the earliest industries to recover from the lockdown blues. Home textile exporters sew a success story on pandemic-induced lifestyle changes with most of the companies reverting to YoY growth from Q2 FY2021 itself and reporting three consecutive quarters of double-digit growth thereafter.
Four leading exporters of home textiles who account for about 40% of India’s home textile exports have averaged 25-40% higher than the 3-year average for the pre-Covid period. If the current trend is any indication, these companies can be reasonably expected to post 20-25% growth in the second quarter also.
Exports exhibit rising trend
Leading exporters have registered a robust growth of 125% YoY (10% QoQ) in the operating income in Q1 FY2022. Indeed, they are also aided by low base effect, owing to 40% YoY decline in turnover in Q1 FY2021 due to the pandemic and also to an extent by the additional export incentive income for the prior period, that is, Q4 FY2021, in this quarter. Nevertheless, even after adjusting for the additional export incentive income for the prior period, turnover for the leading companies stood 24% higher than the pre-Covid level, viz. Q1 FY2020. This is commendable as there was some operational disruptions caused due to the second wave of the pandemic during the quarter.
India’s home textile exports grew at a healthy rate of 9% in FY2021 despite pandemic-led operational disruptions, especially during the first quarter. It should be noted that Indian home textile sector was in a bad shape even before the outbreak of the pandemic. The industry had seen negligible growth in exports in the previous years, wherein our home textile exports increased by just 1%, 1% and 5% in FY2017, FY2018 and FY2019 respectively, before shrinking by 3% in FY2020.
Amid the product categories, blankets, curtains etc. remained the fastest growing segment with a 28% growth in FY2021, followed by carpets and floor coverings with a 12% growth. Value-wise, carpets & floor coverings remain the largest product category in exports with 33% share in FY2021, followed by bed/ table/ toilet/ kitchen linen with 27% share.
Interestingly, in the first two months of the current fiscal, blankets & curtains reported the lowest growth (80% YoY, on a low base), while exports in other segments more than trebled vis-à-vis corresponding period of last year.
Clarity on RoSCTL scheme
In July 2021, Government of India announced extension of Rebate of State and Central Taxes & Levies (RoSCTL) scheme on made-ups (home textiles) & apparels till March 2024. It has come as an icing on the cake for the home textile manufacturers. It not only provides improved clarity but will also facilitate better pricing of products for the exporters.
US is the largest market
US has been the main consumer of Indian home textiles all these years and there is unlikely to be any drastic change in this scenario in the coming years. US accounted for nearly 60% of the Indian exports in FY 2021. Besides faster opening up, increase in exports to the US is partly attributable to the distribution model for these products, with a meaningful share accounted for by the large departmental chains that remained open even during the lockdown phase.
Rising cotton price is worrisome
However, rising cotton yarn price is an issue of concern for the home textile manufacturers. Cotton yarn prices have touched all-time highs in recent months, averaging 3% higher in Q1 FY2022 vis-à-vis Q4 FY2021, and 28% higher vis-à-vis FY2021. Thereafter, cotton yarn prices moderated marginally by 1% in July 2021, but stood 52% higher on a YoY basis. However, cotton yarn prices are expected to moderate in H2 FY2022 with the demand-supply scenario normalising.
On the whole, factors like pandemic-induced lifestyle changes stemming from heightened hygiene and increased stay-at-home, are expected to support demand/ growth in the upcoming quarters. As the hospitality sector opens up fully institutional demand is also likely to pick up in the coming days. Further, expectations of a strong festive demand this year, backed by favourable vaccination coverage across key markets, is reflected in the healthy order book position of Indian home textile exporters.