The immediate reduction in US tariffs on Indian textile goods from 50% to 18% has brought long-awaited relief to an industry that had been grappling with margin compression, regulatory costs, and weakening demand—particularly in home textiles, where the market had declined by around 4% and smaller players were nearing shutdown.
The US remains India’s largest textile consumption market, accounting for nearly 28–29% of exports. Historically, Indian exporters were excluded from free trade agreement (FTA) benefits, facing structural disadvantages relative to peers.
The abrupt tariff cut signals a broader shift in global trade dynamics, with protectionist measures giving way to renewed acceptance of globalization.
Over time, proposed FTAs with the US, UK, and EU could make 70–75% of India’s textile exports duty-free, materially altering the sector’s demand-supply balance.
Home textiles are expected to be the primary beneficiary of this shift, supported by strong buyer relationships in the US and EU and high levels of product trust.
Despite earlier tariff headwinds, India has retained meaningful global market share in categories such as towels and sheeting, positioning it well to absorb share vacated by China, which continues to face significantly higher US tariffs.Relatively lower tariffs and geopolitical stability reinforce competitive advantages over other regional suppliers. Structurally, the sector is undergoing notable transformation.
Man-made fibres (MMF) are steadily replacing cotton in the domestic market, opening new growth avenues even as China and Vietnam currently dominate this segment.
At the same time, cotton remains a strategic strength for India, accounting for roughly 62% of exports, with cotton blends emerging as a key growth category. Technical textiles are also gaining traction as a high-growth, non-wearable segment.
The easing of trade barriers is expected to trigger a fresh investment cycle. Export growth is likely to drive higher domestic fabric demand, forward integration across the value chain, and capacity expansion in weaving and processing.
Production scale-ups are estimated to take 12–18 months, with many manufacturers planning additional facilities under the Make-in-India framework to meet anticipated demand.
Looking ahead, textile and clothing exports—currently 8% of India’s total exports—are projected to rise to 10–12%, with industry exports expected to grow from USD 36 billion to USD 45–50 billion over the next three years.
With diversification across markets and segments, the sector appears well-positioned for a sustained medium-term growth phase.
Arvind Fashion TP- 700
AFL is a leading branded apparel company with a portfolio of five marquee brands (U.S. Polo Assn. being the cornerstone of the portfolio), commanding leadership in lifestyle and casualwear.
After Covid, it exited it’s non-core businesses (such as Unlimited and Sephora) to focus on profitability and capital efficiency. Despite exiting the businesses which generated 32% of its FY19 revenue, it surpassed its pre-Covid revenue by FY25, driven by its power brands.
It has now evolved into a lifestyle category, generating 15% of its revenue from adjacent categories. AFL’s pivot to a D2C, consignment-led FOFO model is strengthening pricing discipline, inventory turns, and margins, with EBO and online channels scaling rapidly and retail contribution targeted to exceed 50% of revenue, supporting asset-light and profitable growth. We believe AFL is well placed to deliver a CAGR of 13%/25%/32% in revenue/Pre-IND AS EBITDA/PAT over FY26-28E.
Raymond Lifestyles TP- 1425
Raymond Lifestyle is positioned for a steadier growth–profitability trajectory , with domestic demand momentum intact, calibrated capacity expansion, and working capital expected to normalize.
While export recovery remains gradual and outside management’s control, domestic strength continues to anchor performance and earnings visibility. Profitability improved sharply in 3Q, with EBITDA at INR2.4b (+32% YoY; 11% beat), driven by margin expansion in core branded textiles.
Gross margins rose 240bp and EBITDA margins expanded 260bp YoY to 12.8%, supported by favourable mix and operating leverage. RLL’s FY26YTD recovery is evident, with revenue and EBITDA up 9% and 19% YoY, respectively, after a weak FY25.
Assuming sustained domestic momentum and gradual export recovery, we model ~8% revenue CAGR and ~28% EBITDA CAGR over FY25–28E, with margins reaching 12.4% by FY28.
(The author Siddhartha Khemka, Head of Research – Wealth Management, Motilal Oswal Financial Services)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)