Indian apparel exports to grow by 8-9% in FY25: ICRA
Upstox
2 min read • Updated: April 4, 2024, 3:25 PM
Summary
Inventory clearing and strong demand from the EU and US is expected to revive growth for Indian apparel exporters. Although operational challenges with the Red Sea crisis continue to persist, growth will be backed by government schemes, according to the ICRA report. The rating agency’s outlook for the apparel industry remains stable.
Rating agency ICRA expects a muted revenue recovery in apparel exports, with around 8-9% growth in the financial year 2025. The demand is expected to be backed by stock replenishment calls in the EU and US.
Although US apparel imports contracted in 2023, demand from retail clothing stores remained resilient and grew by 4% YoY. According to the report, the retail apparel brands in Europe and the US account for more than half of the global apparel trade and are expected to liquidate high inventory build-up and book their orders for the summer season in the first half of FY25.
“After a nominal decline in revenues in FY24, ICRA expects the apparel-exporting companies to report a recovery in FY25 on a lower base, with replenishment of stock in the US and EU regions. Despite a rationalisation in raw material costs in FY24, the benefit is expected to be passed on to the end-users, considering a weak operating environment at present,” said Priyesh Ruparelia, Vice President and Co-Group Head, of Corporate Sector Ratings at ICRA.
The ongoing Red Sea conflict is not expected to result in immediate cost implications for apparel exporters operating on a FOB basis. However, exporters are facing delays in shipment, with an increased 15-day transit time due to ships taking a longer route.
The rating agency expects some sample companies in the apparel exporting sector to experience a slight dip in their year-on-year revenues to ₹26,000 crore for FY24. The fall in revenues is expected to be in the range of 5-6%, while operating margins of apparel exporters may moderate to 9.8-10% in FY24 against 11.3% in FY23 on account of weaker performance in the first nine months of FY 2024 and reduced operational efficiencies due to lower volumes.
Support from the PM Mega Integrated Textile Region and Apparel (MITRA) scheme and investor inclination towards the China Plus One strategy is expected to enable Indian exporters to gain a higher share of the Chinese apparel export market.