India’s Textile Sector Gains Edge as Vietnam’s Costs Rise, Bangladesh Faces Turmoil

India’s textile sector could find itself in a favourable position globally as rising wages in Vietnam and political turmoil in Bangladesh, two of its main competitors, shift the dynamics of global sourcing, according to a report by Systematix Research. However, the study also underscored that the industry faces immediate challenges that could weigh on financial performance.

The Systematix Research study noted that evolving global conditions are gradually strengthening India's textile sector's long-term prospects, reported ANI.

“India's textile industry seem strong, as channel inventories seem to be normalizing at the global retailer level, there is a likelihood of the US raising tariffs for China, labour costs are rising in Vietnam, and Bangladesh is seeing political instability," the report said. As these developments play out, India could emerge as a preferred alternative for global retailers seeking more stable and cost-effective manufacturing options.

Still, these advantages are counterbalanced by current uncertainties. Trade tariffs remain a pressing issue for exporters, potentially forcing companies to absorb part of the additional costs, which could compress profit margins. To compensate, many companies are expected to transfer some of these costs to consumers. This price adjustment might dampen demand, particularly in major markets such as the US, which could impact export volumes.

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Mixed Performance Across Textile Segments

The financial performance of India’s textile firms in the fourth quarter of FY25 has been underwhelming. Revenue increased modestly by 5 per cent year-on-year (YoY), while EBITDA slipped 3 per cent, and profit after tax (PAT) edged up by only 3 per cent YoY. The report stated, "Textile companies reported muted revenue/EBITDA/PAT performance of +5 per cent/-3 per cent/+3 per cent YoY, respectively, due to tepid volumes, amid tariff uncertainty."

Certain segments showed more resilience. Spinning companies benefited from a 10 per cent YoY and 2 per cent quarter-on-quarter (QoQ) drop in cotton prices, alongside stable yarn pricing, which declined 3 per cent YoY and remained flat sequentially. This helped sustain gross margins despite the overall weak sales environment.

The garments segment displayed a robust rebound as global retailer inventories normalised. Sales volumes in this category rose by 10 per cent YoY and 20 per cent QoQ, reflecting improving demand conditions. In contrast, the home textiles sector continued to struggle, with sales volumes falling 9 per cent YoY and 6 per cent QoQ due to subdued demand.

Looking ahead, the report suggested that several stabilizing factors could aid the sector’s profitability. A combination of steady cotton prices, favourable forex rates, and ongoing improvements in operational efficiency are expected to help Indian textile firms maintain healthy margins despite external pressures.

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