India’s textile sector hits an inflection point as global tariff barriers ease, with Arvind Fashion and Raymond Lifestyle emerging as top picks.
India’s textile industry is entering a decisive inflection phase as easing global tariff barriers—most notably in the United States—significantly improve the sector’s international competitiveness and reset long-term industry economics. The recent reduction of US tariffs on Indian textile products from 50% to 18% has delivered long-awaited relief to an industry that had been grappling with margin pressure, rising compliance costs and subdued demand. The impact had been particularly severe in the home textiles segment, where the market had contracted by nearly 4%, pushing several smaller players close to shutdown.
The United States remains India’s largest textile consumption market, accounting for nearly 28–29% of total exports. Historically, Indian exporters operated at a structural disadvantage due to the absence of free trade agreement (FTA) benefits, while competing nations enjoyed preferential access. The abrupt tariff cut marks a broader shift in global trade dynamics, signaling a gradual move away from protectionism towards renewed acceptance of globalization. Over time, proposed FTAs with the US, UK and European Union could render 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 beneficiaries of this shift, supported by strong buyer relationships in the US and EU, established trust in Indian suppliers, and consistent product quality. Despite recent tariff headwinds, India has retained meaningful global market share in key categories such as towels and bed sheeting, positioning it well to capture incremental demand as China continues to face substantially higher US tariffs.
Lower tariff incidence, coupled with India’s geopolitical stability, further strengthens its competitive position relative to regional peers such as Bangladesh and Vietnam. Structurally, the industry 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 nearly 62% of textile exports, with cotton blends emerging as a key growth category.
Additionally, technical textiles are gaining traction as a high-growth, non-wearable segment, supported by expanding applications across infrastructure, healthcare and industrial uses. The easing of trade barriers is expected to trigger a fresh investment cycle. Export growth is likely to drive higher domestic fabric demand, encourage forward integration across the value chain and accelerate capacity expansion in weaving and processing. Production scale-ups are estimated to take 12–18 months, with several manufacturers planning new facilities under the Make-in-India framework to meet anticipated demand.
Looking ahead, textile and clothing exports—currently around 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 Ltd (AFL) – Target Price: ₹700
Arvind Fashion Ltd is a leading branded apparel company with a strong portfolio of five marquee brands, led by U.S. Polo Assn., which remains the cornerstone of its offering. The company commands leadership in the lifestyle and casualwear segments.
Post-Covid, AFL exited non-core businesses such as Unlimited and Sephora to sharpen its focus on profitability and capital efficiency. Despite exiting businesses that contributed 32% of FY19 revenue, the company surpassed pre-Covid revenue levels by FY25, driven by the strong performance of its core power brands.
AFL has since evolved into a broader lifestyle platform, with 15% of revenue now generated from adjacent categories. Its strategic pivot towards a D2C, consignment-led FOFO (Franchise-Owned, Franchise-Operated) model is strengthening pricing discipline, improving inventory turns and expanding margins.
Exclusive Brand Outlets (EBOs) and online channels continue to scale rapidly, with retail contribution targeted to exceed 50% of total revenue, supporting an asset-light and profitable growth model. The company is well positioned to deliver a 13% revenue CAGR, 25% Pre-Ind AS EBITDA CAGR and 32% PAT CAGR over FY26–28E.
Raymond Lifestyle Ltd (RLL) – Target Price: ₹1,425
Raymond Lifestyle is positioned for a steadier growth and profitability trajectory, anchored by strong domestic demand momentum, calibrated capacity expansion and improving working capital efficiency.
While export recovery remains gradual and largely outside management control, domestic strength continues to provide earnings visibility. Profitability improved sharply in Q3, with EBITDA rising to ₹2.4 billion (+32% YoY), beating estimates by 11%, driven by margin expansion in core branded textiles.
Gross margins expanded by 240 basis points, while EBITDA margins rose 260 basis points YoY to 12.8%, supported by a favorable product mix and operating leverage. FY26 YTD performance reflects a clear recovery, with revenue and EBITDA growing 9% and 19% YoY, respectively, following a weak FY25.
Assuming sustained domestic momentum and gradual export recovery, Raymond Lifestyle is expected to stabilise earnings, with margins projected to reach 12.4% by FY28, supporting long-term value creation.
News Courtesy : The Economic Times