Expect Indian apparel exporters to post 9-11% revenue growth in FY25: ICRA

Indian apparel exporters are projected to achieve revenue growth of 9-11% in FY25, driven by the gradual reduction of retail inventory in key end markets and a shift in global sourcing towards India, according to rating agency Investment Information and Credit Rating Agency of India Limited (ICRA). The long-term outlook for Indian apparel exports remains positive, supported by improved product acceptance, changing consumer trends, and government initiatives such as the Production-Linked Incentive (PLI) scheme, export incentives, and the proposed free trade agreements with the UK and the European Union (EU). This anticipated growth follows a lacklustre performance in FY24, marked by high retail inventory, subdued demand, supply chain disruptions, and increased competition from neighbouring countries.

With demand expected to recover, ICRA anticipates a rise in capital expenditure spending in FY25 and FY26, potentially reaching 5-8% of turnover. Despite a marginal decline of 2% in FY24, Indian apparel exporters are expected to rebound in FY25, benefiting from strategies to mitigate risks and replenish retail inventories, particularly in the US and EU markets. However, challenges related to demand uncertainty persist in several key markets amid a sluggish macroeconomic environment and geopolitical tensions. While revenue growth is anticipated, the industry's operating margins are projected to contract by 30-50 basis points YoY in FY25 due to rising labour and freight costs and other operating expenses. ICRA suggests that recent geopolitical tensions in Bangladesh may lead to capacity expansions in India, which, along with the benefits from the PLI scheme and the Prime Minister's Mega Integrated Textile Region and Apparel scheme, will enhance India's competitiveness in the global apparel sector.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.