Using Textile to Weave a Strong Portfolio + See The List of Companies

Every adversity has the seed of opportunity and the pandemic has given that golden opportunity to the Indian textile industry.
Textile to Weave a Strong Portfolio
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In the last few quarters, the Indian equity market has given spectacular returns. Most of the sectors barring the few have generated returns in such a short period of time that they have not generated in decades – one of them being the textile sector. In the last year, the average return generated by them is in double digits. Our analysis of the share price of 200 odd textile companies shows that on average they are up by 148 percent from their recent lows. Shares of companies like Digjam and Adinath textiles are up by a whopping 3456% and 4804% respectively.

Most of the investors will assume that a rising tide lifts all the boat, better performance by the stock market, in general, is helping these companies to show such performance. Nevertheless, some fundamental change has taken place in the last one and a half years that has led to some structural change that will help the sector to chart a different growth trajectory from here on.

Textile Sector in Brief

The Textile & Apparel (T&A) industry size is USD140 billion in India and it contributes around 5 percent of India’s GDP. Exports make up 24% of the Textile sector and 12% of the overall export earnings of the country. The T&A sector is likely to witness a 10% CAGR over FY20-26E to USD255 billion. The factor that will be helping the sector is first and foremost increased domestic demand due to rising per capita consumption of apparel. Second is work from home culture is likely to stay one or other form, which has led to an increased focus on home improvement products. In addition to these robust government policies are acting as stimulants for the sector.

The best part of the growth for the sector will come from exports, which have remained almost stagnant in over a decade, due to structural changes in the demand pattern being witnessed by India. Nevertheless, they are expected to grow faster than the domestic market at 11% CAGR (from USD34bn in FY20 to USD 65bn in FY26E), primarily driven by growth in home textiles and apparel.

About the author: IE&M Team
IE&M Team
Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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