US Tariffs Hit India's Textile Exports Hard: Companies Face 50% Revenue Shock!

India's vital textile sector is grappling with substantial challenges due to ongoing tariff negotiations with the United States, resulting in a significant downturn in exports. The imposition of a 50% US tariff, coupled with muted demand, has led to a sharp decline in shipments, impacting key players in the industry.

US Tariffs and Export Slump

• India's textile exports to the United States, its largest export market, have seen a notable decrease.
• In October, exports to the US declined by 12.91%, directly attributed to the prevailing US tariffs.
• Companies are witnessing a slowdown in orders, especially for crucial year-end retail events like Black Friday and Christmas.

Company Impacts and Strategies

• Nandan Terry's Concerns
  • Sanjay Deora, CEO of B2B manufacturer Nandan Terry, indicated that many companies rushed shipments in July to avoid higher tariffs.
  • He anticipates a potential 50% reduction in Nandan Terry's US business for the upcoming year due to muted demand.
  • Despite long-standing partnerships with US retailers like Walmart and Kohl’s, projections from India have been reduced.
  • Indian exporters are compelled to offer discounts of 15-25%, forcing Nandan Terry to also provide 12-18% discounts, which is deemed unsustainable.
  • Current rupee depreciation has provided some temporary relief, helping businesses stay afloat.
• Pearl Global's Outlook
  • Pallab Banerjee, Managing Director at Pearl Global, expressed a "bearish" outlook for their Indian manufacturing facilities.
  • These Indian units contribute 25% to the company's revenue, with 50-60% of their orders targeting the US market.
  • Pearl Global anticipates growth in the US market to be capped between 5-12%, a significant drop from the previous year's 29%.
  • US retailers are adopting a conservative spending approach, often withholding the final 5-10% of stock orders.
• Welspun Living's Diversification
  • Welspun Living is focusing on retaining its market share in North America, which accounts for 60-65% of its business.
  • The company is investing USD 13 million in a new US manufacturing facility in Nevada, set to be operational by January 2026.
  • They are also sourcing cotton directly from the US and strengthening their presence across 50 countries, including Europe and the Middle East.
  • Recent trade agreements with the UK and Europe are expected to facilitate further market exploration.

Competitive Landscape

• India's 50% tariff places it at a disadvantage compared to competitors like Bangladesh, Vietnam, and Sri Lanka, which face only a 20% tariff.
• This disparity is impacting the growth prospects of Indian manufacturing units, prompting companies to seek alternative markets.

Call for Government Action

• Industry representatives are seeking urgent government intervention to address the tariff challenges and competitive disadvantages.
• The current situation is described as unsustainable for long-term business health.

Impact

• The US tariffs and resulting export decline pose a significant threat to India's textile industry, potentially leading to reduced revenues, job losses, and a decline in foreign exchange earnings.
• Listed companies in the sector may experience stock price volatility due to diminished growth prospects and profitability pressures.
• Companies are forced to re-evaluate their business strategies, invest in foreign operations, and seek new markets to mitigate risks.
• Impact Rating: 8/10

Difficult Terms Explained

• Tariff: A tax imposed by a government on imported or exported goods.
• Headwinds: Difficulties or challenges that hinder progress or growth.
• Muted Exports: A slower or less significant increase in goods sent to other countries.
• Order Books: Records of goods or services that have been ordered but not yet delivered or completed.
• Margins: The difference between the cost of a product and its selling price, indicating profitability.
• US Retailers: Businesses in the United States that sell goods directly to consumers.
• Black Friday/Thanksgiving/Christmas: Major shopping seasons in the US, typically driving high consumer demand.
• Rupee Depreciation: A decrease in the value of the Indian Rupee compared to other currencies, making exports cheaper for foreign buyers and imports more expensive for India.
• Topline: A company's total revenue or gross sales.
• Bearish: An expectation that prices or markets will decline.
• Diversifying: Spreading business activities across different markets or products to reduce risk.
• GCC countries: Gulf Cooperation Council countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.