Indian textile companies posted a 34% jump in operating profit (EBITDA) for Q1 FY27, driven by strong global demand and the removal of cotton import duties. While the industry is benefiting from a shift in manufacturing orders toward India, investors should remain aware of rising logistics costs due to geopolitical tensions in West Asia and potential pressure on working capital.
Indian textile manufacturers have started the 2027 fiscal year on a strong note, signaling a recovery after a period of stagnation. The aggregate operating profit, or EBITDA, for 21 major textile companies rose by 34% to ₹3,270 crore in the first quarter of FY27. Revenue also saw a healthy increase, growing by 18% to ₹27,000 crore compared to the same period last year. This performance marks a sharp reversal from the previous year, when growth remained flat.
Key players in the sector, including Vardhman Textiles, Welspun Living, and Arvind, reported operating profit growth ranging between 36% and 45% for the quarter. A major boost for these companies was the government’s decision on June 1, 2026, to eliminate the 11% import duty on cotton. This helped lower raw material costs and improved profit margins. Additionally, the market for cotton yarn has stabilized, with price spreads recovering to approximately $0.90 per kg, a significant improvement from the $0.60–$0.70 range seen during the previous down-cycle.
Strategic shifts in global trade are also providing a tailwind. International buyers are increasingly looking to move their supply chains away from traditional manufacturing hubs like Bangladesh and Vietnam, often favoring India as a reliable alternative. This change, combined with the government’s Production-Linked Incentive (PLI) scheme—which supports companies in expanding their manufacturing capacity—is helping the industry capture more export market share. The expectation of new trade agreements with the United Kingdom and the European Union is further fueling optimism among manufacturers.
However, the recovery faces specific challenges that investors should monitor. The ongoing geopolitical conflict in West Asia has created serious logistical issues. Shipping vessels are being forced to take longer routes to avoid the region, which has led to 15–20 day delivery delays and caused freight costs to spike by 40–60%. These delays tie up goods in transit, which stretches the working capital cycle, meaning companies have to wait longer to receive cash for their products.
Looking ahead, the sustainability of these improved profit margins will depend on how effectively companies can manage these higher shipping costs and whether they can continue to pass on raw material price fluctuations to their customers. Investors will likely watch for further updates on the progress of India’s trade agreements and any changes in freight rates that could impact the sector's profitability in the coming quarters.