Cotton spinning industry is navigating a challenging phase in FY26 amidst a mix of stable domestic demand and effects of tariffs levied by the US on Indian apparel exports
After a flattish first half, the trickle-down effect of United States tariff on cotton spinners is expected to moderate the domestic cotton yarn realisation in the second half of the current financial year (H2FY26), as per a report by Icra.
The report noted that the Indian cotton spinning industry, post witnessing a modest recovery in FY25 with increase in domestic yarn consumption by 2 per cent on-year, is navigating a challenging phase in FY26 amidst a mix of stable domestic demand and effects of reciprocal and punitive tariffs levied by the US government on Indian apparel exports.
Following a flat trend in H1FY26, domestic cotton fibre prices fell by around 3 per cent month-on-month (MoM) in November 2025. Against this, average cotton yarn prices fell by 4 per cent. This resulted in contribution levels moderating to Rs 96 per kilogram in November 2025 from Rs 103 per kg in H1FY26. The report noted that contribution levels are likely to stabilise at Rs 98 to 100 per kg for FY26 due to moderation in realisation expected in H2FY26.
Icra’s sample set of 13 companies, which account for 25 to 30 per cent of the industry’s revenue, is expected to report a 4 to 6 per cent decline in revenues on a YoY basis in FY2026. Additionally, margins are expected to contract by 50 to 100 basis points in FY26, primarily due to weaker performance expected in H2FY26, the report pointed out.
Icra emphasised that the industry had undertaken moderate debt-funded capex in FY2025, mainly relating to capacity additions by select players and alternative power generation capacities added by certain others, as a cost-saving measure. Given the available capacities, material expansion in capacity creations is not expected in FY26.
