However, most high-rated entities with a high US exposure have comfortable liquidity and leverage headroom to manage any immediate pressure
The revenue and margins of large apparel and home textile players might fall 15 to 25 per cent and 2 to 5 per cent, respectively, over the next 12 to 18 months due to the United States tariffs, depending on the US exposure. A report has stated that with textiles being a working capital-intensive industry, players could witness the release of working capital in line with the likely reduction in revenue.
However, India Ratings and Research (Ind-Ra) noted that most high-rated entities with a high US exposure have comfortable liquidity and leverage headroom to manage any immediate pressure on their profitability and credit profiles. Also, integrated downstream players are better placed than upstream players to sail through margin pressure.
“India’s trade deals with other key importing nations, namely the United Kingdom and United Arab Emirates (UAE), and its effort to conclude a trade deal with the European Union (EU), might diversify sales to these countries and provide a breather; however, any meaningful shift from the US might take time,” highlighted Rohit Sadaka, Director and Sector Head, Textiles, Corporates, Ind-Ra.
The additional US reciprocal tariffs put the Indian textile industry at a disadvantage compared to key competing nations with lower tariff rates, such as China (34 per cent), Bangladesh (20 per cent), Indonesia (19 per cent), Vietnam (20 per cent) and Cambodia (19 per cent). The report noted that the US has become the primary export market for the Indian textile industry, contributing around 29 per cent to all textile exports.
On the other hand, India accounts for around 9 per cent of all US textile imports, highlighting its importance as a key source for the US. Given the higher tariff differential than that for competing nations and the asymmetric importance of bilateral trade between the US and India, India stands to lose more from escalating tariffs. However, Ind-Ra emphasised that India’s status as a key import source suggests that any slowdown in US demand may be gradual as importers adjust to new supply and price dynamics
