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Textile companies – Q2FY26: steady performance despite tariff uncertainties

ICICIdirect Research 14 Nov 2025 DISCLAIMER

Textile companies registered steady performance despite tariff related uncertainties. Tariff hike impact of 50% was for 40 days during the quarter.
Companies under coverage such Gokaldas Exports (Gokex) and Indo Count Industries registered volume led low-to-mid single digit revenue growth.
The companies focused on maintaining long term relationship with the US retailers by sharing penal tariff hike burden of 25% through availing discounts of 15-18% in Q2.
This helped in maintaining the sales momentum with relatively better export volumes but had significant impact on the profitability. Gokex EBIDTA margins were down by 160bps YoY to 5.4% while Indo Count EBIDTA margins were down by 535bps YoY to 9.8% inQ2FY26.
Overall bottom line witnessed double digit decline during the quarter.

 

Outlook

Scenario 1: If US tariff rate on India remains at 50%

  • Order shipments will get reduced as the retailers might gradually shift to other countries with lower tariffs.
  • Passing of the tariff concession will further affect the margins and the companies might post losses at bottomline in Q3FY26.
  • The companies will quickly try to diversify operations to neighbouring countries such as Sri Lanka or Bangladesh having tariff rate of 20% and 30% respectively in the near term.

 

Scenario 2: If US tariff rate is reduced to 25%

  • If the penal tariff rate of 25% is removed, India will become competitive with other textile exporting countries such as Bangladesh and Vietnam having tariff rates of 30% and 20% respectively.
  • The companies will stop sharing the tariff burden with US retailers and stress on the profitability will get reduced by Q4FY26.
  • Further order book will improve as US retailers’ sentiment will improve and order flow with Indian suppliers will get improved.

 

View

  • In the current environment, we prefer companies that are de-risking their business model through diversification strategy.
  • KPR mills has less exposure to US with 60% of its revenues coming in from EU market. FTA with UK and potential FTA with EU will provide good opportunity to KPR to improve its revenue growth trajectory (Reco: Buy; PT – Rs1330).
  • Indo Count is focusing on increasing revenue mix by increasing the sales of high margins utility bedding business in the coming years. This will drive the profitability and strong double digit earnings growth for Indo Count in the coming years (Reco: Buy; PT – Rs370).
  • Gokaldas Exports will benefit diversified manufacturing base in India and Africa. The company is also focusing on reducing its dependence in US from current 70% to 60% over the next two to three years (Reco: Buy; PT – Rs1,080)
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