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Textile companies: US tariff led pain in the near term; diversification will provide long term gains

ICICIdirect Research 16 Jan 2026 DISCLAIMER

India has 8% market share in US textile imports (including Apparels, Home textile & Worn clothes) of USD100bn+.
Imposition of 50% tariff by US on India exports have made export fundamentals difficult for India companies. Though US retailers and India retailers are equally sharing the tariff burden by taking hit on profitability. We don’t expect these terms to last long in the near future.
If India and US doesn’t enter into a trade deal, there is possibility of India losing its share in US textile imports with US retailers/brands likely to shift the supply base to other countries such as Vietnam and Bangladesh having lower tariff of 20% each.
Indian government is dealing with such high tariff by exploring opportunities in other countries by signing trade deals with respective countries or region.
India has recently signed FTA with the UK and New Zealand alongside existing FTAs with Australia, Japan and UAE and potential deal with EU.
These countries together provide a textile export opportunity of USD280+bn where India currently has market share 3%.  Even a modest improvement in share from 3% to 5% over the coming years would imply ~53% growth over current export levels, highlighting strong growth potential.

View: We believe near term is bleak for textile companies as higher tariff post a risk on the profitability. We should expect textile companies to witness lower profitability from Q3FY26. Though the companies are focusing on diversification it will take another 8-12 months to increase or start trade with the new clients in new countries. However, in long run it will be a very big opportunity for textile companies as it will get huge pie of global textile market to cater, reduce risk of dependence on single geography and potential opportunity of signing new clients.

Textile companies stock prices have corrected from its high due to uncertainties hovering around trade deal. We opine for selective accumulation in stocks having relatively lower revenue contribution from single geography and have production base in multiple countries. In this context Indo Count Industries and KPR Mills looks to be safest bets. Any deal sign with US in the coming months will act as a upside risk for the textile sector.

 

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