Crisil Ratings : US tariffs to shear 5-10% off home textile industry revenue

Profitability to decline this fiscal; lower cash accrual to weigh down credit metrics

Home textile manufacturers are bracing for a 5-10% decline in revenue, apart from reduction in operating profitability1, as the 50% tariffs imposed by the US came into effect on August 27, 2025. Exports of home textiles account for about three quarters of the industry's revenue.

Three factors would soften the blow somewhat-frontloading of sales during April-August 2025; limited capacities of competing nations, such as China, Pakistan and Turkey2 with lower tariffs in the product categories supplied by India; and, likely diversification of Indian manufacturers to alternative geographies.

Additionally, deleveraged balance sheets will partly offset the impact on credit profiles.

Our analysis of about 40 home textile companies, which account for 40-45% of the industry revenue, indicates as much.

Says Manish Gupta, Deputy Chief Rating Officer, Crisil Ratings, "Home textiles are discretionary products and their exports to the US grew a modest 2-3% in the first quarter of this fiscal as retailers remained cautious of demand amid inflationary concerns. But prior to the implementation of higher tariffs from August 27, exports had spiked because of some frontloading of orders. Additionally, with competing countries having limited capacity to make cotton-based home textile products, India should be able to maintain its competitive position in the US market over the near term. That should limit the overall revenue decline for the industry to 5-10% this fiscal."

The impact is expected to be more pronounced for companies that generate more than half of their revenue from the US.

To offset the lower offtake in the US, Indian manufacturers would try to increase trade with the European Union (EU) and the United Kingdom (UK)3. These geographies together accounted for ~13%4 of India's home textile exports last fiscal.

Domestic exporters are expected to sharpen focus on the UK, where the gates have opened after the recent free trade agreement, and the EU.

Says Gautam Shahi, Director, Crisil Ratings, "Scaling up of revenue from the alternative export destinations will take time. Meanwhile, operating profitability on exports to the US over the remainder of this fiscal may decline sharply. This will be a result of the Indian exporters absorbing part of the higher tariffs and some expected reduction in demand from the US due to inflation. The potential oversupply may also affect the profitability of exports to other destinations as well as in the domestic market. Consequently, operating profitability at the industry level could fall 200-250 bps this fiscal from last fiscal."

Cash accruals will thus be lower this fiscal relative to last fiscal, leading to weakening credit metrics of home textiles manufacturers.

The interest coverage ratio could decline to ~4.0 times this fiscal from 5.4 times last fiscal. Financial leverage5, denoted by the debt-to-Ebitda ratio, is expected to weaken to 2.4-2.6 times from 1.9 times-and more sharply for manufacturers with high exposure to the US market.

The industry's ability to navigate these challenges will depend on continuation of higher US tariffs on India versus competing nations, policy support from the central government, demand trends in the US given inflationary pressures, and cotton prices-all of which will bear watching.

Shares of CRISIL Limited was last trading in BSE at Rs. 5037.80 as compared to the previous close of Rs. 5060.95. The total number of shares traded during the day was 935 in over 257 trades.

The stock hit an intraday high of Rs. 5054.95 and intraday low of 4991.05. The net turnover during the day was Rs. 4699824.00.

Source : Equity Bulls

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CRISILRatings INE007A01025 USTariffs HomeTextileIndustry RevenueImpact