India’s cotton yarn sector is poised for a 7–9% revenue growth in the current fiscal (FY26), marking a significant improvement from the modest 2–4% expansion seen in FY25. This expected uptick will be largely volume-driven, supported by a mild increase in yarn prices. Growth is further bolstered by favorable domestic demand and a rebound in export activity, particularly to China.
A CRISIL Ratings analysis of 70 major spinners—contributing 35–40% of industry revenue—points to improving fundamentals. Exports, which form around 30% of the sector’s revenue, are expected to grow by 9–11% this year. This follows a decline in FY25 when China’s surplus domestic cotton output reduced its import needs, contributing to a 5–7% drop in India’s total cotton yarn exports. With normalization in China’s cotton production, Indian exports are regaining momentum, positioning spinners for a stronger fiscal.
Operating margins, which recovered last year, are expected to further improve by 50–100 basis points in FY26. This is due to stable yarn spreads and increased cotton availability, thanks to the Cotton Corporation of India’s significant procurement activities during the current cotton season.
CRISIL’s Director, Gautam Shahi, noted that steady cotton production and competitive export positioning—especially to the US amid higher tariffs on Chinese goods—will further support Indian spinners and downstream sectors such as home textiles and ready-made garments, which are projected to see 6–8% revenue growth.
On the financial side, profitability will receive a boost from lower inventory losses and efficient working capital management due to consistent cotton supply. Interest coverage ratios are expected to improve to 4.5–5 times from around 4–4.5 times last fiscal, while gearing is projected to remain stable at 0.55–0.6 times.
Capital expenditure is anticipated to stay moderate, with only a few players pursuing expansion plans—limiting the need for significant additional debt. According to Pranav Shandil, Associate Director at CRISIL Ratings, stable operations and better margins will support credit profile stability across the sector.
Nonetheless, industry stakeholders should remain vigilant of risks, including shifts in global tariffs, inflation trends, and potential slowdowns in key markets like the US, which could affect demand and pricing dynamics in the near term.
