Summary:

India's cotton yarn sector is expected to grow by 7–9% in FY26, driven by a recovery in exports— particularly to China, which contributes 14% of the industry's export revenue. Strong domestic demand and steady cotton procurement by the Cotton Corporation of India will support profitability and reduce inventory losses. With China’s domestic cotton production stabilizing, exports to the country may increase by 9–11% after a 5–7% decline in FY25. The credit profiles of cotton yarn spinners are projected to remain stable, supported by improved operational performance. Crisil Ratings forecasts interest coverage to rise to 4.5–5 times in FY26, up from 4–4.5 times in FY25, while gearing is expected to stay steady at 0.55–0.6 times. Capital expenditure will remain modest, limiting the need for additional debt. However, potential risks such as global tariff shifts, inflation, weakening U.S. demand, and volatile cotton prices must be carefully monitored.

Source: IBEF

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