Cotton Yarn Manufacturers To Spin 7–9% Revenue Growth In FY26

Stable cotton spreads and improved cotton availability to support margins and credit profiles

India’s cotton yarn industry is expected to grow by 7–9% in FY26, up from a modest 2–4% in the previous fiscal, driven by a rebound in exports—particularly to China—and steady domestic demand, according to a CRISIL Ratings analysis of 70 spinners accounting for 35–40% of industry revenue.

Volume growth will be the primary driver, supported by a modest rise in yarn prices. Operating margins are projected to improve by 50–100 basis points this fiscal, following a 100–150 bps recovery last year. This improvement will be backed by stable cotton yarn spreads and better raw material availability, thanks to significant cotton procurement by the Cotton Corporation of India (CCI) during the 2025 cotton season.

Export recovery will be led by China, which accounts for ~14% of India’s yarn exports and ~30% of overall industry revenue. India’s yarn exports to China fell in FY25 due to a surge in Chinese domestic cotton production, resulting in a 5–7% dip in total exports. With China’s cotton production normalising, yarn exports are expected to grow by 9–11% this fiscal.

Gautam Shahi, Director at CRISIL Ratings, said: “Indian spinners stand to benefit from steady domestic cotton output this season and can regain lost export market share. Additionally, India’s competitiveness in textile exports to the US remains intact due to higher tariffs on Chinese goods, supporting 6–8% revenue growth in downstream sectors like home textiles and garments.”

Capex among cotton yarn spinners will remain moderate, with only select players pursuing expansions. Improved profitability and steady cotton supply will limit the need for significant debt or working capital. Consequently, the interest coverage ratio is projected to rise to 4.5–5x in FY26 (from 4–4.5x in FY25), while gearing is expected to stay stable at ~0.55–0.6x.

Pranav Shandil, Associate Director at CRISIL Ratings, noted, “With improved operating performance and lower inventory holding, credit profiles will remain stable this fiscal.”

However, the industry remains vulnerable to potential changes in international tariffs, rising inflation, slower economic growth in key markets like the US, and fluctuations in domestic cotton prices relative to global rates.