India’s fashion and apparel market to rebound in FY26: Ind-Ra report
28 January 2025, Mumbai
Fuelled by a rise in disposable incomes, increased number of wedding days and favorable monsoon seasons boosting demand, particularly in smaller cities, India's fashion and apparel industry is expected to rebound in FY26, as per a report by India Ratings and Research (Ind-Ra).
As per the report, the retail landscape in India will witness significant shifts. Driven by the growing influence of Gen Z on consumption patterns, organized retail will continue to gain market share with fast fashion, ethnic wear, and luxury outperforming other categories.
Social media's impact and Gen-Z's desire for trendy, fast-turnaround clothing are driving explosive growth in fast fashion. Major retailers are expanding their store counts in this category, with similar growth expected in FY26. The return of players like Shein and increased investments in India's manufacturing capabilities are positioning India as a key hub for both domestic and international fashion, says Ankit Jaipuria, Co-founder, Zyod.
Ethnic wear and luxury categories are also gaining popularity, driven by rising affluence and aspirations among middle- and upper-class consumers. Fueled by increasing internet penetration, e-commerce is projected to grow faster than brick-and-mortar stores, although physical retail remains important for its experiential value, especially for premium purchases.
Retailers are adopting a cautious expansion strategy, focusing on store productivity and cost optimization. EBITDA margins are expected to remain stable in FY25, with improvements anticipated in FY26 as companies become more efficient. Adaptability, balancing efficiency with flexibility, sustainability with scalability, and speed with quality, will be crucial for success.
Driven by fast fashion and premium segments, revenues are projected to grow by 10.5 per cent in FY26, positioning the Indian fashion industry for a transformative phase, balancing innovation, scalability, and consumer desires.
Ind-Ra forecasts neutral credit metrics for FY25, supported by steady profitability and controlled capital expenditure, with improvements expected in FY26. Elevated inventory levels, however, pose a risk of obsolescence, requiring retailers to maintain efficient inventory management. Advertising and promotional spending is projected to remain in the 2.5-3.0 per cent range. Some retailers are investing heavily in brand elevation and consumer engagement, while others are scaling back.
Favorable IPO and QIP fundraising prospects are expected to strengthen equity bases, providing financial resilience. The FY26 recovery is predicted to be driven by improved consumer financial health, increased wedding-related demand, and expansion in organized retail formats like fast fashion, luxury, and ethnic wear.
