Indian hosiery sector outperforms global growth trends

28 August 2023, Mumbai

The hosiery sector has come a long way from just providing bare necessities through innovations in fabric and knitting technologies. In 2022, the global sector including men’s and women’s hosiery was valued at $41.8 billion and is projected to reach $55.6 billion by 2030, growing at a CAGR of 3.6 per cent from 2022-30.

The US market is estimated at $7 billion, whilst China has forecasted a 4.9 per cent CAGR, with market size reaching $10 billion by 2030. Japan and Canada, each forecast to grow at 1.7 per cent and 2.9 per cent respectively over the 2022-30 period. Within Europe, Germany is expected to grow at approximately 2.9 per cent CAGR.

India charts new growth

Closer home, in India, the sector has a phenomenal performance lined up in India with growth expectations between 18 and 20 per cent year-on-year revenue, thanks to a revival of rural demand. The sector’s revenue is expected to touch around Rs 36,000 crore in fiscal 2024, according to CRISIL Ratings.

The operating margin will expand 300-400 basis points (bps) on softer input prices and improved capacity utilisations. The conclusion arrived after 28 hosiery manufacturers accounting for one-third of the sector’s revenue were analyzed and subsequently, CRISIL Rating published the report.

China’s hold over global hosiery

By the end of June 2023, China had already exported 256 million pairs of women’s hosiery to the US, capturing 67 per cent of the market. Moreover, women's hosiery imports from China exceeded the figures recorded by the second-largest supplier, Pakistan (47 million pairs), fivefold. The third position in this ranking was held by El Salvador (28 million pairs), with a 7.4 per cent.

Rural consumers have high impact on the hosiery sector

Last year the rural economies underwent hardship with rising inflation and lower agrarian incomes, This impacted the hosiery sector as 50 per cent of the sector’s consumers are rural and therefore the sector’s revenues dipped by 30 per cent in 2022.

CRISIL Ratings Director Rahul Guha states in the report that in 2023-24, urban demand will remain stable, while a well-distributed monsoon and probable inflation moderation should boost rural demand, leading to a recovery of 35-40 per cent in volume.

Unlimited opportunities

Potential export opportunities, especially to Gulf countries, could bump up the volume further. Capacity utilization had fallen to 60 per cent in 2022-23 but with improved market conditions, particularly rural India bouncing back, capacity utilization will be 90 per cent in fiscal year 2023-24. 

According to a senior CRISIL Rating spokesperson, not too many companies were taking up significant capacity expansion last year, and this resulted in long-term debt becoming minimal. Strong cash flows from higher revenue and profitability will be sufficient to meet incremental working capital requirements and keep overall debt in check according to the CRISIL Ratings expert.  The trade deal between the UAE and India would have significant growth for hosiery.

The sector aims to regain pre-Covid operating margins

As hosiery demand grows, manufacturers are pulling back and curtailing on advertising and marketing. Almost 90 per cent capacity utilization and good export prices are helping manufacturers gain back operating margins – at least by 12 to 16 per cent.

Notably, the Comprehensive Economic Partnership Agreement signed by the government with UAE could boost textile segment exports, especially hosiery. The agreement could add 2-3 per cent to hosiery exports from the historical level of 10 per cent.

Amid strong demand pull, manufacturers will curtail their advertising and marketing expenses. Increased operating leverage from higher capacity utilisations, will aid profitability. Hence, the operating margin will improve to the pre-pandemic level of 12-14 per cent.

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