India’s cotton yarn sector to see 7-9% revenue growth this fiscal, projects CRISIL Ratings

India’s cotton yarn industry is projected to see 7-9 per cent revenue growth in fiscal 2026, up from 2-4 per cent last year. It’s being led by exports rebound especially to China and steady domestic demand. A volume-driven uptick, coupled with modest increase in yarn prices, will support the growth.

Operating margins are expected to improve by 50-100 basis points this fiscal, benefiting from stable cotton yarn spreads and robust cotton availability ensured by the Cotton Corporation of India’s active procurement in the 2025 cotton season.

An analysis of 70 major spinners accounting for 35-40 per cent of industry revenue indicates that yarn exports could grow 9-11 per cent in FY26, reversing last fiscal’s 5-7 per cent decline. This recovery is driven by China’s normalized domestic cotton output, reviving demand for Indian yarn.

The sector also gains from India’s competitive position in textile exports to the US, amid higher tariffs on Chinese products. This is expected to aid 6-8 per cent growth in home textiles and garments. With moderate capex, stable credit profiles, and improved profitability, spinners' interest coverage is set to rise to 4.5-5 times, while gearing remains steady at 0.55-0.6 times. However, trade policy shifts and global demand trends remain key risks ahead.