New Delhi, Apr 3 (KNN) India’s apparel exports are expected to rebound in the upcoming fiscal year 2024-25, with growth projected at 8-9 per cent according to rating agency ICRA's analysis.

This recovery will be led by anticipated demand for inventory replenishment from retailers in the major U.S. and European Union (EU) markets.

After a sluggish FY2024 impacted by high inventory levels, ICRA expects apparel exporting companies' revenues to improve to Rs. 28,150 crore in FY2025 from Rs. 26,000 crore in FY2024.

Apparel brands in the U.S. and EU, accounting for 55 per cent of global trade, are forecasted to clear excess inventory and place orders for the Summer 2024 season in the first half of FY2025.

“Despite a rationalisation in raw material costs in FY2024, the benefit is expected to be passed on to end-users, considering the currently weak operating environment,” stated Priyesh Ruparelia, ICRA VP and Co-Group Head of Corporate Ratings.

While the Red Sea conflict has not immediately impacted costs for Indian exporters operating on FOB basis, except delayed shipments. However, any prolonged escalation could affect export volumes and realisations due to higher shipping costs.

ICRA anticipates increased capital expenditure in FY2025 as exporters position for an expected demand revival and leverage the China Plus One sourcing diversification trend.

Under the PLI 1.0 scheme, 56 of 64 approved applicants have formed new companies, with Rs. 2,119 crore invested through September 2023.

The rating agency projects a 5-6 per cent year-over-year revenue decline for its sample exporters in FY2024 amid a 22 per cent drop in U.S. apparel imports.

However, coverage ratios are expected to remain stable with no major debt addition. Operating margins may moderate to 9.8-10 per cent in FY2024 from 11.3 per cent in FY2023 due to relatively weaker performance.

(KNN Bureau)