FTAs, easing US tariffs to drive next growth cycle for India's home textile industry: Elara Securities

India's home textile industry is entering a multi-year growth cycle, driven by easing US tariffs, the India-UK free trade agreement (FTA) and the proposed India-EU FTA, which are expected to help exporters gain market share in key overseas markets, according to a new report by Elara Securities on Tuesday.

Initiating coverage on the sector, Elara said FY26 likely marked the cyclical trough for the industry after a year impacted by tariff uncertainty, retailer caution and weaker demand. The brokerage has initiated coverage on Welspun Living and Indo Count Industries with 'Buy' ratings, saying both companies are well placed to benefit from the improving export environment.

"India Home Textiles is entering a structural upcycle, led by shift in global sourcing, easing tariff reset by the US and market-share gain opportunities in the UK and Europe," said Prerna Jhunjhunwala, Consumer Discretionary, Footwear and Textiles Analyst at Elara Securities.

The brokerage noted that India already enjoys a dominant position in the US home textile market, accounting for 55.4% of cotton bedsheet imports and 43.5% of terry towel imports. With US tariffs now reduced to 10% across competing countries and retailer inventories normalising, Indian exporters are expected to regain sourcing competitiveness and benefit from a recovery in demand.

Beyond the US, Elara believes Europe presents the next major opportunity. The European Union and the UK together account for 36.7% of global home textile imports, but India's market share remains relatively small at 6.3% in the EU and 10.1% in the UK. The brokerage said the FTAs would eliminate India's long-standing duty disadvantage, opening up a structural opportunity to expand exports of bed and bath products.

"The India-UK and India-EU FTAs materially alter this competitive landscape by bringing Indian exports closer to duty parity with Pakistan and Turkey," the report said. It added that these agreements represent "structural market-share gain opportunities rather than cyclical demand drivers."

According to Elara, Indian manufacturers are also well prepared to meet additional export demand. The top four listed players have a combined bed linen capacity of 386 million metres and towel capacity of 211,400 metric tonnes, with average capacity utilisation of around 65-67%, leaving sufficient room for expansion without significant capital expenditure.

The report also highlighted new growth avenues beyond exports. Welspun Living and Indo Count have together committed nearly $77 million to establish more than 55 million units of annual pillow manufacturing capacity across four facilities in the US, enabling them to shorten delivery timelines, reduce logistics costs and expand their presence in the $4-billion US utility bedding market.

Elara expects FY27 to mark the beginning of a recovery in industry revenues, supported by improved order visibility, easing tariff pressures and stronger operating leverage.

"FY26, in our view, may mark the cyclical trough for the Indian home textiles industry," the brokerage said. "The restoration of a more competitive US tariff structure, along with the UK FTA and the proposed EU FTA, should support a gradual recovery in industry revenues from FY27."