The Indian textile sector, long considered a pillar of the nation’s export economy, is entering a phase of structural repositioning. A blend of tariff negotiations, free trade agreements, and global realignment of supply chains is setting the stage for a powerful recovery—even as the industry braces for short-term margin pressures. Analysts at ICICI Securities remain broadly optimistic, projecting muted earnings in FY26 but materially stronger growth thereafter. With the US moving toward tariff parity, trade agreements with the UK and EU progressing, and Indian firms actively diversifying geographies, leading players such as KPR Mills, Gokaldas Exports, and Indo Count Industries are poised for outsized gains from FY27 onwards.

ICICI Securities Turns Bullish on Textiles

ICICI Securities has upgraded its fundamental view on Indian textile equities, highlighting an attractive risk-reward balance amid structural transition. The brokerage has issued a strong ‘Buy’ recommendation on three textile majors—KPR Mills, Gokaldas Exports, and Indo Count Industries. With defined price targets and a focus on margin recovery, these companies are framed as sector leaders prepared to capitalize on shifting trade flows.

The timing of this outlook coincides with global recalibration. As trade barriers soften and domestic firms scale up, the brokerage argues that export-led expansion will unlock stronger shareholder returns over the medium to long term.

Tariff Reprieve and Trade Alliances

One of the most significant catalysts for the sector is the potential rollback of the 25% punitive tariff imposed by the United States, expected to phase out by late 2025. Restoring tariff parity with Bangladesh and Vietnam is predicted to boost India’s export competitiveness in its most critical market.

Simultaneously, trade diplomacy is yielding tangible benefits. A free trade agreement with the UK is projected to provide Indian exporters a 12% duty advantage over Chinese suppliers. At the same time, advanced negotiations with the European Union and Australia would further diversify demand and strengthen revenue resilience across new regions. Together, these steps represent a decisive shift away from tariff anomalies that have constrained Indian firms over the last decade.

Diversification as Strategic Insurance

Indian firms in the sector are accelerating geographic diversification to avoid over-dependence on a handful of markets. The UK and EU, by virtue of their trade deals, could generate incremental exports worth US$1–2 billion (UK) and US$2–3 billion (EU), offering a substantive cushion against swings in the US market. This approach not only redistributes risk, it also underlines India’s ambition to move from being a volume player to a strategically indispensable part of global supply chains.

Short-Term Setback, Longer-Term Recovery

The outlook for FY26 remains subdued, weighed down by elevated tariffs, aggressive discounting tactics, and thinner profit margins. Analysts forecast muted EBITDA performance across the peer set.

Yet, this challenging period is viewed as transitional rather than structural. From FY27 onward, the anticipated removal of US tariffs and firm order flows from recently negotiated FTAs are expected to rekindle growth momentum. For investors, this interim weakness presents an opportunity to accumulate quality stocks ahead of what could be a breakout recovery cycle.

Top Brokerage Picks

ICICI Securities has mapped out clear valuations for its favored textile companies:

These targets are underpinned by upcoming catalysts such as capacity expansion, strong order visibility, and the broader sectoral uplift expected once trade barriers ease.

Capacity and Utilisation Expansion

Leading players are in the midst of scaling operations to pre-empt rising global demand. Heavy investments in machinery upgrades and infrastructure expansion ensure that higher export orders—particularly from Europe and the UK—can be met without strains on production efficiency. Such capital deployments highlight the confidence of management teams in a sectoral upswing beyond the tariff drag.

Margins and Revenue Trajectory

While EBITDA margins are compressed in the near term, operating leverage looks set to improve as volumes rise. Stronger cash flow generation and healthier balance sheets reinforce the resilience of these firms.

Within the home textile vertical, demand for bedsheets and terry towels in the US has been climbing steadily. On the garment front, India’s edge in the UK and EU markets is strengthening as customers seek diversification away from China. This dual-track growth strategy supports revenue visibility across sub-segments.

Cross-Sector Financial Snapshot

These figures underline the dual narrative: subdued near-term margins but significant mid-term expansion potential.

Market Share Trends

India continues gaining traction in global textile categories. In US bedsheets, the country’s market share has risen from 39% in 2020 to 46% in 2024, while China’s share dropped from 19% to 10% over the same horizon. Parallel gains are evident in terry towels and apparel exports, reflecting India’s growing importance in Western sourcing strategies.

Risks and Vulnerabilities

Despite structural positives, risks remain. Volatility in cotton prices, swings in freight rates, and geopolitical instability are capable of denting profitability. To counter these exposures, firms are adopting calculated hedges—expanding into technical textiles, widening regional exposure, and managing input procurement with greater precision.

Bottomline: A Sector Awaiting Its Inflection

The roadmap for Indian textiles appears clear: a difficult FY26 followed by an inflection point starting FY27. With punitive tariffs waning and trade access expanding, the sector is positioned to capture a larger slice of global supply chains. For investors, the present weakness offers a rare entry opportunity into structurally sound firms at discounted valuations.

ICICI Securities’ frontline picks—KPR Mills, Gokaldas Exports, and Indo Count Industries—stand out as the most compelling avenues for exposure within this turnaround narrative. As the global order evolves, India’s textile industry is not merely surviving—it is gearing up to redefine its role in world trade.