Cotton Yarn Industry Margins Seen Rising 150-200 BPS in FY27: CareEdge Ratings
By jayesh chouhan 2026-06-17 12:37:00
Cotton Yarn Industry Margins Expected to Improve by 150-200 Basis Points Following Strong Q4 Recovery: CareEdge Ratings
After facing headwinds for nearly three years, the Indian cotton yarn industry has recorded a significant recovery in the fourth quarter of the 2026 fiscal year (Q4 FY26). According to a recent report by CareEdge Ratings, the industry's operating profitability margins are likely to improve by 150 to 200 basis points in FY27, driven by favorable demand-supply dynamics and improved pricing.
The report attributes this recovery to several positive factors. These include a reduction in uncertainties regarding US tariffs, rising orders from garment and home textile exporters, a revival in demand from China, and an improved business environment surrounding potential Free Trade Agreements (FTAs) between India and the UK, as well as India and the European Union (EU).
CareEdge Ratings stated that the balance between demand and supply, along with a favorable pricing environment, is expected to persist into FY27. However, the outlook beyond that period will depend on demand from China, fluctuations in cotton prices, geopolitical developments, and the pace of recovery in downstream consumption globally.
The report also highlights significant structural changes on the supply side of the industry. Over the past few years, capacity amounting to approximately 10–12 million spindles has exited the market, reducing the effective capacity to around 40–44 million spindles. This has improved the demand-supply balance for organized players and made pricing more sustainable.
Cotton yarn spreads have also witnessed a significant increase due to improved demand, limited supply, and stable cotton prices. The spread, which stood at approximately ₹95–100 per kg in FY26, has risen to ₹120–125 per kg. According to the report, the removal of import duty on cotton until October 31, 2026, will help maintain a balance between domestic and global prices, potentially sustaining favorable conditions for spreads into the 2027 fiscal year.
CareEdge Ratings projects that the revenue of the Indian spinning industry will grow by approximately 10 percent year-on-year in the 2027 fiscal year. Of this, 3 to 4 percent of the growth is expected to stem from production or volume expansion, while the remainder is likely to be driven by improved sales realizations.
