The textile sector demonstrated exceptional performance in Q1 FY27, with Ebitda rising 34% year-on-year to ₹3,270 crore and revenue increasing 18% to ₹27,000 crore across 21 companies. As reported by Motilal Oswal, this outperformance was supported by a favorable low base and higher order execution, with the sector's margins also improving during the quarter aided by lower tariffs. The brokerage expects the sector to sustain its outperformance trajectory with 18-20% growth and gradual margin recovery as cotton prices stabilise.
According to Motilal Oswal, the textile sector's future growth will be influenced by several key factors including cotton prices, government export incentives, freight and fuel costs, the import-duty deadline on cotton, and incremental order flows from the US and Europe. The brokerage has assigned a 7-10% premium to the mean EV/Ebitda and P/E multiple given improved visibility. Motilal Oswal expects its coverage to grow 14%, 27%, and 38% respectively over FY26-28 in topline, Ebitda, and PAT respectively. The Q1 results come despite disruptions due to the West Asia conflict, which led to significant rise in logistics costs due to shipping delays and working capital issues.
Across segments, apparels grew over 20% year-on-year, aided by better demand and order visibility, while spinning revenues grew 15-20% with increased yarn demand from China leading to higher realizations. Home textile companies are emerging as key beneficiaries as global buyers shift beyond their sourcing base of Bangladesh, Vietnam, etc. due to expected gains from India's free trade agreements with the UK and EU, and tariff competitiveness in the US. Notable performers include Vardhman Textiles, Welspun Living, and Arvind, which saw Ebitda growth of 36-45% and revenue growth of 13-25%. Homegrown company Welspun expects capacity utilization to remain above 80% in FY27, with doubling of US revenue from pillows.
In the medium-term, the sector is expected to see a build-up of the manufacturing ecosystem, besides improving export competitiveness, helped by government's revamped production-linked incentive scheme. The government has shortlisted a total of 170 companies across three rounds of the scheme, providing incentives of up to 15% of incremental turnover, with a total outlay of about ₹10,700 crore. Shares of sector firms have rallied significantly, with Arvind up over 70%, Welspun 44%, and Vardhman up 38% being key outperformers so far in 2026. These stocks could remain in the limelight for now, with a resolution of the ongoing West Asia conflict offering further push.
