US tariffs may pressure FY26 margins, warns Arvind Ltd, delays capex plans

Business Standard

15-05-2025

Indian textile maker Arvind Ltd on Thursday said its profit margins could face pressure in the current financial year as it may have to absorb some of the effects of the Trump administration's new tariff policy.
Following the announcement, the company's shares dropped nearly 5 per cent, even though its profit after tax for the fourth quarter rose 52 per cent from a year earlier to Rs 151 crore ($17.64 million).
Due to what it called "prevailing uncertainty", Arvind Ltd did not share a forecast for the financial year that began in April 2025, only saying it expects to provide one "at a later stage" this fiscal. The company added it would pause all non-essential and discretionary capital expenditure until there is more clarity on the tariff situation. To cope with the potential hit to margins, it also plans to cut costs and boost volumes.
According to a Reuters report, top US retailers have been in talks with suppliers over how to share the added costs caused by the new tariffs.
Do US tariffs give India an edge?
India could still have an advantage compared to other major exporters such as Bangladesh, Vietnam, and China, who are likely to be more severely affected by the US tariffs that are scheduled to kick in July once the declared 90-day pause period ends.
"As an immediate fallout, we are witnessing higher demand for garments and fabrics, with positive signals from key US customers indicating increased business," Arvind Ltd said.
Exports accounted for nearly 40 per cent of Arvind's total revenue in the financial year 2024, the company's annual report showed.
It also sees potential gains from the recently-finalised free trade agreement (FTA) between the UK and India. Currently, the UK represents less than 2 per cent of the company's revenue.
"The latest UK free trade pact... opens up a new key geography for the company," it said.
India-US trade agreement
India is seeking to secure a trade agreement with the US during a 90-day suspension on further tariff increases that Donald Trump declared in April 2025. The US is India's largest trading partner, with bilateral trade reaching approximately $129 billion in 2024, and India maintaining a $45.7 billion trade surplus with the US.
Trump implemented a series of tariffs on imports from various countries, including India, as part of his broader "America First" trade policy. India was subject to a 26 per cent "reciprocal tariff" on its exports to the US.