Gokaldas, Welspun tank up to 17% in 1 week; what's hurting textile stocks?

Business Standard

2 days ago

Shares of textile companies, including garments & apparel, slipped by up to 8 per cent on the BSE in Tuesday's intra-day trade after US President Donald Trump threatened steeper tariffs on Indian goods.
Sangam India, Gokaldas Exports, Welspun Living, Kitex Garments, Pearl Global Industries and Himatsingka Seide were down between 3 per cent and 8 per cent in intra-day trade. In comparison, the BSE Sensex was down 0.44 per cent at 80,661 at 11:33 AM. Track LIVE Stock Market Updates Here
Why did textile stocks slide?
In the past week, textile stocks have fallen by up to 18 per cent following Trump's announcement of a 25 per cent tariff. Further, he indicated imposing a penalty for India's continued energy and defence ties with Russia.
Meanwhile, Trump reduced import duties on Bangladeshi goods to 20 per cent from 35 per cent, intensifying pressure on Indian exporters in a key market.
"The latest tweet from President Trump that 'I will be substantially raising US tariffs on India' for buying Russian oil is a big threat. If he walks his talk, the India-US relations will further strain, and the impact on India's exports to the US can be worse than thought earlier," said VK Vijayakumar, chief investment strategist at Geojit Investments.
The US is India's largest market for textile and apparel exports. During January-May 2025, US imports of textile and apparel from India were valued at $4.59 billion, a rise of more than 13 per cent compared to the same period last year, when the figure stood at $4.05 billion.
ICICI Securities believes the tariff rate of 25 per cent, if implemented in India, will lead to down trading, lower realisation due to sharing of tariff with suppliers and impact profitability of the textile companies in the near term. However in the medium to long term India's tariff rate are competitive with other major exporting countries and hence exports order will normalise once the tariff effect gets absorbed in the market.
ICRA views on Indian apparel and fabric sector
India and the UK recently concluded trade talks, and an agreement was reached on May 6, 2025, after three years of negotiation. The bilateral trade deal providing concessional duty / eliminating duty on select goods would lead to a significant rise in trade volumes and hence earnings. While the broad terms have been agreed upon, the Free Trade Agreement (FTA) between the two countries is expected to be operational in CY2026, subject to legal review.
ICRA expects India's textile export volumes to the UK to double from their current levels in the next 5-6 years post implementation of the revised tariffs, leading to an addition of incremental capacities.
While the imposition of reciprocal tariffs by the US Government for imports from India could impact the profit margins (on a standalone basis), a likely improvement in the operating margins in subsidiaries would offset the impact to some extent for Gokaldas Exports, according to ICRA.
Gokaldas Exports' revenues remain susceptible to the geographical concentration risk as ~81 per cent and ~77 per cent of its revenues were generated from the North American market in FY2024 and FY2025, respectively. The company's top five customers contributed 80-85 per cent of its revenues in FY2024 and FY2025, making the company's revenues vulnerable to the performance of these key customers and demand trends in crucial markets.