• Linkdin

A comprehensive analysis of India's textile stocks in stock market

05 Oct '24
11 min read
A comprehensive analysis of India's textile stocks in stock market
Pic: Adobe Stock

Insights

  • India's textile industry stocks are highly influenced by economic factors such as raw material prices, consumer confidence and interest rates.
  • Despite being the 2nd largest employer, the sector has minimal weight in stock indices, with most companies in mid- to small-cap range.
  • Top textile companies in India like Page Industries and KPR Mills show steady growth, while some others pose higher risks.

Among all the stocks traded in the stock market, textile stocks are a category that is highly influenced by nearly all economic conditions in the country—from interest rates and fluctuations in consumer confidence to the prices of raw materials such as cotton yarn and raw cotton, as well as changes in geopolitical situations, all of which can impact stock prices. However, a clearer picture emerges when we look at some of the relevant statistics. This analysis will examine Indian textile companies across the value chain—from yarn manufacturers to fabric producers, apparel makers, and export manufacturers.

Market Capitalisation

When examining the distribution of textile companies in the stock market according to their market capitalisation on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), most of the stocks are concentrated in the mid-cap and small-cap segments. This reflects the current stage of development that textile companies are at within the country. Market capitalisation is calculated by multiplying the total outstanding shares by the current stock price. Small-cap stocks have a market capitalisation of up to ₹500 crore, mid-cap stocks range from ₹500 crore to ₹7,000 crore, large-cap stocks range from ₹7,000 crore to ₹20,000 crore, and mega-cap stocks exceed ₹20,000 crore.

The latest data shows that approximately 87 per cent of companies in both indices, and most textile stocks, fall within the mid- to higher-risk category. Additionally, their dividend yields are generally higher compared to those of large-cap stocks.

Graph 1: Stocks according to market cap in BSE (in number and %)

Source: BSE

The current composition of companies in both stock markets suggests that many are either in their early stages or positioned for long-term growth. However, when considering the weight of sectoral indices, the textile sector barely registers, with its weight being well below 1 per cent. In the BSE, the sectoral weight is similarly insignificant. Even in the midcap index, the textile sector holds the lowest weight at just 1.59 per cent. This is surprising, given that the textile industry is the second-largest employer in the country after agriculture. A similar trend is observed in the agricultural sector, despite it being the largest employer and a key contributor to GDP and total manufacturing output.

Considering the relationship between market capitalisation and its influence on stock indices, it is important to note that market capitalisation determines the level of influence a stock has within an index. However, based on data from both the NSE and BSE, none of the textile companies hold significant weight in these indices.

Graph 2: Stocks according to market cap in NSE (number and %)

Source: NSE

Comparison of major textile companies

It is essential to analyse some of the leading textile companies, considering the basic overview of the sector. Among the companies examined, Page Industries, Gokaldas Exports, and KPR Mills have the highest market capitalisation within the textile sector. Of these, only the first two are classified under the mega-cap group.

If one must analyse the market capitalisation of these companies, analysing the stock prices also becomes evident. Being some of the largest companies by revenue, the price-to-earnings ratio of these companies is more or less stable when analysed from n month’s perspective.

In addition to market capitalisation, analysing the stock prices of these companies is also important. As some of the largest companies by revenue, their price-to-earnings (P/E) ratios remain relatively stable when viewed over a period of several months.

Graph 3: Market capitalisation of selected textile companies (in ₹ cr)

Source: NSE

Table 1: Business portfolio of some major companies