US tariffs hurting supply chains, raising raw material prices, says Vishal Fabrics CFO
News Summary
Vishal Fabrics' CFO states that the additional 50% US tariff on textile and apparel imports, pushing total duties to 59-64%, is disrupting global supply chains and raising raw material costs. Despite no direct exposure to the US market, Vishal Fabrics faces challenges from a 10-15% increase in cotton and polyester yarn prices due to supply disruptions. The company is mitigating these challenges by working closely with supply chain partners in India, Bangladesh, Latin America, and South Africa, aiming to finalize terms by Diwali to distribute costs and stabilize margins. Vishal Fabrics' domestic market is strong, with exports forming only 2-3% of its topline, but it plans to increase this to 10% by focusing on markets with stable tariffs such as Bangladesh, Latin America, South Africa, Australia, Thailand, and Panama. The company projects over ₹1,600 crore revenue for FY26, with a potential additional ₹100-150 crore if tariff issues ease. Vishal Fabrics also advocates for increased RoDTEP incentives and faster GST refunds (15-30 days instead of 60-90) from the Indian government to ease working capital pressure across the textile sector. The CFO views proposed GST 2.0 reforms positively, expecting reduced raw material costs and improved export competitiveness.
Background
Under the current US President Donald J. Trump, trade protectionist measures, particularly in the form of tariffs, have been a hallmark of US economic policy. The imposition of additional duties on specific imports aims to protect and revitalize domestic US industries, but globally, such actions often lead to supply chain disruptions and increased costs. India is one of the world's leading textile producers and exporters, with its textile industry playing a crucial role in the national economy. To maintain its international competitiveness, the Indian government implements export incentive schemes like the Rebate of State and Central Taxes and Levies (RoDTEP) and continually pursues Goods and Services Tax (GST) reforms to optimize the business environment and reduce production costs.
In-Depth AI Insights
How might the sustained US protectionist stance, exemplified by these tariffs, reshape global textile supply chains and investment flows beyond immediate cost impacts? - The US tariff policy, as a continuation of Trump's 'America First' agenda, aims to reshore manufacturing but is more likely to accelerate the 'de-risking' and diversification of global supply chains rather than a simple reshoring. - Exporting nations like India will intensify efforts to penetrate non-US markets, forming new trade corridors and production hubs. Vishal Fabrics' pivot to Latin American, Southeast Asian, and African markets signals an intensification of regionalized and multipolar trade patterns. - Long-term, this will drive global textile investment away from models heavily reliant on a single large market (like the US) towards more resilient and geographically diversified setups, mitigating geopolitical and trade policy risks. Could the Indian government's move to accelerate GST refunds and increase RoDTEP incentives signal a broader industrial strategy and commitment to export-led growth? - The Indian government's actions are not merely about alleviating short-term working capital pressures but represent a commitment to its 'Make in India' and export growth strategies. Enhancing domestic industrial competitiveness through internal policy optimization becomes crucial amidst rising global trade protectionism. - Timely refunds and increased export incentives effectively reduce capital costs and export barriers for businesses, encouraging greater participation in international trade, especially among SMEs, and thereby boosting overall export volumes and market share. - This policy support also reflects India's ambition to position itself as an alternative in global supply chains, particularly in terms of labor costs and production flexibility, to attract international buyers seeking diversification away from US-China trade tensions. Can the strategy employed by companies like Vishal Fabrics, maintaining profitability and growth amidst tariff headwinds, offer a replicable model for other impacted industries? - Vishal Fabrics' success stems from its reliance on the domestic market, diversified supply chain management, and proactive pursuit of emerging export markets. This offers a clear roadmap for other global manufacturers facing similar challenges. - Key elements include: 1) having robust domestic demand as a buffer; 2) proactively establishing partnerships with global supply chain players to distribute risk; 3) continuously investing in technology upgrades and cost-efficiency to enhance product competitiveness; and 4) actively identifying and entering new export markets with relatively stable tariff environments for geographical diversification. - This model emphasizes adaptability, resilience, and strategic market expansion rather than passively awaiting policy changes, making it particularly relevant for businesses that cannot directly influence trade policies but must operate within their frameworks.