Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil BBB+/Stable/Crisil A2’ ratings on the bank facilities of Himatsingka Seide Ltd (HSL; part of the Himatsingka group).

 

The ratings factor in the recent increase in US tariff and HSL’s exposure to the country, which could impact the operating income and profitability as HSL derives 50-60% of its income from sales to the US. However, the ratings reflect that for the sale of most home textile products to its US customers, the company uses cotton imported from the US. Thus, HSL is exempted from tariff to the extent of proportion of US-imported cotton present in the final product. Effectively, the tariff on HSL will be at 35-38%. This would place HSL close to exporters from major competing nation (China), providing some support to operating income and operating margin. Nevertheless, with high tariff and some expectation of demand moderation in the US, revenue for fiscal 2026 could see a de-growth of 10-15%. Also, with part of the high tariff expected to be borne by HSL, the operating margin could also see a 2-3% de-growth this fiscal.

 

However, the group benefits from strong operating efficiency arising from vertically integrated businesses (manufacturing and distribution) in the home textile segment as well as the products being part of the luxury segment, which is more demand inelastic. The ratings also factor in the healthy market position of the Himatsingka group in the drapery, upholstery, terry and bedding segments. The company raised Rs 400 crore via a qualified institutional placement (QIP) in October 2024, of which, Rs 300 crore is to be utilised for debt reduction, as on as on August 12, 2025, Rs 267.40 crore has been repaid. The remaining amount is retained in the Escrow Account which will be utilised for repayment of debt obligations. These strengths are partially offset by stretch in the working capital, modest financial risk profile and exposure to various risks posed by volatility in cotton prices and foreign exchange (forex) rates, susceptibility to slowdown in the end-user market and competition in the home textile segment.

 

The operating income is projected to decline by 10-15% from Rs 2,778 crore in fiscal 2025 to Rs 2,400-2,500 crore in fiscal 2026 if tariff continues to be high. Increase in tariff, which is higher than other competing nations, has reduced export attractiveness of the company. Moreover, the adverse impact of inflation in the US could also reduce the demand for home textile products. Additionally, the company is focused on expanding its presence in domestic market and other jurisdictions. Any higher-than-anticipated decline in operating profit will remain monitorable.

 

The operating margin is expected to decline by 2-3% in fiscal 2026 from 20.4% in fiscal 2025. The operating margin is likely to be impacted owing to decline in gross margin and reduced operating leverage. In the first quarter of fiscal 2026, HSL recorded revenue of Rs 657 crore at operating margin of 18.4%; 10% decline in revenue on-year due to tariff uncertainties. Crisil Ratings will continue to monitor the HSL’s ability to sustain profitability amid tariff hikes.

 

The financial risk profile is expected to be impacted following increase in US tariff. With the decline in profitability, the debt protection metrices are expected to deteriorate. Interest coverage ratio is expected to decline to 1.5-1.6 times in fiscal 2026 from 1.8 times in fiscal 2025. The company raised Rs 400 crore through QIP in October 2024, of which Rs 300 crore was to be utilised for debt reduction as on August 12, 2025. However, only Rs 267.40 crore has been repaid so far. With the reduction in debt following QIP, the overall capital structure has improved albeit remains leveraged. The adjusted gearing improved from 2.8 times as on March 31, 2024, to 1.63 times a year later.

 

HSL’s working capital cycle remains stretched as reflected in receivables increasing from 99 days as on March 31, 2023, to 128 days a year later and to 155 days as on March 31, 2025. Inventory increased as well from 137 days as on March 31, 2023, to 161 days a year later and to 166 days as on March 31, 2025. Further stretch in the working capital cycle will remain a downward sensitivity factor.

 

Liquidity should suffice to cover the yearly debt obligation of Rs 70 crore in fiscal 2026. However, in case of adverse impact on cash accrual, HSL’s ability to raise further equity and refinance to meet the fund flow mismatch will remain a watch out.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of HSL and its subsidiaries (owned directly or indirectly), Himatsingka Wovens Pvt Ltd, Himatsingka Holdings North America, Inc, and Himatsingka America, Inc. This is because all the companies, collectively referred to as the Himatsingka group, are under a common management and have strong operational and financial linkages with past instances of support.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Healthy market position in the home textile segment: The Himatsingka group is among the top five home textile players in India. It has high-end manufacturing facilities for bedsheets (61 million meters per annum or mmpa), terry towels (25,000 tonne per annum), spinning (211,584 spindles) and drapery and upholstery fabric manufacturing (2 mmpa). Foray into the terry towel segment improved customer diversity, and capacity utilisation of terry towels increasing from 57% in fiscal 2023 and 67% in fiscal 2024 to 68% in fiscal 2025 has enhanced the overall business risk profile.

 

The group has licences for brands and caters to the private labels of major retailers. The company has also added clients in terry towel and bedding verticals, which should help in moderating client concentration over the long term.

 

HSL has tied up with Applied DNA Sciences (ADNAS), a leading authentication and supply chain security company, to ensure tagging of all kinds of cotton, including PIMA cotton that is grown in the US. This will ensure that the purity of the product can be verified at each point along the supply chain. The group has registered three brands — PimaCott, HomeGrown and Organiccott — on this platform. Such initiatives will help attract customers and augur well for the business over the medium term.

 

The company has also launched three owned brands in India — Himeya, Liv and Atmosphere — and planned to increase its market share. This should aid in the growth of the operating income.

 

• Strong operating efficiency: The manufacturing capability is complemented by vertical integration into distribution and retail. The distribution business provides significant market reach in the America, an efficient warehousing infrastructure, a global sourcing base and access to large customers such as CostCo, Macy’s and Walmart in the home textiles space. However, with stability in domestic cotton prices and restocking by big box retailers in key overseas markets, HSL recorded operating margin (earnings before interest, taxes, depreciation and amortization [Ebitda]) of 20.4% in fiscal 2025.

 

Weaknesses:

• Modest financial risk profile: The group's balance sheet has been leveraged owing to sizeable capital expenditure (capex) of Rs 1,950 crore undertaken over fiscals 2016-2020 (to expand sheeting capacity and install a high-count spinning unit and a terry towel unit), acquisition of brands and high working capital requirement. This resulted in lower accretion to networth in the past three years.

 

Moreover, operations are working capital intensive with high reliance on short-term debt owing to ramp up in utilisation in newly installed capacities, sizeable inventory and large credit offered to customers.

 

As a result, the interest coverage ratio is expected at 1.5-1.6 times over the medium term as against around 1.8 times in fiscal 2025. Any significant addition of debt or higher-than-expected decline in profitability, straining the debt protection metrics will remain monitorable.

 

• High concentration on US market: HSL derives 50-60% of its operating income from exports to the US. Due to the recent tariff hike of 50% on Indian exports, which is significantly higher than other competing countries such as China (30%) and Pakistan (19%), the company is at competitive disadvantage. The overall operating income is expected to decline by 10-15% in fiscal 2026 if tariff remains high.

 

The company uses significant amount of cotton imported from the US in its export to the US, which is exempted from the increased tariff, thus the effective tariff shall be 35-38%. However, the company may absorb some impact of the tariff, which is expected to impact the operating profitability as well, which is likely to decline by 2-3% in fiscal 2026.

 

Diversification in other jurisdictions and increase in domestic presence are expected to cushion the loss in US sales and will remain monitorable.

 

• Exposure to volatility in cotton prices and forex rates: The operating margin remains susceptible to fluctuation in prices of key raw material, cotton (which forms 50% of the cost of yarn). Cotton prices have remained stable for the past few quarters, however, they are sensitive to international demand and supply factors, rainfall and pest attacks. Moreover, HSL is a net exporter and derives nearly 90% of its revenue from exports. While it hedges its forex exposure, volatility in the forex rates could impact profitability adversely. Therefore, movements in forex rates and cotton prices will be monitorable.

Liquidity: Adequate

Cash surplus stood at Rs 115 crore as on March 31, 2025. In the absence of any major debt-funded capex and given the adequate cash accrual, along with existing cash buffer, the company will cover debt obligation for fiscal 2026. The company also has access to fund-based limit of Rs 1,096 crore with 12-month average utilisation of 85-90% ended August 31, 2025.

Outlook: Stable

Crisil Ratings believes HSL should benefit from the differentiated product and the ability to expand in domestic and well as other jurisdiction should offset some impact of decline in US sales if tariff remains high. Stable raw material prices and increase in demand should aid in increasing operating income. Better utilisation of the terry towel and bed linen capacities, high operating margin and benefits of backward integration from the spinning unit will enhance the overall business risk profile of the Himatsingka group. Gradual deleveraging, in the absence of any major capex, will also aid the overall financial risk profile of the company.

Rating sensitivity factors

Upward factors:

• Strong business performance, resulting in high cash accrual and enhanced return on capital employed
• Sustained improvement in gross debt to Ebitda ratio to below 3.50 times

Downward factors:

• Weak business performance and higher than expected reduction in revenue or operating margin on a sustained basis, impacting cash generation
• Lower-than-anticipated improvement in debt metrics, owing to substantial debt, with large capex or stretch in working capital cycle; for instance, net debt to Ebitda remaining above 4.5 times on a sustained basis

About the Group

The Himatsingka group is a vertically integrated textile major with a global footprint. The group focuses on design, development, manufacture and distribution of home textile products. It operates one of the largest capacities in the world for bed and bath products, drape and upholstery fabrics, and fine count cotton yarn. Spread across North America, Europe and Asia, it owns or has licences for the largest brand portfolios in the home textile space. With over 8,000 people, the group continues to build capacities and enhance reach in the global textile space.

Any other information: Not applicable