Shares of textile companies such as Gokaldas Exports, Vardhman Textiles, Arvind, Welspun Living, Kitex Garments, Indo Count Industries and Trident slid up to 6 per cent on Tuesday after the government of the notified rates and value caps, dealing a blow to exporters.
KEY HIGHLIGHTS
- Textile stocks fall up to 6% as RoDTEP benefits halved
- Vardhman, Gokaldas, Arvind, Welspun Living among top losers
- Know more about RoDTEP scheme and its impact
The decision follows a significant cut in the budgetary allocation for RoDTEP for FY27 to ₹10,000 crore, compared with ₹18,232.5 crore in the previous fiscal.
RoDTEP scheme & impact
The scheme for Remission of Duties and Taxes on Exported Products (RoDTEP) has been in force for exports made from January 1, 2021, the Directorate General of Foreign Trade (DGFT) website reads. It is designed to reimburse exporters for various taxes, duties and levies incurred at the central, state and local levels during the manufacture and distribution of goods that are not refunded under any other existing mechanism.
Under the scheme, eligible exporters receive refunds in the form of transferable electronic scrips, which can be used to pay basic customs duty.
The move is expected to raise the cost of exporting from India by cutting refunds of embedded domestic taxes that exporters are otherwise unable to recover, thereby impacting margins in an already competitive global market.
Stocks in action
Among individual stocks, Vardhman Textiles fell over 6 per cent to a low of ₹502.30 on the BSE from the previous close of ₹529, though it later recovered to trade at ₹529 at 12.07 pm.
Gokaldas Exports declined nearly 6 per cent in early trade to ₹703.20 from ₹746.60, and was quoting 5 per cent lower at ₹712.20 around 12.06 pm.
Arvind dropped 6 per cent to ₹352, while Welspun Living slipped 5 per cent to ₹132.80. Indo Count Industries and Kitex Garments were down 3–4 per cent.
The sharp correction comes a day after most of these stocks had rallied, tracking positive global cues following a US Supreme Court ruling declaring Trump-era tariffs illegal. The reversal in sentiment underscores investor concerns over the earnings impact of reduced export incentives.
Yarn, fabric exporters to face near-term margin pressure: Elara Capital
Elara Capital said the government’s decision to cut RoDTEP rates will weigh on textile exporters, particularly yarn and fabric players. The brokerage noted that RoDTEP benefits for cotton yarn exporters will fall from about 3.4 per cent to 1.7 per cent of free on board (FOB) value, and for fabric exporters from around 3.5 per cent to 1.75 per cent, creating near-term margin pressure on shipments already executed at earlier incentive assumptions.
While Elara expects companies to gradually pass on the impact through repricing and renegotiation of new orders, it warned that integrated players with meaningful yarn and fabric export exposure, such as Vardhman Textiles and Arvind, could face a 4–6 per cent hit to FY27–28 earnings if the reduction is not fully passed on.
Nitin Spinners faces similar risks, while KPR Mill is relatively insulated due to its higher share of value-added garment exports. The brokerage also flagged the sharp cuts in FY27 budget allocations for RoDTEP and RoSCTL as a signal of tighter fiscal support, raising the risk of a similar rate rationalisation in RoSCTL, which would have a more material impact on garment and home textile exporters, including KPR Mill, Gokaldas Exports, S.P. Apparels, Pearl Global, Welspun Living and Indo Count Industries.
Elara cautioned that the reduction could dent India’s export competitiveness amid pending FTAs and existing tariff challenges, though it maintained its earnings estimates and reiterated Arvind as its top sector pick with a sum-of-the-parts target price of ₹538.