Jute Manufacturers To See 15% Volume Growth In FY27 On Stronger Demand: Report

Jute manufacturers are expected to witness sales volume growth of 15% this financial year, supported by stronger demand and a favourable cost environment, a Crisil Ratings report said on Monday.

India's jute industry is set for a meaningful recovery this fiscal after two challenging years marked by weak demand, high raw material costs and pressure on profitability, the report said.

A revival in domestic demand, improving export prospects and softer raw jute prices are expected to drive growth, improve profitability and support the industry's credit profiles.

It said sales volumes are projected to grow around 15% this fiscal year, reversing an annualised decline of around 10% over the previous two fiscals.

The recovery is expected to be supported by stronger demand and a more favourable cost environment, it added.

The report further said domestic demand is projected to increase about 20% this fiscal, reversing a cumulative decline at a similar pace over the preceding two years.

The downturn was largely triggered by a sharp rise in raw jute prices, which manufacturers passed on to customers, dampening demand and prompting a shift towards lower-cost alternative packaging materials, it said.

With input costs now moderating, product prices are expected to soften, supporting a recovery in demand.

The rating agency said that export demand is also beginning to show signs of improvement.

Growth in downstream sectors such as home textiles, lifestyle products and other value-added jute applications is expected to support exports.

In addition, the rationalisation of US tariffs from the elevated levels seen last fiscal could improve the competitiveness of Indian jute products in global markets.

"While improving demand will support revenue growth, profitability is likely to receive an even larger boost from easing raw material costs.

Better crop output has improved domestic availability of raw jute and led to softer prices despite subdued imports. This is significant because raw jute accounts for 60-65% of the industry's operating expenses.

Lower fibre costs and improved capacity utilisation should drive up profitability. Consequently, operating margins are projected to expand by 130 basis points (bps) to nearly 9% in FY27, Crisil Ratings Senior Director Rahul Guha said.

Raw jute prices had risen by more than 10% last fiscal because of supply constraints; however, higher minimum support prices encouraged farmers to increase acreage, resulting in better crop output this year.

"The expected improvement in profitability this fiscal, combined with limited debt-funded capex, should strengthen credit metrics. Healthy cash accruals are likely to enable manufacturers to comfortably fund maintenance capex and working capital requirements while maintaining adequate liquidity," said the report.

Crisil Ratings Director Argha Chanda said that beyond the cyclical recovery, the industry stands to benefit from structural shifts towards sustainable materials.

"Growing environmental awareness, tighter rules on single-use plastics and rising preference for biodegradable alternatives are creating new opportunities for jute-based products. Emerging applications in geotextiles, agro-textiles, home decor, industrial packaging and other value-added segments are gradually expanding the addressable market. While value-added applications currently account for only 12% of revenue, they offer better realisations and could become important drivers of long-term growth," Chanda added.

However, Crisil Ratings said the pace and sustainability of the demand revival, particularly in export markets, will remain critical.

Equally important will be the trajectory of raw jute prices, as any sharp increase could once again pressure margins, while crop-related disruptions and changes in government policy support could also influence industry performance, it added.