Textile stocks Gokaldas Exports, Vardhman Textiles, Arvind, Welspun Living fall as government halves RoDTEP benefits, what is RoDTEP and its benefit

Shares of textile companies such as Gokaldas Exports, Vardhman Textiles, Arvind, Welspun Living, Kitex Garments, Indo Count Industries and Trident fell as much as 6 percent on Tuesday after the government capped benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme at 50 percent of the notified rates and value limits, dealing a blow to exporters.

KEY HIGHLIGHTS

The decision follows a significant reduction in the budgetary allocation for RoDTEP for FY27 to ₹10,000 crore, compared to ₹18,232.5 crore in the previous fiscal.

RoDTEP scheme & impact

The Remission of Import Duties and Taxes on Exported Products (RoDTEP) scheme is in effect for exports taking place from January 1, 2021, according to the website of the Directorate General of Foreign Trade (DGFT). It is intended to reimburse exporters for various taxes, levies and levies incurred at central, state and local levels during the production and distribution of goods and which are not refundable under any other existing mechanism.

Under the scheme, eligible exporters will receive refunds in the form of transferable electronic scrips, which can be used to pay basic customs duties.

This move is expected to increase the cost of exports from India by reducing refunds on embedded domestic taxes that exporters would otherwise not be able to reclaim, eroding 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 its previous close of ₹529, although it later recovered to trade at ₹529 at 12.07 pm.

Gokaldas exports fell nearly 6 per cent to ₹703.20 from ₹746.60 in early trade, trading 5 per cent lower at ₹712.20 around 12.06 pm.

Arvind fell 6 per cent to ₹352, while Welspun Living fell 5 per cent to ₹132.80. Indo Count Industries and Kitex Garments fell 3-4 percent.

The sharp correction comes a day after most of these stocks recovered, following positive global cues after a U.S. Supreme Court ruling that declared Trump-era tariffs illegal. The turnaround in sentiment underlines investor concerns about the profit impact of reduced export incentives.

Yarn and fabric exporters are facing margin pressure in the short term: Elara Capital

Elara Capital said the government’s decision to reduce RoDTEP rates will weigh on textile exporters, especially yarn and fabric players. The brokerage noted that RoDTEP benefits for cotton yarn exporters will decline from about 3.4 percent to 1.7 percent of the free on board (FOB) value, and for fabric exporters from about 3.5 percent to 1.75 percent, creating near-term margin pressure on shipments already fulfilled based on previous incentive assumptions.

While Elara expects companies to gradually pass on the impact through price revisions and renegotiations of new orders, the company warned that integrated players with significant exposure to yarn and fabric exports, such as Vardhman Textiles and Arvind, could expect a 4-6 percent drop in profits if the cut is not fully passed on.

Nitin Spinners faces similar risks, while KPR Mill is relatively isolated due to its larger share of value-added apparel exports. The brokerage also flagged the sharp cuts in budgetary allocations for RoDTEP and RoSCTL for FY27 as a signal of tighter fiscal support, raising the risk of similar tariff rationalization at RoSCTL, which would have a more material impact on apparel and home textiles exporters including KPR Mill, Gokaldas Exports, SP Apparels, Pearl Global, Welspun Living and Indo Count Industries.

Elara warned that the cut could hit India’s export competitiveness amid pending FTAs ​​and existing tariff issues, though it maintained its earnings estimates and reiterated Arvind as its pick for the top sector with a sum-of-parts target price of ₹538.

Abhinav Tiwari, research analyst at Bonanza Portfolio Ltd, said textile stocks are currently seeing divergent trends as lower export incentives weigh on earnings while improving US trading conditions lift sentiment.

He noted that the government’s decision on the RoDTEP scheme effectively reduces reimbursements for embedded costs such as energy and logistics, putting immediate pressure on margins in a sector that already operates with thin spreads, especially for high-export garment manufacturers. Because many export orders are booked months in advance, taking into account previous stimulus levels, companies may cushion the impact or risk losing competitiveness by raising prices, weakening earnings visibility and valuations in the short term.

“At the same time, sentiment has improved following the removal of Trump-era US tariffs, removing major uncertainty for Indian textile exports to the US. Lower tariff risk improves demand visibility and supports order flows, partially offsetting the RoDTEP impact.”

“Pearl Global is relatively better positioned due to its diversified production in India, Bangladesh, Vietnam and Guatemala, which cushions tariff and stimulus shocks,” Tiwari added.

Published on February 24, 2026