Gokaldas Exports , a prominent textile player and major exporter to the US and European Union, has expressed strong support for the Free Trade Agreement between India and the European Union. The company views this development as a significant positive step for Indian textile and apparel manufacturers.

During a management interaction with CNBC-TV18 on Tuesday, January 27, Vice Chairman and Managing Director Sivaramakrishnan Ganapathi emphasized the importance of this agreement, noting that both the US and European Union represent substantial markets for Indian textile exporters.

Current Market Exposure and Growth Projections

The company's revenue distribution shows heavy reliance on the US market, while European Union exposure currently accounts for a smaller but growing portion of business.

Ganapathi expressed confidence that the EU revenue share will increase over the next 12 months, reflecting the company's strategic focus on diversifying its export markets.

Operational Capacity and Investment Strategy

Gokaldas Exports is currently operating at full capacity across all facilities. However, the company's capital expenditure approach reflects a cautious stance given current market conditions.

The management outlined their investment strategy:

• Current Status: Operating at full potential capacity
• Capex Approach: Slow and measured due to ongoing US tariff challenges
• Future Plans: Increased EU investments planned once FTA benefits materialize in 2027
• Margin Expectations: Anticipating improved margins on EU exports following FTA implementation

Impact of US Tariffs on Business Performance

Despite facing 50% tariffs on US exports, Gokaldas Exports maintains a robust order pipeline for the American market. The company's order book strength extends through the first quarter of financial year 2027, with additional orders flowing in for the second quarter.

While the order book remains resilient, margins have experienced significant pressure. US export margins have compressed to low single digits due to the tariff burden, though overall company margins are expected to remain in the high single digit range.

Trade Agreement Benefits and Market Outlook

Under the India-EU FTA framework, several Indian export categories will benefit from zero tariffs, including marine products, chemicals, textiles, footwear, consumer goods, base metals, and sporting goods. This comprehensive coverage positions textile exporters like Gokaldas Exports to capitalize on enhanced market access.

The company is yet to announce its December quarter results, which will represent the first complete quarter reflecting the full impact of 50% US export tariffs.

Stock Performance

Gokaldas Exports shares declined 7.50% during last Friday's market sell-off and have experienced significant correction from recent highs, falling approximately 50% from the 52-week high of ₹1,060.

Gokaldas Exports experienced its most significant single-day decline since April 2020, with shares plummeting 13% during intraday trading on January 8. The apparel manufacturer and exporter, which specializes in designing, manufacturing, and exporting garments for men, women, and children, saw its stock price fall to a low of ₹597.00 from the previous closing price of ₹684.10.

Stock Performance Analysis

The dramatic decline has pushed the stock to trade more than 50% below its all-time high, representing a substantial correction from peak levels. The company's market capitalization stood at ₹4,478.62 crores on Thursday.

Key Factors Behind the Decline

US Trade Policy Uncertainty

The ongoing uncertainty around trade agreements with the US has created significant visibility issues for exporters. Indian exports currently face a steep 50% tariff to the US, making products less competitive and raising concerns over margins, demand sustainability, and long-term profitability. The situation was further complicated by US President Donald Trump's approval of a bipartisan sanctions bill proposing a 500% tariff on countries continuing to do business with Russia, including India.

Critical Order-Booking Window

January represents a crucial period for locking bulk US orders for the summer and autumn seasons. Any disruption or delay during this critical window risks weaker revenue performance for the remainder of the year, adding pressure to export-oriented companies.

Heavy US Market Dependence

Companies like Gokaldas Exports derive 50-70% of their revenue from the US market, creating significant vulnerability to policy and demand shocks. This concentration increases exposure to geopolitical and trade policy changes.

Trading Activity and Technical Indicators

The stock witnessed exceptional trading activity with over 40 lakh shares traded compared to the 20-day average of 1.5 lakh shares, indicating panic selling or institutional exits rather than routine profit-booking.

Financial Performance

The company's recent financial results show mixed performance, with revenue growth offset by declining profitability.

Investment and Capacity Expansion

Despite market challenges, the company continues its investment program with ₹110 crores spent in H1 FY26 and a full-year estimate of ₹150 crores, reflecting continued focus on capacity expansion and modernization efforts. Established in 1979, Gokaldas Exports operates manufacturing facilities across India with an annual production capacity of millions of pieces and maintains a significant focus on sustainability and ethical practices.