Government Mulls Relaxing FDI Rules for E-Commerce Exports — Who Wins, and by how much?
On 25 September 2025 Reuters reported that the Directorate General of Foreign Trade (DGFT) circulated a confidential draft that would permit foreign e-commerce platforms (e.g., Amazon) to directly purchase Indian goods for export via dedicated export entities, subject to compliance and penalties. The draft is explicitly export-only and requires cabinet approval; timing for finalisation remains unclear. This is the immediate policy event investors should watch.
Why the change matters
India’s goods exports (FY25) were roughly ₹3.12 lakh crore (~US$36.6bn) for textiles and apparel segments — textiles account for a substantial share of export volumes and a direct channel to global marketplaces can materially shorten time-to-market. The policy’s objective (per reporting) is to lift export participation of small sellers (currently <10%) and to support platform goals (e.g., Amazon cited an ambition to lift exports from $13bn since 2015 toward much higher targets). If implemented, this could accelerate export volumes and unit economics for many MSME sellers.
Textiles & Apparel
Investors should watch export revenue share, EBITDA margin, inventory turns and leverage. India textile exporters posted FY24–FY25 revenue growth and modest margin improvement: sector EBITDA margins among organised apparel players are in the ~9–13% band (industry trackers report mid-single-digit to low-teens operating margins in FY25), with export-heavy firms often delivering EBITDA margin ≈11%. Healthy listed textile names often target Net Debt / EBITDA <2.0x; firms above 2.5x are leverage-sensitive if working capital expands. Expect quicker order conversion and higher inventory days if platforms hold exported inventory — test models with inventory days +10–30% scenarios.
Pharmaceuticals & CDMOs
Leading domestic pharma players show wide margin dispersion. A concrete example: Mankind Pharma’s Q1 FY26 presentation reported an EBITDA margin of 23.8% (Q1 FY26) and improving ROCE metrics — a template for consumer/OTC players riding platform exports. For export-oriented contract manufacturers, expect EBITDA margins typically ~15–25%, with Net Debt/EBITDA often <1.5x for defensive mid-caps but vulnerable MSMEs may run >2.0x leverage. Regulatory compliance and GMP certification remain gating constraints (and can affect margin conversion).
Electronics & Components (EMS / small appliances)
Industry reports (PwC, SAS Partners) show India’s electronics objective and rising exports; typical listed EMS/OEM incumbents trade with EBITDA margins ~6–12% depending on product mix. For capital-light electronics suppliers (components / accessories), EBITDA margin nearer 8–10% and Net Debt / EBITDA 0.5–1.5x are common. Unit economics for cross-border e-commerce rely on logistics cost per order and return rates; model take-rate / fulfilment cost per order for margin break-even (>10% of AOV is risky).
Agri-processing & Food (packaged foods)
Agri-processors tend to have lower operating margins; listed players show EBITDA margins ~6–12% (higher for branded, lower for commodity processors). Working capital days (inventory + receivables) are critical: watch OCF / Sales and current ratio. Firms with Operating Cash Flow / Net Income >1.0 and Net Debt/EBITDA <2.0x will scale export pilots more comfortably.
Logistics & Fulfilment partners
Logistics partners that handle cross-border fulfilment often deliver EBITDA margins ~7–10%; their incremental scale benefits (higher utilisation) can lift margins 150–300 bps. Track asset turns, EV/EBITDA and free cash flow conversion.
What investors should do now
1. Map exposure: identify portfolio names with >20% seller exposure to platform exports or supply-chain links (logistics, packaging).
2. Wait for formal policy text: do not assume the draft will pass unchanged; focus on cabinet approval and DGFT notification dates.
3. Screen for unit economics: prefer companies where adjusted EBIT margin is positive or improving and Net Debt/EBITDA <2x.
4. Use event-driven sizing: initiate small positions on confirmed pilots or sanction letters; increase on clear tariff/compliance frameworks.
5. Hedge distribution risk: consider short-dated hedges or reduce size where seller concentration or low cash conversion is evident.
Conclusion
The DGFT draft of 25 September 2025 opens a possible new export channel that could materially improve market access for Indian SMEs. Textile, pharma, electronics and agri-processing could be principal gainers – but investors must demand hard, prospectus-level unit economics, low leverage and explicit policy clarity before re-rating names. The policy’s final shape and cabinet timetable will determine who wins and who gets squeezed.
The image added is for representation purposes only
