Strong Q1 beat, margins sustain but improvement hedged

Delivered ₹875 Cr; Q4 FY26 also ~₹860 Cr (highest ever 2nd time confirmed)

Yarn realization EBITDA margin 17.78% vs 14.02% prior year (+376 bps); gross margins 40%+ vs 34–35% prior

₹1.2–1.5 Cr benefit in Q1; ₹50 Cr annual EBITDA run-rate from Q4 onwards post-full operationalization Q3 FY27

Yarn pass-through 120–125% of raw cost increase; fabric only 100% (actual cotton cost pass-through); management expects improvement in coming quarters

Timeline disclosed as schedule; partial benefits expected H2 FY27 (undefined magnitude in Q1); full ramp timeline risk 6–8 months for fabric

Q4 FY26 spreads ₹110/kg; Q1 FY27 and current ₹130/kg. Cotton parity corrected (Indian was 5–7% premium in 2023–24, now parity -1–2%). China demand supporting (India exports 110–115M kg CY26 vs 90–100M kg prior).

Prior call: fabric margins improving as product mix shifts. This call: fabric not yet improving (only cotton cost pass-through, not premium add). Improvement now expected in 'coming quarters' (unspecified timeline).

Prior guidance ₹50 Cr annually from renewable energy capex; Q1 partial realization ₹1.2–1.5 Cr; full run-rate Q4 FY27 onwards. On schedule, transparent on phasing.

Prior guidance ~₹1,100 Cr capex add ₹1,000+ Cr revenue by FY28. This call: fabric ₹500+ Cr (FY27~₹700Cr→FY28 ₹1,200Cr); yarn capacity mostly internal consumption (60%) for fabric. Clarifies mix but not revenue upgrade.

US tariff regime impact: knit fabric utilization 55–60% vs pre-tariff baseline 60–65%. Major US presence impacted by changing tariff rates/regulations. Headwind ongoing, no recovery timeline given.

Spreads ₹110→₹130/kg from improved demand, capacity consolidation, and cotton parity correction. Indian premium 5–7% (2023–24) now parity -1–2%. Volume decline due to internal fabric consumption and logistics delays, not demand weakness.

Margins expect to sustain; cost initiatives ongoing. China not sole reason; domestic demand also good. Passing on raw material increases; no reliance on inventory gains. Margins maintain, unlikely to improve significantly.

No volume de-growth; fabric internal consumption up + logistics stock delays. Running at 98% capacity utilization same as prior. Cost saves from power (~0.5% EBITDA), energy efficiency, automations—permanent nature going forward. Input prices up, not down; spreads from realization beat raw cost.

Yarn pass-through 120–125% of raw cost increase; fabric only 100% pass-through. Expect this to improve in coming quarters as cotton prices settle and global demand firms. New fabric products (yarn dyes, solids) to match or exceed yarn margins long-term.

Weaving couple of months (Sept–Oct); processing ~Diwali (~Nov); spinning December. Fabric revenue FY27 ₹700Cr→FY28 ₹1,200Cr (~₹500Cr incremental). Of new yarn capacity, 60% internal fabric consumption, 40% external sales.

Q1 benefit ₹1.2–1.5 Cr; remainder to come; annual EBITDA impact ₹50Cr once full run (Q4 FY27 onwards). Blended power cost target ~₹5.50/unit when 60% renewable capacity online.

Power savings ~0.5% EBITDA; major driver yarn realization (gross margins 34–35%→40%+). Inventory gains minimal per policy. Working capital no major change.

Maintain 16–20% target; endeavor to reach upper band but no firm commitment. Value-added products continuous evolution (become commodity after 3–5 years). Fabric mix to add 100–150 bps as percentage rises 20–21%→30%.

Currently 55–60% utilization; pre-tariff regime 60–65%. Major US presence impacted by frequent tariff rate changes and regulatory shifts. Uncertainties still prevailing; recovery timeline unspecified.

Industry structure positive; weak players exiting consolidating supply. Demand/supply finely balanced. FTA (UK, EU) opening new markets; garmenting and home textiles key growth. Long-term outlook bright if Indian garment industry scales.

No firm plan yet for next phase. Open to both organic and inorganic in garmenting. Home textiles and garmenting both strong growth areas; Europe opening new home textile opportunities. Evaluation underway; no new capex committed beyond FY28.

Capacity addition (35mm meters fabric, 74k spindles yarn) to add ₹500+ Cr fabric revenue; existing base slightly higher. Ramp timeline 6–8 months fabric; yarn 100% by 31 Mar 2027.

Q1 delivered 17.78% (midpoint). Power savings ₹50Cr annually (partial Q1), fabric mix uplift 100–150 bps by FY28. Management won't commit to improvement beyond sustained band.

Weaving Sept–Oct, processing ~Nov (Diwali), spinning Dec. No new capex beyond FY28; post-FY28 options (garmenting/home textiles) under evaluation.

Earnings heavily exposed to cotton prices and global supply/logistics. Spreads ₹130/kg at current commodity cycle peak; risk of reversion post-tariff normalization or supply normalization.

Knit fabric business heavily dependent on US market; utilization 55–60% vs pre-tariff 60–65%. Frequent tariff rate/regulatory changes creating ongoing uncertainty and depressing orders.

Fabric capacity ramp expected 6–8 months to full utilization; fashion-oriented processing historically slow. Risk of extended ramp, lower-than-expected margins if demand soft or competition intense.

Fabric margins not yet expanding vs yarn (only cost pass-through 100%, yarn 120–125%). Risk that fabric remains commodity-like with thin margins even post-expansion.

Current spinning capacity fully utilized (98%); new capex mostly for fabric/value-add. Garmenting/home textiles entry under consideration but no firm plan; organic or inorganic entry carries execution risk.