Key Financial Performance

Q2 FY27 EBITDA Margin Improvement: The company reported significant improvement in EBITDA margin to 19.8% in Q2 FY27 compared to 10.4% in Q2 FY26. Key drivers included improved demand for cotton and blended yarn, operational efficiency improvements, and stable cotton prices.

Spread Performance: Q1 FY27 spread was around INR133 per kg, while Q2 FY27 spread improved to INR141 per kg. Management expects spreads to remain between INR130-145 per kg for the next 3-4 months.

Depreciation Change: There was a change in depreciation method resulting in a difference of approximately INR7-8 crores. The expected run rate for depreciation from next quarter is around INR17 crores versus INR24 crores in last quarter and INR14 crores in current quarter.

Trade Receivables: Increased from INR396.2 crores in March 2026 to INR473.5 crores in September 2026, attributed to increased turnover. The number of days outstanding remained consistent at 58 days.

Capacity Expansion Project

Odisha Greenfield Expansion: The 150,000 spindle project with INR1,000 crores investment continues to progress on schedule. Building construction is almost complete, machinery has been ordered and started arriving, with erection currently underway.

Timeline: Commercial production expected within 30-40 days from October 30, 2026. Project completion expected by March 2027.

Revenue Projections: Expected revenue contribution of INR150-200 crores in FY27 and INR1,200-1,300 crores in FY28 from the new capacity.

Margin Expectations: Odisha unit margins expected to be 4-5% higher than existing operations due to better power costs and operational efficiency.

Government Incentives:

  • 30% capital subsidy (INR200-220 crores over 5 years)
  • Power cost at INR4 vs INR6 in Punjab for 10 years
  • Employment guarantee scheme of INR7,000-8,000 per labor per month for 5 years
  • Land price rebate upon achieving 1,000 employment

Market Demand & Export Performance

Geographic Revenue Mix: Export markets contributed 52% of total revenue in Q2 FY27.

Key Export Markets: Strong demand from China and Bangladesh continues robust. China imports due to 40% import duty on cotton and 3% duty on cotton yarn, making Indian yarn competitive. Bangladesh demand consistent at 45,000-50,000 tons despite energy crisis.

Domestic Market: Moderated performance but expected to pick up post-Diwali with traditional peak season from Diwali to Holi.

Order Visibility: Company has visibility till March 10, 2027, with strong demand outlook.

Raw Material & Cotton Prices

Current Cotton Prices: Indian cotton prices have moderated from peak of INR70,000 per candy to INR65,500 per candy as of October 2026.

International Comparison: Imported cotton landing price around INR67,000 per candy, with 2-3% gap to domestic prices.

Price Outlook: Expectation that Indian cotton prices may decline further after Diwali with increased arrivals. Government import duty waiver extended till October 31, 2026, with expectations of further extension.

Procurement Strategy: Company sources cotton from 10 countries daily based on best available deals. Maintains 5-6 months cotton inventory with 3-month order book for yarn.

Future Plans & Guidance

Phase 2 Expansion: Land available in Odisha for additional 300,000 spindles after current 150,000. Considering garment sector expansion in second half of next year.

Debt Levels: Peak long-term debt expected to be around INR700-750 crores by March 2027, with working capital not exceeding INR200 crores.

FY28 Outlook: Previous guidance of INR4,000 crores revenue with 15-16% margins, but indications suggest potential for better performance. Management assures at least 15% margins.

Subsidiary Update

Fabric and Garment Companies Merger: Two companies planned for merger with Sportking India. Financial performance for H1 FY27 approximately INR70-80 crores combined revenue at 15-18% EBITDA margins. Merger expected within couple of months through preferential share allotment (non-convertible) and minor cash transaction (INR25-30 crores).

Sustainability Initiatives

Solar Power Project: Successfully commissioned solar power project expected to reduce annual power costs by approximately 15%.

Industry Trends

Global Sourcing Shift: Global brands diversifying sourcing strategies with emphasis on supply chain resilience, reliability and sustainability. India well-positioned due to integrated textile ecosystem and cost competitiveness.

Trade Agreements: India-UK Free Trade Agreement and potential India-EU trade agreement expected to strengthen India's competitiveness in textile markets.

Industry Consolidation: Divergence in margins between compliant and non-compliant players, with GST compliance being a significant factor. Limited new spindle announcements despite improved margins.