VTM

For the year ended March 31, 2026 (FY26), VTM reported an 8% revenue growth, with profit after tax (PAT) shrinking by 75% year-on-year to 11 crores. The current year's EBITDA margin stands at 7.43%, a significant drop from the 19% achieved in FY25. This decline is primarily attributed to significant tariff discounts, mark-to-market losses, and increased raw material costs, impacting overall financial health.

Profitability was severely impacted by several factors, including a 20 crore hit from tariff discounts given to US customers to maintain business, a 2.3 crore mark-to-market loss on foreign currency convertible (PCFC) loans due to rupee depreciation, and a 15% increase in raw material prices, particularly cotton, exacerbated by geopolitical events. Additionally, provisioning for gratuity computation due to new labor codes and other discounts contributed to the margin pressure.

To de-risk from its heavy reliance on the US market, VTM is actively exploring new geographies such as Japan, Europe, UK, and Australia, leveraging new Free Trade Agreements (FTAs). The company expects these efforts to onboard new customers and bear fruit within the next 2-3 quarters, contributing to better visibility and profitability. This geographical diversification is considered crucial given past tariff experiences.

The company operates at approximately 80% overall capacity utilization, with greige fabrics running at 80-83%. New looms installed this year are expected to come into full production during Q1 and Q2 of the current financial year, contributing to future growth. Management aims for a peak revenue potential of 500-600 crores with current assets and full capacity utilization, potentially achievable this year or next.

VTM's inventory turnover days currently stand at 122 days, with inventory increasing from 92 crores to 150 crores. Management acknowledges this buildup and is implementing lean management principles and has hired an industrial engineering consultant to optimize stock turnaround and reduce inventory levels. The goal is to return to previous year's inventory levels within the next two quarters, improving working capital efficiency.

Despite US tariffs on goods reducing from 50-60% to 10%, VTM continues to provide an 18% discount to its US customers to maintain market share and business continuity. Management is actively negotiating with customers to reduce this discount, and some price increases have been secured for specific products. These renegotiated terms are expected to start reflecting positively in the balance sheet from the current quarter onwards.

For the current financial year (FY27), VTM targets a revenue growth of 12-14% and aims to achieve an EBITDA margin of 10-11%, a significant improvement from the 7.43% recorded in FY26. This improved outlook is contingent on geopolitical situations stabilizing, the benefits from new market entries and operational efficiencies materializing, and successful reduction of customer discounts.