Banswara Syntex

The recently signed FTA between India and the U.K. is a significant development for the textile industry, aiming to eliminate tariffs and create a level playing field for Indian exporters. India's apparel exports to the U.K. currently stand at USD1.24 billion, and this agreement is expected to substantially increase this share, providing a 12% duty advantage. This is particularly encouraging for Banswara Syntex given its historical presence in the U.K. market, with hopes for eventual extension to the European market. Management also noted momentum in the U.S. market to replace China due to tariff differentials.

For FY25, Banswara Syntex reported a total income of INR1,307.5 crores, marking a 2% year-on-year increase. EBITDA stood at INR117.2 crores, a 2.8% decline from the previous year, resulting in an EBITDA margin of 9%. The company posted a profit after tax of INR21.4 crores for the fiscal year. in Q4 FY25, total income marginally declined by 1.6% year-on-year to INR346.6 crores, with EBITDA at INR31.5 crores (9.1% margin) and PAT at INR5.1 crores, a 38.4% decline from Q4 FY24.

The Fabric division demonstrated strong momentum, with revenues growing 19% year-on-year to INR540.5 crores in FY25, driven by healthy demand. In contrast, the Yarn division experienced a 10% revenue drop due to modernization, capacity underutilization, and labor shortages. The Garment division underwent structural changes, including closing the Surat division and shifting to a DTA model, leading to a 3% revenue decline to INR275.4 crores and a loss in Q4. This DTA shift aims for better export incentives (3-4% additional) and flexibility to cater to both domestic and export markets.

Banswara Syntex is making substantial investments in brand building, allocating INR3-4 crores for advertising, including plans for television campaigns, to promote its 'Simone Federico' brand. The company aims to achieve INR50 crores in sales for Simone Federico this year, up from INR11.4 crores last year. Additionally, a new brand, 'Federico', will be launched at a more cost-effective price point, focusing on synthetic fabrics. The goal is to leverage existing capacities and improve overall margins by transforming from an industrial supplier to a branded player.

The company's net debt increased by INR109.5 crores, from INR346.7 crores in FY24 to INR456.2 crores in FY25, primarily due to investments in machinery, modernization, plant upgradation, and working capital. The debt-equity ratio stands at 0.81 as of FY25. Management indicated that no significant new capex is required for the next 2-3 years, as past investments have completed modernization. While some planned capex will occur in H1 FY26, debt reduction is anticipated from the next financial year as repayments begin.

For FY26, Banswara Syntex targets a total income of INR1,550 crores and an EBITDA margin of 12%. Specifically, the Fabric business is projected to reach INR650 crores, and the Yarn business INR550 crores. The Garment division is expected to bounce back, targeting INR350 crores in revenue and an EBITDA margin of 7-9%. The company aims for an overall growth rate of 20% for the next 3-4 years, leveraging existing capacities and the tailwinds from trade agreements and global supply chain shifts away from China.