Filatex India

Filatex India delivered a strong Q2 FY26, with revenue growing to INR 1,076 crores from INR 1,049 crores in Q1 FY26, representing a QoQ increase of 2.57%. Sales volume also saw a healthy increase, reaching 101,391 metric tonnes from 97,263 metric tonnes in the previous quarter. This performance was driven by healthy demand and improved capacity utilization. Profitability significantly improved, with EBITDA rising by 14.36% QoQ to INR 88.93 crores and PAT increasing by 16.8% QoQ to INR 47.58 crores.

The first half of FY26 demonstrated steady improvement across all key metrics. Revenue for H1 FY26 stood at INR 2,125 crores, a slight increase from INR 2,103 crores in H1 FY25, despite a challenging external environment. Sales quantity increased to 198,654 metric tonnes, up from 192,218 metric tonnes in the same period last year. Profitability saw a sharp rise, with H1 FY26 EBITDA at INR 166.7 crores, up from INR 106.6 crores in H1 FY25, and PAT nearly doubled to INR 88.32 crores from INR 45.77 crores in H1 FY25, reflecting strong operating leverage and internal efficiency initiatives.

The company is executing a total investment plan of around INR 650 crores, focusing on capacity expansion, sustainability, and energy efficiency. The additional yarn capacity project (INR 235 crores) is progressing well, with major machinery orders placed and completion targeted by September 2026. The recycling project's civil construction is underway, with production scheduled to begin by September 2026. The steam infrastructure project is in the implementation phase, expected to be completed by June 2026, and is projected to add INR 60 crores to EBITDA annually.

Domestically, demand for polyester yarn remains stable. Raw material prices are expected to remain stable in Q3 FY26, with a slight potential increase of 1-2%. The upcoming PTA capacity additions from GAIL, IOCL, and Reliance Industries are expected to significantly reduce India's dependence on imports, lower freight costs, and improve supply chain stability. This could lead to a 2% margin expansion from the raw material side. However, the proposed anti-dumping duty on MEG is a concern, as it could increase production costs, potentially impacting EBITDA by 0.5% to 1%.

Filatex is confident in its recycling project, expecting an EBITDA contribution of INR 80-85 crores from the virgin fiber businesses, with margins of INR 30-35 per kg for chips. The company has tie-ups with two companies for waste supply and is in advanced talks with other brands. While pre-consumer waste sourcing is straightforward, post-consumer waste presents sorting challenges. The long-term strategy is to expand waste-to-chips plants rather than yarn production, leveraging the first-mover advantage in this segment, as other players are expected to commission similar plants only by 2027-28.

The company has initiated automation in labor-intensive post-winding operations, investing INR 40 crores. This automation is expected to reduce manpower dependence by 160-180 people and improve product quality by minimizing human touch in the process. This move addresses the challenge of securing manpower and enhances overall operational efficiency, contributing to improved profitability.