GHCL Textiles Limited — Q1 FY26 earnings call

Call held 1 Aug 2025

Management summary

GHCL Textiles reported a challenging Q1 FY26 with revenue declining 6.5% YoY to ₹270 crores. Despite this, the company achieved EBITDA growth of 10.5% to ₹32 crores and PAT growth of 15% to ₹14 crores, driven by operational efficiencies and cotton cost savings. The company successfully commissioned a new 25,000 spindle unit and is progressing with its vertical integration strategy, but anticipates a tough Q2 FY26 due to market uncertainties and tariff discussions.

Highlights

  • EBITDA increased by 10.5% YoY to ₹32 crores despite tough market conditions.

  • PAT increased by 15% YoY to ₹14 crores.

  • Successful commissioning of a new 25,000 spindle unit, with production commenced on schedule.

  • Yarn produced from the new 25,000 spindle unit received very positive feedback and acceptance from customers.

  • Committed investment plan of over ₹1,000 crores remains on track, with ₹570 crores already invested.

Concerns

  • Revenue declined by 6.5% YoY to ₹270 crores due to reduction in sales yarn volume.

  • Market sentiment weakened by U.S. tariff discussions, limiting customer offtake to essential and short-term orders.

  • Yarn pricing and margins remained under pressure across the industry.

  • Q2 FY26 is expected to be a challenging quarter, particularly due to U.S. tariff uncertainty and muted demand.

Key financials

  1. Revenue ₹270 Cr -6.5%YoY
  2. EBITDA ₹32 Cr +10.5%YoY
  3. PAT ₹14 Cr +15%YoY
  4. Export Revenue Share 6%
  5. Cotton Spread ₹130
  6. Fabric Revenue Share 9.3%

What they filed

Q1 FY27: revenue up 52.6%, net profit up 178.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue305 285 284 268 338 +11%349 +22%364 +28%409 +53%
EBITDA27 23 31 30 37 +37%32 +39%41 +32%69 +130%
Net profit21 9 14 14 16 −24%13 +44%28 +100%39 +179%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

  • Capex ₹1,000 Cr primarily internal accruals, and of course, as and when the debt is required.
    • Vertical integration (weaving, knitting, processing) ₹430 Cr
    • Knitting (40 machines including plant building) ₹38 Cr
    • 25,000 spindle unit (commissioned)
    Our committed investment plan of over Rs. 1,000 crores remains firmly on track, out of which we have invested Rs. 570 crores so far, with the remaining capital being deployed towards further vertical integration opportunities in weaving and processing. (Page 4) / overall CAPEX for the knitting, 40 machines, is about Rs. 38 crores, including plant building. (Page 5) / So, primarily internal accruals, and of course, as and when the debt is required. (Page 11)
  • Debt Debt disclosed
    So, right now, our debt to equity is very low. (Page 11)

Guidance & targets

Revenue

  • Incremental Revenue from 25,000 Spindle Unit Revenue · optimal utilization · High confidence ₹250 crores
    Now our 25,000 spindles of commissions probably which will give us an incremental revenue of Rs. 250 crores.

    — Marshal Sonavane

  • Incremental Revenue from Knitting (40 machines) Revenue · FY27 · High confidence ₹75-80 crores
    And I think this Rs. 38 crores would generate additional revenue of about Rs. 80 crores. Rs. 75 crores to Rs. 80 crores is what additional revenue would be generated.

    — Marshal Sonavane

  • Total Incremental Revenue (Yarn + Knitting) Revenue · FY27 · High confidence ₹325 crores
    So, Rs. 325 crores of the incremental revenue on the base of FY '26? Correct. Yes, your voice broke in between, but yes, I understand that you are asking whether you are correct on these numbers. Yes. I think that is what we are projecting as well.

    — Marshal Sonavane

  • Revenue Potential from Remaining CAPEX (₹430 crores) Revenue · 3-4 years · Medium confidence ₹600-700 crores
    We expect that this would further result into minimum revenue upside of about Rs. 600 crores to Rs. 700 crores.

    — Marshal Sonavane

  • Top Line Growth Revenue · next four, five years · Medium confidence 2x of last year
    Our goal remains to become a premium ready-to-cart fabric manufacturer, targeting a top line of 2x of what we achieved last year

    — Marshal Sonavane

Margin

  • Knitted Fabric Margins Margin · ongoing · High confidence 14-15%
    the margins would be in the range of about 14% to 15%.

    — Marshal Sonavane

  • Overall Integrated Player Margins Margin · 3-4 years · Medium confidence 17-20%
    On an overall basis, I think once we become an integrated player, we expect our margins to be in the range of 17% to 20%.

    — Marshal Sonavane

  • EBITDA Margin Margin · next four, five years · High confidence 15-18%
    a double-digit ROCE, and an EBITDA margin of 15% to 18% over the next four, five years.

    — Marshal Sonavane

  • EBITDA Margin (New Unit) Margin · ongoing · Medium confidence 1-2 percentage points higher
    assuming if some demand stabilizes, definitely it would be minimum 1 to 2 percentage points higher on our EBITDA margins compared to our other units.

    — Marshal Sonavane

  • Long-term EBITDA Margin (Conservative) Margin · long-term · High confidence 15-18%

    Previously 17-20% → 15-18%

    Though we are still maintaining 18% to 20%. However, for a conservative number in the investor presentation, we have said 15% to 18%.

    — Ravi S. Jalan

Outsourcing

  • Outsourced Fabric Percentage Outsourcing · by year-end · Medium confidence 12-15%
    What we are expecting that probably by year-end we would be about 12% to 15% on our outsourced fabric.

    — Marshal Sonavane

Capacity

  • 25,000 Spindle Unit Ramp-up Capacity · Q3 FY26 · High confidence Full ramp-up
    We are in the process of scaling up operations and expect a full ramp-up by the 3rd Quarter of this fiscal year.

    — Marshal Sonavane

  • Knitting Machines Full Execution Capacity · Q4 FY26 · High confidence Full-scale execution
    With installation of 15 machines from October onwards, we should see a full-scale execution of this from Q4 FY '26.

    — Marshal Sonavane

Renewable Energy

  • Power from Renewables Share Renewable Energy · ongoing · Medium confidence 65-70%
    we want to have about 65% to 70% of our power coming from renewables.

    — Marshal Sonavane

  • Solar Power Additional Benefit Renewable Energy · ongoing · Medium confidence ₹4 crores
    the solar and few other arrangements, which we are doing on power would help us save about Rs. 1 or Rs. 2 per unit, which probably would translate to about an additional benefit of about Rs. 4 crores because the new unit would consume about Rs. 2 crores, Rs. 2.5 crores units.

    — Marshal Sonavane

Export Mix

  • Export Revenue Share Export Mix · long-term · Medium confidence 18% or 1-2 percentage points higher
    We are expecting that, last year we clocked about 18% on our export... I think we will be maintaining the same number or maybe increasing by another 1 or 2 percentage points.

    — Marshal Sonavane

Market context

  • ROCE ROCE · next four, five years · Medium confidence double-digit
    a double-digit ROCE, and an EBITDA margin of 15% to 18% over the next four, five years.

    — Marshal Sonavane

What to watch in Q2 FY26

Ramp-up of 25,000 spindle unit

Q3 FY26
Current Production commenced, scaling up operations
Target Full ramp-up

Why it matters

Full utilization of this new capacity is crucial for realizing the projected incremental revenue of ₹250 crores and improving overall profitability.

We are in the process of scaling up operations and expect a full ramp-up by the 3rd Quarter of this fiscal year.

Risks & concerns

  • Weak market sentiment and demand slowdown

    high

    Weakened by U.S. tariff discussions, limiting customer offtake to essential/short-term orders, leading to pressure on yarn pricing and margins.

    Management acknowledged

  • Volatility in global cotton markets and rising domestic cotton prices

    high

    Domestic prices formed up to ₹58,000 per candy mark; global markets volatile. Cotton cost inflation not fully passed through due to muted demand.

    Management acknowledged

  • Uncertainty regarding U.S. tariffs

    high

    No clarity on U.S. tariffs makes Q2 FY26 challenging and impacts demand. Indirect exposure to US market is 25-30%.

    Management acknowledged

  • Margin pressure due to cotton price-demand mismatch

    high

    Cotton prices are up, but demand side cannot accept additional prices, compressing spreads. Current cotton spread is ₹119 per kilo in July, down from ₹130 in Q1.

    Management acknowledged

  • Challenging Q2 FY26 profitability

    high

    Due to higher-priced cotton inventory and muted demand, Q2 will see a tough challenge on maintaining profitability.

    Management acknowledged

Q&A highlights

7 direct
CAPEX for knitting and expected revenue/margins Direct
overall CAPEX for the knitting, 40 machines, is about Rs. 38 crores, including plant building. And I think this Rs. 38 crores would generate additional revenue of about Rs. 80 crores... the margins would be in the range of about 14% to 15%.

Provides specific financial details on a new vertical integration project, including investment, revenue potential, and margin expectations.

Asked by Jatin Damania

Impact of new 25,000 spindle capacity on revenue and timeline Direct
with respect to the new capacity coming of 25,000 spindles, you said we can do an additional of Rs. 250 crores at optimal utilization... Q2 is difficult because there is a ramp-up period but definitely you can expect from Q3 onwards.

Clarifies the revenue contribution from the recently commissioned capacity and the timeline for its full realization.

Asked by Raman K.V.

Deployment of remaining CAPEX and associated revenue/margins Direct
the rest of the Rs. 430 crores would be sort of spent on our vertical integration journey in weaving, knitting and processing. We expect that this would further result into minimum revenue upside of about Rs. 600 crores to Rs. 700 crores... On an overall basis, I think once we become an integrated player, we expect our margins to be in the range of 17% to 20%.

Outlines the future strategic direction for vertical integration, quantifying the investment, expected revenue, and target margins for the integrated business.

Asked by Amey Chheda

Company's exposure to the U.S. market and impact of tariff discussions Partial
our direct exposure is minimal, right? But when it comes to indirect exposure, I think it's difficult to estimate but probably around 25%, 30% is what we have... I think the effect comes from the overall demand stabilizing, right? For example, while we do not have an exposure to U.S., our competition definitely has.

Addresses a key macro concern (US tariffs) and clarifies the company's indirect exposure, explaining how broader market demand affects them even without direct US sales.

Asked by Deepesh Sancheti

Reason for improved EBITDA/PAT despite rising cotton prices and current cotton spread Direct
When it comes to the cotton prices, it moved up from Rs. 55,000 per candy to about Rs. 58,000 per candy. From our operational standpoint, we have been able to reduce our rupees per kilo cost for our cotton... Our current cotton spread in our cotton spread in Q1 FY '26 was Rs. 130 per kilo. Q4, it was Rs. 132. And current as in July, we have seen it at about Rs. 119.

Explains the margin resilience through operational efficiency despite adverse raw material price trends and provides current spread data, indicating potential future pressure.

Asked by Raman K.V.

Long-term ROE and strategies to improve it Direct
historically, our return on capital employed was double digit, so we will come back to that double digit in any case. And over and above this, since this is vertical integration we are doing, this will further enhance our return on equity or return on capital implied... we are expecting this will be a kind of a 14%, 15% of the return on capital implied we will be able to achieve in a medium-term thing.

Addresses a concern about low ROE, linking its improvement to historical performance, vertical integration, and a specific target for ROCE.

Asked by Deepesh Sancheti

Impact of MSP and US cotton prices on margins and resolution Direct
the cotton prices, of course, are on an upward trend. The other part is also on demand... if your demand side does not have the capacity to take up the additional cotton cost, definitely the margin will be in pressure... the U.S. tariff clarity... will bring some relief on the tariff of this thing.

Highlights the dual pressure of rising cotton costs and weak demand on margins, and points to US tariff clarity as a potential resolution.

Asked by Ritesh Gandhi

Outlook on acquiring stressed assets Direct
I do not think we are right now looking at any such kind of express asset, because see, coming around the express assets itself is a Herculean task. So, we are not looking at any such kind of a stress asset to acquire in the near future. But of course, we are always open if something really comparing is coming and the size is coming, which size compels us to kind of look at, we will look at it.

Clarifies the company's M&A strategy, indicating a cautious approach to stressed asset acquisitions but an openness to compelling opportunities.

Asked by Jatin Damania

2 min read 5 chapters

Detailed narrative

Q1 FY26 Performance Overview

GHCL Textiles reported a challenging Q1 FY26 with revenue declining 6.5% YoY to ₹270 crores, primarily due to reduced sales yarn volume. Despite this, operational efficiencies and cotton cost savings led to a 10.5% YoY increase in EBITDA to ₹32 crores and a 15% YoY rise in PAT to ₹14 crores. The company noted that yarn pricing and margins remained under pressure across the industry, with export revenue contributing 6% of overall revenue, down from 11% in the previous quarter.

Strategic Expansion and Vertical Integration

The company successfully commissioned a new 25,000 spindle unit, with production commencing on schedule and positive customer feedback. This unit is expected to achieve full ramp-up by Q3 FY26, contributing an incremental ₹250 crores in revenue. Further vertical integration into knitted fabrics will begin with 15 machine installations from October, targeting full-scale execution by Q4 FY26, expected to generate ₹75-80 crores in additional revenue with 14-15% margins.

Capital Expenditure Plans

GHCL Textiles has a committed investment plan of over ₹1,000 crores, with ₹570 crores already invested. The remaining ₹430 crores will be deployed towards further vertical integration in weaving and processing, aiming to become a premium ready-to-cut fabric manufacturer. This additional investment is projected to yield ₹600-700 crores in revenue and achieve overall integrated margins of 17-20%. The CAPEX for knitting alone is approximately ₹38 crores.

Market Conditions and Margin Outlook

The market sentiment was weakened by U.S. tariff discussions, leading to limited customer offtake and pressure on margins. Q2 FY26 is anticipated to be challenging due to continued uncertainty regarding U.S. tariffs and muted demand, which prevents the company from fully passing on rising cotton costs. The cotton spread declined from ₹130 per kilo in Q1 FY26 to ₹119 per kilo in July, indicating continued margin pressure.

Long-term Vision and Profitability Targets

The company aims to double its top line from last year's figures, achieve a double-digit ROCE, and an EBITDA margin of 15-18% over the next four to five years. Management believes that vertical integration will enhance returns, and the new 25,000 spindle unit is expected to operate at 1-2 percentage points higher EBITDA margins than existing units. They also target 65-70% of power from renewables, expecting ₹4 crores in additional benefit from solar power.

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