GHCL Textiles Limited — Q2 FY26 earnings call

Call held 3 Nov 2025

Management summary

GHCL Textiles reported a resilient Q2 FY26 with revenue growing 11% YoY to INR339 crores and EBITDA up 31% YoY to INR38 crores, driven by record yarn production and successful commissioning of 25,000 new spindles. While yarn demand remained muted and the knitted segment faced challenges, the company is progressing on its vertical integration roadmap and green energy initiatives. Management aims for a INR2,000 crores top line, double-digit ROCE, and 15-18% EBITDA margin in the next 3-4 years, with INR600 crores of its INR1,000 crores capex plan already deployed.

Highlights

  • Revenue of INR339 crores, up 11% YoY, driven by highest ever quarterly yarn production volume.

  • EBITDA of INR38 crores, up 31% YoY, and PAT of INR16 crores, reflecting strong operational discipline.

  • Successfully commissioned 25,000 spindles unit, operating as per expectations and contributing significantly to volume growth.

  • Revenue from fabric increased to its highest ever level at over 11%, indicating progress in vertical integration.

  • 62-megawatt green energy capacity meets over 70% of the company's power needs, up from 60% last quarter.

Concerns

  • Yarn demand remains muted, similar to Q1, with the knitted yarn segment continuing to face challenges.

  • Indian cotton prices are still at a slight premium to global prices, putting the company at a disadvantage compared to competitors like Vietnam and Bangladesh.

  • H1 FY26 yarn EBITDA was approximately 11%, below the normal state of 14-15%, with full recovery dependent on macro factors.

Key financials

2 periods

Headline

  • Revenue
    ₹339 Cr
    YoY +11%
  • EBITDA
    ₹38 Cr
    YoY +31%
  • PAT
    ₹16 Cr

H1

  • FY26 Yarn EBITDA
    11%

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

high confidence
  • Capex ₹1,000 Cr
    • Capacity enhancement (25,000 spindles this year, 40,000 units year before last)
    • Vertical integration (knitted fabrics, woven fabrics, processing)
    • Renewable energy (additional 13 MW)
    Our committed investment plan of over INR1,000 crores remains firmly on track. We have now deployed approximately INR600 crores of this investment primarily in capacity enhancement and vertical integration. This strategy has already enabled us to double our revenue from FY '21 to FY '25 and positions us strongly for future growth. Our goal remains to become a premium ready-to-cut fabric manufacturer, targeting a top line of INR2,000 crores, a double-digit ROCE and an EBITDA margin of 15% to 18% over the next three to four years.
  • Debt Debt disclosed
    See, I think that we will see as and when we progress. But I'll tell you our internal lines, right? We currently have a debt to equity of about 0.03 or something like that. At no point of time, we'll cross, let's say, our debt to equity will not cross 1. Most likely, it will be much lower.

Guidance & targets

Revenue

  • Top line Revenue · next three to four years (FY28-FY30) · High confidence INR2,000 crores
    Our goal remains to become a premium ready-to-cut fabric manufacturer, targeting a top line of INR2,000 crores, a double-digit ROCE and an EBITDA margin of 15% to 18% over the next three to four years.

    — Marshal Sonavane

  • Incremental revenue from 40 knitting machines (complete project) Revenue · next year · High confidence INR275-300 crores
    Of the 40 knitting machines, I will talk about the complete project, right, which is yarn and fabric put together. Depending on the selling price, it would be between INR275 crores to INR300 crores is what we are expecting.

    — Marshal Sonavane

Profitability

  • EBITDA Margin Profitability · next three to four years · High confidence 15% to 18%
    Our goal remains to become a premium ready-to-cut fabric manufacturer, targeting a top line of INR2,000 crores, a double-digit ROCE and an EBITDA margin of 15% to 18% over the next three to four years.

    — Marshal Sonavane

  • Yarn EBITDA (normal state) Profitability · normal state · High confidence 14% to 15%
    We expect, let's say, our 4-year, 7-year margins on yarn has been about 14%, 15%, which we consider a normal state.

    — Marshal Sonavane

  • Vertically integrated EBITDA Profitability · when vertically integrated · High confidence 17% to 18%
    If it goes vertically integrated, we can expect this normal state EBITDA to go from 15% -- 14%, 15% to 17%, 18%.

    — Marshal Sonavane

  • FY26 EBITDA Margin Profitability · FY26 · High confidence 11%
    Got it. Sir, on overall year, can we expect to maintain the 11% EBITDA margin for FY '26? Yes. I think we would be able to deliver 11% there.

    — Marshal Sonavane

  • EBITDA margin for complete unit (25k spindles + 40 knitting machines) Profitability · next year · High confidence 14% to 15%
    For the next year, we can expect this complete unit, which is the 25,000 spindles plus 40 knitting machines to start generating about 14%, 15% EBITDA in similar sort of situation.

    — Marshal Sonavane

  • Margin increase from vertical integration Profitability · once completed · High confidence 4% to 5%
    our vision is that the vertical integration once is completed from knitting, weaving and the ready-to-cut fabric for that processing, our margin will go up around 4% to 5% over and above the margin of the spinning.

    — R S Jalan

  • Historical margin Profitability · historically · High confidence 14% to 15%
    Second, like Marshal very rightly said, our margin has been historically 14% to 15%, and that will go to around 18% to 19%.

    — R S Jalan

  • Future margin Profitability · future · High confidence 18% to 19%

    — R S Jalan

Capacity

  • New 25,000 spindles unit utilization Capacity · Q3 FY26 · High confidence Full ramp-up
    We are on track to achieve a full ramp-up by third quarter of this fiscal year.

    — Marshal Sonavane

Vertical Integration

  • Phase 1 of 15 knitting machines completion Vertical Integration · Q3 FY26 · High confidence Completed
    The expansion of our knitting machines is underway, and we expect Phase 1 of 15 machines to be completed in Q3.

    — Marshal Sonavane

Renewable Energy

  • Power needs met by green energy Renewable Energy · ongoing · High confidence 70%
    Our commitment to operational excellence is supported by our 62-megawatt green energy capacity, which meets over 70% of our needs. And we plan to invest in an additional 13 megawatts to enhance our sustainable footprint.

    — Marshal Sonavane

Market context

  • ROCE Profitability · next three to four years · High confidence Double-digit
    Our goal remains to become a premium ready-to-cut fabric manufacturer, targeting a top line of INR2,000 crores, a double-digit ROCE and an EBITDA margin of 15% to 18% over the next three to four years.

    — Marshal Sonavane

What to watch in Q3 FY26

Full utilization of new 25,000 spindles

Q3 FY26
Current ~50% utilization in Q2 FY26
Target Full utilization

Why it matters

Will contribute significantly to volume growth and revenue, impacting overall financial performance.

We are on track to achieve a full ramp-up by third quarter of this fiscal year.

Risks & concerns

  • Macroeconomic volatility and international trade situation

    high

    The ongoing international trade situation and tariffs contribute to market volatility, affecting demand revival and margin recovery, with stability expected by Q4 FY26 or Q1 FY27.

    Management acknowledged

  • Muted demand for yarn and challenges in knitted segment

    medium

    Yarn demand remains muted, similar to Q1, and the knitted yarn segment continues to face challenges, impacting spreads and recovery timeline.

    Management acknowledged

  • Indian cotton price premium over global prices

    medium

    Indian cotton prices are still at a slight premium to global prices, putting the company at a disadvantage compared to competitors in Vietnam and Bangladesh.

    Management acknowledged

  • Potential for CCI to dictate cotton prices

    low

    The possibility of CCI creating a monopoly situation and dictating cotton prices could impact the stability of cotton costs.

    Management acknowledged

Q&A highlights

6 direct
Cost savings and investment for new renewable energy capacity Direct
So our total 13 megawatt is split across rooftop solar and ground solar... Put together across both the projects, the total spend will be about INR14 crores, INR15 crores, right? And the total saving, which we will receive would be about INR6 crores, INR7 crores odd in that sorry, sorry just a clarification, ground solar is about INR35 crores and rooftop is about INR8 crores. So about INR43 crores, INR45 crores of spend will be there.

Quantifies the financial benefit and investment for green energy initiatives, showing a clear ROI.

Asked by Riddhesh Gandhi

Outlook on EBITDA margin normalization and spread improvement Partial
So my view on the demand side, at least by quarter 4 or maximum by quarter 1 of next year, we should see some stability coming in. The second part is on the cotton cost... if the costs remain benign, I think that would be a big factor in moving the spreads higher.

Provides management's timeline and key external dependencies (demand, cotton costs) for potential margin recovery.

Asked by Riddhesh Gandhi

Contribution of new 25,000 spindles to Q2 revenue and utilization Direct
It was about INR30 crores, INR30 crores, INR35 crores... So basically, it was at around 50% utilization? Yes, yes. It hasn't reached the optimal utilization. It is still sort of work in progress. And you expect it to reach full utilization in Q3? Yes, yes, it will reach full utilization in Q3.

Gives specific numbers for the impact of recent capacity expansion and future ramp-up expectations, indicating immediate benefits.

Asked by Amey Chheda

Incremental revenue potential from 40 knitting machines project Direct
Of the 40 knitting machines, I will talk about the complete project, right, which is yarn and fabric put together. Depending on the selling price, it would be between INR275 crores to INR300 crores is what we are expecting.

Quantifies the significant revenue potential from the vertical integration into knitting, including the new spindles.

Asked by Amey Chheda

Company's direct and indirect exposure to the US market Direct
Okay. So we don't have any direct exposure to US, right? And we definitely would have an indirect exposure. We service some of the larger clients, who have exposure to U.S. But definitely, we do not have information that where our product gets used, whether it goes to US or not. But what we have seen largely is that we have been able to service the similar customers. Our sales to our strategic customers has remained the same, right? So on an indirect basis also, we do not have a material exposure to US right now.

Clarifies the company's limited exposure to a key macro risk (US demand), which is important for risk assessment.

Asked by Amey Chheda

Factors contributing to Q2 performance improvement despite challenging environment Direct
See, first thing is our volume has gone up, right? That definitely adds to our incremental revenue. Second is our proportion of fabric revenue has also increased. Third, we have been able to maintain our overall sales price, right? So our average sales price hasn't dropped so much. I think these three factors primarily contributed to higher revenue. We, of course, got a benefit of higher renewable production, which reached about 74%, 70% of our overall power requirement, which was about 60% last quarter.

Breaks down the specific internal and operational drivers behind the positive Q2 results, beyond just market conditions.

Asked by Saket Kapoor

Timeline for achieving the 16-18% EBITDA margin target Partial
So it would be difficult to give it, because as in the overall macro situation isn't very conducive right now. But Saketji, whatever is controllable at our end, we are doing that, right? When it comes to operational excellence, making sure our capital allocation is correct, moving forward on vertical integration, getting our customer product mix right. I think this is in our control. I think that is what we are doing, but we would need some support on overall macro to make sure that we reach the 16% to 18% situation.

Highlights the dependency on external macro factors for achieving long-term margin targets, despite internal efforts, indicating potential delays.

Asked by Saket Kapoor

Competitiveness of Indian cotton prices compared to Vietnam and Bangladesh Direct
In terms of global cotton competitiveness, Indian cotton prices, while they have come down, are still at a slight premium to global, right? So when it comes to, let's say, Vietnam, Bangladesh, they, of course, get global cotton from other countries at cheaper prices than India. That puts us at a slight disadvantage when it comes to overall cotton pricing.

Identifies a structural disadvantage for Indian textile players in raw material costs compared to key competitors, impacting export competitiveness.

Asked by Deepesh

3 min read 7 chapters

Detailed narrative

Q2 FY26 Financial Performance Overview

GHCL Textiles reported a robust Q2 FY26, with revenue reaching INR339 crores, marking an 11% year-on-year growth. This performance was primarily driven by the highest-ever quarterly yarn production volume. EBITDA for the quarter stood at INR38 crores, demonstrating a significant 31% year-on-year increase, while PAT was reported at INR16 crores. The company attributed these results to strong operational discipline and the successful execution of its expansion strategy amidst challenging market conditions.

Capacity Expansion and Utilization

The company successfully commissioned its new 25,000 spindles unit, which is now operating as per expectations and contributed significantly to the volume growth in Q2 FY26. This new capacity contributed approximately INR30-35 crores to Q2 revenue, operating at around 50% utilization. Management expects this unit to reach full utilization by Q3 FY26, providing a full benefit to the company's performance in the upcoming quarter.

Vertical Integration Progress

GHCL Textiles is actively advancing its vertical integration roadmap. The expansion of knitting machines is underway, with Phase 1 of 15 machines anticipated to be completed in Q3 FY26. This strategy has already yielded results, with revenue from fabric reaching its highest-ever level at over 11% of total revenue. The complete project, encompassing yarn and fabric, is expected to generate incremental revenue of INR275-300 crores.

Strategic Capital Allocation and Future Targets

Out of a committed investment plan of over INR1,000 crores, approximately INR600 crores have already been deployed towards capacity enhancement and vertical integration. The remaining INR400 crores will be invested in knitted fabrics, woven fabrics, processing, and an additional 13 megawatts of renewable energy. The company aims to become a premium ready-to-cut fabric manufacturer, targeting a top line of INR2,000 crores, a double-digit ROCE, and an EBITDA margin of 15-18% over the next three to four years.

Raw Material and Margin Outlook

Domestic cotton prices eased slightly to around INR54,500 per candy mark, and the company utilized duty-free imports to stock cheaper cotton. While yarn prices at the industry level have declined, GHCL's value-added yarns maintained prices similar to Q1. Management expects cotton prices to remain stable or slightly decrease in the next quarter. Spread improvement is anticipated by Q4 FY26 or Q1 FY27, contingent on demand revival and benign cotton costs, with H1 FY26 yarn EBITDA at approximately 11%.

Green Energy Initiatives

The company's commitment to operational excellence is supported by its 62-megawatt green energy capacity, which currently meets over 70% of its power needs, up from 60% last quarter. An additional 13 megawatts of renewable energy (rooftop and ground solar) is planned with an investment of INR43-45 crores, projected to yield annual cost savings of INR7.5-8 crores. This initiative helps control power costs and enhances the company's sustainable footprint.

Market Dynamics and Export Strategy

Yarn demand remained muted in Q2, with customer off-take largely limited to urgent short-term needs, particularly in the challenging knitted segment. While exports did not increase in Q2, the company noted no order cancellations and is encouraged by potential positive outcomes from the US-India trade agreement and developments in UK and EU FTAs. Bangladesh and Europe remain key export geographies, with 30-40% of total output going to top brands, ensuring a steady pipeline of orders.

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