GHCL Textiles

GHCL Textiles delivered strong financial results for Q3 FY25, with revenue increasing by 16.9% year-on-year to INR 288 crores and EBITDA growing by 30% to INR 26 crores. For the nine-month period, the company reported a 14% YoY revenue growth to INR 883 crores and a 42% YoY EBITDA increase to INR 84 crores, surpassing previous full-year EBITDA levels. This performance was achieved despite persistent demand headwinds in the textile sector, demonstrating operational resilience and optimal utilization.

The company is aggressively pursuing a strategy of forward integration into value-added products. A new project for 40 knitting machines, with a capex of INR 38 crores, is underway and expected to be completed by December 2025. This initiative is designed to utilize 80% of the yarn produced from the new 25,000 spindles (expected to be operational by June 2025) for internal knitted fabric manufacturing. The long-term goal is to derive 30-35% of revenues from the value-added segment by 2029-30, enhancing overall margins.

GHCL Textiles has committed over INR 1,000 crores in investments for capacity expansion and value addition. INR 350 crores were already deployed in previous years for 40,000 spindles and solar energy. Current year capex includes INR 215 crores for the 25,000 new spindles and INR 38 crores for the knitting project. The company plans to fund these substantial investments through a combination of internal accruals and bank financing, while maintaining a healthy balance sheet with a target debt-equity ratio of not more than 0.5:1.

Despite a sequential increase in power costs from INR 15 crores to INR 21 crores in Q3 FY25, attributed to seasonal wind generation patterns, GHCL Textiles maintains competitive power costs. Approximately 70% of the company's energy requirements are met through renewable sources, a key factor in cost management. This focus on operational efficiency also contributed to a sequential improvement in gross margins from 31% to almost 32.5%.

Management expressed optimism for the textile industry, citing the long-term positive impact expected from the 2025-26 union budget, including measures like tax rebates and an allocation of INR 500 crores for cotton up-gradation. While the yarn market remains subdued, the company is observing increasing export inquiries and signs of revival in key textile hubs like Tiruppur, suggesting potential demand growth in the near future.

The company boasts a strong, debt-free balance sheet with a net cash surplus of INR 25 crores. During the 9-month period, GHCL Textiles generated INR 80 crores in cash inflows and released INR 84 crores in working capital. This liquidity was strategically utilized for INR 75 crores in growth capex, INR 61 crores in debt repayment, and INR 5 crores for dividend payments, reflecting a disciplined approach to capital allocation.