GHCL Textiles Limited — Q4 FY26 earnings call

Call held 30 Apr 2026

Management summary

GHCL Textiles reported a strong Q4 and FY26, with significant revenue and EBITDA growth driven by improved spreads and demand tailwinds from trade agreements. The company maintained a strong balance sheet and progressed on capacity expansion and vertical integration initiatives, including new spindles, knitting machines, and solar power. However, management noted global geopolitical risks, inflationary pressures, and a recent tapering of demand from China, while strategically managing cotton inventory.

Highlights

  • Q4 Revenue of ₹375 crores, up 31% YoY, driven by strong volume and pricing.

  • FY26 Revenue of ₹1,335 crores, up 14% YoY, with FY26 EBITDA of ₹156 crores, up 34% YoY.

  • Spreads improved from ₹123 per kilo in Q3 to ₹148 per kilo in Q4, expected to continue in Q1 FY27.

  • New 25,000 spindle unit stabilized and operating at optimum utilization, with initial knitting machines installed showing encouraging customer response.

  • Rooftop solar capacity commissioned, contributing to energy cost efficiency.

  • Received approval for land allocation in PM MITRA Park Virudhunagar, positioning for future scale growth and product integration.

Concerns

  • Global backdrop of cautious optimism, with ongoing US-Iran conflict disrupting trade routes and elevating logistics costs.

  • Energy markets under pressure and higher fuel prices weighing on the cost economics of synthetic portfolio and fabric manufacturing.

  • Demand tapering down from China since March, after a period of strong yarn demand.

  • Inflationary pressures across commodities and volatility in critical raw materials impacting the textile ecosystem.

  • Working capital days are higher at 120 days (as of March 31) compared to competitors (around 90 days), due to strategic cotton procurement.

Key financials

4 periods

Headline

  • Net Debt
    ₹118 Cr
  • Net Debt to Equity
    0.1×

Q3

  • Spreads
    ₹123/kilo

Q4

  • Revenue
    ₹375 Cr
    YoY +31%
  • EBITDA
    ₹52 Cr
  • PAT
    ₹28 Cr
  • Spreads
    ₹148/kilo

FY26

  • Revenue
    ₹1,335 Cr
    YoY +14%
  • EBITDA
    ₹156 Cr
    YoY +34%

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 ₹100 Cr
    • On-ground solar (10 MW capacity) ₹35 Cr
    • Additional knitting machines ₹15 Cr
    • Strategic investment in PM MITRA Park (land allocation received)
    • Remaining investment from ₹1,000 crore plan (₹350 crores pending) towards fabric and processing ₹350 Cr
    • Replacement and infrastructure capex
    In FY27 we plan to install additional knitting machines and expand our rooftop solar capacity. I am also pleased to share that we have received approval for land allocation in PM MITRA Park Virudhunagar, Tamil Nadu. This is a strategic development for GHCL Textiles and positions us well for the next phase of scale growth and product integration. (Marshal Sonavane) So FY27 capex plan will be between INR100 crores, INR120 crores. Primarily, there is one large investment on our on-ground solar. So, the cash outgo and the commissioning will happen this year. The second part is on strategic investment. Another part is about INR15-odd crores in our knitting machines, which will happen. And there is a large strategic investment which we are doing in PM MITRA Park, which I outlined in my opening remarks as well. That is primarily on line. (Marshal Sonavane)
  • Debt Net ₹118 Cr · 0.1× EBITDA
    Further, our balance sheet remains strong with net debt of INR118 crores, which represents 0.1 x net debt to equity ratio. (Marshal Sonavane)
  • Liquidity Liquidity disclosed Company made a deliberate decision to increase cotton procurement ahead of anticipated price rises, resulting in a temporary increase in working capital. As of March 31, 2026, the company held approximately 120 days of inventory.
    We made a deliberate and considered decision to increase our cotton procurement ahead of anticipated price rises. This has resulted in a temporary increase in working capital, but we expect this to translate into a tangible cost advantage in the coming quarters as that inventory flows through production. (Marshal Sonavane) Sorry, let me give you a specific answer to this. We have approximately around 120 days of inventory as on 31st of March. Okay, so that is almost around four months of inventory. (R. S. Jalan)

Guidance & targets

Profitability

  • Spreads Profitability · Q1 FY27 · High confidence ₹148 per kilo
    So at least in Q1, I believe that it will continue, what spreads we have received in Q4, it would continue at least in Q1. (Marshal Sonavane) So, as I said earlier also that in Q1 of FY27 we at least from a visibility perspective we are there is a high likelihood of this spread of INR148 a kilo continuing. Of course it can go up. But at least on the conservative side we are pretty certain that this will continue. (Marshal Sonavane)

    — Marshal Sonavane

  • EBITDA Margin Profitability · next 3 years · Medium confidence 15-18%
    I think if we continue to maintain that definitely 15% to 18% margin is a within the next 3 years. (Marshal Sonavane)

    — Marshal Sonavane

Revenue

  • Fabric Contribution to Revenue Revenue · FY27 · Medium confidence almost 15%

    From 12% today

    This year, of course there will be an increase of this fabric percentage. We are targeting almost 15% of our revenue to come from fabric. A large part of our knitted fabrics would be in house. (Marshal Sonavane)

    — Marshal Sonavane

  • Total Revenue Revenue · next 3 years · High confidence ₹2,000 crores
    Got it. And we are still holding to the INR2,000 crores revenue guidance in the next 3 years, right? Yes. We are sort of putting an anchor on that. We are holding on to that. (Amey Chheda & Marshal Sonavane)

    — Marshal Sonavane

  • Revenue Growth Rate Revenue · FY27 · Medium confidence 14-15%
    But what we are sort of internally guiding towards is maintaining our current growth rate what we achieved this year. (Marshal Sonavane) Okay. So, 14-15% of it. (Varun Gajaria)

    — Marshal Sonavane

  • Revenue and EBITDA Margin Targets Revenue · FY29-FY30 · High confidence ₹2,000 crores revenue with 15-18% EBITDA margin
    So as for our internal guidance, we are sort of aiming for FY29 at least for the top line, maybe around FY30. So, you can say between FY29 to FY30 is when we are planning to achieve this, both for your top line guidance as well as margin guidance. (Marshal Sonavane)

    — Marshal Sonavane

Working Capital

  • Working Capital Days Working Capital · future · Medium confidence 110-120 days

    From 135-140 days today

    What is an ideal working capital level, as I said, it depends on model to model. But it usually has been between 110 to 120 days for us also. And I think that is the level we are planning to maintain. (Marshal Sonavane)

    — Marshal Sonavane

Market context

  • Return on Capital Employed (ROCE) Profitability · going forward · Medium confidence double digit
    Now our focus is also on the ROCE. Yet, this year some ROCE improvement has happened around 1%. And our ultimate objective, by optimizing the working capital, by optimizing the margins, we have an objective to go to a double digit of the ROCE going forward. (R. S. Jalan)

    — R. S. Jalan

What to watch in Q1 FY27

Spreads continuation

next quarter (Q1 FY27)
Current ₹148 per kilo (Q4 FY26)
Target ₹148 per kilo or higher

Why it matters

Spreads are a key profitability driver, and management expects Q4 levels to continue in Q1.

So at least in Q1, I believe that it will continue, what spreads we have received in Q4, it would continue at least in Q1. (Marshal Sonavane)

Risks & concerns

  • Global Geopolitical Developments (US-Iran conflict)

    high

    Ongoing US-Iran conflict disrupting traditional trade routes, resulting in shipment delays and elevated logistics costs.

    Management acknowledged

  • Energy Market Volatility and Fuel Prices

    high

    Energy markets are under pressure and higher fuel prices are weighing on the cost economics of the synthetic portfolio and fabric manufacturing.

    Management acknowledged

  • Inflationary Pressures and Gas Availability

    high

    Inflationary situation and gas availability could lead to rising costs in processing and fabric making, impacting yarn prices.

    Management acknowledged

  • Demand Tapering from China

    medium

    Demand from China has shown signs of tapering down since March after a period of strong yarn uptake.

    Management acknowledged

  • Working Capital Stretching

    medium

    Working capital days are currently around 120 days, higher than competitors' 90 days, impacting ROE.

    Analyst acknowledged

Q&A highlights

7 direct
Spreads in Q1 FY27 Direct
So at least in Q1, I believe that it will continue, what spreads we have received in Q4, it would continue at least in Q1. Beyond that, as I said it is depending on how the global geopolitical situation evolves, there could be an impact over it, but at least for quarter 1, we have a visibility that the spreads look to be continuing.

Analyst sought clarity on the sustainability of improved spreads, and management confirmed Q4 levels (₹148/kilo) are expected to continue in Q1, providing near-term visibility.

Asked by Riddhesh Ram Gandhi

Capital Structure and Buyback Plans Direct
We are as of now we are not looking at a buyback, but we are looking to deploy this cash what we generate and also see earlier we had a plan of about INR1,000 crores of investment. Out of that about INR675 crores is already deployed. The remaining INR300 crores, INR350 crores odd which is pending is to be deployed in next 3 years primarily.

Analyst questioned the low leverage and potential for shareholder returns via buyback. Management clarified their capital allocation priority is towards strategic investments in fabric and processing, including the PM MITRA Park, rather than buybacks.

Asked by Riddhesh Ram Gandhi

Demand Drivers for Domestic and Export Markets Direct
I think one big factor was the overhang from the US reciprocal tariffs and the penalty tariffs which was on India. I think subsequently India-US trade deal got agreed and both squashed the tariff itself, sort of that unleashed a lot of demand factors. And that was main trigger why demand in the U.S. market went up. And India, as you know, is primarily dependent on U.S. for a large part of its export.

Analyst inquired about the drivers of demand tailwinds. Management attributed it to the resolution of US reciprocal tariffs, India-EU FTA, yarn demand from China (though tapering), and improved domestic market sentiment, providing insight into market dynamics.

Asked by Prerna Jhunjhunwala

Cotton Inventory Strategy and Levels Direct
Sorry, let me give you a specific answer to this. We have approximately around 120 days of inventory as on 31st of March. Okay, so that is almost around four months of inventory. But Marshal rightly said now the purchases will be tapered down and these four months along with some few interests purchases we will be consuming over the period of till now.

Analyst probed the company's cotton inventory strategy given rising prices. Management confirmed a strategic build-up of 120 days of inventory as of March 31 to capitalize on lower prices, but indicated tapering purchases going forward.

Asked by Aradhana Jain

Drivers for 15-18% EBITDA Margin Guidance Direct
Second part is we are going towards vertical integration. So, these 25,000 spindles is actually integrated project with fabric. Our global fabric revenue also is going up. Right now, it is on an outsourced model, but we sort of have, we have plans to invest in both fabric making and processing. I think that would add another incremental EBITDA margin.

Analyst asked for the drivers behind the ambitious EBITDA margin target. Management highlighted vertical integration into fabric, product portfolio optimization towards higher-margin products, and maintaining high utilization levels as key strategies.

Asked by Madhur Rathi

Comparison with Ambika Cotton's Higher Margins Direct
So, Ambika Cotton primarily is a vertically integrated player. They are a big name or a very well recognized name in fabric. So, they are vertically integrated. They are not a stand-alone yarn manufacturer. Second, they have been running this business of vertically integrated fabric for a much longer time and they have been able to optimize their products or maintain a quality which will fetch them higher margin.

Analyst challenged GHCL's lower margins compared to a peer like Ambika Cotton. Management explained the difference by citing Ambika's longer history of vertical integration and optimized product/quality, while stating GHCL is on a similar journey.

Asked by Madhur Rathi

Impact of Rupee Depreciation Direct
In terms of rupee depreciation, I believe it impacts us in both ways. So definitely, we get a better money or realization on exports, the quantity which we export. But at the same time, it impacts us in our cotton price because we have almost 30% of our cotton on imported, right? We buy a lot of imported cotton; I think that becomes expensive for us.

Analyst asked about the impact of rupee depreciation. Management provided a balanced view, noting benefits from higher export realizations but also increased costs for imported cotton and spares, indicating a neutral overall effect.

Asked by Saket Kapoor

2 min read 6 chapters

Detailed narrative

Strong Q4 and FY26 Financial Performance

GHCL Textiles delivered robust financial results for Q4 and FY26. Q4 revenue increased by 31% year-on-year to ₹375 crores, with EBITDA at ₹52 crores and PAT at ₹28 crores. For the full fiscal year 2026, revenue grew 14% to ₹1,335 crores, and EBITDA saw a significant 34% increase to ₹156 crores. The company's balance sheet remains strong with net debt of ₹118 crores, translating to a low 0.1x net debt to equity ratio.

Market Dynamics and Demand Tailwinds

The company experienced improved market conditions, particularly in Q4 FY26, driven by both volume and pricing. Key demand tailwinds included the resolution of US reciprocal tariffs, the signing of the India-EU Free Trade Agreement, and increased yarn demand from China (though this has tapered since March). Domestic market demand also strengthened across knitting and weaving segments. Spreads improved from ₹123 per kilo in Q3 to ₹148 per kilo in Q4, with management expecting this to continue in Q1 FY27.

Operational Enhancements and Capacity Expansion

GHCL Textiles maintained optimum utilization across its units. The new 25,000 spindle unit has stabilized and is operating at full capacity. The initial batch of knitting machines has been successfully installed, receiving encouraging customer feedback. Additionally, rooftop solar capacity commissioned during FY26 is now contributing to energy cost efficiency, with further expansion planned for FY27.

Strategic Vertical Integration and Future Growth

The company is committed to broadening its value-added portfolio and deepening vertical integration. Management aims for fabric to contribute almost 15% of revenue in FY27, up from 12% in FY26, with 50% of this coming from in-house knitted fabric. Approval for land allocation in PM MITRA Park Virudhunagar is a strategic step for future scale growth and product integration, with significant capital investment planned for fabric and processing capabilities.

Raw Material Management and Working Capital

Cotton prices moved upwards, from approximately ₹55,000 per candy in December '25 to around ₹62,000 currently. GHCL Textiles strategically procured cotton ahead of anticipated price rises, resulting in approximately 120 days of inventory as of March 31, 2026. While this temporarily increased working capital, it is expected to provide a cost advantage. The company plans to optimize working capital, targeting a reduction from current levels towards 110-120 days.

FY27 Capex and Long-Term Targets

For FY27, GHCL Textiles plans a capital expenditure of ₹100-120 crores, primarily for a 10 MW on-ground solar project (₹35 crores) and additional knitting machines (₹15 crores). The company reiterates its long-term target of achieving ₹2,000 crores in revenue with a 15-18% EBITDA margin by FY29-FY30. The objective is also to achieve double-digit Return on Capital Employed (ROCE) going forward.

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