Indo Count Inds.

Indo Count Industries reported a sales volume of 25.2 million meters in Q2 FY26, marking a 6.78% quarter-on-quarter increase. Total income grew by 11.89% QoQ to ₹1,082 crores, driven by higher contributions from new businesses and volume growth in the core business. EBITDA for the quarter was ₹123 crores, a 3.36% QoQ increase, while PAT stood at ₹39 crores. The company also achieved a debt reduction of approximately ₹175 crores in H1 FY26, bringing the net debt to equity ratio to 0.34X in September 2025.

The company announced a new licensing agreement with the Tommy Hilfiger brand, adding to its portfolio of six licensed brands. The utility bedding and USA branded segments collectively contributed 17% of revenues in Q2 FY26, up from 13% in the prior quarter, and are currently operating at an annual run rate of approximately USD 85 million. Management reiterated its guidance to achieve USD 275 million in revenues from these segments over the next three years, underscoring a strong focus on premiumization and brand-led growth.

The 50% tariff imposed on India in late August 2025, coupled with an additional 25% Russian oil penalty, significantly impacted Indo Count's export competitiveness in the US market. This resulted in an EBITDA margin decline to 11.4% in Q2 FY26 from 12.3% in Q1 FY26, representing a 0.9 percentage point drop. Management anticipates continued margin pressure until the end of the year, expecting the tariff structure to stabilize following ongoing US-India trade discussions.

Indo Count maintained approximately 60% capacity utilization across its existing US manufacturing facilities. The third manufacturing facility in North Carolina, a Greenfield project with an investment of approximately USD 15 million, is now expected to become operational in late Q3 FY26 or early Q4 FY26. This facility is projected to produce 18 million pillows annually and generate USD 85-90 million in annual revenues at optimal capacity. Total CAPEX for FY26 is estimated at around ₹200 crores, with no other major CAPEX planned for FY27 apart from maintenance.

The Indian domestic market is experiencing an encouraging uptick, particularly in value-added offerings. During Q2, the company expanded its retail footprint by adding 700 new counters for its Boutique Living and Layers brands, enhancing penetration in key domestic markets. Furthermore, the core non-US business now contributes 30% of the overall revenue mix on an annualized basis, with management expecting increased market share and contribution from ROW markets due to new FTA agreements with countries like Japan, Australia, and the Middle East.

Despite the current margin pressures, management expressed optimism for a recovery, expecting the EBITDA margin for the core business to return to 15% to 16% levels within the next 6 to 9 months as markets stabilize. Internal targets for EBITDA margins are set at 15% to 16% for the pillow business and 17% to 18% for the brand side. The company also anticipates stronger EBITDA to PAT conversion over the next two years as core business volumes scale up and new businesses gain traction.