Indo Count Industries Limited — Q2 FY26 earnings call

Call held 12 Nov 2025

Management summary

Indo Count Industries reported sequential growth in Q2 FY26 volumes and revenues, driven by new business contributions and core operations. Despite facing significant US tariffs and an additional Russian oil penalty that impacted EBITDA margins, the company expanded its brand portfolio with Tommy Hilfiger and saw encouraging traction from Wamsutta. Management reiterated its long-term revenue guidance for utility bedding and US brands, while acknowledging continued margin pressure in the near term until tariff structures stabilize.

Highlights

  • Signed a licensing agreement with the Tommy Hilfiger brand, marking the sixth licensed brand.

  • Utility bedding and USA branded segments contributed 17% of revenues in Q2 FY26, up from 13% QoQ, reaching a run rate of approximately USD 85 million per annum.

  • Sales volume for Q2 FY26 stood at 25.2 million meters, a 6.78% QoQ growth from 23.6 million meters in Q1 FY26.

  • Total income for Q2 FY26 was ₹1,082 crores, an 11.89% QoQ growth from ₹967 crores in Q1 FY26.

  • EBITDA for Q2 FY26 was ₹123 crores, a 3.36% QoQ growth from ₹119 crores in Q1 FY26.

  • EBITDA margin for Q2 FY26 was 11.4%, a decline of 0.9 percentage points QoQ from 12.3% in Q1 FY26, primarily due to tariff impacts.

  • PAT for Q2 FY26 was ₹39 crores, a 2.63% QoQ growth from ₹38 crores in Q1 FY26.

  • EPS for Q2 FY26 was ₹1.97 per share.

  • Achieved debt reduction of approximately ₹175 crores in H1 FY26, with the net debt to equity ratio standing at 0.34X in September 2025.

Concerns

  • US Tariffs (50% + 25% Russian oil penalty)

  • Margin Pressure

Key financials

  1. Sales Volume 25.2 million meters +6.8%QoQ
  2. Total Income ₹1,082 Cr +11.9%QoQ
  3. EBITDA ₹123 Cr +3.4%QoQ
  4. EBITDA Margin 11.4% -7.3%QoQ
  5. PAT ₹39 Cr +2.6%QoQ
  6. EPS ₹1.97
  7. Net Debt to Equity Ratio 0.34×

What they filed

Q1 FY27: revenue up 11.7%, net profit up 67.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue991 1,009 865 733 828 −16%779 −23%758 −12%819 +12%
EBITDA150 122 52 88 81 −46%63 −48%67 +29%114 +30%
Net profit83 67 8 40 42 −49%25 −63%37 +363%67 +68%
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.

Segment breakdown

  • Utility Bedding & USA Branded Segments
    17% Revenue Contribution$85 Mn Annual Run Rate
  • Overall Branded Business
    20% Revenue Contribution
  • Core Non-US Business
    30% Revenue Contribution

Guidance & targets

Revenue

  • Revenues from utility bedding segment and US brand business Revenue · by 2028 · High confidence USD 275 million
    On our 2028 guidance; we reiterate our earlier guidance of achieving approximately USD 275 million in revenues from the utility betting segment and the US brand business over the next 3 years.

    — Mohit Jain, Executive Vice-Chairman

  • Annual revenues from utility bedding business (North Carolina facility) Revenue · at optimal capacity utilization · High confidence USD 85 to 90 million
    Once fully ramped up, this facility is expected to generate USD 85 to 90 million in annual revenues at optimal capacity utilization.

    — Mohit Jain, Executive Vice-Chairman

  • Annual revenues from utility bedding business (total) Revenue · by 2028 · High confidence USD 175 million
    We remain confident in our previously stated guidance of achieving approximately USD 175 million in annual revenues from the utility bedding business by 2028.

    — Mohit Jain, Executive Vice-Chairman

Margin

  • EBITDA margin on core business Margin · next 6 to 9 months · Medium confidence 15% to 16%
    As markets stabilize, hopefully in the next, I would say, 6 to 9 months, then margins will go back to 15% to 16% levels on our core business. That's our expectation.

    — Mohit Jain, Executive Vice-Chairman

  • EBITDA margin for pillow business Margin · High confidence 15% to 16%
    On the pillow business, we expect an EBITDA margin of 15% to 16%.

    — Mohit Jain, Executive Vice-Chairman

  • EBITDA margin for brand side Margin · High confidence 17% to 18%
    And on the brand side, 17% to 18% is our internal target.

    — Mohit Jain, Executive Vice-Chairman

Profitability

  • EBITDA to PAT conversion Profitability · next two years · Medium confidence Stronger
    As volumes in the core business scale up and new business show more traction, we expect stronger EBITDA to PAT conversion over the next two years.

    — Manish Bhatia, CFO

Capacity

  • Third manufacturing facility in North Carolina operational Capacity · Late Q3 FY26 or early Q4 FY26 · High confidence Late Q3 FY26 or early Q4 FY26
    The facility is now expected to become operational during late Q3 FY26 or early Q4 FY26.

    — Mohit Jain, Executive Vice-Chairman

Capex

  • Total CAPEX Capex · FY26 · High confidence ~200 odd crores
    If you go to our investor deck, we had a total CAPEX plan this year of approximately 200 odd crores...

    — Mohit Jain, Executive Vice-Chairman

  • Major CAPEX Capex · FY27 · High confidence Nothing else planned (other than maintenance)
    And for next year, other than maintenance CAPEX, there's really nothing else planned at this point of time.

    — Mohit Jain, Executive Vice-Chairman

Risks & concerns

  • US Tariffs (50% + 25% Russian oil penalty)

    high

    A 50% tariff imposed in late August 2025, plus an additional 25% Russian oil penalty, significantly impacts export competitiveness and margins. Management expects this situation to prevail until tariff structures stabilize.

    Management acknowledged

  • Margin Pressure

    high

    EBITDA margin declined to 11.4% in Q2 FY26 from 12.3% in Q1 FY26 due to tariffs and product mix shifts, with management expecting this pressure to continue until the end of the year.

    Management acknowledged

  • Demand Slowdown in US

    medium

    There is a risk of demand slowdown in the US due to the inflationary environment and the full pass-through of tariffs to consumers, especially after the holiday season, creating a fluid market situation.

    Analyst acknowledged

Areas of evasion (2)

  • Normalized margin trending in non-US business
  • Detailed explanation of utility vs brand business classification

Q&A highlights

0 direct, 2 evasive
Impact of tariffs on future margins and demand in the US Partial
So, at this point of time, our 3rd Quarter looks very similar to our 2nd Quarter in terms of volume. So, there are similar numbers. As we get into Q4 and forward, as I said, once the holiday season pans out only time will tell. Once, the full impact of retail price increases are not there in the market at this point of time. So, once that kicks in, how do the retailers react, how do they level set their inventories are to be seen, this is very fluid at this point of time.

This question directly addresses the most significant headwind (tariffs) and its unknown impact on future demand and profitability, highlighting market uncertainty.

Asked by Prerna Jhunjhunwala

Normalized margin trending in non-US business Evasive
No, I mean, we would not get into specifics. We can take it up offline if needed.

Management explicitly refused to provide specific margin guidance for a growing segment not impacted by US tariffs, which could be a key diversifier for the company.

Asked by Bhavin Chheda

Difference between utility business and brand business Evasive
We will take it up offline with our team I would highly recommend you to read our investor deck. It's very clearly defined in that.

Despite being a fundamental classification for their new growth strategy, management did not clearly explain the distinction during the call, suggesting a lack of immediate clarity or willingness to elaborate.

Asked by Nishita

3 min read 6 chapters

Detailed narrative

Q2 FY26 Financial Performance and Growth Drivers

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.

Strategic Brand Expansion and US Market Penetration

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.

Impact of US Tariffs and Margin Compression

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.

Capacity Expansion and Capital Expenditure Plans

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.

Domestic Market Growth and Diversification Strategy

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.

EBITDA Margin Outlook and Recovery Expectations

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.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Textiles earnings calls