Indo Count Industries Limited — Q3 FY26 earnings call

Call held 16 Feb 2026

Management summary

Indo Count Industries delivered a stable Q3 FY26 performance with total income of ₹1,074 crores, despite a challenging 50% U.S. tariff environment. The company saw significant growth in its new businesses, which contributed 20% to the top line. While profitability was impacted by tariffs and labor costs, the company is optimistic about future margin recovery and leveraging recent FTAs with Europe and the US to drive growth and geographical diversification.

Highlights

  • Total Income for Q3 FY26 stood at ₹1,074 crores, showcasing steady performance despite full quarter impact of 50% U.S. tariff.

  • New business contributed 20% to total top line in Q3 FY26, growing 16% QoQ to ₹210 crores and achieving an annualized run rate of nearly USD 100 million.

  • Commencement of commercial production at new greenfield pillow manufacturing facility in Kernersville, North Carolina, adding 18 million pillows annually, taking total utility bedding capacity to 31 million pillows per annum.

  • Honoured with TEXPROCIL Export Award for '23-'24, winning Gold Trophy for highest exports of bed sheets/linen for the sixth consecutive year.

  • S&P Global ESG score sharply risen to 78, up from 45 over the last 2 years, ranking within the top 3 percentile globally among textile peers.

Concerns

  • EBITDA for Q3 FY26 stood at ₹102 crores, a decline of 16.8% QoQ from ₹123 crores in Q2 FY26.

  • EBITDA margin for Q3 FY26 was 9.5% (adjusted 10.4%), down from 11.4% in the previous quarter, primarily due to partial tariff absorption and ₹9.2 crores impact from new Labor Code.

  • PAT for Q3 FY26 stood at ₹24 crores, compared to ₹39 crores in Q2 FY26.

Key financials

  1. Total Income ₹1,074 Cr -0.74%QoQ
  2. Volume 24.8 million meters
  3. EBITDA ₹102 Cr -17.1%QoQ
  4. EBITDA Margin 9.5%
  5. Adjusted EBITDA Margin 10.4%
  6. PAT ₹24 Cr -38.5%QoQ
  7. EPS ₹1.23

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.

Capital allocation

high confidence
  • Capex ₹150 Cr Cut — some capex will spill over, especially ZLD
    • Invested up to 9 months ₹131 Cr
    • Additional for Q4 ₹20 Cr
    • ZLD (Zero Liquid Discharge) project
    • Normal balancing and maintenance capex

    Previously planned ₹214 Cr

    Sure. So this year, we had planned around INR214 crores odd, if I'm not mistaken. And we've invested up to 9 months, INR131 crores. In Q4, we should have another INR20-odd crores. So let's say, INR150-odd crores should be where the year ends. Some of this capex will spill over, especially the ZLD. We are in the final stages of choosing our technology partner. So that will spill over into next year. And then there will be normal balancing capex, maintenance capex, as we say, that will come into '26, '27.
  • Debt Debt disclosed
    Net debt has been reduced by INR215 crores as compared to March '25. ... We don't see any major changes or fluctuations in our debt. We have seen a reduction in first 9 months. And hopefully, the worst is behind us.

Guidance & targets

Revenue

  • Double revenues Revenue · by 2028 · High confidence 2x current revenue
    Importantly, we stay committed to our long-term vision of doubling our revenues by 2028, supported by a well-balanced mix of business and geographies, strong brands and an expanding global manufacturing footprint.

    — Mohit Jain

New Business Revenue

  • New business contribution New Business Revenue · by FY28 · High confidence USD 275 million
    And our new business, which has reached a run rate of about USD100 million by FY '28, the new business, which includes the bedding -- utility bedding and also the U.S. brand business, both put together should be in the region of around USD275 million was your guidance which was given in the previous quarter also? Do we stand by that? Yes.

    — Mohit Jain

EBITDA Margin

  • EBITDA Margin EBITDA Margin · long-term · Medium confidence 15-16%
    Having said that, our objective is to get back to 15%, 16%. I think we've been consistently saying that that's our goal on EBITDA. And let's hope that we can get there soon.

    — Mohit Jain

Incubation Costs

  • Incubation cost impact Incubation Costs · by end of Q4 · High confidence 0

    From 150-200 bps today

    As we've mentioned, Abhishek, it's 150 to 200 basis points. So you can run the numbers. I mean, we are not going to provide any specific number, but it's approximately 150 to 200 basis points. We expect this to get over by end of quarter 4.

    — Mohit Jain

New US Facility Revenue

  • Third US facility revenue contribution New US Facility Revenue · within 3 years (part of USD 175M target) · High confidence USD 85-90 million
    The third facility should give us USD85 million to USD90 million which is part of the USD175 million.

    — Mohit Jain

What to watch in Q4 FY26

Incubation cost impact on EBITDA

by end of Q4
Current 150-200 bps
Target Zero

Why it matters

Elimination of these costs is expected to improve overall profitability and margins.

We expect this to get over by end of quarter 4.

Risks & concerns

  • Tariff uncertainty and impact on competitiveness

    medium

    The 50% U.S. tariff environment impacted core business revenues, though volumes were maintained through product mix adjustments and partial tariff absorption. Recent FTAs are expected to ease this.

    Management acknowledged

  • Margin pressure from tariffs and Labor Code

    medium

    Q3 EBITDA margin was 9.5% (adjusted 10.4%), a 100 bps QoQ degrowth, due to partial tariff absorption and a ₹9.2 crore impact from the new Labor Code. Management expects gradual easing.

    Management acknowledged

  • Demand impact from increased prices

    medium

    Retailers increased prices due to tariffs, which has had 'a little bit of an impact on demand', requiring monitoring of sales in the next 1-2 quarters.

    Management acknowledged

  • Muted consumer sentiment

    medium

    Consumer sentiment in the US has been 'a little bit muted' in the last 2 quarters, including the holiday season, but management expects a rebound in 2-3 quarters.

    Management acknowledged

  • Implementation time for trade deals

    low

    While FTAs with Europe and the US are transformative, management noted that 'implementation takes time and scaling up takes further time'.

    Management acknowledged

Q&A highlights

5 direct
US market demand, inventory levels, and potential revenue spike Partial
So we have to wait and watch, but U.S. is a very resilient economy. All the numbers on retail sales, on labor, unemployment numbers have all come in on the positive side. In terms of inventory levels, yes, customers have not overbought anything, but it all depends on how retail sales go in the next 1 to 2 quarters, I would say.

Analyst sought clarity on US demand and inventory, which are key drivers for textile exports, and management indicated a wait-and-watch approach for the next 1-2 quarters.

Asked by Rahul Jain

Reversal of tariff-related discounts and impact on margins Partial
So one thing you need to keep in mind is between our Q2 and Q3, we have a 100 basis point EBITDA margin hit due to the 50% Russian oil tariff. Yes, we did give a case-to-case basis, tariff discounts to customers, which will start getting reversed. We are in touch with all our customers as we speak. It's too early. This has all happened in the last 7, 10 days. So we have engaged with them. As this unfolds, it will all start resulting in -- will start showing in the numbers.

Analyst inquired about the recovery of margins once tariff discounts are reversed, and management confirmed that discounts will reverse but it's too early to quantify the full impact.

Asked by Rahul Jain

Absence of Bangladesh in US home textile import data Direct
So actually, Bangladesh produces very, very low products, which we would compete with them in the European market. In the U.S. market, we actually don't compete with Bangladesh at all. So that's why you don't see Bangladesh on the map. So you absolutely correctly pointed it out.

Analyst questioned the competitive landscape, and management clarified that Bangladesh is not a competitor in the US market for their product range, providing insight into market segmentation.

Asked by Gautam Trivedi

Duty-free benefits for US cotton imports and content requirements Direct
So this is specifically when our product development teams and sales teams go and show a customer a specific product, they like it. It's on the higher end of the range. That's the cotton that we import. Any cotton that is imported into India, which is 32 millimeter in length and above is -- has duty-free access irrespective of country of origin into India. So most of the cotton that Indo Count imports today are 32 millimeter and above in length. ... What the government is working on is that if you use U.S. cotton and fiber from the U.S., then you get -- then the tariff becomes 0. Again, we have not seen the fine print.

Analyst sought to understand the mechanics of duty-free access for US cotton, and management explained the current rules (32mm+ length, 20%+ US content for tariff reduction) and the pending 0% tariff rule for US fiber.

Asked by Dolly

Timeline for US pillow expansion and revenue targets Direct
The third one commissioned in January of 2026. Our capacity is 31 million pillows. And if I'm not mistaken, around 2 million quilts. With this capacity, we should be able to do around USD175 million in revenue, and we expect that to happen in 3 years. We are currently in the first year. ... The third facility should give us USD85 million to USD90 million which is part of the USD175 million.

Analyst sought specific details on the new US manufacturing capacity and its revenue contribution, which management clarified with concrete numbers and timelines.

Asked by Dhvaneet Savla

Impact of tariffs on revenue vs. cost lines and quantification Partial
So in terms of where the impact, it depends on the nature of the order. If it's an FOB shipment, the impact comes on gross margin. And if it's not FOB, then it comes it will come in the EBITDA margin. Very difficult to quantify at this point of time. ... No, that would not be possible because it's all sensitive information that done on...

Analyst asked for a breakdown of tariff impact on financial statements, but management stated it's difficult to quantify precisely due to order-specific nature and sensitive information.

Asked by Shradha Agrawal

Margin trajectory and impact of tariffs/investments Direct
So Sachin, more or less, your thought process is correct, but you've got to realize that this U.S. business will -- the impact will not - we expect that the impact will not be then quarter 1 of next year. There will be some impact yet in Q4, the impact -- but in starting Q1, we expect that it will go away. So as I said, by March, it will go away. And coming back to the regular margin levels is also dependent on capacity utilization. So as capacity starts getting utilized, then there's no reason why we shouldn't be at a normalized margin.

Analyst sought confirmation on the margin recovery path, and management confirmed the general trajectory, highlighting the end of US business impact by Q1 FY27 and the role of capacity utilization.

Asked by Sachin

Consumer sentiment in the US and demand rebound Direct
No I think we got to all realize, a, the U.S. is a very resilient economy. But at the same time, finally, tariffs have come in. These are not small numbers, whether it is 15%, 20% from China, it was up to 146% sometime last year. So finally, it's the U.S. consumer who's paying for it, right? So retail goods, if you travel to the United States, even if you have a glass of juice today or a cup of coffee, the prices have all gone up. So only time will tell what consumer sentiments remain and how robust is the discretionary spending. ... But once everything settles down, we expect it to come back after 2, 3 quarters, the demand levels.

Analyst probed on the current consumer sentiment and its impact on demand, with management acknowledging muted sentiment but expecting a rebound in 2-3 quarters.

Asked by Surya Narayan

3 min read 7 chapters

Detailed narrative

India-US/EU FTAs: A Transformative Opportunity

The company highlighted the recent conclusion of FTAs with Europe and the United States as truly transformative for the Indian textile sector. These agreements are expected to provide duty-free access to Europe, a market of over USD 260 billion, and ease tariff uncertainty with the US. This development positions India more competitively against other exporting countries, creating a level playing field for Indian players. Indo Count is already in discussions with customers and evaluating strategies to capitalize on this 'golden opportunity'.

US Manufacturing Expansion and Utility Bedding Growth

Indo Count commenced commercial production at its new greenfield pillow manufacturing facility in Kernersville, North Carolina, in January 2026. This is the company's third and largest US manufacturing unit, adding 18 million pillows annually and increasing total utility bedding capacity to 31 million pillows per annum. This expansion strengthens the company's US footprint, improves customer proximity, and enhances operational flexibility. The utility bedding business is expected to contribute approximately USD 175 million to the consolidated top line over the next few years, with the new Kernersville facility contributing USD 85-90 million to this target.

Q3 FY26 Performance Amidst Tariff Challenges

Despite operating in a challenging 50% U.S. tariff environment, Indo Count delivered a stable performance in Q3 FY26. Total income stood at ₹1,074 crores, a slight decrease from ₹1,082 crores in Q2 FY26. Sales volume for Q3 FY26 was 24.8 million meters. The company maintained volumes by undertaking calibrated product mix adjustments and partially absorbing tariffs. New businesses largely offset the impact on core business revenues, contributing 20% to the total top line and growing 16% QoQ to ₹210 crores.

Profitability and Margin Outlook

EBITDA for Q3 FY26 was ₹102 crores, down from ₹123 crores in Q2 FY26, resulting in an EBITDA margin of 9.5% (adjusted 10.4%). This decline was attributed to partial tariff absorption and a ₹9.2 crore impact from the new Labor Code. Management aims to restore EBITDA margins to 15-16% in the long term and expects margin pressure to gradually ease. The 150-200 basis points impact from incubation costs for new businesses is anticipated to conclude by the end of Q4 FY26, further supporting margin recovery.

ESG Leadership and Brand Portfolio Strength

Indo Count significantly strengthened its ESG leadership position, with its S&P Global ESG score rising to 78 from 45 over the last two years, placing it within the top 3 percentile globally among textile, apparel, and luxury goods peers. The company's portfolio of licensed brands, including Wamsutta, Fieldcrest, Waverly, and GAIAM, continues to be strong growth drivers. The newly relaunched Wamsutta brand is performing well, receiving encouraging customer feedback and strong product reviews.

Capital Expenditure and Debt Management

For FY26, Indo Count initially planned ₹214 crores in capital expenditure, with ₹131 crores invested up to the first nine months. An additional ₹20 crores is expected in Q4, bringing the total for FY26 to approximately ₹150 crores. Some capex, particularly for Zero Liquid Discharge (ZLD) projects, will spill over into the next fiscal year. The company has reduced its net debt by ₹215 crores compared to March '25 and expects no major fluctuations in debt, with the worst behind it, as it focuses on working capital management for revenue growth.

Consumer Sentiment and Demand Recovery

Management noted that retail sales during the holiday season were decent, but retailers increased prices, which had a slight impact on demand. While the U.S. economy remains resilient, consumer sentiment has been 'a little bit muted' in the last two quarters. However, the company anticipates a rebound in demand levels after 2-3 quarters as market conditions stabilize. The recent trade agreements are expected to provide clear visibility for customers, aiding decision-making and supporting future demand.

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

More Textiles earnings calls