Nitin Spinners Limited

Nitin Spinners reported a revenue of INR 760.08 crores for Q2 FY26, marking an 8% year-on-year decline, and INR 1,553.40 crores for H1 FY26, a 4% decline, primarily due to reduced selling prices and global headwinds^🌐. The EBITDA margin for the quarter compressed marginally to 13.1% from 14% in Q2 FY25. Net profit also saw a decrease, standing at INR 34.78 crores for Q2 FY26 compared to INR 42.16 crores in the previous year. The textile industry continues to face uncertainties from U.S. tariff measures, subdued demand, and sustained margin pressures, with yarn prices declining by 2-3% during the quarter.

The company has initiated a significant capex plan of INR 1,100 crores aimed at increasing spinning capacity by approximately 25% and the fabric division by over 50%. This expansion is strategically focused on moving up the value chain, with 85-90% of the new yarn production intended for the fabric division, including value-added dyed yarns. This move is expected to enhance overall margins and strengthen the company's leadership in the textile trade. The new capacity is projected to contribute INR 400 crores in incremental revenue in FY27, with full utilization potentially adding INR 1,000 crores and bringing total revenue potential to INR 4,200 crores.

The Government of India's temporary removal of import duty on cotton until December 31, 2025, is expected to support industry conditions. Management noted that Indian cotton prices are now at par with imported benchmarks, eliminating the need for extensive raw material stocking. Furthermore, an investment of INR 17.9 crores in renewable energy generation is anticipated to reduce power costs by approximately 5%, translating to annual savings of INR 10-12 crores, thereby optimizing power cost operations across plants.

Despite the challenges posed by U.S. tariffs, Nitin Spinners has limited direct exposure to the U.S. market and is actively diversifying its export base across more than 50 countries. Bangladesh remains the largest export destination, and the company is strengthening its foothold in the U.K. and EU markets, which currently account for 6-7% of fabric sales. Efforts are also underway to explore direct export opportunities in the African continent, aiming to mitigate the impact of tariffs and expand trade opportunities.

Nitin Spinners maintains a prudent financial policy, with its long-term debt to equity ratio standing at a low 0.53 as of September 2025, well within the target of below 1:1. The average cost of borrowing for long-term loans, net of interest incentives, is approximately 5.7%. While the company's working capital requirement reduced by INR 189 crores this quarter, an additional INR 200-250 crores in working capital will be needed to support the expanded capacities, demonstrating controlled leverage for growth.

Management observed significant industry consolidation, with over 10 million spindles (18-20% of total installed capacity), primarily from smaller, older units, having ceased operations over the last 2.5-3 years. This rationalization is expected to benefit larger, more efficient players. The company anticipates an improvement in industry conditions and margin normalization within one to two quarters, driven by the settling of geopolitical issues and a subsequent pickup in demand.