Sanathan Textiles Limited

Sanathan Textiles reported Q1 FY26 revenue from operations of ₹745 crores, marking a 1.77% sequential increase from Q4 FY25. However, on a year-on-year basis, revenue declined by 4.5% due to softening raw material prices and lower average sales prices. Despite these headwinds, the company achieved an EBITDA of ₹70 crores, improving from ₹68 crores in the prior quarter, with an EBITDA margin of 9.3%, and a PAT of ₹40 crores, yielding a 5.4% margin. Sales volume for the quarter stood at 59,000 metric tons, reflecting healthy underlying demand and high plant utilization.

The company's significant greenfield facility in Punjab, designed to add 3,46,000 metric tons per annum of polyester yarn capacity, is nearing completion. Trial production has commenced, and commercial operations are scheduled to begin on August 27, 2025, despite a two-month delay caused by early monsoon. This expansion will increase the company's total polyester yarn capacity to 5,46,000 tons per annum in a phased manner, with an expected revenue contribution of ₹1,500 crores from this new capacity for the partial FY26.

The new Punjab facility incorporates advanced green manufacturing practices, including 100% zero liquid discharge and the use of agri-waste as fuel for boilers, eliminating liquid fuel consumption. Management highlighted that this sustainable approach, coupled with an agreement with the Government of Punjab, is expected to result in lower power costs compared to the existing Silvassa unit (which is around ₹6 per unit) for the first four years of operation, enhancing cost efficiency and reducing the carbon footprint.

Sanathan Textiles maintains a diversified product portfolio, with polyester filament yarn contributing 77% of revenue, cotton yarn 17-18%, and technical textiles. Beyond the Punjab expansion, the company plans to double its technical textiles capacity from the current 9,000 metric tons per annum, targeting full-year FY27 for this enhancement. Additionally, 72,000 new spindles will be added for cotton yarn, with full-year benefits expected by FY28, reinforcing its integrated manufacturing capabilities.

Despite the YoY revenue decline in Q1 FY26 due to price softening and increased operating costs (power, fuel, wages), management remains confident in achieving its full-year FY26 targets. The company reiterated its guidance for an annual top line of approximately ₹4500 crores and a double-digit EBITDA margin, specifically aiming for 10% to 11%. The average sales price is expected to stabilize in the range of ₹114-115, with the Silvassa facility alone projected to contribute around ₹3,000 crores to the top line.

The Indian textile industry is undergoing a significant shift towards man-made fibers (MMF), particularly polyester, with India's MMF segment projected to grow 5-7% over the next 2-3 years. Sanathan's strategy for its new capacities focuses on the local market, leveraging advantages as a local supplier, while maintaining flexibility to direct material to North, West, South, or export markets based on maximizing netbacks. The company expects its export mix to be 6-7% for FY26, with direct exports to the US being minimal for polyester.