Sanathan Textile

Sanathan Textiles reported a stable Q3 FY25 with consistent demand and gross margins. Revenue from operations for Q3 FY25 stood at Rs. 743.13 crores, with EBITDA at Rs. 58.47 crores and PAT at Rs. 34.17 crores. For the nine months ended December 31, 2024, the company demonstrated strong year-on-year growth, with revenue reaching Rs. 2266.43 crores (up 2.95% YoY). EBITDA for 9M FY25 increased by 32.33% YoY to Rs. 195.17 crores, and PAT grew by 43.15% YoY to Rs. 116.80 crores. Gross margins improved from 13.91% in 9M FY24 to 15.65% in 9M FY25.

The company is actively commissioning a greenfield project in Wazirabad, Punjab, aimed at significantly increasing its polyester filament yarn manufacturing capacity from the current 550 tons per day to 1,500 tons per day in a phased manner. The first phase of this expansion is targeted to be operational by Q1 FY26, adding approximately 250,000 tons annually, with the second phase ramping up total annual capacity to 355,000 tons. The total CAPEX for Phase 1 of the Punjab plant is estimated at Rs. 1,850 crores.

Sanathan Textiles clarified the utilization of IPO funds, noting that Rs. 4 crores were utilized by the end of December. Subsequently, Rs. 160 crores were used for loan repayment of Sanatana Textiles Limited in January 2025, and Rs. 140 crores for term loan repayment of Sanathan Polycot Private Limited in February 2025. Beyond the Punjab project, the company plans a Rs. 400 crore CAPEX for a cotton project in FY27 and a Rs. 250 crore CAPEX for the second phase of the polyester plant in FY28, demonstrating a structured long-term investment strategy.

Currently, polyester filament yarns contribute 77% of the company's revenue, followed by cotton yarn at 19% and technical textiles at 4%. Post the commissioning of the Punjab filament yarn project, this ratio is expected to become more skewed towards filament yarn. However, management aims to return to a similar ratio in the longer run after subsequent cotton yarn and industrial yarn capacity additions in FY27 and the second polyester phase in FY28. The company also plans to double its technical textile yarn capacity from 9,000 tons to 18,000 tons in the coming year.

Management reported that raw material prices for polyester filament yarn, specifically PTA and MEG, have remained relatively stable, with PTA at approximately $645 per ton and MEG at $550 per ton. Cotton prices have been slightly soft, but cotton yarn prices have remained stable. Realization for polyester yarn was around Rs. 112 per kg, for cotton (excluding scrap) Rs. 325 per kg, and for technical textile Rs. 125 per kg, with realizations stabilizing since December after fluctuations in Q2 and Q3.

The domestic polyester yarn segment is operating at an effective capacity utilization of 84-85%, which management considers close to 100% given defunct capacities. Demand remains strong, with all material being sold, indicating robust growth over the past year despite added industry capacity. The company expressed confidence in absorbing new capacity from the Punjab plant, citing market growth and flexibility to place material in western/southern markets or export based on net back, mitigating concerns about competition in the North.