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    Sanathan Textile

    SANATHANGood
    Textiles·12 Feb 2025
    Management Summary

    Sanathan Textiles reported a stable Q3 FY25 with consistent demand and gross margins. The company demonstrated strong year-on-year growth for the nine months ended December 2024, with both EBITDA and PAT increasing significantly. Strategic capacity expansion is underway with a greenfield project in Punjab, expected to significantly boost polyester filament yarn manufacturing capacity by Q1 FY26, aligning with the company's long-term growth strategy.

    Highlights

    8
    • Q3 FY25 Revenue from operations stood at Rs. 743.13 crores.

    • Q3 FY25 EBITDA was Rs. 58.47 crores, up 0.43% QoQ.

    • Q3 FY25 PAT stood at Rs. 34.17 crores, up 4.94% QoQ.

    • Nine Months FY25 Revenue from operations was Rs. 2266.43 crores, up 2.95% YoY.

    • Nine Months FY25 EBITDA was Rs. 195.17 crores, a 32.33% increase from 9M FY24.

    • Nine Months FY25 PAT was Rs. 116.80 crores, a 43.15% increase from 9M FY24.

    • Gross margins for 9M FY25 improved to 15.65% from 13.91% in 9M FY24.

    • Sales quantity for nine months was 1,80,000 tons, up 3.44% YoY.

    What Changed2

    vs Q4 FY25

    Guidance items10 → 9 (-1)Risks discussed3 → 2 (-1)
    Key financials

    Metrics

    8

    Periods

    2

    Headline

    3
    • Revenue
      ₹743.13 Cr
      QoQ+0.1%
    • EBITDA
      ₹58.47 Cr
      QoQ+0.4%
    • PAT
      ₹34.17 Cr
      QoQ+4.9%

    9M

    5
    • Revenue
      ₹2,266.43 Cr
      YoY+2.9%
    • EBITDA
      ₹195.17 Cr
      YoY+32.3%
    • PAT
      ₹116.8 Cr
      YoY+43.1%
    • Gross Margin
      15.7%
    • Sales Quantity
      1,80,000 tons
      YoY+3.4%

    Segment breakdown

    Filament Polyester
    77% Revenue Contribution
    Cotton
    19% Revenue Contribution
    Technical Textile
    4% Revenue Contribution
    List

    Guidance & targets

    9
    CategoryTargetPriority
    Capacity
    Polyester Filament Yarn Manufacturing Capacity
    1,500 tons per day (from 550 tons per day)
    High
    Capacity
    Cotton Yarn and Industrial Yarn Capacity Addition
    N/A
    High
    Capacity
    Polyester Plant Phase 2 Commissioning
    N/A
    High
    Capacity
    Punjab Phase 1 Annual Production
    250,000 tons annually
    High
    Capacity
    Punjab Phase 2 Annual Production
    355,000 tons annually (total)
    High
    Capacity
    Technical Textile Yarn Capacity
    Doubling (adding 9000 tons to current 9000 tons)
    High
    Capex
    Punjab Greenfield Project (Phase 1)
    Rs. 1,850 crores
    High
    Capex
    Cotton Project
    Rs. 400 crores
    Medium
    Capex
    Polyester Plant Phase 2
    Rs. 250 crores
    Medium

    Risks & concerns

    2
    RiskSeverity

    Raw material price volatility (cotton, PTA, MEG)

    Management noted that quarter-to-quarter variations can depend on factors like raw materials volatility.Management acknowledged

    medium

    Competition and demand absorption in North India post-expansion

    Analyst questioned potential impact of new competitors and export competitiveness on capacity utilization in the North. Management expressed confidence in market growth and flexibility to place material in other regions or export.Analyst acknowledged

    medium

    Q&A highlights

    3

    “With respect to your first question on the utilization of funds from the IPO, see the company received the funds in the last week of December. So, we were able to utilize around Rs. 4 crores out of the funds received. There are three main objects of the IPO. First was Rs. 160 crores for repayment of loans of Sanatana Textiles Limited, which were done in the month of January, 2025. The second object was Rs. 140 crores repayment of term loans of Sanathan Polycot Private Limited that was done in the month of February, 2025. And the third was General Corporate Purpose. So, we managed to utilize the funds in the last week.”

    Clarifies the timing and allocation of IPO funds, addressing concerns about unutilized capital, and provides a breakdown of CAPEX plans and timelines for different segments.

    asked by Surya Nayak

    3 min read6 chapters

    Detailed Narrative

    01

    Q3 & 9M FY25 Financial Performance Overview

    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.

    02

    Strategic Capacity Expansion in Punjab

    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.

    03

    Capital Allocation and IPO Fund Utilization

    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.

    04

    Segmental Revenue Mix and Future Outlook

    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.

    05

    Raw Material Costs and Product Realization

    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.

    06

    Industry Demand and Competitive Landscape

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.