Sanathan Textiles Limited — Q3 FY26 earnings call

Call held 9 Feb 2026

Management summary

Sanathan Textiles reported a challenging yet operationally resilient Q3 FY26, with consolidated revenue growing 31.9% QoQ to INR1078.7 crores. The Punjab facility achieved EBITDA positive status, and Silvassa maintained optimal utilization. Margins were temporarily impacted by external factors and one-time costs, but management anticipates improvement in Q4 and a strong FY27 driven by capacity expansions and favorable market tailwinds.

Highlights

  • Consolidated revenue grew 31.9% QoQ to INR1078.7 crores, driven by Punjab facility ramp-up.

  • Punjab facility achieved EBITDA positive performance in Q3 FY26, marking a key milestone in its commissioning journey.

  • Silvassa facility maintained optimum capacity utilization and is set to double technical textile capacity from 9,000 MTPA to 18,000 MTPA by Q1 FY27.

  • Management expects improved yarn spreads and cheaper raw material in Q4 FY26, leading to better profitability.

  • Incentives for the Punjab plant are set to start flowing in Q4 FY26, contributing to its financial performance.

Concerns

  • Consolidated normalized EBITDA margin compressed to 5.6% in Q3 FY26, primarily due to temporary industry factors like GST-related demand deferral and pricing pressure post BIS/QCO removal.

  • Q3 FY26 profitability was impacted by one-time costs of INR2.6 crores for additional gratuity liability and INR3.5 crores for Punjab capacity scale-up expenses.

  • Working capital blockage increased due to the inverted duty structure (GST rates from 18% to 5%), despite government efforts to expedite refunds.

Key financials

  1. Consolidated Revenue ₹1,078.7 Cr +31.9%QoQ
  2. Consolidated Normalized EBITDA ₹59.9 Cr
  3. Consolidated Normalized EBITDA Margin 5.6%
  4. Standalone Revenue ₹768.1 Cr +3.6%YoY
  5. Standalone PAT ₹38.1 Cr

What they filed

Q1 FY27: revenue up 8.4%, net profit up 38.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue743 741 731 750 767 +3%768 +4%753 +3%813 +8%
EBITDA58 59 71 70 71 +22%53 −10%82 +15%95 +36%
Net profit35 37 50 47 51 +46%38 +3%56 +12%65 +38%
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 Capex disclosed internal accruals for Silvassa expansion
    • Technical textile expansion at Silvassa facility ₹80 Cr
    • Phase 2 expansion at Punjab facility (additional 200 TPD capacity) ₹125 Cr
    • Cotton yarn operations in Madhya Pradesh ₹400 Cr
    Yes, it's about INR80-odd crores for the expansion at Silvassa. ... Through internal accruals. ... So it's only a small capex maybe about INR150 crores or INR125 crores to INR150 crores which will add up to adding that additional 200-odd tons per day. ... what we will be spending now will be about INR100-odd crores for the second phase at Punjab and we will be doing spending about 400 and odd crores at the cotton facility for Madhya Pradesh.
  • Debt Net ₹1,300 Cr
    • Forex hedge Entire foreign debt hedged for 10 years EUR 50 Mn
    Yes. The net debt at consolidated level was close to INR1,300 crores. And the foreign debt was close to 50 million euros. But the entire foreign debt which is in Euros has been hedged for the entire period of the debt, which is 10 years.
  • Liquidity Liquidity disclosed Working capital for the standalone business is close to 1.6. There is a larger blockage of funds due to the inverted duty structure (GST from 18% to 5%), though government efforts are expediting refunds.
    See, the working capital is close to 1.6 for the standalone as the requirements of the Polycot plant at Punjab are very negligible. ... Yes, I mean there are no challenges. Except that yes, we have a larger blockage of funds because of the larger inversion. Earlier we had an inversion from 18 to 12. Now we have an inversion from 18 to 5, so there's a little more money blocked. But having said that, the government is also working and we are seeing that results that the refund of the inversion will be coming to us faster than it was coming earlier. But yes, there will be a little more working capital blocked on that.

Guidance & targets

Profitability

  • Consolidated EBITDA Profitability · Q4 FY26 · High confidence INR90-100 crores
    Q4, we are looking at anything between INR90 crores to INR100 crores consolidated EBITDA.

    — Management

  • Consolidated EBITDA Profitability · FY27 · High confidence Double-digit EBITDA
    Yes, so FY '27, with everything put together, we will be looking at a top line of close to 5,700 and a double-digit EBITDA on that.

    — Management

  • Interest and Depreciation Profitability · Next financial year · High confidence INR130-140 crores
    Yes that goes to around INR130 crores, INR140 odd crores of interest cost for next year?

    — Management

Revenue

  • Consolidated Top Line Revenue · Q4 FY26 · High confidence INR1,200 crores
    INR1,200 top line.

    — Management

  • Consolidated Top Line Revenue · FY27 · High confidence Close to INR5,700 crores
    Yes, so FY '27, with everything put together, we will be looking at a top line of close to 5,700 and a double-digit EBITDA on that.

    — Management

Capacity

  • Punjab Phase 1 Polymerization Capacity Capacity · End of Q4 FY26 · High confidence 700 metric tons per day
    As of today, the production has reached approximately 575 metric tons per day and we remain on track to achieving Phase 1 polymerization capacity of 700 metric tons per day by the end of Q4 FY '26.

    — Sammir Dattani

  • Punjab Phase 2 Polymerization Capacity Capacity · FY28 · High confidence 950 metric tons per day

    From 700 metric tons per day today

    Following the achievement of the full Phase 1 capacity at Punjab, we intend to move towards execution of Phase 2, which will further enhance our polymerization capacity from 700 metric tons per day to 950 metric tons per day.

    — Management

  • Silvassa Technical Textile Capacity Capacity · Q1 FY27 · High confidence 18,000 metric tons per annum

    From 9,000 metric tons per annum today

    This expansion will double our installed capacity from 9,000 metric tons per annum to 18,000 metric tons per annum in Q1 FY '27, strengthening our presence in the high-value technical textile and supporting long-term margin improvement.

    — Sammir Dattani

Operations

  • Madhya Pradesh Cotton Plant Operational Status Operations · H2 FY28 · High confidence Operational
    So we will be there up and running probably second half of FY '28 for the MP.

    — Management

Margin

  • Gross Margin Margin · Q4 FY26 and going forward · High confidence 30-31%
    Okay, so on the gross margin side, so we can see 31% around 30%, 31% of gross margins in 4Q and going forward quarters?

    — Management

What to watch in Q4 FY26

Punjab Phase 1 Capacity Utilization

Before end of Q4 FY26
Current 60-65%
Target 100% (700 TPD)

Why it matters

Achieving full Phase 1 capacity utilization at Punjab is crucial for improving consolidated profitability and fixed cost absorption.

No, 100% level means Phase 1, right, which is 700 tons per day? ... Yes. So that we will be there before the end of this quarter.

Risks & concerns

  • Challenging industry environment in Q3 FY26

    medium

    Volatility across global trade, elevated US tariff impacting export orders, GST rate change causing inventory buildup, and sudden removal of BIS QCO created temporary margin pressure.

    Management acknowledged

  • Temporary margin pressure

    medium

    Driven by GST-related demand deferral and pricing pressure following the removal of BIS and QCO requirements, but expected to improve in Q4.

    Management acknowledged

  • Working capital blockage due to inverted duty structure

    medium

    The inversion of GST rates from 18% to 5% has led to a larger blockage of funds, although the government is working on faster refunds.

    Both acknowledged

Q&A highlights

7 direct
Impact of tariff situation and other factors on Q3 profitability Direct
our indirect exports is about 25% and we have said about 5% to 7% of that is to the US. So yes, there was some impact. And more so because most of these customers were high-end value purchasers. So we had to divert because the entire volume was not coming from them, we had to move to the local market and domestic market where more of the commodity play was there, which impacted our margins in a certain way to some extent.

Explains the margin compression in Q3 due to external factors and a necessary shift to domestic commodity play.

Asked by Aashish Upganlawar

Margin trajectory and factors affecting it (GST, QCO, Punjab costs) Direct
The 5.5% is on a consolidated basis you're talking about, it's 7 points, I mean, the consol basis because of the Punjab facility which is not ramped up fully which I explained earlier. Coming to the standalone point of view, as I explained, one was this, the other impact was the QCO, when the QCOs were removed post the GST. So once the GST was reduced, there was a halt by customer buying because of the confusion over the implementation of the new GST regime.

Provides detailed reasons for the significant margin drop in Q3, including operational costs from Punjab and regulatory changes.

Asked by Aashish Upganlawar

Yarn spreads trend (January vs. December) and outlook Direct
Yes, so January spreads have improved. And two things will impact as far as we are concerned, two things will come into play for this quarter. One is yes, the spreads have improved compared to December, January spreads have improved across the verticals and with the enhancement of the capacity to 700 tons in Punjab over this quarter. So definitely we'll have a much better quarter.

Indicates a positive trend for Q4 profitability due to improved spreads and the ramp-up of the Punjab facility.

Asked by Harsh Mittal

Status of incentives for Sanathan PolyCot business (Punjab plant) Direct
No, the incentives, see we have there is a process there when we applied for it, they have vetted all the numbers and all the investment numbers and then we have got a certificate regarding the confirmation of the incentives. As far as actually flowing it in, yes, it's set to flow in this quarter.

Confirms that incentives will start flowing in Q4, which will contribute positively to the Punjab plant's profitability.

Asked by Harsh Mittal

Impact of QCO removal on margins and outlook for Q4 Direct
No, you're right. In the third quarter, yes, the QCO did impact because as I mentioned, there were a following thing post the GST reduction which held up movement of material and then immediately after that came the QCO removal. So there was a bit of a challenge there, but we have overcome that and our finished products the impact of the QCO was reflected immediately. Whereas the raw material which also comes lower post the QCO is impacted slowly, which I said we'll get the full advantage in this quarter coming up. So definitely we will see a better number this quarter going forward and we will be like the Q2 numbers.

Reaffirms that Q4 will see better margins, potentially returning to Q2 levels, due to the delayed impact of QCO removal on raw material costs.

Asked by Sanjay Manyal

DGTR's anti-dumping probe on PTY imports from China and its impact Partial
No, it will only help us if it comes through. But I think there are still investigations on and we are yet to see the result of that. But having said that, in today's condition, hardly anything is coming there. Yes, initially when the QCO was removed, a lot of material, a cheaper material did flow in from China, which impacted our pricing, yes. And the prices dropped by almost about 10%, 12%. But having said that, post that almost 50% of that we have recovered back and we are on a way to get there.

Clarifies the current status and past impact of Chinese imports on pricing and the potential future benefit if the probe is successful.

Asked by Tanishk

Working capital implications of the inverted duty structure Direct
Yes, I mean there are no challenges. Except that yes, we have a larger blockage of funds because of the larger inversion. Earlier we had an inversion from 18 to 12. Now we have an inversion from 18 to 5, so there's a little more money blocked. But having said that, the government is also working and we are seeing that results that the refund of the inversion will be coming to us faster than it was coming earlier. But yes, there will be a little more working capital blocked on that.

Highlights a specific operational challenge impacting working capital, despite government efforts to expedite refunds, due to the inverted duty structure.

Asked by Aradhana Jain

Punjab facility capacity utilization timeline Direct
No, 100% level means Phase 1, right, which is 700 tons per day? ... Yes. So that we will be there before the end of this quarter.

Provides a clear and near-term timeline for achieving full Phase 1 capacity utilization at the Punjab plant, which is crucial for future profitability.

Asked by Aradhana Jain

3 min read 6 chapters

Detailed narrative

Q3 FY26 Performance Overview

Sanathan Textiles reported consolidated revenue of INR1078.7 crores for Q3 FY26, marking a significant 31.9% quarter-on-quarter increase, primarily driven by the ramp-up of the Punjab facility. Standalone revenue stood at INR768.1 crores, reflecting a 3.6% year-on-year growth. Consolidated normalized EBITDA was INR59.9 crores with a margin of 5.6%, while standalone normalized EBITDA was INR56 crores with a 7.3% margin. Standalone PAT for the quarter was INR38.1 crores, representing a 5% margin.

Operational Highlights & Capacity Expansion

The Silvassa facility continued to operate at optimum capacity utilization, with plans to double its technical textile yarn installed capacity from 9,000 MTPA to 18,000 MTPA by Q1 FY27, backed by an INR80 crore investment from internal accruals. The greenfield Punjab facility scaled up its polymerization capacity from 350 to 450 metric tons per day during Q3, achieving EBITDA positive performance. Production has reached 575 TPD, with a target of 700 TPD by the end of Q4 FY26, and further expansion to 950 TPD by FY28. The company is also expanding cotton yarn operations in Madhya Pradesh with a planned investment of INR400 crores, expected to be operational by H2 FY28.

Financial Performance & Margin Analysis

Q3 FY26 margins were impacted by temporary industry factors, including GST-related demand deferral and pricing pressure following the removal of BIS and QCO requirements. The company incurred one-time costs of INR2.6 crores for additional gratuity liability and INR3.5 crores for Punjab capacity scale-up expenses. Management anticipates an improvement in margins for Q4 FY26, expecting to return to Q2 levels, driven by cheaper raw material availability post-QCO removal and improved yarn spreads across verticals.

Industry Landscape & External Tailwinds

Q3 was a challenging quarter due to volatility from elevated US tariffs, GST rate changes, and the sudden removal of BIS QCO requirements. However, management believes these challenges are largely behind them. Positive external tailwinds include the expected resolution of India-US tariff issues, new opportunities from the India-EU trade agreement, and supportive domestic policies like the reduction in GST rates on fabrics and the forward-looking Union Budget 2026, which are expected to enhance demand and competitiveness for the Indian textile sector.

Capital Allocation & Debt Profile

The company's capital allocation strategy focuses on capacity expansion and modernization. The Silvassa technical textile expansion of INR80 crores is funded through internal accruals. Future capex includes INR125-150 crores for Punjab Phase 2 and INR400 crores for the Madhya Pradesh cotton facility. Consolidated net debt stood at INR1,300 crores as of December 31, 2025. The EUR50 million foreign debt is fully hedged for the entire 10-year period. Working capital has seen a larger blockage due to the inverted duty structure, though government efforts are expected to expedite refunds.

Outlook & Strategic Roadmap

For Q4 FY26, the company targets a consolidated EBITDA of INR90-100 crores and a top line of INR1,200 crores. Looking ahead to FY27, Sanathan Textiles aims for a consolidated top line of close to INR5,700 crores with a double-digit EBITDA margin. The strategic roadmap emphasizes disciplined capacity scaling, expanding the technical textile footprint, and strengthening the integrated yarn portfolio to drive long-term value creation and sustainable growth.

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