Sanathan Textile

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.

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.

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.

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.

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.

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.