S. P. Apparels Limited

S.P. Apparels reported a steady Q3 FY26, managing operations efficiently despite a soft sector environment. Consolidated revenue from operations grew 6.6% year-on-year to INR 382.9 crores, with EBITDA increasing 11.2% to INR 56.6 crores, resulting in a 14.8% EBITDA margin. Profit after tax rose 9.1% year-on-year to INR 27.0 crores. For the nine months ended December 2025, consolidated revenue grew 21.9% to INR 1,213.7 crores, and PAT increased 27.3% to INR 82.4 crores.

The signing of India-US and India-EU trade agreements has brought significant clarity to the tariff situation, removing previous uncertainties. The India-US pact, reducing tariffs to 18%, strengthens competitiveness and opens access to a USD 118 billion US textile import market. The India-EU FTA, eliminating up to 12% import duties, has improved buyer sentiment. Management expects these developments to normalize booking patterns and drive order inflows from Q2 FY27 onwards, with Q4 and Q1 FY27 still experiencing some pressure.

The Garment division remains the backbone, with adjusted operational revenue growing 7.6% YoY to INR 343.6 crores in Q3 FY26. SPUK generated INR 19.2 crores in revenue with a positive EBITDA of INR 0.8 crores, targeting USD 20 million (INR 200 crores) over the next two financial years. The Retail division also turned profitable, reporting INR 17.2 crores in revenue and INR 0.8 crores EBITDA, driven by Crocodile (INR 14.5 crores) and Angel & Rocket (INR 3 crores) brands. Young Brand is scaling towards 1,700 installed machines and expects 15-20% growth next financial year.

Garment division utilization in India declined in Q3 FY26 due to new machine additions and the impact of US tariffs, but is expected to improve in the next financial year. In Sri Lanka, the company integrated an additional factory, bringing total operational capacity to approximately 1,650 machines. Operations in Sri Lanka are expected to reach normalized levels from Q1 FY27, with optimum utilization targeted for Q2 FY27. The Sri Lanka business is projected to reach INR 50 crores in FY26.

The company's current standalone gross debt stands at INR 275.4 crores, with net debt at INR 227.9 crores. For FY27, planned capex is approximately INR 30 crores, including INR 10-15 crores for maintenance, INR 10 crores for solar capacity, and INR 5 crores for Young Brand expansion. On the ESG front, S.P. Apparels plans to add 3 megawatts of rooftop solar capacity across three units in FY26-27, increasing total in-house solar capacity to 4 megawatts.

Management confirmed that the new Labour Code changes will have no material operational or financial impact, as the company aligned with the requirements in 2020. However, wage increases from March 2025 have contributed to margin pressure. Realization trends, showing a 3% degrowth, are attributed purely to product mix, with a higher proportion of children's products, and the company plans to introduce more adult orders to improve average realization.