S. P. Apparels Limited — Q3 FY26 earnings call

Call held 13 Feb 2026

Management summary

S P Apparels reported a steady Q3 FY26 with consolidated revenue growing 6.6% YoY to INR 382.9 crores and PAT increasing 9.1% YoY to INR 27.0 crores. The company navigated a soft sector environment efficiently, benefiting from recent clarity on India-US and India-EU trade deals. Management is optimistic about future growth, targeting INR 2,000 crores revenue by FY27, driven by new customer additions, Sri Lanka operations stabilization, and SPUK expansion, despite some near-term pressure from tariff-related order adjustments.

Highlights

  • Consolidated revenue of INR 382.9 crores, up 6.6% YoY in Q3 FY26.

  • Consolidated EBITDA of INR 56.6 crores, up 11.2% YoY in Q3 FY26, with a margin of 14.8%.

  • Consolidated PAT of INR 27.0 crores, up 9.1% YoY in Q3 FY26.

  • India-US and India-EU trade deals signed, bringing clarity to tariff situation and improving buyer sentiment.

  • SPUK business targeting significant growth to USD 20 million (INR 200 crores) over the next two financial years.

Concerns

  • Q3 FY26 was a soft quarter for the sector, and Q4 is also expected to be softer due to US tariff issues.

  • Garment division utilization declined in Q3 FY26 due to new machine additions and the impact of US tariffs.

  • EBITDA margins for the Garment division (ex-YBAPL) saw a degrowth in 9M FY26 due to wage increases and tariffs.

Key financials

  1. Consolidated Revenue ₹382.9 Cr +6.6%YoY
  2. Consolidated EBITDA ₹56.6 Cr +11.2%YoY
  3. Consolidated EBITDA Margin 14.8%
  4. Consolidated PAT ₹27 Cr +9.1%YoY
  5. Standalone Revenue ₹258.8 Cr +10.9%YoY
  6. Standalone EBITDA ₹40.4 Cr
  7. Standalone EBITDA Margin 15.6%
  8. Standalone PAT ₹19.3 Cr +7.2%YoY

What they filed

Q1 FY27: revenue down 5.2%, net profit up 35.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue256 234 278 290 308 +20%264 +13%252 −9%275 −5%
EBITDA40 39 46 45 54 +35%40 +3%43 −7%47 +4%
Net profit18 18 25 20 27 +50%19 +6%21 −16%27 +35%
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.

Segment breakdown

  • Garment Division (Q3 FY26)
    ₹343.6 Cr Adjusted Operational Revenue₹58.3 Cr Adjusted EBITDA
  • SPUK (Q3 FY26)
    ₹19.2 Cr Revenue₹0.8 Cr EBITDA
  • Retail Division (Q3 FY26)
    ₹17.2 Cr Revenue₹0.8 Cr EBITDA
  • Crocodile Brand (Q3 FY26)
    ₹14.5 Cr Revenue
  • Angel & Rocket (Q3 FY26)
    ₹3 Cr Revenue

Capital allocation

high confidence
  • Capex ₹30 Cr
    • Maintenance capex ₹10 Cr
    • Solar capacity addition ₹10 Cr
    • Young Brand expansion project ₹5 Cr
    With respect to capex, we are planning to have some maintenance capex, which will be roughly around INR 10 crores to INR 15 crores every year. And as a part of sustainability, we will be investing into the solar, which Chairman has given in the beginning of his speech, that could be costing us another INR 10 crores. And around expansion could be reinstating whatever in young brand we spoke about the project could cost us another INR 5 crores. So roughly around INR 30 crores for capex next financial year.
  • Debt Gross ₹275.4 Cr · Net ₹227.9 Cr
    Our current debt position on a standalone basis, gross debt stood at INR 275.4 crores and our net debt is INR 227.9 crores.

Guidance & targets

Revenue

  • Consolidated Revenue Revenue · FY27 · High confidence INR 2,000 crores
    We are maintaining our revenue guidance of INR 2,000 crores by FY27 on a consolidated basis.

    — P. Sundararajan

  • SPUK Revenue Revenue · next two financial years · High confidence USD 20 million (INR 200 crores)
    We are targeting a significant growth in the business over the next two financial years with a revenue goal of about USD 20 million, that is approximately INR 200 crores as customer additions and design-led engagement scale up.

    — P. Sundararajan

  • Sri Lanka Business Revenue Revenue · FY26 · High confidence INR 50 crores
    For the first nine months, we have done INR 37 crores on the Sri Lanka business, and we expect to go up to INR 50 crores this financial year.

    — V. Balaji

  • US Business Contribution Revenue · FY27 · Medium confidence 20%+
    So if we consider that the U.S. business will increase to 20 plus for the year FY27.

    — P.V. JEEVA

  • Garment Division Standalone Exports Revenue · Ongoing · High confidence INR 1,200 crores
    We run the full capacity of about 5,000 machines; we will be doing close to INR 1,200 crores. Of exports alone.

    — P. Sundararajan

Profitability

  • Garment Division EBITDA Margin Profitability · Ongoing · High confidence 15%
    No, we, currently, we would like to stick to the guidance of 15%at the EBITDA level on the Garment division.

    — V. Balaji

  • Young Brand EBITDA Margin Profitability · Ongoing · High confidence 15 to 18%
    So we expect the margins with respect to YBAPL at an EBITDA margin of 15 to 18% Quarter-to-quarter, it may vary. But yearly, we expect it to be around 15 to 18%

    — V. Balaji

Operations

  • Sri Lanka Operations Normalization Operations · Q1 FY27, Q2 FY27 · High confidence Normalized levels from Q1 FY27, optimum utilization in Q2 FY27
    We expect operations in Sri Lanka to reach normalized levels from Q1 FY27 with meaningful shipments and optimum utilization in Q2 FY27.

    — P. Sundararajan

Capacity

  • Young Brand Installed Machines Capacity · Ongoing · High confidence 1,700 machines
    the Young Brand is scaling towards 1,700 installed machines with the sales utilization ramp to around 1,500 machines.

    — P. Sundararajan

ESG

  • Total Solar Capacity ESG · FY26-27 · High confidence 4 megawatts
    planning for addition of approximately 3 megawatts of rooftop solar capacity across three additional units for the next financial year FY26-27, taking total installed capacity on in-house solar facility to 4 megawatts.

    — P. Sundararajan

Growth

  • Young Brand Growth Growth · next financial year · High confidence 15% to 20%
    So with regards to Young Brand for next financial year, there will be a growth. Again, as we've guided normally between 15% to 20%.

    — S. Chenduran

What to watch in Q4 FY26

Sri Lanka Operations Normalization

Q1 FY27 (normalized levels), Q2 FY27 (optimum utilization)
Current Stabilization efforts progressing, expect normalized levels from Q1 FY27
Target Normalized operations, meaningful shipments, optimum utilization

Why it matters

Full utilization of acquired capacity in Sri Lanka is key to margin and revenue growth.

We expect operations in Sri Lanka to reach normalized levels from Q1 FY27 with meaningful shipments and optimum utilization in Q2 FY27.

Risks & concerns

  • Soft Sector Demand

    medium

    Q3 was soft for the sector, and Q4 is also expected to be softer due to US tariff issues, though managed efficiently.

    Management acknowledged

  • Wage Increase Impact on Margins

    medium

    Minimum wages increased from March 2025, contributing to margin degrowth in 9M FY26.

    Management acknowledged

  • Sri Lanka Operations Stabilization Timeline

    medium

    Operations in Sri Lanka are expected to reach normalized levels from Q1 FY27, with optimum utilization in Q2 FY27.

    Management acknowledged

  • Product Mix Impact on Realization

    low

    Higher proportion of children's products leads to lower realization, but plans are to introduce more adult orders.

    Management acknowledged

Q&A highlights

7 direct
FY27 Guidance Revision Post Tariff Changes Direct
So on the guidance, in the Chairman's speech, he has assured that our guidance on the revenue front stands at INR 2,000 crores for FY27 on a consolidated basis.

Confirms the company's long-term revenue target remains unchanged despite recent trade policy shifts.

Asked by Bharat Gulati

EBITDA Margin Degrowth in Q3/9M Direct
So, if you look at last year versus this year, our wages have gone up from March 2025 minimum wages have changed. And because of the tariffs, there has been a couple of factories that has been closed down because of, so purely because of tariff and the wages increase, there is an impact on the margin front.

Explains the specific operational and cost factors contributing to margin pressure, indicating it's not solely demand-driven.

Asked by Bharat Gulati

Realization Trend and Product Mix Direct
So, it's purely on the product mix. Like when you do a lot of children products like the baby, body suits and the sleep suits, the realization tend to come down. It's purely the product mix only.

Clarifies that changes in realization are due to product mix strategy rather than pricing power erosion, with plans to introduce more adult wear.

Asked by Bharat Gulati

Impact of New Labour Code Changes Direct
No. See, in the Chairman's speech, there is no material impact because of the Labour Code. See, the Labour Code was supposed to be introduced in the year 2020 itself. So we have aligned ourselves with the Labour Code in the year 2020 itself. So, there will be no big material changes or impact in the financials because of the new Labour Code.

Assures investors that a potential regulatory change will not materially impact financials, as the company has already adapted.

Asked by Shubhankar Gupta

Timelines for US/UK Trade Deal Benefits and New Customer Acquisition Partial
Actually speaking, it will take another one more quarter to come back to normal because all the customers have been with us now and they were waiting for the tariffs to be revised. So now they have already press the button to receive the normal business inquiries and placing the orders that has already started. And all these things will reflect from Q2 numbers. And we are also adding some new customers, about four to five more new customers, maybe two from the U.S. and another two, three from the Europe and the UK.

Provides a timeline for the positive impact of trade deals to materialize and outlines the strategy for new customer acquisition.

Asked by Shubhankar Gupta

Sri Lanka Capacity Ramp-up and Utilization Direct
Actually, we have four factories. Out of that for three factories, we can ramp up the capacity from Q3. From Q3 as per our plan, it will be around 100% utilization for three factories and one factory it will take another six months' time.

Details the specific timeline and targets for achieving full utilization of the Sri Lanka manufacturing facilities.

Asked by Bhavin Chheda

US Cotton Usage and Bangladesh/EU Deal Impact Direct
First of all, this U.S. cotton using U.S. cotton for zero tariff it is a deal, but it is not attractive. Because the American cotton is much more expensive when it landed, it will be at par with the duty paid for other Indian cotton or something. So, there is no big difference unless and until any customers from the U.S. insist for American cotton, there is no big advantage.

Clarifies that a specific tariff benefit (zero duty on US cotton) is not practically advantageous due to higher raw material costs.

Asked by Bhavika Jain

Low Fixed Asset Turns and Improvement Drivers Direct
SPAL, it is backward integrated, the investment gone into our two spinning plants, dyeing plant is not reflecting in the margins because of the cotton prices movement. But once the U.S. business revives, I think the yarn realization will be up, and we should see the margins going up.

Explains the reason for current low asset turns (backward integration) and links future improvement to US business recovery and better yarn realization.

Asked by Rupesh Tatiya

3 min read 6 chapters

Detailed narrative

Q3 FY26 Performance Overview

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.

Impact of Trade Deals and Market Outlook

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.

Segmental Performance and Growth Drivers

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.

Capacity Utilization and Sri Lanka Operations

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.

Capital Allocation and ESG Initiatives

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.

Labour Code and Cost Management

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.

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