S P Apparels

S.P. Apparels experienced a challenging Q4 FY26, with consolidated revenue declining 8.8% YoY to INR 364 crores and EBITDA falling 18.5% YoY to INR 44 crores. Consolidated EBITDA margins compressed to 12.2% from 13.6% in Q4 FY25. This softness was primarily attributed to reduced export volumes in the Garment division, stemming from the after-effects of US tariff-related disruptions that began in Q2 and impacted booking/shipment schedules, alongside short-term issues like the Strait of Hormuz affecting cargo movement.

Despite Q4 headwinds, FY26 concluded with strong growth. Consolidated revenue increased 13.2% YoY to INR 1,578 crores, and EBITDA grew 16% to INR 217 crores, with margins improving to 13.8%. The Garment division, including Young Brand Apparel, delivered INR 1,421 crores in operational revenue and INR 230 crores in EBITDA. Young Brand Apparel, heavily reliant on US customers, saw its FY26 adjusted operational revenue at INR 321.26 crores with an EBITDA of INR 49.23 crores, impacted by Q2 tariff disruptions. The SPUK business achieved positive EBITDA of INR 1.10 crores on GBP 7.5 million revenue for FY26, while the Retail division narrowed its losses to INR 6.1 million and achieved positive EBITDA from Q2 to Q4 FY26.

The company is actively pursuing strategic expansions and geographical diversification. Sri Lanka operations commenced in mid-April 2026, with an initial INR 45 crores in FOB business in FY26, targeting INR 200-250 crores in FY27 and INR 400-450 crores by FY28. Salem and Sivakasi expansion projects, which were temporarily paused due to US tariff uncertainty, are now resuming, expected to contribute INR 50-60 crores (Salem by FY28) and INR 40-50 crores (Sivakasi by FY27) respectively. The company aims to balance its geographic revenue mix to 30% US, 35% Euro, and 35% UK by FY27, reducing reliance on any single market.

Management expressed confidence in achieving INR 2,000 crores in consolidated revenue for FY27 with a 14%-15% EBITDA margin, and a long-term ambition of INR 2,500 crores by FY28 with a 15% EBITDA margin. This growth is expected to be driven by the normalization of customer engagement, increased focus on the US market, and the ramp-up of new capacities in Sri Lanka, Salem, and Sivakasi. The company also expects its core garment export business to sustain an adjusted EBITDA margin of 17%-18%.

Raw material costs, particularly cotton, increased during the year but are now stabilizing around INR 70,000 per bale. The company is managing these cost pressures through a combination of selective price pass-through to customers, who are accepting increases due to global market conditions, and internal efficiency initiatives. Despite these pressures, the overall margin stance remains unchanged, with a guided EBITDA margin of around 15%, supported by pricing discipline and tight cost management. Favorable currency movements are also expected to partially offset higher input costs.

The company's current India machine capacity is 4,000, with a target to reach 6,000 machines by Q1 FY27, including 5,700 in India, 2,000 in Sri Lanka, and 1,400 in Young Brands for FY27. Current utilization stands at 64%, and management's immediate focus is on improving this to an optimum level of 90% before considering further significant capacity additions in FY28. The temporary slowdown in Sivakasi expansion was due to US tariff volatility, but recruitment and production are now resuming, with full operation expected within three months.