Vardhman Textiles faced a challenging Q3 FY26 characterized by structural cost disadvantages in Indian cotton and cautious buying behavior from U.S. customers. While yarn exports showed signs of recovery driven by Chinese demand, overall margins remained under pressure. The company is focusing on strategic expansions in performance fabrics and garmenting to diversify its portfolio and mitigate tariff-related risks.
vs Q4 FY26
Notable Quotes from the Call
Most Confident Moment
Management's conviction in doubling garmenting capacity and the 50% green power target by FY27.
Least Confident Moment
Neeraj Jain's admission that margin improvement may not happen in a 'bigger way' unless yarn prices increase further to offset cotton costs.
| Metric | Value | YoY |
|---|---|---|
| EBITDA Margin | 15% | -11.8% YoY |
| Yarn Capacity Utilization | 95% | — |
| Fabric Capacity Utilization | 89.5% | -10.0% YoY |
| Inventory | ₹3.7K Cr | +37.0% YoY |
Segment Breakdown
| Metric | Latest | Trend |
|---|---|---|
| Revenue(crores) | 2468 | |
| EBITDA Margin | 15% |
| Category | Target | Priority |
|---|---|---|
| Other | Green Power Share→49-50% | High |
| Capacity | Garmenting Capacity→Double (approx 12,000-14,000 shirts) | Medium |
| Volume | Performance Wear Capacity Utilization→60%+ | Medium |
| Severity | Risk |
|---|---|
high | Cotton Price Parity Disadvantage Indian cotton is $0.08/lb higher than global parity, making Indian mills structurally less competitive than Vietnamese or Indonesian peers. Management |
high | Reinstatement of 11% Import Duty The end of the duty-free window on Jan 1st removes a key cost-saving lever for mills needing high-quality or cheaper imported cotton. Both |
medium | U.S. Tariff War and Cautious Sourcing U.S. buyers are delaying decisions and recalibrating supply chains, leading to a 10% drop in VTL's fabric utilization. Management |
Areas of Evasion(2)
The Indian cotton market is currently facing a structural disadvantage with prices at $0.75-$0.78 per pound, significantly higher than the New York Futures landed cost of $0.72-$0.75 for global competitors. This is driven by an 8% increase in MSP and aggressive procurement by the CCI, which has absorbed 50% of total arrivals (85 lakh bales). Management notes that CCI is virtually a monopolistic stockist, and their new sale policy prices cotton at approximately $0.80 per pound, further squeezing mill margins.
Vardhman has successfully commissioned its fabric expansion at Budhni and the new Vardhman Performance Fabrics unit, bringing total processed capacity to 200 lakh meters per month. While current fabric utilization has dipped to 89-90% due to U.S. market headwinds🌐, the company expects these new lines to gain momentum in Q1 FY27. The performance wear segment is a key strategic milestone, with a target utilization of over 60% for the next financial year.
Despite soft domestic demand, yarn exports saw a notable improvement in December 2025, reaching 115 million kgs compared to the 100 million kg average. This recovery is primarily driven by fresh demand from China and a preference for contamination-free yarns. Yarn prices have improved by $0.10 to $0.15 per kg in the last 30 days, though this has not yet fully offset the elevated cost of Indian cotton.
Management has reversed its previous cautious stance on the garmenting division, now planning to double capacity within the next 8 months. This pivot is motivated by the impending EU Free Trade Agreement (FTA), which is expected to create significant opportunities for Indian garment exporters. Although the garmenting business remains small relative to the total company size, the expansion signals a move toward higher value-added integrated operations.
Vardhman is aggressively pursuing green energy initiatives to improve its ESG profile and operational costs. Currently, green power accounts for only 9% of total demand, but the company has a clear roadmap to increase this to 49-50% by FY27. This transition is part of a broader focus on 'controllable levers' like operational efficiency and cost discipline to maintain stability in a volatile macro environment.