GHCL Textiles Limited Q3 FY26 Earnings Call Summary

Summary

GHCL Textiles Limited - Q3 FY 2026 Earnings Call Summary Friday, January 30, 2026, 12:00 NOON (IST)

Event Participants

Executives 5 M. Parasuraman, Manu Jain, Marshal Sonavane, R.S. Jalan, Raman Chopra

Analysts 8 Arun Chulani, Deepesh Sancheti, Devang Vishal, Kareena, Mehal Gogia, Partha Mazumder, Raj Lakhani, Riddhesh Gandhi, Saket Kapoor, Saransh Gupta

Financials & KPIs

Geographic & Segment Commentary

• Domestic Market: Remains the primary revenue driver, accounting for ~91% of sales in 9M FY26. While demand has been muted, the company consciously shifted focus here from exports due to better realizations in specialized high-value categories.
• Export Market: Contribution stood at 11% for Q3, up from 9% in Q2, but down from 17% YoY. Management noted a revival in inquiries from Bangladesh and Vietnam in December, particularly for premium customized products.
• Fabric & Vertical Integration: Fabric revenue contribution reached ~12% in Q3. The company is transitioning from a pure spinner to a fabric player, with 1,000 tons of knitted fabric and 142 lakh meters of woven fabric produced in 9M FY26.

Company-Specific & Strategic Commentary

• Vertical Integration: Phase-1 knitting (15 machines) to be completed in Q4 FY26, with Phase-2 (25 machines) in H1 FY27. The goal is to move to a 40% yarn and 60% processed fabric mix within 2-3 years.
• Renewable Energy: 75% of power requirements are met via green energy. A new 3MW rooftop solar unit (Feb '26) and 10MW ground solar project (June '26) are expected to save ₹7-8 crores annually.
• Value-Added Focus: Management is prioritizing specialized, high-margin products over commodity yarns to maintain 14-15% normalized EBITDA despite industry down-cycles.
• Asset Modernization: Continuous annual modernization capex ensures high efficiency; no major modernization spend required for the next 3 years as focus shifts to expansion.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Margins & Spreads

• Question: What caused the sequential margin compression and what is the outlook for spreads? (Saket Kapoor)
• Answer: Compression was due to a seasonal drop in renewable energy generation and industry-wide spread reduction (₹131 to ₹128/kg). Green shoots were seen in December/January, and Q4 margins are expected to be better (Marshal Sonavane).

Vertical Integration

• Question: How will the revenue mix look post-integration? (Saransh Gupta)
• Answer: The vision is to consume ~30-40 tons of yarn internally per day, eventually reaching a mix where only 40% of production is sold as yarn and 60% as processed fabric (Marshal Sonavane).

Capital Allocation & ROE

• Question: Why continue capex when ROE is currently in the low single digits? (Deepesh Sancheti)
• Answer: Textile is a cyclical industry; investing during a down-cycle allows for better capital cost negotiations. Historically, the company has delivered 15-16% EBITDA, and integration will push this toward 18-20% (R.S. Jalan).

FTAs & Global Trade

• Question: How will the EU FTA benefit the company if direct exports are low? (Devang Vishal)
• Answer: While yarn duties are low (5%), garment duties are high (12%). The FTA will primarily benefit Indian garmenters, creating massive indirect “pull” demand for the company’s yarn and fabric (Marshal Sonavane).

Key Takeaway

GHCL Textiles delivered a resilient Q3 FY26 with revenue of ₹351 crores and a 23% YoY growth in 9M EBITDA, despite facing industry-wide spread compression. The company maintained a 98% utilization rate and successfully achieved a credit rating upgrade to A/A1, supported by a low net debt of ₹41 crores. Strategic focus remains on vertical integration, with knitting capacity doubling by H1 FY27 and a target of converting 60% of output into processed fabric over the next three years. While current ROCE is suppressed at ~5% due to the textile down-cycle, management expects a recovery to 8-10% by FY27 as cost-saving renewable projects (13MW total) and duty-free access via upcoming FTAs (UK, EU) stabilize demand. The company is positioned to capitalize on the sector’s recovery, leveraging a robust balance sheet and high operational efficiency to transition toward a high-margin, ready-to-cut fabric model.