Summary
RSWM Limited - Q3 FY26 Earnings Call Summary Thursday, February 12, 2026 4:00 PM IST
Event Participants
Executives 5 Manoj Bansal (CTO & CRO), Nitin Tulyani (President & CFO), Rajeev Gupta (JMD), Rakesh Jain (Sr. GM - Corporate Finance), Surender Gupta (Sr. VP - Legal & Company Secretary)
Analysts 4 Abhijit Rao (VP Capital), Mithil Bhuva (unlistedindia.com), Rohit Ohri (Progressive Shares), Ruben (Individual Investor)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹1,093 crores | -1.5% QoQ (est); moderation in volumes across selected segments like knit and denim. |
| Revenue (9M) | ₹3,412 crores | Stable performance despite a challenging global demand environment. |
| EBITDA | ₹82 crores | +4% QoQ and +41.7% YoY; driven by favorable product mix and cost efficiencies. |
| EBITDA Margin | 7.4% | +60 bps QoQ and +260 bps YoY; expansion achieved via better operating leverage and yield improvement. |
| Gross Margin | 39.2% | +78 bps QoQ and +310 bps YoY; supported by stable raw material costs and disciplined sourcing. |
| PAT | ₹4 crores | Impacted by ₹10 crore one-time exceptional expense related to labor code service costs. |
| Finance Cost | ₹36.5 crores | Declined by ₹4 crores YoY; aided by repo rate reduction (to 5.2%) and optimized working capital. |
| Capacity Utilization | High 90% (Yarn) | Yarn remains high; Knit, Melange, and Denim utilization currently lower but expected to improve. |
Geographic & Segment Commentary
- Global Exports (US & EU): Management noted a significant structural shift following the India-EU FTA (0% tariff vs 8-12% earlier) and US interim trade framework (tariffs reduced to 18% from 50%). These agreements are expected to unlock participation in $250B+ annual import markets, particularly in value-added man-made fibers.
- Knitted Fabric: Segment undergoing ₹92 crore expansion to increase capacity by 20% (750 MT to 900 MT). Focus is on “fashion-intensive” printed knit lines for kids and women’s wear, targeting 30-35% of the knitted market previously underserved by the company.
- Yarn & Denim: Experienced temporary softness due to previous US tariff hikes and Bangladesh import pressures. Management is shifting capacity from low-margin grey synthetic yarn to high-value dyed yarn (20,000 spindles shifted at Kharigram).
Company-Specific & Strategic Commentary
- Sustainability & LNJ GreenPET: Investing ₹427 crores (70:30 debt-equity) in a food-grade recycled PET resin facility in Ratlam, MP. The project leverages existing 130 MT/day bottle collection strength to serve FMCG packaging mandates, with a revenue potential of ₹500 crores at full scale.
- Energy Efficiency: Achieved 70% renewable energy consumption through a 60MW RTC agreement with Adani and 9.6MW behind-the-meter solar. Power cost savings are estimated at ₹1.00 to ₹1.50 per unit.
- Modernization (Project RAPIDD/COCICA): Transitioning all boilers from fossil fuels to biofuels. Continuous modernization Capex (approx. ₹50 crores annually) targets machines with 12-24 month payback periods based on power efficiency and labor productivity.
- Industry 4.0: Partnered with Green Stitch for AI-based ESG reporting and automated business responsibility tracking. Digital tools are being integrated into R&D for 3D sample preparation and product development.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue | ₹5,000 crores (FY27) | Expected ~10-15% growth driven by full capacity utilization in Knit and Melange segments. |
| EBITDA Margin | Double Digit (10%+) | Targeted within 6-8 quarters; predicated on FTA benefits and shift to value-added products. |
| LNJ GreenPET | Operational (H1 FY27) | 12-15 month timeline for food-grade resin facility to reach operational status. |
| Knit Expansion | Fully Operational (H1 FY27) | Phase-wise integration of the BAKPL (Birla Advanced Knits) assets for printing capabilities. |
Risks & Constraints
| Risk | Context |
|---|---|
| Geopolitical/Trade | While tariffs are easing, ongoing policy uncertainties and global demand softness in 2025 impacted volume growth. |
| Bangladesh Dependency | Bangladesh remains a critical export market with yarn import pressures; India’s lack of domestic garmenting capacity maintains this dependency. |
| Exceptional Costs | New labor code implementations led to an unexpected ₹10 crore service cost hit this quarter. |
Q&A Highlights
Bangladesh Strategy
- Question: How does the yarn import issue in Bangladesh impact RSWM? (Ruben)
- Answer: Bangladesh lacks sufficient spinning capacity and must import yarn. While their spinning lobby pushes for duties, the new US tariff parity puts India on a level playing field. RSWM will remain focused on Bangladesh until India develops more domestic garmenting capacity. (Rajeev Gupta)
LNJ GreenPET Project
- Question: What is the technology and funding for the new PET project? (Rohit Ohri)
- Answer: We are using European technology (Starlinger) for washing and pelletizing lines. Funding is 70:30 (Debt:Equity), with ₹300Cr debt and ₹127Cr internal accruals/equity. (Manoj Bansal/Rajeev Gupta)
Asset Modernization
- Question: How much of the machinery park needs replacement given RSWM is 65 years old? (Rohit Ohri)
- Answer: We spent ₹50Cr on modernization last year. We prioritize machines that are power-inefficient or labor-intensive. It is a phased journey to avoid skewing cash flows. (Rajeev Gupta)
Working Capital
- Question: Is working capital cost high? (Ruben)
- Answer: We use vendor discounting platforms and have optimized receivables. The average cost of working capital is now below 9%. (Nitin Tulyani)
Key Takeaway
RSWM Limited delivered a resilient Q3 FY26, characterized by significant EBITDA margin expansion to 7.4% (+260 bps YoY) despite a slight moderation in revenue to ₹1,093 crores. The company is pivoting toward a higher-margin product mix, notably through a ₹92 crore expansion in knitted fabrics and a strategic entry into food-grade recycled PET resins via the ₹427 crore LNJ GreenPET project. Management successfully reduced finance costs by ₹4 crores through better working capital discipline and benefited from 70% renewable energy adoption. While near-term PAT was muted by a ₹10 crore one-time labor cost, the structural shift toward value-added dyed yarns and printed knits, combined with favorable FTA developments in the EU and UK, supports an ambitious revenue target of ₹5,000 crores and double-digit EBITDA margins by FY27. RSWM remains a key beneficiary of global supply chain realignment provided it can successfully navigate regional volatility in Bangladesh.
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