Summary
Sanathan Textiles Limited - Q3 FY 2026 Earnings Call Summary Monday, February 09, 2026 17:00 hours
Event Participants
Executives 4 Jude Patrick Dsouza (Company Secretary), Paresh Dattani (Chairman and Managing Director), Sammir Dattani (Executive Director), Sanjay Shah (Chief Financial Officer)
Analysts 5 Aashish Upganlawar (InvesQ PMS), Aradhana Jain (B&K Securities), Chaitanya Doshi (InCred Equities), Darshil Pandya (Finterest Capital), Harsh Mittal (Emkay Global Financial Services)
Financials & KPIs (Consolidated)
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹1,078.7 crores | +31.9% QoQ; driven by the ramp-up of the new Punjab facility and increased sales volumes. |
| Normalized EBITDA | ₹59.9 crores | 5.6% margin; Punjab facility achieved EBITDA positive status during the quarter. |
| Reported EBITDA | ₹57.2 crores | 5.3% margin; includes one-time costs of ₹3.5 crores for Punjab scale-up and ₹2.7 crores for gratuity provisions. |
| PAT | ₹55.8 crores (9M) | Sequential pressure due to higher depreciation and finance costs associated with the Punjab commissioning. |
| Standalone Revenue | ₹768.1 crores | +3.6% YoY; reflected stable operations and full capacity utilization at Silvassa despite volatility. |
| Standalone PAT | ₹38.1 crores | 5% margin; impacted by industry-wide pricing pressure and GST-related demand deferral. |
| Net Debt | ₹1,300 crores | Includes €50 million in foreign debt, fully hedged for a 10-year period. |
Geographic & Segment Commentary
- Silvassa Facility (Polyester/Technical/Cotton): The plant operated at optimum capacity utilization by pivoting to domestic markets when export demand for home textiles and apparel slowed due to US tariffs. It generated approximately ₹3,000 crores in annualized revenue, with ₹400 crores from cotton and ₹100 crores from technical textiles.
- Punjab Facility (Polyester Filament): A greenfield site that scaled polymerization capacity from 350 to 450 metric tons per day (MTD) during Q3, reaching 575 MTD currently. The facility achieved EBITDA-positive status this quarter, with 100% of raw materials (PET/MEG) sourced domestically from Indian Oil’s Panipat Refinery.
- Madhya Pradesh (Cotton Subsidiary): Expansion into cotton yarn via Sanathan Polycot Private Limited is underway with land allotment completed. Ground-level work is slated to begin post-monsoon 2026, with commissioning expected in H2 FY28.
Company-Specific & Strategic Commentary
- Technical Textile Expansion: Management is doubling capacity from 9,000 to 18,000 MTPA at Silvassa with an ₹80 crore investment funded via internal accruals, targeting Q1 FY27 commissioning.
- Regulatory Adaptation: The company navigated the sudden removal of BIS Quality Control Orders (QCO) in November and a GST reduction on fabrics (12% to 5%) by absorbing temporary inventory buildup and pricing pressure.
- Phase 2 Punjab Expansion: Post-reaching 700 MTD in Q4 FY26, the company will initiate Phase 2 to reach 950 MTD by FY28, requiring a relatively low capex of ₹125-150 crores due to existing infrastructure.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue | ₹5,700 crores (FY27) | Anticipates full-year contribution from Punjab Phase 1 and technical textile expansion. |
| EBITDA Margin | Double-digit (FY27) | Expected from improved fixed cost absorption, higher-value technical textiles, and normalized spreads. |
| Q4 FY26 EBITDA | ₹90 - ₹100 crores | Expects stronger performance as Punjab reaches 700 MTD capacity and raw material costs stabilize. |
| Q4 FY26 Revenue | ₹1,200 crores | Projected consolidated top-line for the final quarter of the fiscal year. |
Risks & Constraints
| Risk | Context |
|---|---|
| Tariff Volatility | US tariffs impacted indirect exports (5-7% of total sales), forcing a shift to lower-margin domestic commodity products during Q3. |
| Inverted Duty Structure | The GST reduction on fabrics from 12% to 5% has increased working capital blockage, though management expects faster government refunds. |
| Regulatory Shifts | The removal of QCO/BIS requirements led to a 10-12% drop in FDY prices due to Chinese imports, though 50% of this has since been recovered. |
Q&A Highlights
Margin Recovery
- Question: What led to the drop in profitability and when will it normalize? (Aashish Upganlawar)
- Answer: Margins were hit by the lack of fixed cost absorption in Punjab (utilizing only 60-65%), GST-related demand pauses, and US tariff impacts on high-end exports. Normalization to double-digit EBITDA is expected in FY27 as Punjab hits 100% utilization and the technical textile expansion goes live (Paresh Dattani/Sanjay Shah).
Raw Material Sourcing
- Question: How does the removal of QCO impact your raw material costs? (Tanishk)
- Answer: While QCO removal hurt finished product pricing initially, it now allows for cheaper imported raw materials from China. This benefit will be fully realized in Q1 FY27, helping stabilize gross margins at approximately 30-31% (Paresh Dattani).
Debt and Capex Funding
- Question: What is the run rate for interest and depreciation next year? (Darshil Pandya)
- Answer: Consolidated interest and depreciation will remain similar to current levels (approx. ₹130-140 crores annually), though interest may decrease slightly due to scheduled repayments. The Silvassa expansion is entirely funded through internal accruals (Sanjay Shah).
Key Takeaway
Sanathan Textiles reported a resilient Q3 FY26, with consolidated revenue reaching ₹1,078.7 crores, driven by the strategic ramp-up of the Punjab facility which turned EBITDA positive this quarter. Despite a temporary dip in standalone margins to 7.3%—caused by US tariff headwinds, GST rate changes on fabrics, and the removal of BIS QCO requirements—the company maintained full utilization at its Silvassa plant by diverting volumes to the domestic market. Strategic focus remains on high-value segments, with technical textile capacity set to double to 18,000 MTPA by Q1 FY27 and a planned cotton yarn expansion in Madhya Pradesh for FY28. Management issued a confident outlook for FY27, guiding for ₹5,700 crores in revenue and double-digit EBITDA margins as incremental capacities stabilize. While the inverted duty structure and global trade volatility remain watch points, the resolution of India-US tariff issues and the India-EU trade agreement are expected to serve as significant growth tailwinds.
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