Summary
VTM Limited - Q2 FY2026 Earnings Call Summary Thursday, January 22, 2026 02:00 PM
Event Participants
Executives 3 K. Preyatharshine (Company Secretary), P. Senthil Kumar (CFO), Visalakshi Kannan (Director)
Analysts 1 Drishti (Finportal Investments)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue (FY25) | ₹344.53 crores | +65.66% YoY; Driven primarily by the home textiles division expansion. |
| PAT (FY25) | ₹45.38 crores | +149% YoY; Result of improved product mix and effective cost management. |
| EBITDA Margin (FY25) | 19.4% | +690 bps YoY from 12.5%; Reflects operational leverage and premiumization. |
| EBITDA (Q2 FY26) | ₹6.16 crores | Impacted by 60% US tariffs on home textiles; company offered discounts to maintain volumes. |
| PAT (Q2 FY26) | ₹2.32 crores | Sharp decline due to exogenous tariff shocks and peak season discount sharing. |
| Export Mix (FY25) | 64.11% | Key markets include North America, Europe, Middle East, and Australia. |
| Home Textile Mix | ~60.0% | Core growth segment; 40-45% of total revenue is concentrated with one customer (Quince). |
| Capacity Utilization | 85-100% | Grey fabrics at 85-90%; Home textiles is fully utilized, necessitating current expansion. |
Geographic & Segment Commentary
- Home Textiles: Contributes ~60% of revenue with a focus on “top of bed” products (quilts, blankets) and premium fibers like bamboo and linen. Management is shifting away from US concentration due to 60% tariffs, targeting growth in UK, Australia, and South America.
- Grey Fabrics: Traditional business segment with 85-90% capacity utilization. The company is investing in new Jacquard looms to increase value-added production and feed the internal home textile supply chain.
- USA Market: Current major exposure; facing significant headwinds from 60% tariffs. VTM is mitigating this by offering temporary discounts to maintain Black Friday/Christmas volumes while pivoting to premium, less price-sensitive products.
Company-Specific & Strategic Commentary
- 3PL Fulfillment Model: VTM acts as a Third-Party Logistics provider for brands, offering warehousing and “each” fulfillment directly to end-customers. This model reduces supply chain layers and increases “stickiness” with online-first brands.
- Capacity Expansion: A new 1 lakh sq. ft. AI-equipped facility is being launched to effectively double home textile capacity. The plant features computer vision for fabric checking and automated sewing machines.
- Modernization & ESG: Invested ₹4.73 crores in ITMA rapier looms in FY25. Sustainability initiatives include a 5.5 MW solar plant (saving 10-12% on power costs) and heat recovery systems in boilers.
- Product R&D: Developing “climate-adaptive” textiles designed to regulate temperature. The company is also exploring an entry into the domestic Indian market and the garment/apparel sector.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | ~25% CAGR | Target for next 2-3 years based on capacity expansion and new market entry. |
| Non-US Revenue | 25-30% Growth | Strategic focus to diversify away from US tariff risks. |
| PAT Margin | 5-7% | Conservative estimate for FY26/27 if US tariffs persist at current levels. |
| Capacity Headroom | 25-30% Turnover Jump | Incremental revenue potential from ongoing capacity addition measures. |
Risks & Constraints
| Risk | Context |
|---|---|
| Tariff Concentration | 60% US tariffs on home textiles pose a material threat to margins; company currently shares the burden through discounts to maintain continuity. |
| Customer Concentration | ~40-45% of revenue is tied to a single US customer (Quince); any reduction in their order volume would significantly impact the top line. |
| Raw Material Volatility | Fluctuations in Indian cotton prices and dollar exchange rates for imported premium fibers pressure operating margins. |
| Working Capital | The 3PL/Fulfillment model requires holding 1.5-2 months of inventory to ensure just-in-time delivery for brands. |
Q&A Highlights
US Tariff Management
- Question: How is VTM dealing with the 60% US tariffs and can they be passed on? (Drishti)
- Answer: VTM does not pay the tariff directly; the US buyer does. However, VTM has provided discounts for Black Friday/Christmas sales to support customers and move stock. Premium products (Jacquard blankets) are less price-sensitive and can absorb tariffs better (Visalakshi Kannan).
Competitive Moat & Logistics
- Question: What sets VTM apart from giants like Welspun or Indocount? (Drishti)
- Answer: VTM bypasses the traditional supply chain by offering 3PL services, warehousing, and direct fulfillment of individual packages (“eaches”). This factory-direct model is highly valued by new-age online brands (Visalakshi Kannan).
Client Concentration (Quince)
- Question: What is the risk if the primary customer, Quince, reduces orders? (Drishti)
- Answer: Quince currently contributes 40-45% of revenue and is expected to grow at 20%. To mitigate risk, VTM is hiring teams to diversify into the UK and EU and expanding the product basket to include bath and window textiles (Visalakshi Kannan).
Expansion & Utilization
- Question: What is the status of the new facility and current utilization? (Drishti)
- Answer: Grey fabric utilization is 85-90%, while home textiles is 100% utilized. The new 1 lakh sq. ft. facility targets a doubling of capacity and uses AI-enabled fabric checking (P. Senthil Kumar/Visalakshi Kannan).
Key Takeaway
VTM Limited reported a strong FY25 with revenue growing 65.66% to ₹344.53 crores and PAT surging 149% to ₹45.38 crores, driven by its 3PL-integrated home textile model. However, Q2 FY26 performance was significantly pressured by 60% US tariffs, leading to a moderated PAT of ₹2.32 crores as the company shared the tariff burden via discounts to protect its 40% revenue share with Quince. Strategically, VTM is doubling its capacity with a new AI-powered facility and pivoting toward non-US markets (UK, EU, Australia) and premium “top of bed” products to restore margins. While the company guides for a 25% revenue CAGR, near-term profitability remains constrained by geopolitical factors, with management targeting a conservative 5-7% PAT margin if tariffs persist. VTM remains focused on geographical diversification and value-added fibers to mitigate high customer and regional concentration risks.
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