Vardhman Textiles Weaves Resilience Amidst Global Headwinds in Q2 FY26

Vardhman Textiles Limited, a prominent name in the Indian textile sector, has demonstrated remarkable resilience in its Q2 FY26 performance, navigating a complex landscape marked by global headwinds and domestic challenges. The company, a vertically integrated textile manufacturer, reported standalone revenue from operations at INR 2417 crore. Despite a slight year-on-year decline of 2% in revenue, the company maintained a robust EBITDA margin of 15.5%, reflecting its strategic agility and operational efficiency.

The quarter's financial outcomes underscore Vardhman's ability to sustain performance amidst significant external pressures, including elevated US tariffs and surplus spinning capacity globally. The yarn business, contributing 66% to the total revenue, and the fabric segment, accounting for 34%, both sustained robust performance. The Fabrics division, in particular, delivered performance on par with the previous year, maintaining an impressive 90% capacity utilization. This stability is attributed to the company's diversified portfolio, which spans domestic and non-US export markets, providing critical stability.

Strategic Maneuvers and Capacity Expansion

Vardhman's strategic response to market disruptions has been multifaceted. The company has prioritized diversification, innovation, deep customer engagement, strategic partnerships, and operational agility. This includes targeted diversification to markets such as the EU, UK, Australia, Canada, Bangladesh, and Sri Lanka, alongside accelerated delivery timelines to enhance its value proposition. The focus on high-value segments like melange, cellulosic, compact, sustainable, and performance yarns has been instrumental in protecting reasonable margins.

On the expansion front, Vardhman is progressing well with its announced capital expenditure plans. The yarn capacity expansion saw about 15,600 spindles completed in H1 FY26, with another 17,000 spindles also completed. An open-end project of 6,624 rotors is set to commence. The processed fabric capacity is being augmented by 31 million meters annually, expected to be completed by H2 FY26. Furthermore, the Vardhman Performance Fabric (Synthetic Woven) plant, with an additional capacity of 18 million meters annually, is under erection and anticipated to be commissioned within Q2 FY26, with production starting in Q3 FY26. These initiatives, along with modernization and green capex, are projected to increase the company's overall production capacity by approximately 30%.

Navigating Raw Material and Trade Dynamics

The Indian spinning industry has grappled with persistently high domestic cotton prices compared to global levels, largely influenced by the elevated minimum support price. However, the government's temporary relaxation of the 11% import duty on cotton provided a crucial window for mills to import, helping to manage raw material costs. Vardhman proactively utilized this opportunity, which contributed to maintaining its margins. Management anticipates further market stabilization by Q4 FY26, contingent on the resolution of US trade deals and continued favorable government policies regarding cotton imports.

US-based customers have shown caution, delaying orders and reducing quantities, prompting Vardhman to support its strategic customers to retain business. The company views the current environment as temporary and is committed to supporting its customers through price adjustments where necessary, particularly in the fabric division. The domestic market, buoyed by the festive season and GST rationalization, has shown positive sentiment, which is a favorable sign for future demand.

Outlook and Commitment

Vardhman Textiles remains cautiously optimistic about the future. Encouraging signals from the Indian government regarding US trade negotiations reinforce the belief that India's competitiveness will strengthen. Despite near-term uncertainties, the company's strategic positioning, supported by initial orders from diverse geographies and value-added segments, remains strong. The management's unwavering commitment to quality, operational efficiency, and innovation forms the pillars of its resilience and future growth, ensuring it continues to weave a sustainable growth story.