RSWM Limited: Navigating Headwinds with Strategic Turnaround and Green Growth

RSWM Limited, a prominent player in the Indian textile industry, has demonstrated remarkable resilience and strategic foresight in its Q2 and H1 FY26 performance. Despite a challenging global economic landscape marked by U.S. tariffs and volatile raw material prices, the company reported a significant turnaround to profitability, underscoring its disciplined execution and proactive management initiatives. The latest earnings call and investor presentation reveal a company focused on optimizing operations, expanding into high-value segments, and committing to sustainable growth.

For Q2 FY26, RSWM reported a standalone revenue of ₹1,150 crore. The half-year performance for H1 FY26 saw revenue from operations at ₹2,319 crore. A standout achievement was the dramatic shift in profitability. The company posted a Profit After Tax (PAT) of ₹6.3 crore in Q2 FY26, a strong recovery from a loss of ₹21 crore in the corresponding quarter of the previous fiscal year. Similarly, for H1 FY26, PAT reached ₹13 crore, a significant turnaround from a loss of ₹35 crore in H1 FY25. This positive momentum was largely driven by expanding gross margins and robust EBITDA growth.

Financial Highlights: A Story of Recovery

The financial results highlight RSWM's ability to enhance operational efficiency and manage costs effectively. Gross profit for Q2 FY26 rose to ₹445 crore, with gross margins expanding to 38.4%, an improvement of 195 basis points year-on-year. This was primarily attributed to lower raw material costs and a more profitable product mix. EBITDA for Q2 FY26 surged by 85.6% year-on-year to ₹79 crore, with EBITDA margins reaching 6.8%, up 318 basis points. The company's Profit Before Depreciation and Tax (PBDT) climbed to ₹48 crore, a 6.2x increase year-on-year, reflecting strong recovery and effective cost management.

Here's a snapshot of the key financial figures:

Strategic Initiatives: Building for the Future

RSWM is not just reacting to market conditions; it is proactively shaping its future through several strategic initiatives. A significant focus is on expanding its knitting operations with a ₹92 crore investment. This project aims to increase knitting capacity by 20%, from 750 MT to 900 MT per month, within 6-9 months. The investment includes acquiring new advanced machines, adding European-made dyeing and processing equipment, and upgrading existing units. A key aspect is the launch of a printed knits product line, targeting the fashion knitted market and broadening the product range to support diversification and value-added fabrics. This forward integration is expected to be margin accretive.

Another cornerstone of RSWM's strategy is a substantial renewable energy boost. The company is investing ₹60 crore to add 60 MW of additional renewable energy capacity, aiming to source 70% of its total energy consumption from green sources. This initiative is projected to yield annual savings of ₹30-40 crore, directly impacting the bottom line, while significantly reducing its carbon footprint. The capacity addition is expected to be implemented within 30 days of approval, demonstrating a swift commitment to sustainability and cost efficiency.

Furthermore, RSWM is implementing stringent cash conservation and working capital management strategies. These include optimizing the product mix for better profitability, moving up the value chain through forward integration in knit and denim, and focusing on operational cost reduction, particularly power. The company has successfully reduced its average working capital utilization by 10% in Q2 FY26, inventory by 16% (₹121 crore), and receivables by ₹51 crore, reinforcing financial discipline and resilience.

Market Dynamics and Outlook

The textile industry faced significant headwinds in Q2 FY26, primarily due to the 50% tariff imposed by the U.S. government on textile goods and the removal of import duty on cotton. These factors led to lower capacity utilization in the mélange and knit businesses and impacted cotton yarn prices. However, RSWM's management is actively exploring new export markets beyond the U.S. and focusing on strengthening customer relationships to mitigate these challenges. The company is also committed to debt reduction, with term loans already reduced and plans for additional repayments, further enhancing its liquidity and financial structure.

Conclusion: A Resilient Path Forward

RSWM Limited's Q2 and H1 FY26 performance reflects a company that is not only navigating a complex global environment but also strategically positioning itself for long-term sustainable growth. The turnaround to profitability, coupled with significant investments in green energy and value-added product expansion, demonstrates a clear vision and disciplined execution. By focusing on operational excellence, financial prudence, and environmental responsibility, RSWM is building a robust foundation to deliver consistent performance and create lasting value for all stakeholders in the quarters ahead.