Sanathan Textiles: Weaving a Stronger Future Amidst Strategic Expansions

Sanathan Textiles Limited, a prominent player in India's yarn manufacturing sector, recently announced its financial results for Q2 and H1 FY26, showcasing a period of strategic expansion and robust standalone performance. While the commissioning of a new facility brought initial start-up costs, the company's underlying operational strength and ambitious growth plans paint a confident picture for the future. For Q2 FY26, the company reported consolidated revenue from operations of INR 818.0 crore, marking a 10% year-on-year increase. However, consolidated EBITDA stood at INR 63.2 crore, an 8.5% YoY increase, with PAT at INR 20.1 crore, a 38.2% YoY decline. This decline was primarily attributed to approximately INR 11 crore in start-up costs associated with the new Punjab facility and increased finance and depreciation expenses.

On a standalone basis, reflecting the performance of its established Silvassa operations, the company delivered a strong operational performance. Standalone revenue from operations reached INR 767.1 crore, a 3.2% YoY growth. EBITDA surged by 22.2% YoY to INR 71.2 crore, driven by better gross margins, and PAT soared by 44.6% YoY to INR 50.6 crore. This divergence highlights the immediate impact of new project commissioning on consolidated figures, while core operations remain highly efficient and profitable. The company's diversified product portfolio, spanning polyester, cotton, and technical textiles, continues to be a cornerstone of its business, with polyester yarn contributing 77% of the revenue, cotton yarn 19%, and technical textiles 4%.

Strategic Expansions and Market Tailwinds

The most significant development for Sanathan Textiles this quarter was the commissioning of its new Punjab facility on August 27, 2025. This greenfield project, strategically located in Wazirabad, Punjab, is designed to cater to the key domestic markets in North India. It began operations at 350 metric tonnes per day and is steadily ramping up to 700 tonnes per day. This expansion has nearly doubled the company's total installed capacity from 2,23,000 MTPA to 4,79,000 MTPA, positioning Sanathan Textiles for substantial future growth and enhanced market penetration. Management anticipates the plant will reach optimal capacity over the next quarter, contributing positively to operational efficiency and margins, with a target of 100% utilization for Phase 1 by the last quarter of FY26.

Further demonstrating its growth roadmap, the company is expanding its cotton yarn capacity through its wholly-owned subsidiary, Sanathan Polycot. A new greenfield manufacturing facility is planned in Madhya Pradesh, leveraging the state's rich cotton textile heritage. This project, with an estimated CAPEX of Rs. 420-445 crore, is expected to be commissioned in Q1 FY28 and generate Rs. 450-500 crore in revenue. The decision to shift this expansion from Silvassa to Madhya Pradesh reflects management's agility in capitalizing on better opportunities, including benefits from the PM MITRA Park with subsidized land and power.

Financial Discipline and Future Outlook

Management highlighted the positive impact of recent government policies, particularly the reduction of GST on man-made fiber and yarns from 12% to 5%. This change, coupled with a revised 5% slab for ready-made garments, is expected to act as a strong tailwind, fueling consumption and stimulating demand across the textile value chain. The company believes this creates a healthy demand environment and underpins its growth outlook for the coming quarters.

Despite the initial impact of start-up costs on consolidated margins, Sanathan Textiles maintains a confident outlook. The company's debt-to-equity ratio stands at a healthy 0.76x, and its entire External Commercial Borrowing (ECB) is fully hedged over a 10-year period, mitigating currency risk. Management articulated clear financial guidance: targeting annual revenue of Rs. 4,100-4,300 crore with a double-digit EBITDA margin for FY26. Looking ahead, they project Rs. 5,800-6,000 crore revenue with an 11% EBITDA margin for FY27, and Rs. 7,300-7,400 crore with a 12% EBITDA margin for FY28. This disciplined financial approach, combined with strategic capacity expansions and a focus on operational excellence, positions Sanathan Textiles to deliver sustainable growth and create long-term value for its shareholders.

Conclusion: Poised for Sustained Growth

Sanathan Textiles is clearly in a transformative phase, marked by significant capacity expansion and strategic market positioning. While the initial costs of commissioning the Punjab facility have temporarily impacted consolidated profitability, the underlying standalone performance remains robust. With the new facilities set to ramp up, favorable government policies, and a diversified product portfolio, the company is well-equipped to capitalize on growing demand. The management's clear guidance and proactive approach to risk management, such as hedging ECB, reinforce confidence in its ability to achieve its ambitious targets and deliver sustained growth in the coming years.