S.P. Apparels Limited: Weaving a Strong Q2 FY26 Performance Amidst Global Shifts

S.P. Apparels Limited, a leading Indian manufacturer and exporter of knitted garments, has delivered a robust financial performance for the second quarter and half-year ended September 30, 2025 (Q2 & H1 FY26). The company's consolidated total revenue for Q2 FY26 stood at INR 427.34 crores, marking a 9.2% year-on-year growth. This impressive top-line expansion was complemented by a significant improvement in profitability, with consolidated EBITDA rising 28.1% to INR 63.65 crores and Profit After Tax (PAT) surging 58.4% to INR 34.70 crores. The strong results underscore the effectiveness of the company's strategic initiatives and disciplined execution, particularly in navigating a dynamic global trade environment.

The Garment Exports division, including Young Brand Apparel, continues to be the primary revenue driver, contributing INR 389.21 crores to the Q2 FY26 operational revenue, representing approximately 91.15% of the total. This segment witnessed a healthy 10.2% year-on-year growth, supported by robust demand and new customer acquisitions across Europe and the U.K. A notable highlight of the quarter was the significant turnaround in the S.P. Apparels UK (SPUK) and S.P. Retail Ventures Limited divisions, both reporting positive EBITDA for the first time in several years. SPUK generated INR 17.99 crores in revenue with INR 1.13 crores EBITDA, while the Retail division contributed INR 21.68 crores in revenue with INR 0.53 crores EBITDA. This turnaround reflects successful strategic decisions, including the rationalization of underperforming assets and a sharpened focus on profitable growth.

Strategic Expansion and Diversification

S.P. Apparels is actively pursuing a multi-pronged strategy to sustain its growth trajectory and mitigate risks. A key initiative is the expansion into Sri Lanka through its subsidiary, SPAIPL, which became operational in October 2023. This move is designed to leverage Sri Lanka's cost-effective manufacturing environment, duty-free access to Europe and the U.K., and abundant skilled labor. The company plans to scale up to 2,000 machines in Sri Lanka by FY27, adopting an asset-light model by targeting customer-approved factories for acquisition. This geographical diversification aims to reduce reliance on single-country manufacturing and mitigate tariff, workforce, and political risks.

In India, the company is focused on enhancing capacity utilization within its traditional garment division. It aims to increase its export capability to 100 million pieces by FY27, maintaining 90-93% utilization. This includes a plan to add approximately 1,000 machines by FY26E, with a greenfield expansion in Sivakasi contributing 450 machines. However, the Salem expansion, which involves adding 300+ machines, has been consciously deferred due to the prevailing U.S. tariff situation, demonstrating management's adaptive approach to market realities.

Retail Rejuvenation and Government Support

The retail division's positive EBITDA is a testament to the successful turnaround strategy. The Crocodile brand continues its strong performance, maintaining its position as a leading menswear brand with robust demand. The Angel & Rocket brand, a premium kidswear offering, has gained significant traction, validating the company's investment in this segment. Management's decision to exit the underperforming 'Head' brand franchisee has been instrumental in cutting losses and sharpening the focus on profitable growth. The company aims to organically scale Crocodile's revenue to INR 200 crores within the next 3-5 years and sees significant potential for Angel & Rocket to reach INR 4-5 crores per month.

S.P. Apparels is also well-positioned to benefit from supportive government policies. The Export Promotion Mission (EPM), with an outlay of INR 25,060 crores till FY31, is a landmark initiative designed to strengthen India's export competitiveness by providing access to credit and helping exporters penetrate new markets. Combined with ongoing Free Trade Agreement (FTA) negotiations (e.g., India-UK, India-UAE) and schemes like RoSCTL and RoDTEP, these initiatives create a powerful tailwind for the Indian apparel industry. The 'China Plus One' strategy further enhances India's textile export growth prospects, with expectations of reaching $65 billion by 2026.

Outlook and Management Confidence

Management remains confident in achieving its top-line guidance of INR 2,000 crores for FY27 on a consolidated basis, supported by the SPUK division's turnaround, sourcing flexibility, and design-led engagement. The positive momentum in the retail division, coupled with the readiness to resume Salem expansion once tariff clarity emerges, further strengthens the consolidated outlook. The company is guiding for a consolidated EBITDA margin of 15% going forward and expects to maintain Q2 FY26 margins for Q3 and Q4, even amidst U.S. tariff pressures.

S.P. Apparels is strategically diversifying its product mix to include more adult wear and intimate wear exports, aiming to reduce dependency on kids' wear and improve realization values. This proactive approach, combined with robust operational efficiencies and a clear roadmap for sustainable growth, positions S.P. Apparels Limited as a resilient player poised for continued success in the global apparel market. The company's focus on integrated operations, customer diversification, and leveraging macro tailwinds demonstrates a disciplined and forward-looking management approach, instilling confidence in its long-term value creation potential.