RSWM FY26: A Margin-Led Turnaround, With New Growth Bets in Knits and rPET

RSWM Limited ended FY26 with a clear shift in financial direction. The company reported revenue from operations of INR 4,554 crore, EBITDA of INR 327 crore, and PAT of INR 52 crore. In FY25, RSWM had posted a loss, so FY26 marks a return to profitability. The improvement was led by better gross spreads, cost control, and lower finance costs, even though the demand environment stayed mixed through the year.

In Q4 FY26, revenue from operations stood at INR 1,142 crore, up 4.5 percent sequentially but down year on year due to weaker exports. EBITDA was INR 85 crore with an EBITDA margin of 7.4 percent, higher by 115 basis points versus Q4 FY25. PAT for the quarter was INR 35 crore, though management clarified that it includes a one-time deferred tax liability reversal of about INR 23 crore after opting for the new corporate tax regime from FY27.

FY26 performance: revenue down, margins up

The top line declined year on year, but the quality of earnings improved. Management repeatedly emphasized that the focus in FY26 was profitability over volumes. On the concall, the Joint Managing Director also explained that part of the revenue decline came from curtailing Chhata spinning operations, which had contributed about INR 250 crore of revenue earlier but was considered inefficient.

Gross profit expanded despite lower revenue. In the investor presentation, gross profit increased to INR 1,753 crore and gross margin improved to 38.1 percent, up 246 basis points year on year. The CFO attributed this to better raw material management and improved spreads in the second half.

Lower finance costs supported the bottom line as well. For FY26, finance cost was INR 123 crore versus INR 135 crore in FY25, a reduction of about INR 12.5 crore. The company also highlighted ongoing working capital improvements, visible in lower inventories and trade receivables.

Operating context: demand softness and cost volatility

Management described FY26 as a challenging year for the textile sector, with global demand remaining soft and discretionary spending cautious in Western markets. The concall also flagged multiple moving parts that affected the cost base and execution, including the partial removal of RoDTEP during the year, cotton import duty for most of the quarter, and the impact of geopolitical tensions on freight and energy.

A key operational issue in Q4 was gas availability and cost. Management said gas disruptions affected the denim division for some days in March. While availability improved in April, gas prices moved up significantly, creating a lag issue because customer price revisions typically apply only to new orders.

On asset utilisation, management indicated meaningful headroom in three businesses. Melange yarn utilisation was about 65 to 70 percent, with an internal target to return to 85 to 90 percent as conditions normalise. Denim was running at above 80 percent with scope to reach 85 to 90 percent, while knits had slipped below 80 percent and management believes it can return to above 85 percent.

Strategy and capex: knits expansion and energy optimisation

RSWM’s near-term capex is concentrated on improving competitiveness and expanding value-added capacity in knits. The company outlined an INR 92 crore investment to expand and upgrade knitting operations, including acquisition of advanced machinery from Birla Advanced Knits Private Limited. As of 31 March 2026, the machine acquisition was completed, and the upgrade is expected to be completed by H1 FY27.

Management expects benefits to start reflecting from Q3 FY27. In the concall, the project team added that knit capacity is expected to rise from about 600 tons to 900 tons, and that printing will be added as a new segment. They indicated an EBITDA uplift of about 3 percent to 4 percent from current levels once the expansion is implemented and product mix improves.

The second visible lever is renewable energy. The investor presentation highlighted that renewable capacity has been scaled to 138 MW from 78 MW. The incremental 60 MW hybrid renewable power was commissioned on December 6, 2025, with an investment of INR 60 crore. Management positioned this as a hedge against rising power costs, including an additional Rajasthan power cess of INR 1.02 per unit effective October 1, 2025. On the concall, management spoke of a roughly INR 1 per unit impact and average savings of about 3 to 4 lakh units per day, noting seasonal variability in wind and solar.

Diversification bet: entry into bottle-to-bottle rPET

A major strategic step is the acquisition of 100 percent of LNJ GreenPET Private Limited for INR 20.01 crore in cash. The company described this as an entry into the recycled PET segment, specifically a greenfield bottle-to-bottle recycling facility to manufacture food-grade recycled PET chips and granules. The site is in Ratlam, Madhya Pradesh, with about 44 acres allotted and approvals in progress. Commercial production is expected to commence in Q1 FY28.

In the concall, management quantified total project capex at INR 427 crore, with about INR 300 crore as project finance and the remaining about INR 127 crore funded through a mix of equity and loan from holding companies. Management also said construction is intended to start in mid-May 2026. The rationale given is synergy with RSWM’s existing recycled fibre operations, where management stated the company already converts about six million PET bottles per day into polyester fibre.

Separately, the company proposed raising INR 36.06 crore through issuance of 24.70 lakh convertible warrants to promoter group entity LNJ Textiles Advisory LLP at INR 146 per warrant. Management framed this as promoter confidence and funding support for subsidiary projects and general corporate purposes.

What to track from here

RSWM’s FY26 outcome is best read as a margin-led recovery rather than a volume-led growth cycle. Revenue declined, but the company expanded EBITDA margins materially and turned PAT positive. Working capital metrics improved and borrowings reduced year on year.

The next phase hinges on execution. Management is targeting better utilisation in melange, denim, and knits, while also completing the knit expansion in time for benefits from Q3 FY27. The renewable energy scale-up is positioned as a structural cost lever. The rPET bottle-to-bottle project is a larger, longer-dated bet, with commissioning expected only in Q1 FY28 and meaningful project financing involved.

Management’s tone across the presentation and concall remained cautious, flagging demand uncertainty and input cost volatility while maintaining focus on value-added products, cost discipline, and capital allocation with one-to-three-year payback periods. For investors, the near-term proof points are steady margins without one-offs, sustained working capital control, and tangible improvement in utilisation as export markets stabilise.