Sutlej returns to profit as H1 FY27 EBITDA margin reaches 6.5%

Sutlej Textiles and Industries Limited returned to a standalone profit of Rs 9.4 crore in H1FY27, versus a Rs 44.1 crore loss in H1FY26, as EBITDA margin rose 473 basis points to 6.5% and total income increased 23.4% to Rs 1,537.4 crore.

How did Sutlej return to profit in H1FY27?

Sutlej returned to profit because standalone EBITDA rose to Rs 100.5 crore in H1FY27 from Rs 22.5 crore in H1FY26, while total income increased by Rs 291.8 crore to Rs 1,537.4 crore. EBITDA margin was 6.5%, compared with 1.8% a year earlier. Profit before tax after exceptional items turned to Rs 14.5 crore from a Rs 65.5 crore loss.

The bottom-line reversal occurred despite higher finance costs. Interest expense rose 16.3% year on year to Rs 38.2 crore in H1FY27, while depreciation declined 11.2% to Rs 47.8 crore. Tax was Rs 5.1 crore, against a Rs 21.4 crore tax credit in H1FY26, resulting in PAT, or profit after tax, of Rs 9.4 crore and a PAT margin of 0.6%.

Q2FY27 accounted for more than half of H1FY27 PAT. Standalone Q2FY27 PAT was Rs 6.7 crore, compared with a Rs 18.4 crore loss in Q2FY26, while EBITDA rose to Rs 53.4 crore from Rs 17.5 crore. Against Q1FY27, Q2 income increased 18.3% to Rs 833 crore and EBITDA increased 13.4%, although EBITDA margin declined 28 basis points from 6.7% to 6.4%.

Which costs supported Sutlej's Q2FY27 margin expansion?

Sutlej's Q2FY27 margin expansion coincided with lower employee, power and fuel expense ratios, despite a higher cost-of-goods-sold ratio. Employee expense was 14.3% of total income, down from 18.0% in Q2FY26, and power and fuel expense was 9.9%, down from 12.0%. EBITDA margin consequently increased to 6.4% from 2.7%.

Cost of goods sold was 57.4% of Q2FY27 income, up from 54.0% in Q2FY26 and 53.0% in Q1FY27. In rupee terms, it increased 38.5% year on year to Rs 478 crore, exceeding the 29.7% increase in Q2 income to Rs 833 crore. Management attributes EBITDA improvement to a better product mix, operational efficiencies and disciplined cost management.

First-half costs also rose more slowly than income in two categories. H1FY27 employee cost increased 6.3% to Rs 236.2 crore and other expenses increased 11.6% to Rs 348.6 crore, against 23.4% income growth. The presentation's headline page separately puts Q2 power and fuel at 10.1% of income, while its detailed cost chart gives 9.9%; both figures are below 12.0% in Q2FY26, but the presentation does not explain the difference.

How did Sutlej's Yarn and Home Textiles businesses perform?

Sutlej's Yarn business delivered the larger segment earnings reversal, reporting EBIT, or earnings before interest and tax, of Rs 52.4 crore in H1FY27 after a Rs 22 crore loss in H1FY26. Segment revenue increased 21.7% to Rs 1,411 crore. Q2FY27 Yarn EBIT was Rs 28.4 crore, compared with a Rs 7.3 crore loss in Q2FY26.

Yarn production rose to 59,547 metric tonnes in H1FY27 from 48,941 metric tonnes a year earlier, while capacity utilisation increased to 88% from 83%. Sales volume rose to 49,330 metric tonnes from 47,915 metric tonnes, so production grew faster than sales volume. H1FY27 Yarn revenue comprised 60% domestic sales and 40% exports.

Home Textiles also returned to positive EBIT, recording Rs 1.3 crore in H1FY27 against a Rs 14.6 crore loss in H1FY26. Revenue rose to Rs 116 crore from Rs 89 crore. In Q2FY27, revenue was Rs 67 crore, up from Rs 46 crore, while EBIT turned to Rs 4 crore from a Rs 5 crore loss.

Home Textiles generated 55% of H1FY27 revenue domestically and 45% from exports, compared with a 60% domestic and 40% export mix in Q2FY27. Nesterra, Sutlej's domestic retail brand, had 485 active stores in Q2FY27 after calibrated network expansion. Management identified value-added yarns, home textiles and sustainable fibres as areas intended to lift realisations.

What changed in Sutlej's borrowings by H1FY27?

Sutlej's total borrowings rose to Rs 968 crore in H1FY27 from Rs 876 crore in FY26, excluding subordinate debt. Management attributed the increase largely to higher working-capital utilisation supporting business operations. Long-term borrowings increased to Rs 450 crore from Rs 409 crore, while short-term borrowings rose to Rs 519 crore from Rs 467 crore.

Debt to equity increased to 1.17 times in H1FY27 from 1.07 times in FY26 and 0.97 times in FY25. The presentation says Sutlej has consistently kept debt to equity below 1.2 times. The borrowing increase accompanied 23.4% growth in standalone H1FY27 income and a 16.3% rise in interest expense to Rs 38.2 crore.

Consolidated results showed a similar earnings reversal. Consolidated H1FY27 income was Rs 1,540.7 crore, up 22.8% from Rs 1,254.8 crore, and EBITDA increased to Rs 100.4 crore from Rs 15.8 crore. Consolidated PAT was Rs 8.6 crore, compared with a Rs 52 crore loss, while consolidated EBITDA margin rose 526 basis points to 6.5%.

Conclusion

Sutlej's H1FY27 turnaround combined a Rs 53.5 crore change in standalone PAT, a 473-basis-point rise in EBITDA margin and positive EBIT in both Yarn and Home Textiles. Revenue growth to Rs 1,537.4 crore was accompanied by slower growth in employee and other expenses, though Q2 cost of goods sold grew faster than income and H1 interest expense increased to Rs 38.2 crore.

Next, management's stated focus on differentiated, value-added products, energy efficiency and cost control will be relevant to the continuation of the H1FY27 performance. Investors can also monitor Yarn capacity utilisation of 88%, Home Textiles' Rs 1.3 crore H1FY27 EBIT, and whether debt to equity remains below management's stated 1.2-times threshold as borrowings stand at Rs 968 crore.