/** Title: Vardhman Textiles Q1 FY27: Margins Bounce Back as Spinning Improves and New Fabric Capacities Ramp Up */

Vardhman Textiles Q1 FY27: Margins Bounce Back as Spinning Improves and New Fabric Capacities Ramp Up

Vardhman Textiles opened FY27 with a sharp improvement in profitability. In Q1 FY27, standalone revenue from operations rose to 2,648 crore, up 13 percent year on year. EBITDA increased to 528 crore, up 33 percent, and the EBITDA margin expanded to 19.4 percent versus 16.5 percent in Q1 FY26. Profit after tax came in at 285 crore, up 41 percent, with PAT margin at 10.5 percent.

Management attributed the stronger quarter largely to the spinning business. The call commentary highlighted a better product mix in yarn sizes and a benefit from raw material bought earlier, combined with subsequent cotton price increases that were reflected in yarn realizations. Management also cautioned that Q1 included a partial trading gain on raw materials and that margins are expected to moderate as cotton inventory resets to prevailing market prices.

Q1 FY27 performance in context

The quarterly trajectory through FY26 showed pressure on margins, with EBITDA margins hovering around 14 to 16 percent in the previous three quarters. Q1 FY27 broke that trend with a meaningful step-up in profitability.

Operationally, yarn volumes improved. Yarn production was 70,046 MT in Q1 FY27, up 2 percent year on year. Yarn sales including internal transfer increased 7.2 percent to 70,052 MT. Fabric volumes were softer, especially in grey fabric, where both production and sales declined about 7 percent year on year.

Mix and markets: yarn dominates, exports near half

The company’s Q1 FY27 revenue mix remained anchored in yarn. Product-wise, yarn accounted for 69 percent of revenue and fabric contributed 31 percent. Geographically, domestic sales were 53 percent while exports were 47 percent. In FY26, yarn formed 65 percent and fabric 35 percent, with domestic at 56 percent and exports at 44 percent.

Management commentary on exports focused on the revival of Chinese demand for yarn. It said exports are typically sold out for about three months, while domestic lead times are shorter and generally do not exceed 45 days. In Q&A, management quantified its China exposure: roughly 20 to 25 percent of its yarn exports go to China, translating to about 7 to 8 percent of total yarn production.

The management also explained why China is buying more yarn externally. One driver is the relatively higher cotton price inside China, supported by reserve cotton sales at elevated levels. Another is traceability and compliance concerns, where imported yarn can reduce the risk of Xinjiang-origin cotton in supply chains that ultimately serve markets with restrictions.

Fabric recovery and new synthetic woven unit: early but building

On fabrics, management acknowledged that improvement was not as strong as expected. It linked this to a US tariff-related disruption last year that caused the company to miss sampling for a season, which in turn reduced US orders flowing to India during the current period. It added that conditions began improving over the last month and expects better business from US customers over the next two to three months.

A second challenge in fabrics is the lag in passing through yarn cost changes. Management said yarn prices increased sharply during the period, and only around 60 to 70 percent of the increase had been passed on to customers, with 20 to 30 percent still pending. It expects that with volume improvement and time, margins can be restored.

The newer synthetic woven initiative, referred to as Vardhman Performance Fabric, is in its ramp-up phase. Commercial production started in March FY26. Management said the unit has capacity of about 15 lakh metres per month and utilization is currently 15 to 20 percent, reflecting the time needed for sampling and approvals because the products are new to the company and intended to replace imported fabrics. It also stated that two large brand approvals were received recently and production would begin in August. The internal aim is to reach 70 to 80 percent utilization within the next six months.

Capex and capacity: what is completed, what is still in flight

Vardhman has outlined total announced capex of 3,660 crore. The presentation and call indicate that a large part of this program is already online or nearing completion.

Key updates include:

• Yarn capacity expansion: the company stated that expansion of about 15,600 spindles was completed in H1 FY26 and an additional about 17,000 spindles has been completed. It also has an open-end project targeted for FY 2027-28.
• Processed fabric expansion: commercial production started in March FY26. The company reported processed fabric capacity of 240 million metres per annum, including a processing line-4 with 31 million metres per annum added in March 2026.
• Modernization, automation and technology upgrades: described as largely completed.
• Green capex: planned completion by FY27. Management said a biomass boiler in Baddi started in late July 2026, while another in Madhya Pradesh is expected to start in about a month. It also expects benefits from solar and wind investments to build over the next six months.
• Garments: the board approved capacity expansion from 2.2 million to 4.5 million shirts per annum, with investment of about 125 crore and completion expected by end of FY26-27. In Q&A, management estimated peak revenue from garments could be about 300 crore at full utilization, and it expects a ramp-up period due to worker training.

On the broader future expansion at Dhar under the PM MITRA Park context, management clarified that currently announced capex does not include expenditure on Dhar, and the company is waiting for land availability and reliable power timelines before committing.

Margin outlook: moderation expected, but management sees a better base

Management was direct that Q1 margin levels include a raw material trading benefit and should moderate. However, it also stated that the sector’s earlier lows were a stressed situation and expressed a view that EBITDA margins could normalize around 13 to 14 percent. It linked this to a healthier demand-supply balance in spinning, reduced capacity additions globally, and improved competitiveness as Indian cotton prices have aligned closer to international prices.

On spreads, management said cotton-yarn spread during the period, when measured using market prices of cotton and yarn, was around USD 0.90 per kg of yarn. It suggested that historically spreads have been in the range of about USD 0.85 to USD 1 per kg, with the past two to three years being an exception where spreads were materially lower.

Takeaways

Vardhman’s Q1 FY27 performance reflects a meaningful profitability rebound driven by spinning and supported by raw material dynamics. Management expects margins to normalize lower than Q1 but believes the industry backdrop is structurally better than the stress phase of the prior two years.

The next monitoring points are clear. Fabric utilization needs to improve as US orders return and pass-through catches up. The synthetic woven unit needs to demonstrate sustained ramp-up beyond approvals into steady volumes. And the benefits from green capex, particularly biomass, solar and wind, are expected to show progressively over the next six months.

Overall, the quarter reinforced Vardhman’s position as a large, vertically integrated textile manufacturer with a steady balance sheet and a multi-year capex program focused on capacity, modernization, and sustainability.