Vardhman Textiles Limited reported improved performance in Q4 FY26 as U.S. tariffs eased and Indian cotton prices aligned with global markets. Management highlighted a significant shift in industry dynamics, noting that approximately 11 million spindles have permanently exited the market, leading to better capacity utilization. Looking ahead, the company remains optimistic about potential growth from future free trade agreements and continued modernization, despite ongoing geopolitical and raw material price volatility.
Market Recovery and Capacity Shifts
Following a challenging period, the company observed a recovery in demand as U.S. tariffs on textile imports were removed. This policy shift allowed Indian garment and home textile exporters to return to 90% to 100% capacity utilization. A significant structural change in the industry has been the permanent closure of roughly 11 to 11.5 million spindles, reducing the aggregate operational capacity in India to approximately 41-42 million spindles. This consolidation has balanced supply and improved the competitive landscape for organized players like Vardhman Textiles.
Cotton Pricing and Global Alignment
A critical development during the quarter was the alignment of Indian cotton prices with international levels, which had previously been a point of disadvantage. Historically, Indian cotton traded at a premium; however, recent market dynamics and stable CCI (Cotton Corporation of India) pricing policies have brought local prices in line with the New York futures market. Currently, cotton price spreads have seen a 40% to 50% improvement compared to previous lows, providing a more sustainable margin environment for spinners.
Operational Highlights and Capex
Vardhman Textiles has successfully completed nearly 90% of its planned modernization capex, enhancing shop-floor flexibility and quality standards. The company is also expanding its fabric and garmenting segments to capitalize on emerging opportunities. While direct exports remain steady at approximately 44% to 45% of total revenue, management is focused on increasing garmenting viability, with an average realization of $7.5 per shirt. Furthermore, the company is actively pursuing sustainability through investment in green power, such as biomass boilers, expected to contribute to cost reductions from June/July 2026 onwards.
Future Outlook
Management is cautious but optimistic regarding the next 12 to 15 months. The potential for new trade agreements with the UK and Europe is viewed as a major growth engine. While the company faces a mark-to-market impact of INR 57-58 crore due to currency fluctuations, it remains well-positioned to leverage its robust balance sheet and current operational capacity. The company continues to monitor global geopolitical tensions and raw material price trends while prioritizing operational efficiency.
Source: BSE
