# 1. Financial Performance ## A. Key Figures * Revenue: ₹1,150 Cr Q2 FY26 (-1.4% YoY, -1.6% QoQ) · ₹2,319 Cr H1 FY26 (-2.3% YoY) * Gross Profit: ₹445 Cr Q2 (+4.1% YoY) · ₹885 Cr H1 (+2.7% YoY) * Gross Margin: 38.4% Q2 (+195 bps YoY, +116 bps QoQ) · 37.8% H1 (+173 bps YoY) * **EBITDA:** ₹79 Cr Q2 (+6% YoY) · ₹160 Cr H1 (+66% YoY) * EBITDA Margin: 6.8% Q2 (+318 bps YoY) · 6.8% H1 (+280 bps YoY) * PAT: ₹6.3 Cr Q2 (vs. ₹-21 Cr prior year) · ₹13.2 Cr H1 (vs. ₹-34.9 Cr prior year) * PBDT: ₹48 Cr Q2 (6.2x YoY) · ₹95 Cr H1 (3.4x YoY) * Finance Costs: ₹30.6 Cr H1 (-11.5% YoY, -8.9% QoQ) ## B. Revenue Trends * **Demand Resilience Amid Output Constraints:** Revenue declined modestly YoY and QoQ due to **lower capacity utilization in mélange and knit segments**, despite sustained market demand. * **H1 Performance Reflects Structural Challenges:** Full half-year revenue contraction driven by persistent inefficiencies in the mélange business, limiting top-line expansion. ## C. Margin & Profitability Drivers * **Strong Margin Expansion:** Gross and EBITDA margins improved significantly YoY, driven by **lower raw material costs**, **favorable product mix**, and **operational efficiency initiatives**. * **Profitability Turnaround Achieved:** PAT turned positive in Q2 and H1, reversing prior-year losses, supported by margin gains and **cost discipline**, including **curtailment of low-margin activities**. * **Cost Optimization in Progress:** Finance costs reduced both YoY and QoQ, with management actively **renegotiating loan rates** and targeting further reductions in interest outflows. ## D. Balance Sheet & Liquidity * **Working Capital Discipline:** Inventory reduced by **₹121 Cr** and receivables by **₹51 Cr**, improving cash conversion and reducing leverage. * **Deleveraging Underway:** Term loan repaid during the quarter, with plans for further reductions to strengthen liquidity and lower financing burden. * **Non-Core Asset Monetization:** Company advancing plans to reduce NPAs and monetize nonoperating assets to fund **₹92 Cr in margin-accretive investments**. --- # 2. Capacity & Utilization ## A. Key Figures * **Yarn Utilization:** **Mid-90s%** (synthetic & cotton) · **5% lower** (mélange) · **8–10% gap** (knit) * **Knit Capacity:** **700 tons/month** current · **900 tons/month** post-expansion (+200 tons) * **Investment:** **₹92 Cr** allocated for knit modernization and printing facility ## B. Yarn Utilization * **Demand Pressure in Knit Segment:** RSWM’s knit utilization weakened due to **C. S. customer-driven discount demands**, triggering order renegotiations and reduced downstream fabric demand. * **Resilient Core Yarn Operations:** Yarn business remains robust with utilization in the **mid-90s% range** across synthetic and cotton; mélange and knit face modest headwinds, while denim holds steady. ## C. Knit Expansion * **Strategic Capacity Build:** ₹92 Cr investment to expand monthly knit capacity by **200 tons**, advancing forward integration and product diversification. * **Enhanced Product Mix:** Addition of **in-house printing capability** will shift mix toward higher-value printed fabrics, with **120 tons/month** dedicated to printed output post-expansion. --- # 3. Product & Segment Mix ## A. Key Figures *No significant quantitative financial metrics available for extraction.* ## A. Synthetic Yarn * **Margin Pressure Persists:** Profitability weakened in recent quarters due to production shifts toward low-tariff markets, despite anticipated FTA benefits with the **U.K. and UAE** still pending implementation. * **Strategic Client Focus:** Business model emphasizes long-term partnerships and tailored product offerings over aggressive customer expansion. ## B. Knit & Denim * **Product Expansion Underway:** Investment aims to deliver a full-suite offering, including printed fabrics, to meet strong market demand and deepen customer integration. * **Customer Retention Challenged:** Mélange segment under pressure as key U.S.-bound export customers face headwinds, leading to low order volumes and prompting new product development and client acquisition efforts. ## C. Forward Integration * **Profitability & Efficiency Drive:** Company advancing multiple initiatives—product mix optimization, forward integration in knit/denim, energy cost reduction via **solar and wind adoption**, and strict CAPEX controls—to navigate a difficult demand environment. * **Vertical Integration Benefits:** End-to-end capabilities from recycled fibre to fabric expected to enhance incremental margins and strengthen P&L contribution over time. * **Growth Levers in Motion:** Strategic focus remains on acquiring **new clients**, entering **new markets**, and launching **new products**, with execution progress varying across segments. --- # 4. Export & Customer Demand ## A. U.S. Tariff Impact * **Tariff-Driven Supply Glut:** Yarn prices softened due to import competition and domestic oversupply, as integrated spinners redirected garment output inland amid U.S. export disruptions. * **Capacity Under Pressure:** Spinning sector faces idle capacity, reflecting downstream export bottlenecks caused by U.S. trade barriers. ## B. New Market Diversification * **Strategic Reorientation:** Company actively renegotiating with U.S. buyers and shifting focus to de-risk exposure through geographic diversification. * **Expansion into Alternative Markets:** Export push underway for knit, denim, and mélange products in non-U.S. regions, with **ongoing discussions with U.K. customers** bolstered by direct engagement. * **FTA Headwinds Persist:** U.K.-India trade deal still pending full implementation, limiting near-term market access benefits. --- # 5. Cost & Supply Chain ## A. Key Figures * **Renewable Energy Capacity:** **70 MW** (10 MW behind the meter, 60 MW round-the-clock) * **Green Energy Usage:** **70%** of total consumption * **Energy Cost Savings:** **₹1/unit** reduction expected · **₹30–40 Cr** annualized savings * **Working Capital Utilization:** **10% decline** in Q2 FY'26 * **Inventory Reduction:** **₹730 Cr → ₹608 Cr** ## B. Energy Cost Savings * **Strategic Decarbonization:** Secured 70 MW of renewable power via Adani Green, enabling 70% green energy usage and aligning with customer sustainability demands. * **Cost Advantage:** Achieving meaningful energy cost savings driven by rising conventional power tariffs in Rajasthan, with full annual benefit expected next fiscal. * **Execution Timeline:** Partial savings realized in current year; full impact to flow from next financial year onward. ## C. Imported Cotton * **Price Pressure Despite Duty Removal:** Cotton yarn prices declined 5–6% due to falling Indian prices and cheaper global supply, negatively impacting margins despite import duty removal. * **Structural Shift Underway:** Duty-free access to imported cotton enhances availability and quality (low contamination), supporting long-term product differentiation. * **Global-Local Price Linkage:** Domestic and export yarn prices fell due to global oversupply, U.S. tariff changes, and import liberalization, pressuring near-term profitability. ## D. Working Capital * **Leaner Operations:** Working capital utilization down 10% on improved collections, supply chain coordination, and **significant inventory drawdown**. * **Proactive Cash Flow Management:** Expanded invoice discounting, domestic factoring, and bill discounting for raw material payments to capture interest arbitrage and reduce funding costs. * **Vertical Integration for Control:** Shift to in-house printing to address quality issues and lead time gaps versus job workers, enhancing operational autonomy. --- # 6. Risks & Tariff Exposure ## A. Key Figures * **U.S. Tariff Rate:** **50%** on all textile goods * **GST Rate Change:** Reduced from **12% and 18% to 5%** ## B. U.S. Trade Policy * **Severe Sector Headwinds:** Q2 FY'26 marked a challenging period for the textile industry due to the sudden imposition of **50% U.S. tariffs**, with knitted garments and mélange yarn segments facing the highest impact. * **Long-Term Confidence Amid Disruption:** Management views the tariff challenge as temporary, expecting resolution by the time new projects come online, supporting continued long-term investment. * **Near-Term Demand Erosion:** Tariff effects cascaded into Q3, disrupting order flows from July onward, with October seeing peak pressure—though early signs of stabilization expected in November. * **Project Withdrawal Drivers:** Decision to exit a key project driven by **GST rate rationalization to 5%** and adverse geopolitical conditions in J&K, undermining economic viability. ## C. Inventory Valuation * **Negative Inventory Revaluation:** Removal of cotton import duties led to cheaper global supply, depressing domestic prices and triggering **negative mark-to-market valuations** for mills holding cotton inventory. * **Supply Chain Stress:** Elevated inventory, weak order inflows, and liquidity strain emerged across the textile chain, amplifying operational risks. ## D. Geopolitical Delays * **Project Halt in Jammu:** Despite early application under a government incentive scheme, the Jammu project is stalled due to delayed subsidy approvals from the state government, with no contingency plans disclosed. * **Export Financial Pressure:** Geopolitical and trade disruptions caused shipment delays and forced steep buyer-negotiated discounts, intensifying margin pressure for exporters. --- # 7. Guidance & Outlook ## A. Key Figures * **CAPEX Investment:** **₹92 Cr** for knit expansion (debottlenecking, modernization, printing) · **₹60 Cr** for renewable power via group captive * **Modernization Budget:** **₹55 Cr** allocated for 2025–2026 CAPEX, with spending tightly controlled to ensure **positive cash flow** ## B. CAPEX Plan * **Strategic Capital Allocation:** Knit expansion includes **120 MT of printed fabric capacity** out of 200 MT total, enhancing value-added output. * **Funding Reallocation:** Capital from withdrawn projects being liquidated via J&K government; proceeds to be redeployed through **LNJ Greenpet** for new initiatives. ## C. H2 Recovery * **Turnaround Roadmap:** RSWM 0 initiative targets **cost optimization, improved product mix, and market expansion**, with full impact expected in H2 FY25–26. * **Duty-Free Import Impact:** Near-term headwinds from duty-free cotton imports likely to persist into Q3, though **only three of six segments significantly affected**; mitigation efforts underway. * **Management Confidence:** Leadership affirms strong long-term outlook, emphasizing **sustainable growth** and **prudent capital stewardship**.