SP APPARELS LTD (NSE: SPAL) Q3 2026 Earnings Call dated Feb. 13, 2026
Corporate Participants:
Unidentified Speaker
P. Sundararajan — Chairman and Managing Director
V. Balaji — Chief Financial Officer
Analysts:
Unidentified Participant
Prerna Jhunjhunwal — Analyst
Bharat Gulati — Analyst
Shubhankar Gupta — Analyst
Bhavin Chheda — Analyst
Pranav — Analyst
Yash Bajaj — Analyst
Bhavika Jain — Analyst
Rupesh Tatiya — Analyst
Bharat Sheth — Analyst
Bharat Gulati — Analyst
Presentation:
operator
Ladies and gentlemen, good day. Welcome to the SP Apparels Q3FY26 earning conference call hosted by Alara Securities. As a reminder, all the participants line will be listen mode. There will be an opportunity for you to ask a question after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing 0 on your touchtone phone. Please note that this conference is being recorded now. I hand the conference over to Mr. Prerna Junjunwala from LR Securities. Thank you. And over to you ma’.
Prerna Jhunjhunwal — Analyst
Thank you Man Sir. Good afternoon everyone. On behalf of Elara Securities Private Limited I would like to welcome you all to Q3FY26 post result conference and business update call or of SP Apparels Limited today we have with us the senior management of the company including Mr. P. Sundara Rajan, Chairman and Managing Director, Mrs. S. Lata, Executive Director Mrs. S. Shanta, Joint Managing Director Mr. S. Chanduran, Joint Managing Director Mrs. P.V. cheeva, Chief Executive Officer and Mr. V. Balaji, Chief Financial Officer of the company. I would now like to hand over the call to the management for opening remarks.
Thank you. And over to you sir.
operator
Sam? Ma’, am, we are unable to hear the management. Check the line please. Members of the management, are you able to hear me? Ladies and gentlemen, thank you for holding. The management is reconnected. Please go ahead. Management, please go ahead.
P. Sundararajan — Chairman and Managing Director
Okay. Good afternoon everyone. I am Chairman managing director of SPF Health Limited. Thank you for joining HPFL’s investors call. I am pleased to share our business update. The evolving trade environment, customer traction across key markets and our priorities as we enter the next phase of growth. This has been a steady quarter for us and I am happy to share that our operations across all verticals have continued to perform well. Even though Q3 was soft for the sector, we managed the quarter efficiently. The industry environment and policy Clarity trade deal between India and US was cause of worry for past seven to eight months.
And now signing of India US agreement has helped bring clarity on the tariff situation. We are also happy that EU and India have signed the trade deal. Rasmun. Further, we are all aware that UK and India also have agreed for a trade deal. This scenario is very positive for the textile industry. The clarification on the India US agreement has removed the uncertainties we saw in the recent months. At the same time, Sri Lanka remains useful for programs where duty free access to the UK and EU market provides an advantage. Especially with the UK India FTA still about less than a year away.
The India US pact which brings tariffs down to 18% strengthens our competitiveness and opens access to $118 billion US textile import market while the US Bangladesh zero duty provisions for governments using US origin content is something we are monitoring in Europe. The India EU FTA eliminating up to 12% import duties has improved buyers sentiment overall. Our presence in both India and Sri Lanka gives us the flexibility to navigate these ships and service customers efficiently. On the demand side, we are seeing healthy reengagements from American buyers who had earlier prepared for a Sri Lanka shift. Many of them now prefer continuity in India under the revised tariff clarity.
At the same time, our ability to serve UK EU orders from Sri Lanka gives us flexibility on the landed cost and the lead tax. We have active dialogue with existing customers on expanding product line and and we are onboarding new programs aligned to our quality, compliance and delivery style. Our governmenting division continues to be the backbone of SPFIL in India. The utilization for Q3FY26 declined largely on account of addition of new machines and impact of US Tariff. However, the we believe the utilization to improve in next financial year. We also onboarded four to five new buyers during the year which has strengthened our presence in these key markets.
The temporary pause with our US customer which we saw in Q3 due to the US tariff situation has now eased after the signing of the India US agreement and customers have started working on new order placements with clear normalization in booking patterns. In Sri Lanka, we made further progress by integrating one more additional factory in this space, taking total operation capacity to approximately 1650 machines. Stabilization efforts across production, HR and financial systems are progressing well, supported by the fast rollout of our homemade ERP platform. We expect operations in Sri Lanka to reach normalized levels from Q1FY27 with meaningful shipment and optimum utilization in Q2FY27 during the year.
By acquiring the factories, we have also added new customers from Sri Lanka. Orders from these customers begin in Q1 and we expect steady contribution from Q2 onward. Young Pride Appeals, being predominantly US focused, saw little pressure in Q3 because of the earlier tariff uncertainty. Q4 will have more pressure in the revenue. Despite this, the division maintained healthy operational margins. With the tariff situation now resolved, customers engagement has picked up sharply and order visibility for the upcoming seasons is strong. We have received the Salem expansion that was temporarily passed and the young brand is scaling towards 1700 installed machines with a phased utilization ramp to around 1500 machines.
We are also onboarding one or two new UK European customers which will help diversify the customer mix and reduce over reliance on The US market Young brand is also geared up to produce. Draw. For the domestic market as a diversification of the product overall Young brand well positioned to deliver strong growth as demand normalizes. Our multi country manufacturing model is at the heart of our strategy. The clarity in the US duty free access from Sri Lanka to the UK and the ability to command EU UK program between India and Sri Lanka provide us with resilience as well as agility. With tariff uncertainty withdrawing, the Young brand expansion is back on track and the Sri Lanka platform will operate and at a normalized from Q1 next year. With customer shipments ramping from Q2 we will continue sharing utilization metric and performance KPIs.
With regards to SPFL UK we remain very optimistic on SPUK. We are targeting a significant growth in the business over the next two financial years with a revenue goal of about US dollars 20 million that is approximately 200 crores as customer additions and designless engagement scale up. Spuk’s ability to source between India and Sri Lanka depending on land cost is a distinct advantage and we expect this to contribute to improved profitability as the base expansion. As the base expands, the order book status division wise or SP AL is 353 crores. Young Brand Apparels is 87 crores, SPUK is 30 crores.
With regard to retail, our retail division remains EBITDA positive and added another anchor store recently. Prokorean continues to perform steadily with disciplined inventory and Angelin Rocket is gaining traction as we sharpen products omnichannel and consumer engagement. The cleanup of underperforming channels, cost discipline and tighter merchandising have strengthened this fundamentals and we expect sustained profitability. On ESG front, we are progressing well on our sustainability commitments by planning for addition of approximately 3 megawatts of rooftop solar capacity across three additional units for the next financial year 2627 taking total installed capacity on in house solar facility to 4 megawatts on the new labor code we are already aligned with the most requirements and and we do not expect any material operational impact on the financial and once the Gazette notification comes through we will align with the rules as and when cleared.
We are maintaining our revenue guidance of 2000 crores by FY27 on consolidated basis. Q3 was softer for the sector but Q4 also will be softer because of the US tariff issue and we see a stronger outlook from next finance year onward as policy clarity translates into steady order inflows. Our order pipeline and customer additions in Sri Lanka combined with the resumption of N grand expansion and scaling up of SPUK support this trajectory. We will continue to prioritize quality growth, disciplined execution to summarize, the signing of the India US agreement has restored visibility for customers who were in wait and watch mode.
We expect production to continue in India for growth programs while Sri Lanka provides flexibility for the UK and EU opportunities. Our diversified footprint, integrated capabilities and strong compliance culture position position us well to capture incremental share as global sourcing recalibrate. With that, I will now hand the call over to Mr. Balaji, our CFO to take you through the financial highlights for the quarter and nine months. Balaji, over to you.
V. Balaji — Chief Financial Officer
Thank you sir. Good afternoon everyone. I’ll just take you through the financial performance of the company for the Q through and the nine months ended. Standalone performance for Q3 adjusted revenue stood at 258 crores, a growth of 10.9% year on year. Adjusted EBITDA stood at 40.4 crores with a EBITDA margin of 15.6. Percentage profit after tax during the current quarter stood at 19.3 crores against 18 crores of Q3FY25 a growth of 7.2% year on year on a standalone basis for nine months ended December 2025, adjusted revenue grew by 20.8 crores and stood at 851 crores.
Adjusted EBITDA stood at 138 crores with an EBITDA margin of 16.3%. Profit after tax during nine months stood at 66.4 as against 58.8 crores, a growth of 13% year on year. On a consolidated basis, revenue from operations in Q3 stood at 382 crores, a growth of 6.6% year on year. EBITDA grew by 11.2% year on year to Rs. 56.6 crores with an EBITDA margin of 14.8%. Profit after tax stood at 27 crores as against 24 crores, a growth of 9.1% year on year. On a nine month basis, revenue from operations stood at 1213 crores as against 995 crores, a strong growth of 21.9% year on year.
EBITADA during nine months stood at 29.7% growth year on year which stood at 173 crores with a margin of 14.3%. Profit after tax stood at 82.4 crores against 64.77 crores, a growth of 27% year on year. On a segment wise performance, garment division Q3FY26 adjusted operational revenue stood at 343 crores. A growth of 7.6% year on year. Adjusted EBITDA during the quarter stood at 58.3 crores. A growth of 7.6 year on year. Nine months ended. Adjusted operational revenue grew by 16.7 year on year to 1,105 crores. Adjusted EBITDA stood at 179 crores. A growth of 16.3% year on year.
SPUK Q3 revenue stood at 19.2 crores with a positive EBITDA of 0.8 crores. Retail division Q3FY26 revenue stood at 17.2 crores with a positive eBITDA of 0.8 croces against a loss of 0.6 crores. Q3FY25. Further, in the retail division, Crocodile brand revenue stood at 14.5 crores and angel and Rocket revenue stood at 3 crores. For the current quarter, our current debt position on a standalone basis, Roth Debt stood at 275 crores and our net debt is 227 crores. With all these information and all the other information that are present in the present in the presentation, we will move to the question and answer session.
Thank you.
operator
Thank you very much. Now we begin the question and answer session. Anyone who wish to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use a headset while asking a question. Ladies and gentlemen, we’ll wait for the moment while the question queue assembles. The first question is from the Bharat Gulati Dalalan Brochao. Please go ahead.
Bharat Gulati — Analyst
Yeah, hi. Thank you for the opportunity. I just had a couple of questions. So my first question, sir, would be regarding any change in our FY27 guidance. Given that the tariffs have been revised and we would see higher utilization levels in our Ybal business, would there be any revision in guidance?
V. Balaji — Chief Financial Officer
So on the guidance, I guess in the Chairman’s speech he has assured that our guidance on the revenue front stands at 2000 crores for FY27 on a consolidated basis.
Bharat Gulati — Analyst
Got it. And the past guidance that we’ve given on margins of about 15%, consolidated margins on the EBITDA front, would we see a change in that going forward? With operating leverage kicking in due to the higher utilization levels in our YBL and our Sri Lanka business? No.
V. Balaji — Chief Financial Officer
We currently would like to stick to the guidance of 15% at the EBITDA level on the government inclusion.
Bharat Gulati — Analyst
Okay. Sir, and so if I just look at our EBITDA margins in terms of X of ybal, it’s seen kind of a degrowth in, in this nine months as well as in this quarter. So would that, would there be any specific call out or is tariffs the only reason for that to happen?
V. Balaji — Chief Financial Officer
So if you look at last year was this year our wages have gone up from March 2025, our minimum wages have changed and because of the tariff there has been a couple of factories that have been closed down because of. So purely because of tariff and the wages increase, there is an impact on the margin front.
Bharat Gulati — Analyst
So it would be fair to say that our government Division X of YBL should touch that 18% EBITDA mark again next year.
V. Balaji — Chief Financial Officer
Yes, definitely. I feel that on the garmenting division you have the Sri Lanka business sales also. So while we give guidance on garmenting division, Sri Lanka business is also part of the garmenting division. So naturally Sri Lanka business will give you only 10% margin. So literally when you add up both together, including the Sri Lanka business, we are looking at 15% margin in the garment inclusion going forward.
Bharat Gulati — Analyst
Got it? Got it sir. And just so to understand in terms of realization, there’s been a trend of about degrowth that’s been seen in the in the past three quarters, about roughly 3% degrowth in our realization. So is this going to continue going forward or will we see an uptick in realizations as the product mix changes towards the adult?
V. Balaji — Chief Financial Officer
So it’s purely on the product mix. Like when you do a lot of children products like the baby’s body suits and the skeet suits, the realization tend to come down. It’s purely the product mix only.
P. Sundararajan — Chairman and Managing Director
At the pressure for margin. From Q1 onwards we will normalize it. Q2 will be the stabilization. Q2 27.
Bharat Gulati — Analyst
Got it. But so just to understand just our realizations, will they be continuing in the downward trend or is this a new base for us for realizations or can we see them go back to that 140 kind of average realization level?
V. Balaji — Chief Financial Officer
The realization is to do with the product mix only got nothing to do with the margins. Do we expect this either maintain or move up little bit? Because you know we are planning to to bring in more of adult orders also. So which will bring up the average price hoping because we need to fill up the capacities by bringing in adult adult orders.
Bharat Gulati — Analyst
Right, right. Fair enough. So fair enough. And just so just one last question I wanted to understand in terms of a capacity that we, I mean in terms of the what we mentioned in our ppt, the volumes that we’ve exported and the realization when, when I, you know, do the math on that, I don’t see us achieving the revenues in our garment business. So what exactly is the exports? The 18.2 million exports in this quarter that’s been done. Which business is that exactly talking towards?
V. Balaji — Chief Financial Officer
That’s purely on the garmenting division which is standalone. So if you look at standalone number, it will get reflected there.
Bharat Gulati — Analyst
All right, so that’s standalone and then our yb. So it excludes basically our YBL business.
P. Sundararajan — Chairman and Managing Director
And our Sri Lanka operation all needs to be excluded.
Bharat Gulati — Analyst
So didn’t get that. Sorry, can you repeat yourself? Sir, Sorry, I couldn’t hear you. Sir. Sorry. As your voice cracked a little bit.
V. Balaji — Chief Financial Officer
On the garmenting division which is segmental reported in the presentation, it is inclusive of the export and the YBA put together. So you exclude YBA in the garmenting division, you will find the numbers.
Bharat Gulati — Analyst
So that number would be for purely our standalone India exports, wouldn’t include. Got it, sir. Got it. Very helpful, sir. Thank you. Thank you.
operator
Thank you. The next question is from the line of Shubankar Gupta from Equity Capital. Please go ahead.
Shubhankar Gupta — Analyst
Hello. Hi sir. Am I audible?
V. Balaji — Chief Financial Officer
Yeah, yeah, you’re audible.
Shubhankar Gupta — Analyst
So the first question is with regards to the labor code changes. So as per what I could see from the presentation and the numbers, the 27 crore consolidated pad does not include the labor code changes impact, is that correct? And if that is so, then can we get a number as to what would that impact be like?
V. Balaji — Chief Financial Officer
No. See in the Chairman’s speech there is no material impact because of the labor code. See, the labor code was supposed to be introduced in the year 2020 itself. So we have aligned ourselves with the labor code in the year 2020 itself. So there will be no big material changes or impact in the financials because of the new labor code.
Shubhankar Gupta — Analyst
Okay. So we are saying that we had already increased the salary of our. All our labor force.
V. Balaji — Chief Financial Officer
Yes.
P. Sundararajan — Chairman and Managing Director
So that should not be challenged. Right. Okay. Okay. That should not have any impact. Fair enough. Second question, sir. So it’s. It’s more broad. So second question is around. So there has been so many trade deals which have happened.
Shubhankar Gupta — Analyst
Right. But then there are two major ones which is one is US and one is uk. So what is our take on the timelines with regard to the same? And are we doing anything extra to gain from these big trade deals which have happened? Can you come again please? So basically my question is there have been major trade deals that happened in the last six, seven months. Out of which two are major US and uk. What’s our take on the timelines with regard to the same like how will it start impacting SP’s numbers and are we doing anything extra to gain like gain more market from these trade deals?
V. Balaji — Chief Financial Officer
Actually speaking it will take another one more quarter to come back to normal. And because all the customers have been with us now and they were waiting for this service to be revised. So now they have already the press the button to to resume their normal business inquiries and the placing the orders that has already started. And so all these things will reflect from Q2 Q2 numbers. And we are also adding some new customers, about four to five more new customers, maybe two from the US and another two three from the Europe and the UK.
So everything will reflect from Q2 onwards. And the Q4 is going to be under pressure for financial number Q1 is going to slowly improve and Q2 will be the restoration of the original situation.
Shubhankar Gupta — Analyst
Got it. So and and like what could be the clarity on the timelines with regard to both US and UK deal? Like will will we see any goodness in calendar year 27 with regards to UK or US according to you?
V. Balaji — Chief Financial Officer
So see with respect to guidance we have, we have included that the trade deal will be considered and we will have a U.S. business restart. So the guidance has been given with the 2 crores 2000 crore top, top line is based on the.
P. Sundararajan — Chairman and Managing Director
Balaji. It is based on the U.S. but I don’t think we’ve taken into account the UK FDA in the guidance. You can consider the U.S. agreement but not the U.K. yet.
V. Balaji — Chief Financial Officer
No, U.K. agreement is still not true.
P. Sundararajan — Chairman and Managing Director
Yeah, yeah.
V. Balaji — Chief Financial Officer
But we are working on, you know based on filling our capacities. So whatever is now the distance, what. We are getting that will be enough to fill our capacity which will fetch this kind of volume Here you know the guideline is 2000 crores. Considering all this situation, US and Europe as well as the UK. That’s the situation now.
Shubhankar Gupta — Analyst
Okay. Okay, got it. So I think that is helpful.
operator
Thank you. The next question is from the line of Bhavin Cheda from INAM Holding. Please go ahead.
Bhavin Chheda — Analyst
Yes, congratulations on a very good set of numbers in difficult environment. And strong commentary also on FY27. That’s a very good detailed presentation. It includes every division’s data. From your opening remarks you indicated a weak quarter four. Why is that? When quarter three has been decent, has been growing and the margin is there. So anything specific you’re saying the recovery would happen from quarter one or quarter two.
V. Balaji — Chief Financial Officer
The customers, American customers have slowed down their order placing and in fact in Q4 shipments we have agreed to continue the. All of a sudden neither we can stop the production or shipments nor the customer can completely exit from India and place it move to other countries. So we both mutually agreed to give some kind of a discount to them to maintain the continuity. So definitely that kind of the orders are under production in Q4 and Q1 27 they were not prepared for placing orders because they already decided to move the business from India. In the meantime since this the tariffs reversal has happened.
So now they are now geared up to place the order. So in the meantime we have lost some some kind of order placement during the Q1 shipment. So that is the. That’s the transition quarter. So even now if they start placing the shipment will start from Q2.
Bhavin Chheda — Analyst
Yeah. So basically you’re saying you accepted less orders since initially the tariff was there. So some top line and margin could be impacted. But 25% margin has been taken off. So that hit won’t come to the EBITDA margin in quarter four. Right. Both in terms of revenue and also on the bottom line there have been couple of orders which we have neglected because of huge deep discount that customers are asking for.
P. Sundararajan — Chairman and Managing Director
Sorry, I can explain. Hi, this is Chandurin. So from a US perspective on young brands where we had given discounts and the customers were holding back on some of the orders for Q knowing that tariff reversal will happen. So it has been a bit slow for this quarter and Q1 onwards. Now they are pushing the orders back again so we will have a bit of impact because of them holding to place the orders because they were unsure about how it was going to move. But Q1 onwards we will see the growth and the improvement in terms of the numbers Q4 begin to understand where.
Bhavin Chheda — Analyst
I understand used to be only 10, 11% of your overall turnover. Right.
V. Balaji — Chief Financial Officer
On the young brand it’s almost 85% of the turnover. So collectively if we come have consolidated it should be 25%. Balaji, correct me if I’m wrong. The US contribution on the entire business you’re saying 40%. No, 85%.
P. Sundararajan — Chairman and Managing Director
And SP apparels put together our US exposure is less than 25% which should be roughly around 23 to 25 percentage. 23 to 25%. Okay, okay. So that some part of the business could have got impacted in last quarter but it would Recover Good forward Q1 we are expecting the recovery to happen and post Q1 I guess Q2 will be the optimum time where you will find all the Orders reinstated and then kicking off from there on. Okay, so young brand, you have reported an EBITDA margin of almost 22%. Auto tool it was 15%. So it has improved substantially.
Probably are saying because the US part is much more quarter four, it could be less, but it will remain. Since the tariff has been taken off again next year, it would remain upwards of 20%. As things normalize. Sir, I am again telling you our guidance is garmenting division. We are guiding for 15% EBITDA margins including N brand SP apparel from the Sri Lanka business all put together we are guiding for 15 percentage. Okay, the mix could be different but overall blended basis you are confident? Yes, vary from quarter to quarter. But on a consolidated basis it will have.
The government division will have 15 percentage. And sir, next year since Sri Lanka major capacity would start by the year end. So in terms of utilization, normally ramp up takes how much time and when can we achieve say optimum 80, 90% on the Sri Lanka facility. Normally it will be second year, third year.
V. Balaji — Chief Financial Officer
Yeah, actually we have, yeah, we have four factories out of that, for three factories we can ramp up the capacity from Q3. From Q3 as per our plan, it will be around 100 utilization and for one of the factories, 100% utilization for three factories and one factory it will take another six months time.
Bhavin Chheda — Analyst
Great, thank you investor.
operator
Thank you. The next question is from the line of Pranav from Rare Enterprises. Please go ahead.
Pranav — Analyst
Hi sir, thanks a lot for the opportunity. Sir, can you just spend some time on highlighting will we gain market share in EU after EU FDA against say Bangladesh, Vietnam, China, etc. And how does that market looks and how are we taking efforts to see that market with new accounts, new customers and new SKUs. Thank you. For the American, for the American business you’re talking about, right? Europe. Europe after eu, fda.
V. Balaji — Chief Financial Officer
So you say yes, you know, definitely because of this trade deal agreement for fda. Definitely the India is the most preferred country for all the Europeans and the UK customers which we are already, you know, seeing the benefits by, you know, the new customers are coming in and they are talking about the capacities for new businesses. Everything is very, very positive. And the focus, because Bangladesh is something now what we hear from the market of the brand, they would like, if not reduce the business in Bangladesh, at least they will not place more orders in Bangladesh.
So as a, as a part of this mitigation, so those additional business and some of the businesses which they want to reduce from Bangladesh will come to India only. And it is up to us whether, you know, when it comes to us, you know we are treating Sri Lanka, India as you know as the one part. So we will decide how much we will produce in silver Sri Lanka, how much you produce in India. So we look at the India Sri Lanka as one part in front of our retail customer.
Pranav — Analyst
Understood sir. Thank you.
operator
Thank you. We move on to the next question that is on the line of Yash Bajaj from Lucky investments. Please go ahead.
Yash Bajaj — Analyst
Yes, good afternoon and thanks for the opportunity. So my first question is this quarter what would be the number of machines across India, standalone Sri Lanka and young brands?
V. Balaji — Chief Financial Officer
So in terms of machine utilization we were closely around 4,200 machines in India and 280 missions in, in Sri Lanka and thousand machines in Edinburgh.
Yash Bajaj — Analyst
Utilization and the installed. Have we added any machines this quarter?
V. Balaji — Chief Financial Officer
Yeah, this quarter we have added 700 machines. We don’t want to give all the, all the mission details in the presentation purely because, because of the strategy of the company. We don’t want to provide any other data in the presentation. So we have, we have, we have not shared any data there. This year we added 700 machines.
Yash Bajaj — Analyst
Okay, got it. And so, so we had kind of held back our plans in terms of adding machines in the young brands business because of the U. S Tariff issue. Now that the tariff issue we have gotten some clarity regarding that. So are we back on, you know adding the plan machinery machine addition which you are thinking of in FY27 as well?
V. Balaji — Chief Financial Officer
Yes. Yeah. So I think as we said in the initial opening remarks there is plans to expand or restart that project in Salem with for young brand in terms of expansion for this the coming financial year it would be around 150 missions effective running.
But that can scale up to 350 missions by the end of the next financial year.
Yash Bajaj — Analyst
Okay, got it. And my second question is on the Sri Lanka business. Last quarter we had highlighted that we would achieve close to 50 crores of business this year. So are we on track this year for Sri Lanka business to achieve that number?
V. Balaji — Chief Financial Officer
For the first nine months we have, we have done 37 crores on the Sri Lanka business and we expect to go up to 50 crores this financial year.
Yash Bajaj — Analyst
Okay. Okay, got it. And my, my third question is on the young brands business we have witnessed a very good gross margin expansion this quarter. Quarter. I mean considering that you know there was US tariff issue and all that you would expect that the gross margins could have impacted. So any reason how we have had such a healthy gross margin expansion of 300 basis points. So I can explain Malaji yes sir.
V. Balaji — Chief Financial Officer
Yeah. So in terms of the grass, if you look at the current quarter, last quarter was because we have agreed to certain discount this quarter we have passed on the certain discounts to the customer and supplier. So there are improved margins and moreover the customers have requested for a discount which we have given earlier to be passed on to the suppliers. So that is why the margin is little better this year, this quarter. So we expect the margins with respect to OIBA at an EBITDA margin of 15 to 18 percentage. Quarter to quarter it may vary but yearly we expect it to be around.
15 to 18 percentage in the real depth.
Yash Bajaj — Analyst
Yeah, pretty much on that with a lot. Not every. All the discounts brought to the customers happened in Q3. A lot of those will be in Q4. Q3 had only November December effectively in terms of the impact of discounts. And as Mr. Balaji said, those were passed on to the raw material suppliers as well. So we had better raw material prices. And I think there was a bit of rupee depreciation helped to an extent as well. Okay, understood. And my last and final question is on the spark business SPUK business which we are planning in the next two years.
In your initial commentary you mentioned that we’ll be planning to reach 200 crores kind of business in that. So can you help us understand what is leading to this kind of, you know, optimism for kind of generating that kind of business in that segment and at that scale what kind of margin and working capital requirement would be there?
V. Balaji — Chief Financial Officer
Yes. Regarding sp you the growth expected as per the guidance is because we are definitely the existing customers. They’re observing our business model moving from, as I used to say before, from Leicester to London and setting up entirely the new team with designers and everything. So the customers are waiting to watch and see how we are settled down in the UK and the last few quarters we have performed and our prices are acceptable. Product development, design support, everything is there. Extremely happy. So now they have openly. Have they told our team in the UK said that yes, no, we can do most of our departments, we will, we are consolidating our supplier and you are in the top four of our vendor list.
So they have, they have given a guidance of, you know, this is a kind of volume. Say one customer is giving about 80 crores and another one is another about 80 crores and we are adding another one or two more new customers. So putting all together the, the main major business comes from the existing customer. So which means it should happen, there should not be, there is no reason why it cannot happen. And with regard to the margin, you know, it’s a trading model. So the fixed expenses are there. So we are working towards achieving 4% at the EBIT.
At the EBIT level.
Yash Bajaj — Analyst
Got it. And the working capital required for this would be so working.
V. Balaji — Chief Financial Officer
It’s a trading business. The working capital should not be a big requirement as such. We take from suppliers 45 days credit to 60 days with certain suppliers. And it will be a requirement of one month turnover only for AS working capital. So it’s a high ROC in business.
P. Sundararajan — Chairman and Managing Director
Joel, you have anything to say, you are there. Okay, Got it.
Yash Bajaj — Analyst
Thank you so much and all the best.
Prerna Jhunjhunwal — Analyst
Thank you. The next question is from the line of Prerna Junjunwala from LRA Securities. Please go ahead. Hi sir. Congratulations on strong set of numbers. Just wanted to understand on your machine addition plans, are we on track of the numbers that you have guided in the past to add machines?
V. Balaji — Chief Financial Officer
See, with respect to number of machines to be added in this financial year, we have guided for thousand missions and we have already added 700. But because of this US tariff we have slowed down even we have closed down couple of factors which we have started. So currently we look at maybe two quarters that could be an extension of the addition of missions. But I guess we are on track.
P. Sundararajan — Chairman and Managing Director
But the position what chairman had given to you, it is based on the existing available machines. So. So there won’t be any increase of machines for this year.
Prerna Jhunjhunwal — Analyst
Okay. And for FY27 and 28, given the. Given there is some more clarity on trade deals and stuff coming in. So can we see that also going as per track as discussed earlier?
V. Balaji — Chief Financial Officer
Rena, it’s hardly 15 days since that trade deal has happened. And so many things. Every day there is a new update on certain things. Today our commerce minister has said that even India will get a zero percent trade similar to Bangladesh on cotton bought from us. So 27, 28. I guess that will be very tough to look at. But we have been adding missions and we still have good amount of headroom to improve our utilization level. Even though when the trade deals happen.
Prerna Jhunjhunwal — Analyst
I appreciate that. Thank you.
P. Sundararajan — Chairman and Managing Director
This is lasting setup. There is no plan for new new projects or new acquisitions.
Prerna Jhunjhunwal — Analyst
Okay. And so what about Sri Lanka? How there are we planning? You mentioned about one more factory to be added. So where should we reach in Sri Lanka? Because there we have tariff.
P. Sundararajan — Chairman and Managing Director
Madam said we have already added four factories. So now we are close to 10, 60, 50 missions of you in Sri Lanka. So I. I think by March we will have this 1650 missions and we can add more missions in the same factories. So the adding missions will be an issue.
Prerna Jhunjhunwal — Analyst
So okay.
V. Balaji — Chief Financial Officer
They are in line with whatever guidance that we have given for FY27.
Prerna Jhunjhunwal — Analyst
That’s fantastic. So thank you and all the best.
V. Balaji — Chief Financial Officer
Thank you.
operator
Thank you. The next question is from the line of Bhavika Jain from Invest Nivetia Investment. Please go ahead.
Bhavika Jain — Analyst
Thank you for taking my question Sir. I want a bit understanding on the tariff duty. So basically as for my understanding like we have 18% reciprocal tariff. So do we have to pay like in total 30% or is going to be the total 18% and along with this I also want to know like there was a threshold of 20 like there is a relief from us initially where if we have a US origin material somewhere about 20 then we get some relief on the tariff duty. So just want to understand if we like SP Apparel were enjoying that release by using US cotton or like if you can give me understanding on that.
And the second question I have related to the the recent Bangladesh deal on the US import. So so just want to understand because as now we are having the tariff advantage and also we export like to us also. So are we planning to do the use the US because the talk which are going on about the increase the same clause which India will will get. So are we looking to take advantage of that or just want to understand the Indian cotton market scenario.
V. Balaji — Chief Financial Officer
First of all you know this US Cotton using US cotton for zero tariffs it is, it is a deal for you know but it is not attractive. Why? Because the American cotton are much more expensive and when it’s landed it will be at form with the duty paid other Indian cotton or something. So there is no big difference unless and until any customers from the US insist for American cotton there is no big advantage. We don’t see any big advantage. So even if it comes to India India is anyway is you know we are strong in the cotton and I don’t think we will look at the American continent unless the customers ask for it.
And there is there will not be any cost benefit on your first question.
Prerna Jhunjhunwal — Analyst
I guess this 18% is a reciprocal tariff. So already there is a duty with setting which we retailers are paying and over and above that is a reciprocal tariff. So this reciprocal tariff is 12% plus this 18% will put together 30% duty on the Indian imports. So that’s the kind of impact that the customers and supplier retailers will have.
Bhavika Jain — Analyst
Follow up question on the Bangladesh. So as per my understanding the Europe Bangladesh deal which is going to end because they are now in the developing state status country status Bangladesh. So what you see like, do you see having any advantage from that side in terms of like customer acquisition from like Europe from. Because Bangladesh losing the, the customers from that because of the, the deal going to end.
V. Balaji — Chief Financial Officer
As I told you in Bangladesh. What article I read today is that, you know it says that American cotton is so expensive. This is what I told you before. So even if they import that American cotton and re export it, the landed cost is going to be the same unless otherwise any customer from America is insisting for using American contact. Otherwise I don’t think Bangladesh will you know up for this American one. There are so many things they have to buy bulk and keep the stock whether they can win from China or India in a short period, you know, so flexible.
Bhavika Jain — Analyst
Sorry to interrupt. My question is. Sorry to interrupt sir. My question is related to the Europe and Bangladesh deal. The, the deal they have right now of duty free is going to end. So on that thing I want your understanding the Euro is going to be one station.
V. Balaji — Chief Financial Officer
It is then it will be. We will be at par with Bangladesh as well as Sri Lanka like other countries and we will be better placed as against Bangladesh. We, we expect the country expects more business coming from EU and uk.
Bhavika Jain — Analyst
Okay, thank you.
V. Balaji — Chief Financial Officer
I think your question. Sorry, I think I. I have not clear your question answer.
operator
Thank you. Ladies and gentlemen, in order that the management is able to address all the questions in the queue you are requested to limit yourself for one or two question as per the participants. The next question is from the line of Rupesh Tatya from Long Equity Partners. Please go ahead.
Rupesh Tatiya — Analyst
Hello sir. Thank you, thank you for the opportunity. I have two questions. So first the question sir is on the parent business side, standalone business, how how are we looking at the US growth now? Now that all the uncertainty is gone, can US became become, you know, I mean it’s fairly large market so can it become you know 20, 30% of our revenue in two three years. So that is question number one. And second question sir is again on standalone business only is our fixed asset terms. I, I find a little bit on a lower side.
So maybe if you can explain why, why are they low and how can we improve the fixed asset terms? Because margin you are guiding 15, 16% I mean and not like 20%. So at least then I was hoping that the asset terms will go up. So These are the two questions.
V. Balaji — Chief Financial Officer
Yeah, I’ll answer to question number one regarding US market. Yes, there has been a dip in two and Q1. Also the existing customer, they started looking at India and we’ll be maintaining the same percentage of 15 to 17% and we are adding one more customer in US. So if we consider that also the US business will increase to 20 plus for the year 2627.
P. Sundararajan — Chairman and Managing Director
With respect to your question on the 15th, like so, SP apparel is a backward integrated. So like we have the investment gone into our two spinning plant, dying plant is not reflecting in the margins because of the cotton prices, its movement. But I guess once the spinning the US business revives, I think yawn realization will be up and we should see the margins going up for FY 2627. We estimate only 50% is purely because of the impact of the US coming late in the second half. So once the US business revised, our spinning plant and the dyeing plant will be fully utilized and they will also be yielding more margins which will improve the margins on a standalone basis.
Rupesh Tatiya — Analyst
That’s helpful. Sir, just one follow up on the first question. My question is a little bit broader in the sense that I mean you have two customers, you’re adding one customer. But given the landscape now, I mean why can we not add let’s say 10 customers in next two, three years? It’s a little bit broader question.
V. Balaji — Chief Financial Officer
So you need to, you need to be clear. I, I guess the question is not clear.
Rupesh Tatiya — Analyst
I mean why, why are we, let’s say, let me put it this way, why are we a little bit cautious on the US growth given now the trade deal and you know, competitive advantage against China and some of these other things. Why, why are we still, you know, slightly cautious on the US growth?
V. Balaji — Chief Financial Officer
Currently our contribution is quite very low with us and we are improving on the US so we are moving from 10% to 20% in the standalone business and we are also reducing the contribution of US in Yang brand by adding two more UK based customers. So we are still, we are looking at a balanced customer base. Like next year we may have 20%. Next year we may increase it by another 5%. So we would stick to a balanced approach of US, UK and Europe. That will be our strategy.
Rupesh Tatiya — Analyst
Okay. Okay, thank you. Thank you for answering my questions.
operator
Thank you. The next question is from the line of Bharat Seth from Quest Investment Advisor Private Limited. Please go ahead.
Bharat Sheth — Analyst
Hi sir. Good, good morning and congratulations. Sir, my question is related to, I mean the Sri Lanka. How do we are looking, I mean Beyond, I mean 27.
P. Sundararajan — Chairman and Managing Director
It is very, it looks very prospective and very potential. Sri Lanka. We, we have been, you know, very confident the way the things are happening. In Sri Lanka because you know, the labor, labor force is available and the efficiency skill is good. And it’s EU duty free and UK duty free. And so and it’s not too far from place from Tamil Nadu. So we don’t see any, any. We treat this as, you know, one of our other, you know, Tamil Nadu factories, like an extended factories of Tamil Nadu. That’s how we see it. And their way of working is very much, you know, compatible to our way of working and they are open to change to our way of working.
And customers also are not, not hesitating or reluctant to give more businesses into Sri Lanka. So what they say, the customers say spfl either you do in India or Sri Lanka is one and the same for them. And so under capacity there are good possibilities of increasing the capacities in the four factories. What we have acquired. So we can increase another about 500 machines over a period of 2, 3 years time. So it’s not an issue we look at. It is a very potential one point and the great future.
Bharat Sheth — Analyst
My second question, are we looking at different product than the existing product range? Like Sri Lanka has a much better, I mean capability in lingeries. So are we really evaluating or. We have already started manufacturing that.
Unidentified Speaker
It’s not that we have just started manufacturing but we are looking at the special products. Even we are focusing on woven in Sri Lanka also. We are approaching customers to increase the woven business.
V. Balaji — Chief Financial Officer
And not only that, you know, that is more flexible Sri Lanka because you know they all multi skill, they can handle, you know, all kind of fabric woven or you know, or polyester or modal or cotton and style ladies fashion or you know, undergarments of babies. So they are so versatile in those factors. Factories are all the factories in Sri Lanka. And not only that, now that you know, the UK has given UK and also eu I think they have given one more.
The scheme is that they import fabric from anywhere in the world and we are getting duty free into EU and the UK. Previously if it is from China, they used to impose 12% duty. Now they have removed everything. They can source import from any country and they re export, it’s duty free. So which is a big advantage where we can get some, some style. Some orders of China based fabrics also.
Bharat Sheth — Analyst
Okay, thank you and all the best sir and wishing you very.
operator
Thank you. The next question is from day from Sapphire Capital. Please go ahead. Hello, Am I audible?
V. Balaji — Chief Financial Officer
Yeah, yeah, yeah, yeah, you are audible.
operator
Ma’, am, we can hear you. Please go ahead.
P. Sundararajan — Chairman and Managing Director
Yes, you are very much audible.
operator
Since there is no response, we Will take the next question. The next question is from the line of Anant Mount Infra Finance. Please go ahead.
Unidentified Participant
Hi. Am I audible?
P. Sundararajan — Chairman and Managing Director
Yeah, yeah, you are audible.
Unidentified Participant
Yeah. I just have a small question. I’m sorry if I didn’t know this before. I have a question regarding the share of loss from an associate company. Which associate company will this be? Because this is just coming in FY26. So is this in. I think Sri Lanka and SP UK and SP retail have been consolidated. So I’m just trying to understand which associate company would this be.
V. Balaji — Chief Financial Officer
So with respect to associate company, you’re right, it is Sri Lanka. Sri Lanka operations comes under the associate company. But on the UK and retail it’s all consolidated consolidated revenue. So associate company is purely under operations from the Sri Lankan.
Unidentified Participant
So can you explain your setting in Sri Lanka? Like are you. Are you outright purchasing companies or are you partnering with companies or factories in Sri Lanka?
V. Balaji — Chief Financial Officer
So in. In the associate currency in Sri Lanka, the foreign companies are not allowed to own the land. So what we have done is that we started an associate company and we have extended loan to that associate company for the purpose of buying all the assets in that associate company. So in the related party transaction we see an ECB extended from SP Apparels to the associate company.
Unidentified Participant
And this associate company would be headquartered in Sri Lanka, would have origins in Sri Lanka, Correct?
V. Balaji — Chief Financial Officer
Correct.
Unidentified Participant
Okay. Thank you so much.
V. Balaji — Chief Financial Officer
Thank you.
operator
Thank you. The next question is from the Bharat Gulati from Dalalan Broocha. Please go ahead. Mr. Baragulati.
Bharat Gulati — Analyst
Yeah, sorry. Sorry, I was on mute. Apologies. Just trying to understand that our current capacities that we are. That we have available for operation in India, it’s at about 4,002. So I’m a little confused. Our presentation talks about close to 5,000 machines as of FY25. But currently 4,200 plus we’ve added 700 machines. So has there been a shutdown of a lot of machines?
V. Balaji — Chief Financial Officer
So 4200 machines is the utilization and every factory has brought some unutilized emissions. And moreover when we spoke in the beginning, we have closed down couple of factories due to the U.S. tariff issue.
P. Sundararajan — Chairman and Managing Director
Mainly planned for U.S. orders.
Bharat Gulati — Analyst
Got it. So sir, just would it be able to quantify how many machines are there today available to us in our. In our respected geographies that are. That you are guiding for the 2000 crores of top line? So how many would. How many machines are there operational for that guidance to be achieved?
V. Balaji — Chief Financial Officer
Operational mission details. I. I guess you can reach out to our IR and collect data.
Bharat Gulati — Analyst
Sure. Just one last question sir. So if I just do a kind of reverse calculation of our India utilization and the volume shift for the quarter I arrive at about 103 million pieces for the entire year. So would that be fair that we have a current capacity of 103 million pieces to be available to be shipped from India currently.
V. Balaji — Chief Financial Officer
So we usually don’t go by the number of pieces that we produce because if you produce children garments it will be different. If you do fashion design products it will be different. So it differs. So we don’t go by number of pieces. Roughly around our capacity we should be.
Bharat Gulati — Analyst
Doing roughly around 4200 machines, right?
V. Balaji — Chief Financial Officer
5000.
P. Sundararajan — Chairman and Managing Director
5000 machines. If we run the full capacity of 5000 machines, close to.
Bharat Gulati — Analyst
Crores of exports alone.
P. Sundararajan — Chairman and Managing Director
Exports alone.
Bharat Gulati — Analyst
Exports alone.
Bharat Gulati — Analyst
Got it. So 1200 crores of exports would be from the 95% kind of utilization that we plan to achieve next year in our current capacity. Got it. And young brand. So if you can just give a broad understanding of what will be see a growing trend take place in young brands next year in terms of revenue top line or will it be flattish like how do we look at that?
V. Balaji — Chief Financial Officer
So yeah, with respect.
Bharat Gulati — Analyst
Yeah.
Unidentified Speaker
Yes. So with regards to young brand for expansion there will be a growth again as we guided normally between 15 to 20%. So definitely that kind of a growth will be dead. But to have the full impact of the growth will come the next financial year with the Salem project fully running. But there will be better utilization and we are adding, as we said they’re adding customers as well, even UK customers TM brand. So there will be a growth compared to this year. Fair enough. So fair enough. So just to get a broad understanding that there would be no Capex for next year going forward we would be doing all this Capex for Salem and for India closing this financial year, right? Yes.
V. Balaji — Chief Financial Officer
With respect to Capex I guess we are planning to have some maintenance Capex which will be roughly around 10 to 15 crores every year and we are as a part of sustainability we will be investing into the solar which chairman has given in the beginning of his speech. That could be be costing us another 10 crore and roughly around expansion could be reinstating whatever in England we spoke about. Project could cost us another 5 crores for roughly around 20 crores we expect. Sorry, 30 crores for capex next to financial year.
Bharat Gulati — Analyst
Got it, got it. So no major expansion Capex. Got it. Yeah. Thank you so much. Got it. So thank you for the follow up sir. Appreciate it. I’LL reach out to you offline for the follow. So for the further queries, thank you.
operator
Thank you. Ladies and gentlemen, due to the time constraint, this will be the last question. I now hand the conference over to the management for the closing comments.
P. Sundararajan — Chairman and Managing Director
Thank all the participants, and I would like to thank everyone for showing interest in this company. And I hope we were able to answer to all the questions up to your expectation. And we still expect your support as you have been all the time. And we still still stay confident about our growth plan and growth path. And we seem to be having a very strong plan. And thank you once again for having confidence in this company. Thank you.
operator
Thank you. On behalf of LRR Securities. That concludes this conference. Thank you for joining us. You may now disconnect your line.