Sanathan Textiles Ltd (NSE: SANATHAN) Q3 2025 Earnings Call dated Feb. 11, 2025
Corporate Participants:
Jude Patrick Dsouza — Company Secretary and Compliance Officer
Beena Paresh Dattani — Director Social Welfare, Chairman and Managing Director
Sameer Dattani — Director
Sanjay Anirudh Shah — Chief Financial Officer
Analysts:
Surya — Analyst
Vikram Vilas — Analyst
Garvita Jain — Analyst
Saket Kapoor — Analyst
Kunal Mehta — Analyst
Bhavya — Analyst
Harsh Mittal — Analyst
Presentation:
Jude Patrick Dsouza — Company Secretary and Compliance Officer
Good evening ladies and gentlemen. It is my privilege to welcome you to this earnings call of Sanatan Textiles Ltd. For the third quarter and nine months ended December 2024. I am Jude D’Souza, the company secretary and Compliance Officer. Interested with overseeing investor relations. I will be your moderator for today’s session as we delve into the business and financial performance of the company. Please note all the participants will have their video disabled and audio on mute during the call. The participant asking questions will only be requested to have his or her audio muted. Post the management commentary. The company will open for Q and A session. Interested participants may click on the raise hand icon at the center bottom of the pane on WebEx application to join the Q and A queue. The participant may click this option during the management commentary itself to ensure they find a place in the queue. Upon announcement of their name, the participant will be requested to unmute by the host. The participant must unmute by clicking on the Unmute me button. Post this the participant can ask the question before we proceed. I would like to bring to your attention that certain statements made during this discussion may constitute forward looking statements. These statements are based on our current expectations, assumptions and beliefs regarding future developments and are inherently subject to various risk uncertainties and factors beyond our control. Such forward looking statements involve both known and unknown risk and we advise you to interpret them with caution. Now it is my honor to introduce the esteemed members of our management team who are present with us today. Mr. Paresh Dattani, the Chairman and the Managing Director. Mr. Sameer Dattani, Director and Mr. Sanjay Shah, the Chief Financial Officer. Kindly note that this conference is being recorded and the recording will be made available on our website accompanied by a full transcript for future reference. Without further ado, I now invite Mr. Paresh Dattani, our Chairman and Managing Director to share his insights and address the esteemed participants.
Beena Paresh Dattani — Director Social Welfare, Chairman and Managing Director
Thank you. Ju. Good evening everyone. Thank you for joining our Q3 and 9 Monon conference call. It’s a pleasure to inform you that the demand this quarter has been consistent and so has the gross margins also been consistent. The quarter overall has been a stable quarter for us as expected by us. But on a year to year basis. When we look at the nine month year to year basis our EBITDA as well as PAT has gone up by 30%. The gross margins on a year to year basis have moved up from 13.9% to 15.65%. Looking ahead, we are commissioning a greenfield project capacity in Bazirabad in Punjab which will increase our manufacturing capacity of filament yarns from 550 tons a day to 1500 tons per day in a phased manner. The first phase is expected to be operational by Q1FY26. There the work is on and everything is on course to commission in that quarter as expected by us. Thank you. Now I ask Sami to take you through the business and operations of the company.
Sameer Dattani — Director
Thank you. A good evening to everyone. India’s textile industry is one of the largest in the world contributing to 2.3% of the country’s GDP. In the recent budget, the Government of India increased its allocation towards the textile sector with a keen focus for the PLI scheme which is focused on man made fiber. They also have announced a five year contract cotton mission scheme which will improve the production of cotton. And they also have key policies to encourage the technical textile market in India which is a 29 billion dollar market. At Sanatan Textiles, we are strategically aligned for the expected growth in the years to come. Because we are among the few companies that specialize in three yarn verticals. We make polyester filament yarns, cotton yarns and yarns for technical textile. Further, the increase in the custom duty on import of fabrics in the recent budget will give a good advantage to the downstream domestic producers in India. At Sanatan, we have delivered a strong performance this quarter across all three segments mainly due to stabilized pricing and operational efficiency. Our sales Quantity this for nine months has been 1 80,000 tons compared to 1 74,000 tonnes on a year on year basis showing optimum use of the install capacity. This has given us a nine month revenue of 2,260 crores. And on a year on year basis the gross margins have also improved slightly being 13.91% last year versus 15.65% this year. I would now like to hand over the call to Mr. Sanjay Shah, our CFO to take you on the financial performance of the company.
Sanjay Anirudh Shah — Chief Financial Officer
Thank you, Sameer. For the quarter ended December 31, 2024, revenue from operations stood at rupees 743.13 crore as against rupees 742.17 crore in Q2FY25 on account of marginal increase in sales volume. EBITDA for the quarter is rupees 58.47 crore as against rupees 58.22 crore. In Q2FY25, PAT stood at rupees 34.17 crores against PAT of rupees 32.56 crore in Q2FY25. For the nine months ended 12-31-2024, revenue from operations stood at R2.266.43 corrode as against Rs2.201.37 corrodes in nine months. FY24 led by higher sales volume EBITDA for nine months. FY25 still. Stood at rupees 195.17 crore as against rupees 147.48 crore in nine months FY24. On account of higher volumes and better margins. Nine months FY25 PAT stood at rupees 116.80 crore against PAT of rupees 81.59 crore in nine months FY24. Thank you all.
Questions and Answers:
Jude Patrick Dsouza
We shall now open for the Q and A. The first line of question is from. Surya.
Surya
Yeah. Am I audible, sir?
Jude Patrick Dsouza
Yes, you are.
Beena Paresh Dattani
Yes, you are audible.
Surya
Okay. Thank you sir. Thank you for the opportunity. So just. Or just to understand the. The contest of your capex, you know, going forward. Actually I was checking the deviation reports of IA so where the amount remains unutilized for the IPO money that has been raised. So please offer that comment. And secondly, just continuing from the last con conference call. Uh, so just. Just to understand when the co. When capitalization of the polyester capacity, cotton. Cotton yarn capacity and technical yarn capacity will be added. And if you can quantify the gross block additions there too you can be precise on the. For the month of commissioning. That will be better for my understanding. And lastly, just one question is that I was understanding that your last quarter of the last year was very fantastic. So where the EBITDA margin was, you know, very outlier. So what is the reason for that? Whether such kind of thing also currently, you know, visible.
Sanjay Anirudh Shah
Okay. With respect to your first question on the utilization of fund from the ipo. See the company received the funds in the last week of December. So we were able to utilize around 4 crore out of the funds received. There are three main objects of the IPO. First was 160 crore repayment of loans of Sanathan Textiles Limited which were done in the month of January. The second object was 140 crore repayment of term loans of Sanatan Polycort Pride Limited that was done in the month of February. And the third was general corporate purpose. So we managed to utilize the funds in the last. Okay. With respect to the Capex as discussed earlier the Punjab plant is expected to be operational in the first quarter of next year. The approximate CAPEX amount as explained last time is close to 1850 crores. Post which we are planning to have our cotton project. The initial estimated is close to 400 crores post that we would be taking up the phase two of our polyester plant. The Capex would be around close to 250 crores.
Beena Paresh Dattani
And on your last question regarding the last quarter. Yes, we had a good quarter. As I mentioned in the last call that we normally look at the year entire year performance because quarter to quarter they may be small variations depending on a few factors like sales like gross margins, raw materials volatility, etc. So on a yearly year basis we look at it. That’s why we said that this year FY25 also we’ll be ending the year at about close to 9% EBITDA. I hope this answers all your queries.
Operator
Thank you sir. The next line of question is from Saket Kapoor. Mr. Saket, we move to the next line of question from Mr. Vikram Vilas.
Vikram Vilas
Hello.
Beena Paresh Dattani
Yeah.
Vikram Vilas
Okay sir, what was the volume in this quarter? And if you compare to last year same quarter what was the volume growth or decline? If you can share.
Sanjay Anirudh Shah
Yeah. The sales volume in the Current quarters were around 59942 as compared to 61, 862. A drop of 3% as compared to the previous year quarter. But on an annual basis our sales have increased by 3.28% for the nine months.
Vikram Vilas
Okay, understood. And in terms of pricing, how is the pricing? If you look at synthetic or cotton yarn even I think cotton. Prices also corrected. Is it having impact on the cotton yan pricing? If you can give some views or even from raw material prices for synthetic in terms of ptaj pick 2 cost how much is
Beena Paresh Dattani
As the cotton prices? You are rightly saying the cotton prices have been a little soft. But cotton yarn prices have been more or less stable in this period in the last quarter also. And that is what we expect it to be going forward. Also as far as the raw material for the polyester filament. Yeah. That is PT meg more or less. It’s been stable few dollars plus and minus. But it has been more or less stable and so have been the yarn prices also.
Vikram Vilas
Okay. What so PT image effective cost per kilogram would be
Beena Paresh Dattani
PTA. PTA in dollar terms the PTA cost that we have is about $645 and Meg is about $550 a ton.
Vikram Vilas
Understood. That is. So in the Punjab how much loan basically till now how much total capex we have done?
Beena Paresh Dattani
Can you repeat that? We were losing you.
Vikram Vilas
For Punjab polyester capacity how much total capex we have done so far?
Beena Paresh Dattani
We have already spent 141550 crores as on December. December 31st. And our we have drawn about a thousand crores from our loan. And 450 crores plus we have installed from our own accruals.
Vikram Vilas
Okay that. Okay got it. And last question is that what was the revenue mix from say Filament cotton and technical for this quarter? For nine months Whatever is available.
Sanjay Anirudh Shah
Yeah. The filament polyester contributed close to 77% quarter 19 and IDY close to 4%.
Vikram Vilas
This is nine month or for this quarter?
Sanjay Anirudh Shah
Yeah, nine months. Even for the quarterly the ratio remains the same.
Vikram Vilas
That was it. Okay, thank you sir.
Operator
The next line of question is from Ms. Garvita Jain.
Garvita Jain
Am I audible? Hello.
Beena Paresh Dattani
Hello.
Garvita Jain
Yes, sir. Sir, actually I’m looking for two figures. One is realization and one is the spread which is COGS to sales ratio. So could you give me these two figures for all the three segments separately for the past quarter and for FY24 as well if possible. Sir,
Beena Paresh Dattani
It would be difficult at this point of time.
Garvita Jain
You don’t have the realization numbers as well, sir?
Beena Paresh Dattani
No.
Garvita Jain
Okay, that’s fine. And
Sameer Dattani
Only for polyester to be close to 112 rupees per kilogram.
Garvita Jain
Sorry sir, if you could repeat.
Beena Paresh Dattani
112 rupees per kilogram without GST.
Garvita Jain
Per kilogram without GST. This is the realization number. Right?
Beena Paresh Dattani
Right. Right. Cotton would be excluding the scrap. It would be close to 325
Garvita Jain
Excluding scrap. 325 per kilogram. Right?
Beena Paresh Dattani
Yeah, yeah.
Garvita Jain
And sir, could you give me the idea about what has been the trend for the realization? Has it been increasing or there are fluctuations or what?
Beena Paresh Dattani
See, there were fluctuation in Q3, Q2. But now they have stabilized since December.
Garvita Jain
Okay. And no numbers available for spread, sir?
Beena Paresh Dattani
No, no, not really.
Garvita Jain
And not for the technical textile as well. Realization.
Beena Paresh Dattani
It is close to 125 per kilogram.
Garvita Jain
125 per kilogram,
Beena Paresh Dattani
Right? That’s right.
Garvita Jain
Okay, thank you so much, sir. That’s all. From my side
Jude Patrick Dsouza
We shall try again the line of Mr. Saket Kapoor.
Saket Kapoor
If we could provide an investor presentation. Sorry, if I have. Correct me there, I could not find one along with our results. So this volume numbers, the mix, the sales and the competitive data. These can be very easily provided to us much beforehand. The call commences. And these are the basic data which we all investors or analysts would be looking forward going ahead. Sir, so kindly look into our request of providing the same in a. In an investor presentation manner. And wherein also sir, our. Where our facilities are and all the three segments, our capacity, the utilization levels. These are the basic inputs which are needed to analyze the number in depth. So kindly look into the same.
Sanjay Anirudh Shah
Done. We have made a note of your request and very valid. From next quarter we’ll be updating the investor presentation with all this information. As far as the larger company level information on capacity is concerned, it’s available on our website even today. And the quarter updates we will present in the presentation, we’ve made note of that and we’ll ensure that it’s there every quarter from the upcoming quarters.
Saket Kapoor
Events. Events. The one you were mentioning about the website. The more it is decimated to the stock exchange part, the more. The more better it is for the investor community. So if something.
Sanjay Anirudh Shah
Point well noted.
Saket Kapoor
Yeah, yeah, yeah. Sir. And now coming to the first the point of the split up of sales between the three verticals that I missed your number. Can you just repeat once again for the three segments,
Sanjay Anirudh Shah
The split up of the revenue of the three segments.
Saket Kapoor
Yes sir.
Sanjay Anirudh Shah
For this sorter and look consistently we. We given a percentage here and there. It is 77% of our revenue comes from the polyester filament yarns. And about 1718 to 19% comes from cotton yarn. And about 4% comes from yarns for technical textiles.
Saket Kapoor
Okay. And we are. We are doing a Capex which is to be commissioned at Punjab for the. The. The polyester yarn only. So that this percentage is going to change to what level? Post decommissioning.
Sanjay Anirudh Shah
Yes. Once we commission the filament yarn project at Punjab this ratio will be more lopsided towards the filament yarn. From moment till we commission our future cotton yarn. And then we. We aim to in a longer run stay almost in the same ratio.
Saket Kapoor
Okay. And sir, going ahead what we have understood since we are a new in the listed space. The. The more margins are done at the. At the value addition level and not at the first level of yarn. So what’s the thought process of the management in. In just sufficing to keeping itself only to the yarn segment and. And technical textile being a very small percentage of the overall portfolio. And what. What is. What could be the rationale? Since I think so the. The. The turnover ratios are also lower in terms of only catering to the yarn segment, the capital employed and the turnover issue. By what I was trying to make sense of sir.
Sanjay Anirudh Shah
So in the last few years our focus has been to expand backwards and forwards but stick only to the yarn business. You are quite right that value addition happens in the chain. But we’ve been trying to focus on the value addition in the yarn segment at the moment. So that’s why our input are petrochemicals, PTA and Meg. What we sell are only the final yarns. The texturized yarns, the colored yarns, the stretch yarns, the value added. Yarn products to the customers. We do not sell any intermediary products like polyester chips or poi. The yarns for technical textile. We are also will be doubling in the coming year. Our current capacity is 9,000 tons. And we are adding an additional 9,000 tons in the Punjab facility.
Saket Kapoor
Okay. So when we look at small points. Sir, when we look at the capital work in progress. Closing balance for September. The balance sheet which is available. It was 772 crores. And I think. So you have mentioned about 1850 being spent on the Punjab facility.
Sanjay Anirudh Shah
Correct.
Saket Kapoor
And that. And that to be commissioned at. By the first quarter or by March. I think. So it will be commissioned for March 2025, sir.
Sameer Dattani
Yeah. Commissioning the first quarter. So April or May first quarter. So Franklin, as explained earlier during the call we have already splant close to 1450 crores by 31st December. Substantial portion has already been spent.
Saket Kapoor
Okay. But. But sir, why the closing balance is showing at 700 crore. We are also capitalizing it. Then
Sameer Dattani
Some part would be lying in advances to credit us also. No capital advances.
Saket Kapoor
Okay, sir. So then then sir, for a quarterly basis how should the depreciation line item looks Once we commissioned it? Once it is capitalized.
Sameer Dattani
So once it is capitalized the Punjab plant will have an annual hit of close to 90 crores towards depreciation.
Saket Kapoor
Okay. And our ramping up exercises we will be. How are we going to ramp up this facility Reaching the optimum level.
Sameer Dattani
So within one quarter we would be fully ramped up for facetime.
Saket Kapoor
And. And phase. Phase one would be seven. If you could just give me some more color. What is the total capacity addition in volume terms? 550 tons per day, I think. So you have mentioned.
Beena Paresh Dattani
No. 550 is what we are producing today. Punjab will be in two phases. The first phase will give us close to about 250,000 tons annually. And the second phase will ramp it up to 355,000 tons annually.
Saket Kapoor
Okay. And the total cost of project is 1850. Phase one. And phase two milla.
Beena Paresh Dattani
No, phase one is 1850.
Saket Kapoor
Okay. And phase two? Sir,
Beena Paresh Dattani
Phase two will be about 250 crores.
Saket Kapoor
Okay. And we will be doing that commissioning by when? Sir,
Beena Paresh Dattani
We’ll. We’ll get those numbers on FY28.
Saket Kapoor
Okay. So it’s a long long way. So after this commissioning of the polyester first phase we will be going ahead with the cotton yarn part.
Beena Paresh Dattani
I lost you. Can you repeat it?
Saket Kapoor
Sir, after the commissioning of the much space for the polyester yarn at Punjab. We will be going ahead with the cotton yarn capacity addition.
Beena Paresh Dattani
That’s right. So cotton yarn and the industrial yarn capacity addition will be done FY27. And the second phase of polyester will come in FY28.
Saket Kapoor
Okay, sir. And lastly sir, our facilities for all the three. Can you provide me the location? I think so. It is mentioned is the region where the other facilities are there other than the the polyester one which we are commissioning at Punjab.
Beena Paresh Dattani
Yes. We have our entire cotton yarn yarns for technical textiles and the filament yarn what is running today. That is at Silvasa which is Dadran Ragar Haveli. And the new filament yarn plant is at Wazirabad in Punjab.
Saket Kapoor
Right, sir. I’ll join the queue for the follow up. And we hope that more decimation as discussed in an elaborated manner. And also sir would suggest that if we could hire a good IR team investor relations team or industrialization house that will cater to the investor queries and will create the awareness in the investing community. Because now everything is shouldered on our learned company secretary to take care of. So I think so I would be a good idea to go ahead to create.
Beena Paresh Dattani
Yeah. The process. And we will keep you informed on that.
Saket Kapoor
Yeah.
Beena Paresh Dattani
Thank you.
Saket Kapoor
Thank you, sir. I’ll join. I’ll join the Q. Sir,
Jude Patrick Dsouza
The next line of question is from Mr. Kunal Mehta.
Kunal Mehta
Hi sir. Good evening. My question is how much is the outstanding external commercial borrowing
Sanjay Anirudh Shah
As on the 31st of December it was close to 42 million euros.
Kunal Mehta
42 million. And how is the repayment of that? Next.
Sanjay Anirudh Shah
Yeah. The half yearly installments would be close to two and a half million. It would be a period of eight years. Closed. The last installment would be due in 30 to 33.
Kunal Mehta
Okay. Okay, sir. Thank you.
Jude Patrick Dsouza
The next line of question is from Bhavya.
Bhavya
Question. Given that you have mentioned in the previous con call that the margin in cotton is way more than polyester. Even though the turnover of polyester and the filament is more than the cotton. Why don’t the. Why doesn’t the company also go for a capex in the cotton segment?
Beena Paresh Dattani
Hi Bhavya. As we mentioned in the last call over a spread of five years we have seen that the because of the acid turn of polyester gives US is about 2.1, 2.2 and the asset turn on cotton is 1. The EBITDA margins are more or less similar over a five year period on both those segments. And coming to your second part that regarding the expansion of the cotton as we have mentioned that we are on the process and we alternately as we have been doing in the past alternately we expand over the three segments. So we give each segment a gestation period to stabilize and place the material also.
Surya
It. Am I audible?
Sanjay Anirudh Shah
Yes, Mr. Surya.
Surya
Yeah. Yes. So just one question is that as last time you have you were saying that no you will be replacing the demand of close to 1/4 with the Punjab facility and.
Beena Paresh Dattani
No, we lost you. We lost you. Can you repeat it please?
Surya
Yeah. Am I audible now?
Beena Paresh Dattani
Yes.
Surya
Okay. So last time actually we we spoke about the demand situation in the north. And roughly 1/4 of the capacity will be replacing with with the Punjab facility which is currently coming from the silver side. So point is that if new competitors will be also trying in north. So will it hit the capacity utilization A and B when the Silvasa will be replaced that quantum. So will it be. Last time you hinted that some of the output will be exported also. But in the export we may not be competitive. And we saw which is being seen in the our export trade. So it is close to 4,5% only, not more than that. So will then in that case will it be observed in the western or southern market as you said?
Beena Paresh Dattani
See as far as the capacity of anybody adding to the capacity there, well, the industry will require more material over the next couple of years. So there is bound to be a growth. The question is where the growth comes from. But as we stand today, there are no further projects announced in the industry and effectively a project of this size takes about two and a half to three years to commission. As far as our own capacity which we have been placing in the north, we will. We have three options there. We either place it in the west where the growth is also happening downstream, we place it in the south or we export it depending on wherever we get a better net back. It’s not that we are compelled to export that material, we have the option. The fourth option is of course that if we still feel that after our capacity there, we still have space to send it up north, we will do that. If then it all depends on the better net back that we get.
Jude Patrick Dsouza
The next line of question is from Mr. Harm Audible.
Harsh Mittal
Yes, good evening everyone. So my first question is to Parish. Sir, sir, any idea about how the demand in the polyester yarn segment grown in Q3 industry demand? I am speaking in domestic wise, this is the first question.
Beena Paresh Dattani
No, how the industry demand
Harsh Mittal
Has panned out in or has grown grew in the quarter three in in India, in domestically.
Beena Paresh Dattani
See as we stand today, Harsh, we are operating as an industry at about 84, 85% which effectively is almost close to 100% because the installed capacity, certain capacities are defunct but they are there on the paper. Effectively this is what the industry will operate at. And with this operation of industry also today, every, every piece of material is being sold. So you can imagine the growth that has happened over the past one year where the industry had added capacity and yet today we are able to run the industry at 85%.
Harsh Mittal
Thanks. And second question is a small bookkeeping question is that what is the foreign currency translation income or expense? We have reported in this quarter, in the previous quarter, last year and in the Sequentially in Q2.
Sanjay Anirudh Shah
So in the current quarter, there was a gain of about 2.18 crores. In the previous quarter, there was a forest loss of about 2.04 crores.
Harsh Mittal
Okay. And last year? Last year,
Sanjay Anirudh Shah
Yeah. More or less. Same,
Harsh Mittal
Which is 2.18 crores.
Sanjay Anirudh Shah
Correct.
Harsh Mittal
Thank you. So these were my questions. Thank you.
Jude Patrick Dsouza
That was also. We do not have any more Q A session questions. Thank you.
Beena Paresh Dattani
Thank you, Jude. I also thank all of you to be on the call. And I thank the entire team at Sanatan for the untiring efforts and all our stakeholders for their continued support and faith in the company. This is all from our side. And I’d like to thank you very much for your time and attention. Thank you.