Sanathan Textiles Limited (NSE: SANATHAN), a leading integrated yarn manufacturer, reported a significant increase in consolidated revenue for the third quarter of fiscal year 2026, driven by the successful scaling of its new Punjab facility. Despite a challenging global trade environment and domestic regulatory shifts, the company maintained optimal utilization at its primary Silvassa plant. The company’s stock closed at ₹443.20 on the National Stock Exchange following the earnings release on February 6, 2026.
Strategic Expansion in North India
The primary development during the quarter ended December 31, 2025, was the continued operational ramp-up of the company’s greenfield facility in Punjab. The plant’s capacity increased by 25% during the period, rising from 350 metric tonnes per day (MTPD) to 450 MTPD. Management noted that the facility turned EBITDA positive during the quarter as the North Indian market effectively absorbed the incremental production volumes without resulting in inventory accumulation.
The facility is currently producing at 575 MTPD and is on track to reach its full Phase I polymerisation capacity of 700 MTPD by the end of the fourth quarter of FY26.
Financial Performance and Margin Pressure
Sanathan Textiles’ consolidated financial results reflected a period of high growth tempered by transitional costs and industry-wide headwinds.
Revenue Growth: Consolidated revenue from operations reached ₹1,078.7 crore in Q3 FY26, representing a 31.9% increase over the previous quarter and a 45.1% increase year-on-year.
Profitability: The company reported a consolidated net loss of ₹4.8 crore for the quarter, compared to a profit of ₹34.2 crore in the same period last year. This was largely attributed to the initial costs of scaling the Punjab facility and one-time employee-related expenses.
Nine-Month Performance: For the first nine months of FY26, the company recorded consolidated revenue of ₹2,642 crore, a 16.6% increase compared to ₹2,266.4 crore in the prior year period.
Normalised EBITDA for the quarter, which adjusts for one-time impacts, stood at ₹59.9 crore. The company accounted for ₹2.7 crore in additional gratuity liabilities due to new labor codes and ₹3.5 crore in costs related to the Punjab capacity scale-up.
Management Outlook and Growth Drivers
Paresh Dattani, Chairman and Managing Director of Sanathan Textiles, characterized the period as a consistent operational performance despite a “challenging quarter for the industry”. He highlighted the company’s ability to pivot to domestic markets to maintain full utilization at the Silvassa facility when US tariffs and regulatory changes pressured export-oriented segments.
The company’s future strategy focuses on high-value segments and further geographic diversification:
Technical Textiles: Capacity at the Silvassa technical textile yarn division is being doubled from 9,000 MTPA to 18,000 MTPA, with completion expected by Q1 FY27.
Phase II Punjab: Following the completion of Phase I, the company intends to expand the Punjab facility’s polymerisation capacity further to 950 MTPD.
Cotton Expansion: Sanathan is advancing plans for its cotton division in Madhya Pradesh to leverage the region’s textile ecosystem.
Macroeconomic and Regulatory Landscape
The textile sector faced several headwinds in Q3, including the sudden removal of BIS/QCO certifications in November and a change in GST rates on fabrics from 12% to 5%. While the GST change led to brief inventory build-ups as customers delayed purchases, management expects the lower rate to support demand in the long term.
Furthermore, the resolution of trade issues and new agreements, such as the India-EU trade deal, are expected to revive export demand for apparels and home textiles. The Union Budget 2026 has also provided a favorable outlook for technical and automotive textile segments, aligning with Sanathan’s current expansion projects.
Reasons to Pass on SANATHAN
- Return to losses despite revenue surge: The company reported a consolidated net loss of ₹4.8 crore in Q3 FY26 versus a profit a year earlier.
- Margin pressure from expansion: Profitability was weighed down by ramp-up costs at the Punjab facility and employee-related expenses.
- Execution risk from rapid capacity expansion: Ongoing Phase I and planned Phase II expansions at the Punjab plant increase operational and capital risk.
- High dependence on volume absorption: EBITDA positivity at the new facility assumes continued strong domestic demand without inventory build-up.
- Regulatory cost impact: New labour codes resulted in additional gratuity liabilities during the quarter.
- Industry headwinds persist: Global trade challenges, U.S. tariffs, and regulatory changes continue to affect export-oriented segments.
- GST-related demand disruption: The reduction in GST rates led to short-term inventory build-ups and delayed customer purchases.
- Capital-intensive growth pipeline: Multiple expansion projects across technical textiles, polymers, and cotton increase funding and execution complexity.
- Earnings volatility during transition: Normalised EBITDA masks near-term earnings variability during the scale-up phase.
- Cyclical sector exposure: Performance remains closely tied to textile demand cycles and policy-driven incentives.