Nitin Spinners Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

2 Dinesh Nolkha (Chairman & Managing Director), Purushottam Maheshwari (Chief Financial Officer)

Analysts

7 Abhishek Shah (Fortitude Fund Management), Ankit Gupta (Bamboo Capital Limited), Awanish Chandra (SMIFS Limited), Madhur Rathi (Counter Cyclical Investments), Uday Kumar (UK Capital), Varun Gajaria (Boring AMC), Varun Poduval (SMIFS Limited)

Financials & KPIs

Geographic & Segment Commentary

• Yarn Segment: Continued strong performance with improved realizations; yarn prices increased higher than cotton price increases, supported by healthy domestic and export demand. China's increased cotton yarn imports (India exports rose from 90-100 million kgs in CY25 to 110-115 million in CY26) and consolidation of weaker spinning capacities supported the demand scenario. External yarn volume growth was suppressed in Q1 due to higher internal consumption by the fabric division and logistics-related dispatch delays, which were subsequently cleared in July.
• Fabric Segment (Woven + Knit): Woven fabric enjoyed stable pricing versus the previous quarter with utilization above 92%. The fabric business passed on raw material cost increases fully but could not improve spreads as much as yarn (which passed on 120-125% of input increases). Knit fabric utilization remained at 55-60%, below the pre-US tariff regime level of 60-65%, due to persistent uncertainties in the US market, where the company has major presence.
• Geographic Mix: Exports contributed ~65% of revenue versus ~35% domestic. The India-UK FTA is expected to open new sourcing opportunities, and EU FTA discussions are expected to create a level playing field against competing textile nations.

Company-Specific & Strategic Commentary

• Capacity Expansion Program: Fabric capacity expanding by 35 million meters (weaving + finishing for solid dye and yarn-dyed fabrics) and spinning by 74,000 spindles (22,000 MT). Of the new yarn capacity, ~60-65% will feed internal fabric consumption. Incremental revenue potential of ~₹1,000 crores, with fabric contributing ₹600+ crores. Weaving capacity to start in ~2 months, processing around Diwali, spinning by December; yarn fully ramped by March 31, 2027, fabric ramp-up to continue into Q1-Q2 FY28.
• Renewable Power Expansion: Solar capacity expansion on schedule, expected operational by end of Q3 FY27. Will meet ~60% of overall power requirements, targeting blended power cost of ~₹5.50/unit. Annual EBITDA savings of ~₹50 crores expected to kick in from Q3/Q4 FY27; ~₹1.2-1.5 crores of benefits already realized in Q1 FY27.
• Cost-Saving Initiatives: Multiple initiatives including energy-saving measures, automations from expansion program, and modernization of existing capabilities contributed ~0.5% of EBITDA. These savings are permanent in nature and will continue.
• Vertical Integration & Value-Added Strategy: Fabric share of top line expected to rise from ~20-21% to ~30%, adding 100-150 bps to blended margins. Management evaluating downstream entry into garmenting/home textiles post-FY28 capacity ramp-up; no new CapEx beyond current program until after FY28.
• India-UK FTA & Trade Agreements: Recently implemented India-UK FTA expected to support exports by opening new sourcing opportunities; EU FTA discussions noted as important for level playing field.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Yarn Spreads & Margin Sustainability

• Question: What were yarn spreads in Q1 FY27 and current levels in Q2? Will margins sustain? (Madhur Rathi, Counter Cyclical Investments; Ankit Gupta, Bamboo Capital)
• Answer: Spreads were ~₹110 in Q4 FY26, currently ~₹130 and sustaining in Q2. Improvement driven by improved demand, capacity consolidation (weaker players exiting), and correction in Indian vs. international cotton parity. Indian cotton previously traded 5-7% above Cotlook Index but is now at minus 1-2%, a delta of 7-8%. Management expects to maintain 17-18% EBITDA margins near-term barring extraordinary geopolitical changes, driven by permanent cost savings and stable price regime. (Dinesh Nolkha)

EBITDA Expansion Bridge & Inventory Gains

• Question: Can you bridge the 376 bps YoY EBITDA margin expansion - how much from spreads, realization, mix, and cost efficiency? Any inventory gains? (Varun Poduval, SMIFS)
• Answer: Power savings contributed ~0.5% of EBITDA. Gross margins improved from 34-35% to ~40%+, predominantly from better yarn realizations (passing on more than raw material increases). Inventory gains were minimal - company does not carry extraordinary inventories; they are balanced with forward sales commitments. Working capital cycle unchanged. (Dinesh Nolkha)

Volume Decline Explained

• Question: Yarn volumes degrew ~14% QoQ and ~7% YoY despite demand improvement - what explains this? (Narayan Dhanak, individual investor)
• Answer: No actual decline in volumes; production is at 98% capacity utilization. Lower external yarn sales reflect higher internal consumption by the fabric division and dispatch delays of ~1 month due to international logistics challenges (vessel availability). The delayed shipments were dispatched in July. (Dinesh Nolkha)

Capacity Expansion: Timeline, Mix, and Revenue

• Question: What is the timeline for new capacities, the yarn/fabric split of incremental ~₹1,000 crores, and ramp-up expectations? (Abhishek Shah, Fortitude; Sandeep Garg, individual investor; Varun Gajaria, Boring AMC)
• Answer: Weaving starts in ~2 months, processing ~1-1.5 months later (around Diwali), spinning by December. Yarn fully ramped by March 31, 2027; fabric takes another 1-2 quarters into FY28. Fabric contributes ₹600+ crores of the ~₹1,000 crores incremental revenue. ~60-65% of new yarn goes to internal fabric consumption. Fabric revenue expected to grow from ~₹700 crores to ~₹1,200 crores in FY28. Top line could be higher given 8-10% price increases, but management is not factoring this in yet. Margin guidance: 100-150 bps uplift from higher fabric mix share (20-21% to ~30%). (Dinesh Nolkha)

China Demand & Industry Outlook

• Question: Is China's cotton yarn buying the key driver of demand, and how durable is it? What is the 2-3 year industry outlook? (Ankit Gupta; Narayan Dhanak)
• Answer: China is one of several factors supporting demand, not the only one - domestic demand has also been good. India's exports rose from 90-100 million kgs (CY25) to 110-115 million (CY26). With lower Chinese crop expectations, imports should continue. Industry structure has consolidated: weaker players exited over 2 years, and limited new spinning capacity is coming up. Investments are shifting toward garmenting and home textiles (finished products), which will drive demand for yarn and fabric. Demand-supply is "finely balanced" at present. (Dinesh Nolkha)

FY27 Margin Guidance

• Question: With product mix improving and power savings kicking in, can margins stay within the 16-20% guided range? (Awanish Chandra, SMIFS, closing)
• Answer: Management confirmed it should remain in the 16-20% band, with power savings and increased fabric share (presently ~20-21% of top line, moving to ~30%) supporting the upper end. Management emphasized it is an endeavor to reach the upper level but did not provide specific guidance beyond the band. (Dinesh Nolkha)

Knit Fabric Utilization

• Question: What is the current knit fabric utilization versus the earlier 65-70% expectation? (Reina, individual investor)
• Answer: Currently at 55-60%, below the pre-US tariff regime level of 60-65%. Persistent uncertainties in the US market (frequent tariff changes) have delayed recovery, though management expects improvement as conditions stabilize. (Dinesh Nolkha)

Cotton Crop Outlook

• Question: What is the current crop size and quality situation for the upcoming cotton season? (Uday Kumar, UK Capital)
• Answer: FY26 season closing at ~318-320 lakh bales vs. 326-327 lakh bales last year - a minor decline. Current year sowing acreage is nearly flat (-0.5% to -1% YoY). Rains over the next 4 weeks will determine the crop size. This year's quality looks good so far, versus last year's poor quality which prompted significant imports. (Dinesh Nolkha)

Key Takeaway

Nitin Spinners delivered its second consecutive record quarter with revenue of ₹875 crores (+10.3% YoY), EBITDA margin of 17.78% (+376 bps YoY), and PAT of ₹75.3 crores (+83.6% YoY), driven by improved yarn spreads (from ~₹110 to ~₹130 per kg) backed by favorable cotton price parity (Indian cotton now at -1-2% vs Cotlook Index versus +5-7% in FY24-25), capacity consolidation in the spinning industry, and China's increased import demand. The company's strategic focus is on its ~₹1,000 crores incremental revenue capacity expansion (74,000 spindles and 35 million meters of fabric) and renewable power expansion (₹50 crores annual EBITDA savings targeted from Q3 FY27), which are expected to lift fabric's revenue share from ~20% to ~30% and add 100-150 bps of margin. Management guides to remain within the 16-20% EBITDA margin band, with yarn capacities ramping by March 31, 2027 and fabric by Q1-Q2 FY28. Key watch points include US tariff volatility impacting the knit fabric segment (utilization at 55-60% versus pre-tariff 65%), cotton crop quality and monsoon outcomes, and management's cautious stance against guiding beyond current capacity-constrained levels despite improving demand and trade tailwinds from the India-UK FTA.