Arvind Ltd (ARVIND) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to Arvind Limited Q2 FY '27 earnings conference call. As a reminder, all participants' lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Satyaprakash Mishra. Thank you, and over to you, Mr. Mishra.
Satyaprakash Mishra (Arvind Ltd): Thank you. Good afternoon, everyone. A very warm welcome to Arvind Limited earning call for the quarter and half year ended September 2026. The financial results and investor presentation have been uploaded to on on our website, and I hope you had chance to go through them. Before we begin, let me introduce the management team today. With me, Mr. Punit Lalbhai, the Vice Chairman; Mr. Jayesh Shah, Whole-Time Director and Group CFO; Mr. Nigam Shah, Executive Director and CFO of Arvind Limited. I will start with a quick quick overview for the quarter, how the operating environment shaped up, our operational and financial performance, and the outlook for the near term. After that, Punit will share his perspective on the broader environment and our strategic priorities, and then we will open the floor for questions. Let me begin by saying that this has been a record quarter for Arvind, and it has come in what has clearly been another year of disruption. The conflict in Middle East and Europe has continued, and its effects have gone well beyond the first quarter. We have seen it in energy prices, in freight routes, and in costs of crude and petrochemical-based inputs, including its punitive impact on the currency. A significant part of our cost base continued to reflect high-priced cotton and petrochemical inputs procured earlier part of the year. While supply chain disruption added further pressure, despite these challenges, we remained focused on execution and took a proactive approach to cost management, sourcing, and operational efficiencies. Against this backdrop, our performance once again underscores the resilience of Arvind's business model. While we continued to grow volume and strengthen customer relationship, we have also demonstrated the ability to navigate difficult market conditions through disciplined execution.
Satyaprakash Mishra (Arvind Ltd): Our integrated textile value chain remained a key strength, while the growing contribution from Advanced Material business continues to diversify our earnings portfolio and create new growth avenues. Coming to the operations part, we saw healthy volume across our core textile businesses supported by strong execution, higher vertical integration, and portfolio additions in our Advanced Material business. In Denim, volume crossed 18 million meters during the quarter. This is the highest in 17 quarters, a growth of 19% on a year-on-year basis, this is on the back of higher demand. In Woven business, volume stood at 34 million meters. In Garmenting, we crossed 11 million pieces for the second quarter in a row. On the strategic side, two developments are worth highlighting to you in this call. First, last quarter we spoke to you about our design gallery in London. This quarter, we have taken the next step in Europe with a Denim design and marketing hub in Amsterdam, which is a global center for Denim innovation and fashion. This brings us closer to our customers and strengthens our representative network in key overseas markets like Europe. Second important one is we commissioned our Phase 1 of the greenfield garmenting facility in Varanasi. I'm sure all of you have heard of it and seen it in your social media posts. Phase 1 of this has a potential of giving a revenue of 250 crores which has been done with a capex of 75 crores, which also includes the cost of land. This takes us forward this takes us our forward integration strategy in textile business further and strengthens our ability to serve global customers in the knitted and essential segment. Advance Material has had a dream run again this quarter with a high double-digit volume growth and mostly in human protection and composite segment. Both of these businesses are seeing high demand from Tier 1 customers as well as defense and mobility segments. We also have a few important order wins during the quarter including prestigious ones from Indian defense. Overall, the pipeline looks robust for the future as well. Now coming to the financial performance during the quarter, consolidated revenue stood at 2,919 crore, a growth of 23%. EBITDA was at 331 crore, up 27%. Both these key figures are all-time high quarterly numbers for Arvind Limited. Importantly, we held our EBITDA margin at 11.4% in a quarter where raw material prices had higher impact compared to quarter one. This reflects a better business mix, operating leverage, and disciplined execution, and most importantly, the bludgeoning of cost aspect under our watch, which will also have lasting impact in quarters ahead. Coming to the segments, Textile business reported a revenue of 1,909 99 crores, up 11% with an EBITDA of 190 crore. Margin would have been a little higher, but for rising input costs, which had an impact of 75 basis points in textile margins. Garmenting reported a revenue of 577 crores, which is a growth of 9%. This is on account of better product mix and higher realization. Moving on to Advanced Material, this business reported a record revenue of 805 crores, up 81%. This includes numbers for Dalco GFT for a full quarter of 3 months. The India business also grew at a strong 23% to 550 crores. This is the fifth quarter in a row of strong growth led by high volume growth in human protection and composites. Dalco GFT is a in its first full quarter with us reported a revenue of 256 crore. This was supported by robust demand in US, stable volumes, and margins, though it was affected by higher raw material costs as well, including sharp rise in fuel prices. What is encouraging is that AMD India's EBITDA growth has been 29%, which is higher than the revenue growth, which is on account of better product mix and operating leverage. Overall, the Advanced Material business EBITDA margin stood at 14.8% during the quarter. Consolidated net profit after tax stood at 123 crores, which is a growth of 16%. Consolidated net debt position decreased by nearly 95 crore to 2,063 crores. This is in spite of a temporary increase in working capital, which will normalize by March 2027. Coming to capital allocation, during the first half of FY27, we have invested roughly about 372 crores across our capex programs across various businesses.
Satyaprakash Mishra (Arvind Ltd): And this is in line with the plan that we have laid out for the full year. I'm also happy to share that Arvind's credit rating has been upgraded by one notch from AA- to AA with a stable outlook by Care Rating Agency. We see this as a recognition of our stronger financial profile. Looking ahead, we remain cautiously optimistic about the operating environment. The recently implemented India-UK trade agreement and India's relatively favorable tariff position in the US compared to the competing sourcing countries are expected to support order flows from the second half of the year, while the proposed India-EU FTA, free trade trade agreement, provide an additional long-term growth runway. In advanced material, demand continues to be supported by strong momentum in defense, aerospace, renewable energy, infrastructure, and specialty industrial applications. In particular, the continued scale up of our defense business and allied programs supported by higher capital spending and localization of initiatives provide confidence in delivering 18% plus growth in quarter three FY27. At the same time, the raw material availability, elevated input cost continue to exert pressure on margins. Through focused sourcing and productivity and pricing initiatives, we remain confident that the margin will be maintained in future. All growth capex projects remain on track, and we expect to invest more than 500 crore during FY27. To sum up, while the operating environment continues to evolve, we enter the second half on a strong footing. New trade agreements, a growing advanced material franchisee, and our integrated fiber-to-garment model provide multiple levers of growth. Coupled with long-standing customer relationship and stronger balance sheet, we believe we are well-positioned to navigate near-term challenges and deliver sustainable profitable growth. I'll now hand over the call to Punit for his opening remarks.
Punit Lalbhai (Arvind Ltd): Good afternoon, everyone. Pleasure to be here. Satya has given a very comprehensive sort of rundown of what happened during the quarter and also a glimpse into the future. So I'll keep my comments really brief before we go into question answers. The the the factor that has been most encouraging through this period is that demand has held up quite well, both in textiles and advanced materials. We are looking at, you know, a reasonably robust demand environment, and which is giving us confidence that we should be able to deliver good numbers going forward as well. However, the on the flip side, the global conflicts have led to cost escalations, mostly in raw material and and logistics, which are rising so sharply that even an improving currency and reasonable amount of cost pass on is still lagging these dramatic increases. And there is no let up on on the horizon that is currently visible. So it seems like we will have to still navigate the complex environment. But with the, you know, experience that our team has, especially with delivering a couple of reasonably strong quarters in the environment, in this very environment, we feel that we should be able to manage. So with that cautiously optimistic note, I open up the floor to questions.
Moderator: Thank you very much. We will now begin with a question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Aradhana Jain from 361 Capital. Please go ahead.
Aradhana Jain (361 Capital): Hi. Thank you for the opportunity and congratulations to the management on a good set of numbers. A couple of questions from my end. First so wanted to understand a little more on the garmenting segment. While there has been a growth of 9%, but volumes continue to be a little on the lower side. So we delivered like a 4% volume growth this quarter. What exactly would you say is leading to you know the volume growth not being on the higher side? Is it demand
Aradhana Jain (361 Capital): capacity availability, or, you know, are we facing any other issue, on the garmenting side? And, how is the order book shaping up for you in the second half of this year from both domestic and export standpoint? And, how are things shaping up from US and UK perspectives specifically, given that there's been a lot of, you know, tailwinds on that side? And lastly on the garmenting side, given we've done a phase 1 expansion in Varanasi right now, could you help us understand what is the way forward with respect to the overall garmenting expansion over the medium term, you know, from Varanasi perspective or the other geographies that we are into? And how much would we expect the capacities to overall increase over, say, the next 3 to 4-year period in the garmenting side? That's my first question.
Punit Lalbhai (Arvind Ltd): Sure. So the the answer to the garmenting question is very simple, that we should be able to catch up in the second half. We have been increasing capacity steadily, and we've always been guiding that that capacity increase sort of should lead to, you know, mid teens kind of overall growth. And give or take, you know, a percentage here or there. So, I think we should still be on track to deliver that by the year end. So, we are expecting a much more growth-oriented second half compared to the first half, which is normally the sort of seasonality that that the the business with our set of customers experiences. That said, H1 was a little soft on demand in a couple of categories, particularly the export market for nits. A couple of our customers did see, you know, volumes that were lower than expected. So, maybe we've lost up, I mean, we we had a little bit of extra capacity that we didn't utilize in in in the first half of the year on the knit side. But denim has been performing well, shirts has been performing reasonably well, essentials has been doing extremely well. So, broadly, we are all going in the right direction. The capacities are coming on stream broadly, as per expectation and we should be in that mid-teens level of growth. And I would guide everyone to sort of switch over their thought process to revenue rather than number of pieces because now our product mix is getting fairly complex and number of pieces don't accurately reflect you know, how that growth is going to come. So, I think the simpler way to think of it is what what should be the revenue growth and revenue growth will always be a mix of price and product mix. And we had a softer product mix in quarter in the first half of the year. The product mix towards the second half of the year is a lot richer and therefore, we feel confident of catching up on growth. Varanasi, of course, is the greenfield that we've kicked off this year, but we continue to also do brownfield investments to make our existing locations more productive and that is that is happening quite satisfactorily.
Aradhana Jain (361 Capital): Understood. Of the 500, over 500 odd crores of capex that we plan to do for this financial year of which more than 370 we've already done in the first half, how much is attributable towards garments, and what are the other avenues where we are putting up the capex?
Punit Lalbhai (Arvind Ltd): So, maybe about 200-ish to advanced materials, maybe about 120, between 120 to 150 for garments, and the rest will be in fabric and maintenance.
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