Sanathan Textiles' Revenue Has Nearly Doubled, but PAT Has Not; Can Scaling Up Capacity Boost Its Earnings?
Sanathan Textiles has seen a sharp rise in revenue after its Punjab facility began scaling up, but higher depreciation and finance costs have limited the impact on net profit. This article examines whether rising utilization, improving unit economics, and new capacity can help the company convert its expanded revenue base into stronger earnings.
Sanathan Textiles closed at around ₹508.5 , with a market capitalization of roughly ₹4,364 crore . Its 52-week range stood at about ₹352–₹545 , while the stock traded at around 33.5× trailing earnings and 1.8× price-to-book .
Revenue Is Rising, But PAT Is Falling
Sanathan's consolidated revenue from operations increased 79.1% YoY to ₹1,334.7 crore in Q1 FY27 , compared with ₹745.3 crore a year earlier. EBITDA also increased 55.4% to ₹108 crore . However, PAT declined to ₹23.8 crore from ₹40.4 crore , while consolidated EBITDA margin fell to 8.1% from 9.3% .
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The divergence is largely linked to the Punjab plant. A year ago, the facility was still under construction, meaning depreciation was not being charged and interest was being capitalised. With the plant now operational, depreciation increased to ₹34.7 crore from ₹11.7 crore , while finance costs rose to ₹38.6 crore from ₹4.6 crore .
As a result, higher operating earnings have not yet translated proportionately into net profit. The earnings profile therefore depends heavily on what happens to the plant's utilization and per-ton economics from here.
Punjab Is the Main Earnings Lever
Punjab operated at around 80% utilisation in Q1 FY27 , with management targeting 85–90% in the following quarter and 95–96% thereafter for Phase I. The company sold approximately 46,000 tonnes from Punjab during the quarter, compared with 54,000 tonnes from Silvassa.
Management is focusing on EBITDA per tonne rather than simply looking at consolidated margins. It expects Punjab's polyester-filament business to reach approximately ₹30,000 EBITDA per tonne next year , compared with around ₹11,000 per tonne at Silvassa for its broader mix of polyester, cotton, and technical yarns.
The potential improvement comes from several operating factors. Emkay Research noted lower freight costs for North Indian customers, cheaper power, locally sourced rice husk replacing gas, and automation that can reduce handling losses by around 99%. The brokerage estimates Punjab's EBITDA margin could rise from around 2.5% in Q1 FY27 to roughly 12% at higher utilization.
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Phase II Adds More Capacity
The Punjab expansion is not stopping at Phase I. Management is commissioning an additional 200–250 tonnes per day in phases, taking total polymerisation capacity towards around 900–950 TPD . The company expects the second phase to be fully commissioned around the beginning of FY28, followed by a gradual ramp-up.
This creates both an opportunity and an execution requirement. Phase II can increase revenue capacity, but its economics will depend on how quickly the existing Phase I reaches steady utilisation and whether the incremental capacity can be absorbed without putting pressure on spreads.
Emkay's research estimates that at optimal utilization of around 950 TPD, Punjab could generate ₹4,100–4,300 crore of annual revenue , with consolidated revenue potentially reaching ₹7,200–7,500 crore by FY29 . The brokerage also expects the Punjab plant's location advantage to support market-share gains in North India.
Other Capacity Could Add to the Upside
Punjab is not the only utilisation opportunity. Sanathan has completed installation of its technical-textile expansion at Silvassa, taking installed capacity from 9,000 MTPA to 18,000 MTPA , with commercial production expected shortly.
The existing technical-textile business was already operating at around 94% utilization in Q1, with quarterly revenue of roughly ₹33 crore. Management said it expects to add around 7,500 tonnes of incremental production during FY27 as the new capacity is commissioned.
Sanathan is also planning a 72,500-spindle greenfield cotton project in Madhya Pradesh , involving around ₹400 crore of capex. Management expects this project to generate approximately ₹350–375 crore of incremental revenue once operational.
What Emkay Is Saying
The latest attached brokerage report from Emkay Research , dated September 29, carries a BUY rating with a ₹675 target price , compared with a ₹515 CMP in the report. Emkay raised its target from ₹625 and retained its BUY view after visiting the Punjab plant.
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Its thesis is centred on the Punjab ramp-up, with the brokerage expecting higher utilisation, location advantages, operating leverage and automation to improve profitability. It also expects the company's consolidated EBITDA margin to reach 11–12% and ROCE 16–18% by FY29 , supported by a richer cotton and technical-textile mix.
Importantly, this is Emkay's view , not an independent conclusion. The report's estimates are forward-looking and depend on execution, utilisation and market conditions. Its FY29 estimates project revenue of ₹8,067 crore and EBITDA of ₹885 crore.
Conclusion
Sanathan's Q1 numbers show the unusual phase the company is currently in: revenue is scaling rapidly, but the earnings benefit is being diluted by the depreciation and financing burden of the new Punjab facility .
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The next leg therefore depends less on adding revenue alone and more on improving utilisation, EBITDA per tonne and fixed-cost absorption . With Punjab moving towards higher utilisation, Phase II being commissioned and technical-textile capacity being added, there are several potential operating levers.
The key monitorable is whether those capacity additions can translate into sustained improvement in margins and PAT rather than simply creating a larger revenue base. Emkay's bullish view is built around that expected improvement, while the company's own guidance points to FY27 EBITDA of around ₹520–540 crore .