💰 Financial Performance

Revenue Growth by Segment

Consolidated operating income grew 30% YoY to INR 1,401.5 Cr in FY2025, primarily driven by the acquisition of Young Brand Apparels Private Limited (YBAPL) and a 7% increase in garment export volumes. Standalone revenue growth in FY2024 was flat due to weak demand in export markets, following a 33% growth in FY2022 (INR 867.2 Cr).

Geographic Revenue Split

Exports account for 80% of total revenue. Within exports, the UK and European markets contribute 65-70%, while the US market accounts for 25-30%. The domestic retail market, entered in FY2007, contributes the remainder through the Crocodile brand.

Profitability Margins

Operating profit margins were 14% in FY2025, a slight decline from 14.7% in FY2024 and 18.4% in FY2022. Net profit margin (PAT/OI) was 7.5% in 9M FY2023 compared to 9.8% in FY2022. Margins are currently pressured by a 1-1.5% impact from rising labor costs and overheads.

EBITDA Margin

EBITDA margin (OPBDIT/OI) stood at 14% in FY2025, down from 16.2% in FY2021 and 18.4% in FY2022. The moderation is attributed to increased labor costs and the integration of the lower-margin YBAPL acquisition, which is expected to stabilize over the medium term.

Capital Expenditure

Planned capital expenditure for FY2026 is approximately INR 50 Cr for maintenance and capacity. In FY2025, the company completed the acquisition of YBAPL for INR 167 Cr and a unit from BASML for INR 56 Cr, with a final tranche of INR 60 Cr due in Q4 FY2025.

Credit Rating & Borrowing

The company maintains a strong credit profile with a Stable outlook. Interest coverage moderated to 5.8x in FY2025 from 8.5x in FY2024 due to higher debt levels. Total debt increased to INR 380.8 Cr in FY2025 from INR 203.4 Cr in FY2024 to fund acquisitions.

⚙️ Operational Drivers

Raw Materials

Cotton and yarn are the primary raw materials, representing the largest portion of the cost structure. Fluctuations in these prices directly impact the cost of goods sold as pricing flexibility with global retailers is limited.

Import Sources

Sourcing is primarily domestic within India, leveraging the company's integrated spinning capacities. However, the company also operates a subsidiary in Sri Lanka which requires incremental funding of INR 55 Cr for operations.

Capacity Expansion

Current operations are fully integrated from spinning to garmenting. Recent expansions include the acquisition of a manufacturing unit in Palladam from BASML and the acquisition of YBAPL to expand into the innerwear segment and increase US market presence.

Raw Material Costs

Raw material costs as a percentage of revenue decreased in FY2024, helping offset higher freight and labor costs to maintain a 14.7% operating margin. The company uses order-backed procurement to hedge against price volatility.

Manufacturing Efficiency

Efficiency is driven by backward integration. The company recently completed modernization of existing capacities to improve throughput. FY2025 saw a 7% YoY increase in export volumes despite global headwinds.

Logistics & Distribution

Distribution costs were impacted by increased freight rates in FY2024, though this was partially offset by lower raw material prices during the same period.

📈 Strategic Growth

Expected Growth Rate

34%

Growth Strategy

Growth will be achieved through the integration of YBAPL (adding innerwear products), scaling the Palladam unit acquired from BASML, and leveraging the UK-India FTA to increase export volumes. The company is also diversifying its customer base to reduce concentration.

Products & Services

Infantwear, childrenswear, and innerwear (newly added). Products include value-added garments featuring embroidery, printing, and specialized dyeing.

Brand Portfolio

Crocodile (domestic retail), Young Brand (innerwear).

New Products/Services

Expansion into the innerwear segment via the YBAPL acquisition is expected to contribute significantly to the projected 34% revenue growth in FY2025.

Market Expansion

Targeting expansion in the US market to diversify away from the UK/EU. The company is also ramping up capacities in Sri Lanka and India to capture the 'China Plus One' procurement shift.

Market Share & Ranking

SPAL is one of the largest organized exporters of childrenswear in India with over three decades of experience.

Strategic Alliances

Acquisition of Young Brand Apparels Private Limited (YBAPL) and asset purchase from Bannari Amman Spinning Mills Limited (BASML).

🌍 External Factors

Industry Trends

The industry is seeing a shift in procurement from China to India ('China Plus One'). The infantwear niche is growing at a stable rate as it is considered a non-discretionary essential within the apparel category.

Competitive Landscape

Faces intense competition from large Indian textile exporters and low-cost manufacturing hubs like Bangladesh and Vietnam, which limits aggressive price hikes.

Competitive Moat

Moat is built on deep integration (spinning to retail) and long-standing (20+ year) relationships with global retailers. This integration allows for better quality control and higher margins (14-18%) compared to non-integrated players.

Macro Economic Sensitivity

Highly sensitive to consumer discretionary spending in the UK and EU. Inflationary pressures in these regions led to flat standalone revenue in FY2024.

Consumer Behavior

Shift toward value-added and branded childrenswear. Demand for infantwear remains relatively inelastic compared to fashion apparel during economic slowdowns.

Geopolitical Risks

Exposed to changes in export incentive structures and US-India trade tariffs. The UK-India FTA is a positive catalyst expected to drive medium-term volume growth.

⚖️ Regulatory & Governance

Industry Regulations

Subject to stringent labor laws and international social compliance audits required by global retailers. US trade penalties on Indian apparel are a key regulatory hurdle.

Taxation Policy Impact

Effective tax rate is approximately 25-30% based on PAT of INR 84.7 Cr on PBT in FY2022. Vulnerable to changes in export incentive schemes like RoDTEP.

Legal Contingencies

The company faces moderate stabilization risks from the YBAPL acquisition and must fulfill conditions in the MoU with BASML for the final INR 60 Cr asset transfer.

⚠️ Risk Analysis

Key Uncertainties

Integration risk of YBAPL could impact consolidated margins by 2-3% if synergies are not realized. Sustained inflation in the UK could lead to a 10% drop in export volumes.

Geographic Concentration Risk

High concentration with 65-70% of export revenue derived from the UK and European markets.

Third Party Dependencies

Low dependency on third-party processors due to integrated operations, but high dependency on top 3 customers for 48% of sales.

Technology Obsolescence Risk

Low risk in garmenting, but requires continuous investment in modern spinning and knitting machinery to maintain cost competitiveness.

Credit & Counterparty Risk

High receivables expose the company to counterparty credit risk, particularly with large global retailers facing their own domestic economic pressures.