Arvind Q2 FY27 Earnings Call: Record Revenue of Rs. 2,919 Crore, Guides 18% Q3 Growth

Arvind Ltd held its Q2 FY27 earnings call on October 28, 2026. Here's a quick read of what management said — performance, strategy, and the outlook ahead.

Record Quarter Despite Input-Cost Drag

• Record consolidated revenue of Rs.2,919 crore (+23% YoY) — an all-time quarterly high, with EBITDA of Rs.331 crore (+27% YoY) also a record; EBITDA margin held at 11.4% despite higher raw material costs vs Q1 FY 2026-2027.
• Denim volumes crossed 18 million meters (+19% YoY) — highest in 17 quarters; wovens at 34 million meters and garmenting crossed 11 million pieces for a second consecutive quarter.
• Textile revenue of Rs.1,999 crore (+11%) with EBITDA of Rs.190 crore; rising input costs impacted textile margins by 75 bps. Garmenting revenue Rs.577 crore (+9%) on better product mix and higher realization.
• Advanced materials posted record revenue of Rs.805 crore (+81%) — including Dalco GFT's first full-quarter contribution of Rs.256 crore; AMB India grew 23% to Rs.550 crore with EBITDA up 29%, segment margin at 14.8%.
• Consolidated PAT of Rs.123 crore (+16%) — net debt reduced by nearly Rs.95 crore to Rs.2,063 crore despite a temporary working capital increase, expected to normalize by March 2027.
• CARE upgraded Arvind's credit rating from AA- to AA (stable outlook), which management sees as recognition of a stronger financial profile.

Strong Order Book; FTAs and Defense Pipeline Build

• Q3 FY 2026-2027 order book is "extremely strong" and Q4 FY 2026-2027 is "building up quite nicely" per management, with no concerning demand signals seen so far; US demand described as "reasonably okay" though prolonged conflict could shift sentiment negative — it has not yet.
• Defense orders create a renewable pipeline — combat and officer uniforms are consumables reordered every cycle; the armed forces' year-on-year intention to equip personnel with better-quality equipment was cited as the underlying demand driver, with Arvind pitching newer applications as it builds capability.
• UK FTA uptake is building — since implementation (almost a quarter ago), more customers are traveling to India to de-risk exposure to highly indexed geographies; first benefits possibly in Q4 FY 2026-2027, and UK business expected significantly higher in FY 2027-2028 — maybe by 10-12 million extra, predominantly garments/vertical business.
• Management expects the India-UK trade agreement and India's relatively favorable US tariff position to support order flows from H2 FY 2026-2027; the proposed India-EU FTA is cited as an additional long-term growth runway.
• US advanced materials trends are positive — data centers growing very aggressively support composites, robust US industrial growth drives industrial products, and human protection demand is okay.
• Country-of-origin diversification is underway — Bangladesh garment-conversion business performed well in Q2 FY 2026-2027; Egypt's first denim deliveries expected in Q3 FY 2026-2027.

Inflation Masking Underlying Margin Work

• Management is fighting to win back 75-100 bps of gross margin erosion every quarter in FY 2026-2027 — via product upgrades, proprietary design-and-innovation-led products, mix changes, and volume recovery where margin cannot be recovered.
• EBITDA margin was ~11.5% in FY 2026-2027 with an objective of ~0.5% annual improvement; cost inflation is currently masking these efforts, with expansion visible only once inflationary trends normalize.
• Pass-through is reviewed quarterly (or more often) — but Vice Chairman Punit Lalbhai cautioned "you can only pass on to what the market is able to absorb," with distressed selling by lower-utilization competitors capping full recovery.
• Fabric and wovens realizations grew ~12% in Q2 FY 2026-2027 — primarily price pass-through plus mix; pass-through still lags the cost hit, keeping margins slightly compressed in FY 2026-2027 as new escalations recur each quarter.
• Dalco margins compressed on petrochemical-based inputs — the highest cost hit in Arvind's ecosystem, but pass-on has been most successful there, with new prices accepted by many customers from September (Q2 FY 2026-2027) onwards.
• 80% of customers currently bear logistics costs themselves — so the logistics impact on Arvind is indirect (via customer decision-making) rather than direct in FY 2026-2027.
• Margin levers include a large digitization/automation program — automated planning, a new TMS, automated sourcing platforms, shop-floor IoT — plus value engineering, frugal fixed-cost control, and fixed costs growing more slowly than the top line.

Rs.500 Crore Rolling Capex; Varanasi and US Lines

• Over Rs.500 crore capex planned for FY 2026-2027 — ~Rs.372 crore already invested in H1 FY 2026-2027; breakup: close to Rs.200 crore to advanced materials, about Rs.120-150 crore to garments, remainder to fabric and maintenance. CFO Nigam Shah confirmed the Rs.500 crore is India-only, excluding Dalco, which runs its own separate capex program of ~5 million a year (period unspecified).
• The Rs.500 crore plan runs on a rolling timeline — invested every year, taking ~2 years to fully utilize; at 2.5-3x average asset turnover, each tranche should yield ~1.5x turnover in its first year and ~3x in the next.
• Varanasi Phase 1 commissioned in Q2 FY 2026-2027 — revenue potential of Rs.250 crore on capex of Rs.75 crore (including land cost, per the results disclosure); across both phases it will add almost 25 million pieces (period unspecified), really small garments not counted in the 50 million-piece figure.
• Varanasi focuses on essentials and knitted goods — ramp-up focus over the next 6-8 months; management expects double-digit EBITDA and 20%+ ROCE once fully scaled up (period unspecified).
• The fourth line with Rs.70 crore annual revenue potential was commissioned in Q2 FY 2026-2027 — fully sold before the investment was made; the delay cost ~1.5 quarters of revenue.
• US operations: investing in the next US line in FY 2026-2027 — higher growth hoped for in FY 2027-2028 and mid-teens growth level targeted by FY 2028-2029; current utilization is at very high levels.
• In-house denim capacity stands at 70 million meters p.a. and wovens at 140-150 million meters p.a. (Q2 FY 2026-2027, per CFO Nigam Shah); fabric capacity to still be raised ~10% via marginal investments, with garment capacity expected to grow ~15% (exact year not specified).

Mid-Teens Trajectory; Carbon a Multi-Year Build

• Management guided 18%+ growth in Q3 FY 2026-2027 — underpinned by continued scale-up of the defense business and allied programs; full-year FY 2026-2027 top-line growth guided at 15% or better, with garmenting on track for mid-teens growth by FY 2026-2027 year-end.
• H2 FY 2026-2027 garment volumes guided above the current 11 million pieces — though management did not commit to the analyst's 12.5-13 million piece scenario, steering focus to top-line as mix skews to higher-FOB denim.
• Wovens (~40% of business) are structurally H2-weighted — doubled corduroy capacity and added flannel capacity to even out seasonality, which management said will drive volume growth in FY 2027-2028.
• Garmenting 15% growth guidance reiterated "at this point in time" — brownfield plus 1-2 greenfields advancing over the next 3-4 quarters (through ~Q2 FY 2027-2028) is "enough to give 15% growth"; asked if this supports 15% for at least FY 2027-2028, management said "it can be higher."
• A 25% garment growth model is on the drawing board — hoped to be launched a few quarters out (~FY 2027-2028), with "very ambitious" greenfield plans "of the scale that perhaps has never been thought of at Arvind," not to be formalized until confident of execution.
• Carbon composites may contribute only a few tens of crores (Rs.) over FY 2027-2028–FY 2028-2029 — management said there is "no shortcut to quick growth unless it be inorganic"; management would like carbon to reach 20-30% of overall product "3 or 4 years down the line" (≈FY 2029-2030–FY 2030-2031).
• Dalco is tracking its original FY 2026-2027 growth plan of 9-10% with robust demand; Lalbhai, after meeting key customers, said the investment thesis is probably "as good or even better" than expected at acquisition. Industrials lost ~1.5 quarters of production vs budget in FY 2026-2027 due to conflicts stalling logistics investments; growth expected to return in H2 FY 2026-2027.

QIP Funds May 2027 Repayment; Scheme Dependency De-Emphasized

• ~Rs.500 crore QIP closed in mid-Q2 FY 2026-2027 — the linked ECB repayment is scheduled for May 2027 (Q1 FY 2027-2028); per RBI norms, proceeds have in the interim been utilized for internal growth purposes.
• Acquisition debt detail: 60 million borrowed in India — to be repaid in May 2027 (Q1 FY 2027-2028), which is why the QIP was raised; 40 million sits on the Dalco balance sheet, where Dalco's cash flow is sufficient to fund that repayment (period unspecified) and internal growth. Debt reduction is expected to begin from Q1 FY 2027-2028, against acquisition-related debt only.
• Management does not want long-term debt beyond the pre-Dalco level of ~Rs.400 crore — term loans expected to remain around Rs.350-400 crore with working capital within a 60-day net working capital scenario (period unspecified); no additions planned to covenant-bearing debt.
• Working capital turns at or below 6 as of Q2 FY 2026-2027 — target to improve from ~6 to ~7 turns over FY 2027-2028–FY 2028-2029; management said now is not a great time to push working-capital efficiency as the company must go long on certain inventories to ensure availability and fixed prices.
• Export incentive scheme ("Ross Sale scheme") extended till December end (Q3 FY 2026-2027) — Lalbhai said a business should never be dependent on export incentives; a change could cause a possible 1-2 quarter impact before things readjust. Management did not quantify the scheme's revenue/EBITDA contribution (to be sent by IR) and offered no view on extension probability.
• RBI repo rate increase regime expected to continue for Q3–Q4 FY 2026-2027 — adding 50 bps more to the repo, per CFO Nigam Shah; a technical 25 bps benefit from the rating upgrade is possible (period unspecified) but may or may not translate into real-world benefit.
• Rough & Tough denim brand remains dormant — no current plans for a B2C denim play in the domestic market, though the brand might be revived in future as early-stage just-in-time manufacturing capabilities develop; most free cash flow is to be deployed toward more aggressive growth in advanced materials and garmenting.