RSWM · risk themes across the available quarters.
Bear-case history
Bangladesh spinning lobby is pushing for higher import duties on yarn from India, which could impact RSWM's denim and milange business in the near-to-medium term despite tariff parity normalization with the US.
The tariff relief with the US (reduced to 18%) and EU FTA implementation (expected January 2027) create optimistic outlook, but actual order inflow recovery may take 1-2 quarters to materialize with visible volume improvement.
Management acknowledged that shifting from low-margin to high-margin products was only partially executed in knit, milange, and denim businesses due to market sentiment challenges, requiring another 3-4 quarters to fully implement.
Combined capex commitments of Rs 519 crore (Rs 92 crore knitting + Rs 427 crore Green PET + Rs 22-25 crore solar) require significant cash deployment over 12-15 months while maintaining working capital costs below 9%.
Gas availability improved but costs have risen significantly, impacting denim margins. Passing on cost increases to customers takes time.
Multiple cost increases (gas, dyes, freight, yarn) cannot be immediately passed to customers, compressing spreads in denim and knitting.
Though direct US exposure is limited, indirect impact through garment exporters has affected order book recovery, expected to take two more quarters.
The ₹427 crore project is 70% debt-financed (₹300 crore loan), raising leverage concerns. Management did not address equity dilution risk.