Credit ratings agency ICRA has revised the long-term outlook for the Sanathan Group to '[ICRA] A' and the short-term outlook to '[ICRA] A2+.

According to ICRA, this 'positive' outlook reflects the agency’s expectation that the Sanathan Group's revenues and profit margins will improve in the future. This improvement is anticipated

to be driven by the commercialization of a new plant by Q1, FY26-end.

Upon completion of the ongoing expansion project at Sanathan Polyester (SPPL), the group's production capacity will double by the end of Q1, FY2026. This expansion is expected to further strengthen the company's operating profile due to a better product mix and its closer proximity to both raw material sources and consumption centers.

The management also anticipates that the new plant will report better operating profit margins due to savings in freight costs (resulting from closer proximity to customers) and fuel costs (due to the use of rice husk).

ICRA notes, SPPL's ability to effectively and profitably ramp up the new capacity will be a key factor in monitoring the rating. However, the agency also acknowledges Sanathan Textiles’ established relationships with customers and suppliers, which are expected to help the company secure regular and repeat orders, thereby enabling optimal capacity utilization.

The rating continues to take into account the group’s position as a leading polyester yarn manufacturer in India and the extensive experience of its promoters in the industry. The ratings also benefit from its diverse product portfolio, established distribution network, and location-specific advantages due to its proximity to raw material sources.

However, the rating remains constrained by the susceptibility of the company’s profit margins to the cyclical nature of the textile sector and the volatility in crude oil-linked raw material prices and sales realizations.

The rating is also limited by the intense competition and fragmented nature of the yarn industry, which puts pressure on pricing. Additionally, the company remains exposed to foreign exchange risks, as approximately 40 per cent of the total debt taken for the ongoing capital expenditure is denominated in foreign currency. This, combined with its raw material imports, will keep the company a net buyer of foreign currency in the near to medium term.

Sanathan Textiles is primarily involved in the manufacturing and export of polyester yarn, cotton yarn, and yarn for technical textiles. As of December 31, 2024, the total installed capacity of the company was 200,750 mtpa for polyester yarn, 14,000 mtpa for cotton yarn, and 9,000 mtpa for industrial drawn yarn.