Indo Count's September Quarter: 15.3% EBITDA Margin on 57% More Income, and the Cost Line That Did the Work

Indo Count Industries reported consolidated revenue from operations of Rs 1,672.65 crore for July-September 2026 against Rs 1,062.14 crore a year earlier, up 57.5% (our arithmetic); the company's press release prints total income of Rs 1,699 crore against Rs 1,082 crore, up 57%, and EBITDA of Rs 259 crore at a 15.3% margin against 11.4%. The 57% is the same on either measure. The company credits market-share gains, wallet share, branded sales and (in its quarter-on-quarter comments) product mix for revenue, and asset utilisation and efficiency for margin. But, in our reading, the cost lines do not point to a mix effect: materials consumed, purchases of traded goods and inventory change together rose from 47.0% to 49.6% of revenue (our arithmetic), and the whole margin gain came from "other expenses" falling from 31.5% to 24.9% of revenue. The filings do not explain that line.

The idea in one sentence

If a bed-linen maker's scale and customer ties are a moat, the margin gain should be broad and explainable by the company's own stated causes; at Indo Count it is large, real and concentrated in one cost line the filings leave unexplained, so the moat is something we can suggest and not something the quarter proves.

The fact that breaks the assumption

The headline assumes mix and brands lift margin. The press release gives the chairman's explanation of revenue: "The growth was driven by market share gains; increased wallet share and growing contribution from our branded portfolio." (Anil Kumar Jain, Executive Chairman, [PR]). For margin he says: "Our focus on sweating existing assets, optimizing resource utilization and enhancing operational efficiencies translated into margin expansion." ([PR]). Our reading: that is an operating-leverage story, not a mix story, and the cost lines are consistent with it.

Taking each line as a share of revenue from operations ([RS], consolidated, our arithmetic), Q2 FY27 against Q2 FY26:

• Cost of materials consumed: 42.2% against 46.9%.
• Purchases of traded goods plus change in inventories (the year-ago line is garbled in the extract, so we take it as total expenses less every other listed line): 7.4% against 0.2%. Purchases of stock-in-trade alone were Rs 125.43 crore in Q2 FY27, against Rs 91.03 crore in the June quarter.
• Together, the materials-and-traded-goods block: 49.6% against 47.0%, a rise of 2.6 points.
• Employee benefits expense: 11.5% against 11.7%.
• Other expenses: 24.9% against 31.5%, a fall of 6.6 points.

Net of other income, EBITDA margin on revenue from operations rose from 9.8% to 13.9% (our arithmetic), a gain of 4.2 points: 6.6 points from other expenses and 0.2 from employee costs, less the 2.6-point rise in the materials block. Other income was Rs 26.24 crore against Rs 19.43 crore and fell from 1.8% to 1.5% of total income, so it did not drive the gain. The filings do not define EBITDA; our rebuild from [RS] (profit before tax Rs 176.27 crore, plus finance costs Rs 36.61 crore, plus depreciation Rs 46.37 crore) is Rs 259.25 crore, which matches the company's Rs 259 crore only with other income included. On that basis margin on total income is 15.26% against 11.38% (our arithmetic), a gain of about 3.9 points; the press release prints "+380 bps".

One concrete thing, followed: other expenses

Other expenses were Rs 416.41 crore against Rs 334.38 crore, up 24.5% (our arithmetic) while revenue rose 57.5%. Employee costs rose 55.2%, in step with revenue, so no leverage there. Materials consumed rose 41.8%. Employee and other expenses together rose about Rs 151 crore on about Rs 611 crore of extra revenue (our arithmetic). Against the June quarter, other expenses fell from 29.4% to 24.9% of revenue and employee costs from 14.1% to 11.5%, while the materials block rose from 44.7% to 49.6% (our arithmetic).

The company's explanation, in the press release comments on the quarter-on-quarter change: "Better asset utilization (Domestic and International operations), driving EBITDA growth and margin expansion." ([PR]). For the year-on-year change the same comments say "Higher resource utilization and enhanced operational efficiencies leading to margin expansion." ([PR]). Its presentation adds "65%+ capacity utilization achieved across all three Utility Bedding Facilities" ([IP]). The company gives no figure for utilisation of the core bed-linen plants (total annual capacity 153 million metres, [PR]) and does not say which items in other expenses fell. Our reading: costs that are largely fixed, spread over far more metres, would produce this shape, and the 22.1% incremental EBITDA margin on the extra total income (our arithmetic) is consistent with that. The filings do not confirm it.

The mechanism, and where the parent and the subsidiaries part

On a standalone basis ([RS]) revenue from operations was Rs 1,138.66 crore against Rs 827.96 crore, up 37.5% (our arithmetic), and profit before tax Rs 166.33 crore against Rs 57.11 crore. Rebuilt the same way, standalone EBITDA is about Rs 213.7 crore against Rs 102.9 crore, a margin on total income of 18.3% against 12.1% (our arithmetic). Group margin is lower than the parent's: consolidated revenue exceeded standalone by Rs 534.0 crore against Rs 234.2 crore a year earlier, and consolidated profit before tax exceeded standalone by Rs 9.9 crore, against being Rs 5.1 crore lower (our arithmetic; these differences include intra-group eliminations and are not segment figures).

The auditor's report gives one clue to the scale of the rest of the group. One subsidiary, with four step-down subsidiaries, had total revenues of Rs 813.03 crore in the quarter and a net profit of Rs 10.52 crore ([RS], review report, paragraph 6); the paragraph does not name it or say whether it is the company's US business. Group profit after tax was Rs 131.88 crore. The press release says the new businesses, utility bedding and the US brand business, reached "a quarterly revenue of Rs. 500 Crs+" and 30% of total income, and that Wamsutta's presence has expanded "beyond D2C into the broader US retail market" ([PR]). Our reading: much of the added revenue came from businesses outside the parent that so far earn thin profits, and the margin gain sits in the parent. The filings give no margin by business to test that.

For context on the base: FY26 EBITDA rebuilt the same way was Rs 461.5 crore on total income of Rs 4,210.85 crore, 11.0% (our arithmetic, [RS], year ended 31 Mar 2026). H1 FY27 EBITDA margin was 14.4% against 11.8% ([PR]). The year-ago quarter's 11.4% sits close to the full-year FY26 figure, so, in our reading, the base was not a spike.

Is the year-ago comparison clean?

Mostly, on what the documents show. The two notes with one-time items concern the year to 31 March 2026: the labour-code charge (gratuity Rs 8.82 crore, compensated absence Rs 0.79 crore) after the codes were notified on 21 Nov 2025, and Rs 12.82 crore of interest on a delayed GST refund booked in March 2026 ([RS], notes 5 and 6). Neither falls in the year-ago quarter. The only dated change in the list of consolidated entities is a Shanghai subsidiary from 6 June 2025, before the year-ago quarter began. The flood loss is shown as an exceptional item and offset by an equal insurance claim, so profit before tax is unaffected on the face of the statement (see below). No document mentions US tariffs, so any effect on either quarter cannot be read from them.

The 57% is a total-income figure in the press release; revenue from operations grew 57.5% and total income 57.1% (our arithmetic). The company's table prints 111% for EBITDA growth; the rebuilt figures give the same (Rs 259.25 crore against Rs 123.08 crore).

WHERE THIS BREAKS: the bear case

• One line did the work, and nobody explains it. The company gives no breakdown of other expenses. Our reading: if the fall is fixed-cost absorption, the margin would narrow if volume stopped growing, and the filings show no year-ago volume to say how far volume grew.
• The cost lines do not point to a mix effect. The materials-and-traded-goods block rose 2.6 points, the rise coming from the traded-goods and inventory part (our arithmetic). The company says neither why nor what it contains; the chairman speaks of "inflationary market conditions" ([PR]). Our reading: a mix story would be expected to show in that block, and the filings do not show it.
• The flood is netted, not gone. Note 7 of [RS] says the Bhilad, Gujarat plant was temporarily affected by flooding; an inventory loss of Rs 45.02 crore (net of salvage) and an insurance claim of the same amount are both recognised as exceptional items, netting to nil. The insurer has approved an interim payment of Rs 14.99 crore after quarter end, leaving Rs 30.02 crore of the recognised claim above that interim payment (our arithmetic). The note mentions business-interruption losses without an amount; where they sit in the statement is not stated.
• Net debt fell while payables rose more than inventories and receivables. The press release says net debt reached its lowest ever at Rs 518 crore, 0.2x equity. Our rebuild from the balance sheet: borrowings Rs 1,048.66 crore (non-current Rs 284.96 crore plus current Rs 763.70 crore), less cash Rs 315.64 crore, other bank balances Rs 11.19 crore and current investments Rs 203.43 crore, gives Rs 518.4 crore, with leases excluded. Since 31 March, inventories rose Rs 174.0 crore and trade receivables Rs 42.2 crore, while trade payables rose Rs 254.5 crore (our arithmetic), more than both together. Operating cash flow for the half was Rs 381.98 crore. The financing section also shows supplier-finance proceeds of Rs 200.76 crore and repayments of Rs 146.86 crore in the half; the filings do not explain the arrangement.
• Quality of growth is unknown. The presentation says "Strong Operational Ramp-Up" in utility bedding and shows a total brand business of about 25%, with no basis given; volume and price are not split, and no year-ago volume is readable.
• Moat evidence is a claim, not a measure. The company describes itself as one that "ranks among the top three global manufacturers of bed linen in US" ([PR]) and credits "deeper customer relationships" ([PR]). No customer count, concentration, contract term, retention or pricing data appears. A scale advantage should show in lower costs than peers; the filings give no peer comparison. A 15.3% margin after a 11.4% quarter does not tell a franchise margin from a good quarter.
• Forward statements are the company's. The chairman says "we expect to outperform our guidance" ([PR]) and a slide says the company expects to exceed FY27 total-income and EBITDA-margin guidance; these are forward-looking and unverified, and the guidance figures were not readable.
• Review, not audit. The conclusion of Price Waterhouse is not modified, but a review "is substantially less in scope than an audit" ([RS]), and the report carries the two subsidiary matters in the notes above.

Why it costs the reader something

A reader who sees "margin 15.3% on income up 57%" and files it under brands and mix has probably put the gain in the wrong place. On the filings, the gain sits mostly in one expense line; our reading is that it is a cost-absorption result concentrated in the parent, in a half-year in which payables rose more than stock and receivables. If a moat is being paid for, the risk is paying for pricing power or mix that the numbers do not show. What would show it is the next quarter's other expenses against volume, and a breakdown of that line.

The concrete thing, again

Other expenses fell from 31.5% to 24.9% of revenue while revenue grew 57.5%, and EBITDA margin rose from 11.4% to 15.3% on the company's table. The company says it gained wallet share with customers and used its assets harder. The filings do not say what the cost line is made of, how many metres were sold a year ago, or how concentrated the customers are. Our reading: scale is the likely reason, and it is unproven.

Sources

• [RS] Indo Count, results for the quarter and half year ended 30 Sep 2026 and review report (NSE)
• [PR] Indo Count, press release on Q2 and H1 FY27 results (NSE)
• [IP] Indo Count, Q2 and H1 FY27 investor presentation (NSE)
• Earlier Moat & Margin pieces: Laurus Labs, Q2 CDMO mix and margin; Hero MotoCorp, Q2 revenue and EBITDA gap; daily filing digest, 4 November

Educational research, not investment advice. Every figure above is drawn from Indo Count Industries' own filings of 4 November 2026, read from the primary documents on 5 November 2026; derived figures are our arithmetic, labelled as such. No earnings-call transcript was read. MoatSCORE: not yet scored on the Moat Screener (checked live 5 Nov 2026). No buy/sell recommendations, no price targets, no share prices. Moat & Margin is not a SEBI-registered Research Analyst or Investment Adviser.