Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Stable demand environment and range-bound operating performance.
- High capacity utilization in the Spinning division at 99%.
- Expansion into the Indian market with three brands: Himeya, Atmosphere, and Liv.
- Presence in over 2,400 points of sale across 29 states and 350 cities in India.
- Optimistic outlook for achieving high utilization levels (over 90%) in the next 12 to 18 months.
Negative Points
- Sheeting and Terry divisions have lower utilization levels at 66% and 67%, respectively.
- Gross debt remains high at INR 2,794 crores.
- EBITDA margins are expected to remain range-bound between 18% and 22%.
- Increased absolute debtors over the last three years, leading to higher working capital requirements.
- Challenges in reducing working capital congestion and improving debtor and inventory management.
Q & A Highlights
Q: Our utilization levels have been at 66%-67% since Q2 FY24. How do you see the path of utilization levels going in the next couple of quarters in FY25 and FY26?
A: We aim to increase utilization levels to over 90% within the next 12 to 18 months. This will involve expanding our global client base, tapping more jurisdictions, broadening our product offering, and deepening our channel mix.
Q: With the increase in utilization levels, how do you see EBITDA margins panning out?
A: EBITDA margins are expected to remain range-bound between 18% and 22%, even with higher utilization levels. There will always be some headwinds and tailwinds affecting margins.
Q: What is the revenue projection for the three brands in India over the next two to three years, and what kind of margins can we expect?
A: We aim for India to contribute INR1,000 crores over the next five years. We expect EBITDA margins for the India business to be in the range of 18% to 20%, despite the presence of intermediaries.
Q: There has been a substantial increase in absolute debtors over the last three years. What changes have occurred, and how can this be corrected?
A: This is a granular issue. We are roughly at about 120 days and should be lower. We can discuss this in more detail offline.
Q: How much investment is needed to develop the India business, both in working capital and brand development?
A: The India business will be capital light and high on ROCE. We will leverage existing distribution networks, so no significant capital outlay for physical infrastructure is required. Working capital intensity will be lower than the export business.
Q: In the last call, you guided for INR4,000 crores of revenue in the next 18 months. How will you fund the working capital requirement for this growth?
A: We are focusing on decongesting current working capital to meet future growth requirements. If additional needs arise, we will address them at that point.
Q: What is the demand scenario in the US, and how are retailers looking at demand and giving orders?
A: The US market remains stable. However, we are focusing on expanding our presence in the EU, UK, India, and the Asia Pacific region. These regions offer significant growth opportunities.
Q: How is the competitive intensity in the segment today, given the issues in Pakistan and China?
A: Retailers are gradually reducing exposure to Pakistan and China. We acknowledge the range-bound utilization levels and are working on building a pipeline to improve this over the next 12 to 18 months.
Q: Do you see interest costs coming down with the reduction in working capital?
A: We are working on deleveraging initiatives, including strengthening our balance sheet and optimizing working capital cycles. This should help bring down interest costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
