Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Banswara Syntex Ltd (BOM:503722, Financial) reported an 8.4% increase in total income for Q2 FY25, reaching INR345.2 crore.
- The fabric division showed strong performance with a 24.4% revenue growth in Q2 FY25 compared to the same quarter last year.
- The company is optimistic about future growth due to improved demand from both domestic and export markets, particularly in the US and European regions.
- Banswara Syntex Ltd is investing in modernization to improve productivity and reduce labor costs, which is expected to enhance margins in the future.
- The garment division experienced a significant 55.6% increase in revenue on a quarter-on-quarter basis, indicating a revival in demand.
Negative Points
- The yarn division faced a 23% decline in revenue year-on-year for the first half of FY25, attributed to pricing pressure and subdued demand.
- Inventory levels have risen, with a notable increase in fiber inventory due to rising fiber prices.
- The company's profit margins are under pressure, with challenges in the yarn business affecting overall profitability.
- There is uncertainty regarding the relief from current pricing pressures within the spinning industry, impacting the yarn division.
- The technical textile joint venture with Tesco is progressing steadily but has not yet achieved high growth, with intense competition in the automotive fabric business.
Q & A Highlights
Q: What opportunities do you foresee in the second half of the fiscal year in domestic and export markets, especially with US retailers completing destocking?
A: We expect increased order book positions in both domestic and export markets for fabric and garments. The yarn business, being a commodity, has limited visibility beyond 30 days. However, we anticipate stable revenue in Q3 and Q4, potentially benefiting from US tariff differences favoring India over China.
Q: When do you anticipate inventory levels returning to normal, and what factors might influence this timeline?
A: Inventory levels, which have risen by about INR50 crore, are expected to normalize by the end of Q3. This increase was due to higher fiber prices and slower customer lifting of finished goods, which are confirmed orders set to be dispatched within Q3.
Q: How do you plan to utilize the term loan, and will there be an increase in borrowings in the coming quarters?
A: The term loan, approximately INR90 crore, is being used to modernize spinning, finishing, and garmenting equipment, aiming to increase productivity and reduce labor costs. While working capital borrowings should decrease, long-term borrowings may slightly increase as modernization continues over the next 12 months.
Q: Have internal issues in Bangladesh affected demand for your garment business?
A: Yes, we are seeing a positive trend in order book positions for Q3 and Q4, partly due to Bangladesh's situation. We face labor shortages to handle increased orders, indicating a shift in demand towards India, which is expected to continue.
Q: How is the technical textile joint venture with Tesco performing?
A: The joint venture achieved a revenue of INR40 crore and a profit of INR2.5 crore in the first half. While growth is steady, the automotive industry challenges limit high growth potential. The venture is expected to reach INR200 crore annually, depending on automotive sector growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
