Active Clothing Co Ltd (NSE: ACTIVE) Q3 2025 Earnings Call dated Feb. 17, 2025
Corporate Participants:
Rajesh Kumar Mehra — MD & Executive Director
Analysts:
Ganesh Nalawade — Analyst
Garvit Goyal — Analyst
Pratik Kulkarni — Analyst
Shaurya Punyani — Analyst
Samarth Pachchigar — Analyst
Ashish Soni — Analyst
UD Patel — Analyst
Bhuvan MG — Analyst
Ankur Gulati — Analyst
Nikki Jaiswal — Analyst
Madhav — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Active Clothing Co. Ltd. Q3FY25 earnings conference call hosted by Kirin Advisors Private Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Ganeshna Ravary from Kiran Advisors. Thank you and over to you sir.
Ganesh Nalawade — Analyst
Thank you and good afternoon everyone. On behalf of Kirin Advisors, I welcome you all to the conference call of Active Loading Limited. From the management team we have Mr. Rajesh Mehra, Managing Director; and Mr. Rahul Agarwal.
With that now I hand over the call to Mr. Rajesh Mehra for the opening remarks. Over to you sir.
Rajesh Kumar Mehra — MD & Executive Director
Good afternoon one and all. It’s my pleasure to welcome you all to our Q3 financial year 25 earnings conference call of Active Clothing Co. Ltd. To begin with I would like to give you a brief overview of the company.
Active Clothing is a premier apparel manufacturer based in Mohali, Punjab specializing in high quality plaid knitted sweaters, jackets, circular knitted T shirts and sweatshirts. We are India’s one of the leading integrated design to shelf solution provider offering end to end services including design, manufacturing, marketing and retail. Over the years we have established ourselves as a trusted partner for leading global fashion brands which includes Levi’s, George, Strategy Only, Jack and Jones, Veeramuda, Next, Skechers, Geth, Puma, Ted Baker, TJ Maxx, Benetton, Chibo and Adidas.
Our ability to offer complete apparel solutions under one roof has made us a preferred choice for high fashion streetwear brands and direct to consumer brands worldwide. We offer a state of art manufacturing to Sweden that allows us to maintain strict quality control, improve turnaround times and ensure efficient order management. Our product portfolio includes flat knitted sweaters, fly knit, shoe uppers, circular knits, outer waist jackets and woven garments.
In addition, we have expanded our offerings by introducing knitted beanies and gloves, soft knitted toys and athleair products, further strengthening our presence in the market. A key differentiator for Active Clothing is our tech enabled design and manufacturing approach. By leveraging virtual knitting and digital sampling, we enhance efficiency and sustainability in the product development.
This innovation helps brands reduce waste, save time and optimize costs while maintaining precision in design. As the fashion industry increasingly prioritizes speed, sustainability and digital integration, we continue to align our operations with these evolving needs, we are also deeply committed to ethical and sustainable manufacturing standards. Our facilities hold several industry recognized certifications including FedEx four pillars, factory capability and Capacity Assessment from Walmart Worldwide Accredited Productions which is called RAP and SA8000, Global Organic Textile Standards, Responsible Wool Standards and Global Recycle Standards apart from brands individual compliances.
Additionally, we have worked with the Certified BCI Organic Cotton Yarns and RWF Yarns reinforcing our commitment to responsible sourcing and environmentally conscious production practices. We are pleased to share our financial performance for Q3FY25 and nine months for FY25 which reflect significant growth and strong operational execution. During Q3FY25 we received a total income of 100.22 crores marking an impressive year on year growth of 89.18%. Our EBITDA stood at 9.02 crore registering a 66.11% year on year increase with an EBITDA margin of 9%. PAT came in at 3.14 crore reflecting a remarkable year on year growth of 222.83% with the PAD margin improving by 130 basis points to 3.14%. Additionally, our diluted earning per share stood at 2.02 recording a year on year growth of 220.63%.
For the nine months ended FY25 we recorded a total income of 228.36 crores representing a year on year growth of 30.70%. Our EBITDA reached 22.90 crores growing by 40.47% year on year with the EBITDA margin improving by 70 basis points to 10.03%. Patch for the period was 6.82 crore registering a strong year on year growth of 93.64% while the PAT margin improved by 97 basis points to 2.99%. Our diluted earning per share stood at 4.39 reflecting a year on year increase of 40.26%. These results underscore our strategic efforts, operational efficiencies and strong market positioning as we continue to expand and strengthen our business.
These strong financial results demonstrate the success of our strategic initiatives, operational efficiencies and growing demand of our products in both domestic and international markets. Looking ahead, we are focused on enhancing our production capacity to support future scalability. Our target is to achieve 500 crore revenue in the next three years and thousand crore in the next five years driven by rising market demand and strategic growth initiatives. To achieve this, we are Expanding our dealer network from 200 to 300 to reinforce our sales reach.
Leveraging AI driven design, smart manufacturing and database backed marketing to optimize operations and improve efficiency. Strengthening partnerships with leading fashion brands in both domestic and international markets to solidify our global presence. Focusing on eco friendly materials and advanced production techniques to align with the industry. Shift towards Sustainability as one of the leading companies in India offering a true design to retail model, active clothing company is well positioned for future growth.
With increasing demand from premium global brands and a strong technological foundation, we continue to expand our reach particularly in the high fashion winterwear segment. Our robust manufacturing capabilities, commitment to quality and focus on sustainability make us a trusted name in the global apparel industry.
Before we move to the question answer session, I would like to express my sincere gratitude to all our stakeholders, our employees, our customers, business partners and investors who have played a crucial role in this journey. Your support and confidence in active clothing continues to drive our success and we remain committed to delivering sustained growth and value for all stakeholders.
With that, I now open the floor for questions.
Questions and Answers:
Operator
Thank you. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and do. Participants are requested to use handset while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles participants. You may press star N1 to ask the question. First question is from the line of Garved Goyal from Invest Analytics. Please go ahead.
Garvit Goyal
Good afternoon sir. Congrats for a decent set of numbers. My question is like what are the factors that are driving the kind of growth that we have delivered and secondly are these sectors sustainable? Because historically also in last two financial years there is always a one quarter where we show a decent jump numbers and then there is a fall in the top line in the following quarter. So I just want to understand like how this time is different and what are what kind of top line are we targeting for FY25 and FY26?
Rajesh Kumar Mehra
Thanks for your question. This is all the growth is due to the inputs by state and half art active design center to bring brands mobilized bigger orders with the increasing turnover fixed over at the trading costs leading to the better profitability as well as your answer to the sustainability. Yes, our growth would continue uninterrupted.
Garvit Goyal
What is our top line target for FY25 and 26?
Rajesh Kumar Mehra
Yeah, FY25 will be closing around 300 and in next two years we two to three years we are planning to. We have a target for 500 crores. As I told in the my earlier when I joined the meeting.
Garvit Goyal
When we are focusing on two to three years medium term target are we. Are we anticipating any kind of slowdown in FY26? Because we are not particularly providing any number for FY26. Is there any specific reason.
Rajesh Kumar Mehra
FY23 you need to say 26. 26. 26. Yeah. 26 will be doing 400, 325. 426 and 500 around 27.
Garvit Goyal
Understood. And you mentioned like profitability is getting improved on account of new brand getting on boarded and the kind of initiatives you are undertaking. I just want to understand like from here onward what is the kind of margin profile can we anticipate like is it going to be improvement over the existing margins or how the margins are going to shape up?
Rajesh Kumar Mehra
Yeah. These bigger turnovers would help in spreading overhead costs. In addition to additional customer portfolio and value added products will help the building better margins.
Garvit Goyal
Understood sir. Thank you very much.
Rajesh Kumar Mehra
Thank you.
Operator
Thank you. Participants, you may press star and one to ask a question. Next question is from Land of Pratik from Kamayaka Wealth Management. Please go ahead.
Pratik Kulkarni
Hello sir. Good afternoon.
Rajesh Kumar Mehra
You are not fully correctly audible.
Pratik Kulkarni
Oh sorry. Sorry. Am I audible now?
Rajesh Kumar Mehra
Yes, yes.
Pratik Kulkarni
So in the recent presentation we have given our utilization numbers for sweaters, jacket, T shirts and shoe of us. So this wanted to know that whatever the revenue growth which is going to come in the next two to three years is it going to be you know due to increasing volume or increasing you know price realizations or like increase in margins.
Garvit Goyal
Growth will come from the all. All top line growth will be there and bottom end growth will be there. That will be will come with the existing expansion plans. What we are companies under into. So we are adding more infrastructure and once that infrastructure will be completed in next 34 months time and that is put into the production automatically that infrastructure will give us a additional turnover of 150 to 200 crores.
Pratik Kulkarni
Okay. And sorry sir, if I can ask it again about the expansion plans. I might have mentioned the beginning of the phone.
Rajesh Kumar Mehra
Yeah. Infrastructure is already created. The building, building is already into the process. We are creating a 1 lakh 50,000 square feet additional area. And now the paint work is going on and it is at the final, the final stages and once that is done so then the machinery installation will be there. So roughly four months more time is required to commission that expansion.
Pratik Kulkarni
Okay. Thank you sir.
Operator
Thank you. Next question is from line of Shoria from Archer Partners. Please go ahead.
Shaurya Punyani
Yeah sir, just on that expansion plan so your current capacity I mentioned the PPT is around 46 lakhs. So post expansion where it will. Where it will go to?
Rajesh Kumar Mehra
We are doing approximately 70% increase our capacity. 70% increase.
Shaurya Punyani
And what is the amount of capex we have spent or going to spend on this project?
Rajesh Kumar Mehra
Approximately the capex into the civil which is the land building and machinery we have spend it around 30 crores and in machinery around another 30 crores capex we have done. Yeah. Some of the expense has already been incurred and some is yet to be increased.
Shaurya Punyani
But everything will be done in next four months. You are saying right?
Rajesh Kumar Mehra
Yes. Yes.
Shaurya Punyani
And how it was funded?
Rajesh Kumar Mehra
No, it’s already in the balance sheet. If you see we have a. We have funded this project with the internal crews and from the bank debt.
Shaurya Punyani
Okay. Okay. And how much percentage was the debt? I mean the ratio to internal was.
Rajesh Kumar Mehra
And debt again 60 crores. We have taken a debt of 32 crores.
Shaurya Punyani
32 crores. Okay sir, thank you. That. That answers my question.
Operator
Thank you. Next question is from line of someone from Krijuna and research. Please go ahead.
Samarth Pachchigar
Good afternoon sir and congratulations on a wonderful set of numbers. I have couple of questions sir. So sir, when I see the yearly numbers from past couple of years we see there is an improvement in gross margin but we still aren’t seeing any operating leverage getting played out here. So can you explain me the reason for this?
Rajesh Kumar Mehra
If you see the beta is on a higher side and because since this is the activity is more capex oriented, very heavy capex with their land building machinery. You have to invest more in this business and interest also is a factor which is reducing our net vouchers, net profits.
Samarth Pachchigar
Okay sir, but there is another observation which I have is let’s say in 2020 our material cost was around 70%. Then our employee cost was around 14%. But now when I see the material cost has spread but an employee cost has increased a lot. So what is the reason behind this? What is the reason behind this thing?
Rajesh Kumar Mehra
Actually earlier we were driving the company at now as all the professionals, top of the line professional team is handling the business and the change in the product mix offering is like that where we are doing more value added products and doing by doing the value added products your cost to salary and wages goes on a higher side.
Samarth Pachchigar
Okay. Okay. Now sir, second question which I have is around the distribution side of the business. So can you tell me that? Why? Because when I see across the board, when I compare, when I see the larger players, none of them are involved in providing distribution as a service and we are the one which are providing it. So what is the reason for us to provide that? Because it is a more working capital intensive business.
Rajesh Kumar Mehra
But we’re doing since inception like this because most of the brands they trust on our marketing capabilities and design capabilities. And the solution, what we provide to them is sketch to store. So we start from the concept stage and take the responsibility till the delivery to the shelves.
Samarth Pachchigar
Okay. Okay. And in 2018 we got a. That is our, that is our USPU, I think. Okay. In 2018, for example, when I see that we got in distribution right from Adidas and it is now that we have got the manufacturing contract from Adidas. So why there was a gap between first distribution we got and then we got the manufacturing.
Rajesh Kumar Mehra
So it’s not easy to be on board of these bigger companies. So you have to first develop the products which these brands need. What is the gap in their sourcing? You have to identify and then you can approach them to be on this supplier list. These all brands are under consolidation mode. And entering a new vendor with these kind of companies is very, very difficult. Very few in five years time, six years time they open one vendor or two vendor. So that is only the. When they are closing with someone, you are saying that they.
Samarth Pachchigar
Okay, so you are saying that they opened the window now and then we got the part. Is that true? To my understanding,
Rajesh Kumar Mehra
No, no. It takes time to be on the board. So if I am making a product and we are already sourcing a product, then why they want me to be there. So I have to make some product which they are currently not sourcing or their existing vendor is not able to make that kind of a product, only then I’ll get the entry.
Samarth Pachchigar
Okay. And now sir, one last question which I have is when I see the realization for the product that we have, we have the highest for jackets and sweaters followed by T shirts. So what would be the revenue contribution? Approximately, if you can tell me from the products.
Rajesh Kumar Mehra
Approximately 50% revenue is coming from sweaters, 30% from jackets and 20% balance from T shirts as well as the shoe.
Samarth Pachchigar
And since now we have 50% revenue coming from sweaters for which the demand is mostly around November quarter, but we have September as our heavy quarter. So what is the reason behind having September as a heavy quarter? For us.
Rajesh Kumar Mehra
It’s a 12 month business. It’s not particularly that demand is all the brands they take the deliveries starting from March, April onwards for their coming season. If I am sending a goods to usa so their window for autumn winter the seasons are completed like this Autumn first is autumn or so then they take deliveries from the March. So it is around the year business. The kind of a product what we made with the heavy sweater and light sweater just on the as a layered layering solutions. So concept what we are making in in our product. So we are not a seasonal manufacturer. It’s a 12 month running business.
Samarth Pachchigar
Okay. And just on one side I want to understand in we did one designing for a world’s largest jeans denim manufacturing company. So what actually we provided to them that we got the contract for that for the whole winter line that we did for them.
Rajesh Kumar Mehra
In fact we are the only one company who is providing all these kind of solutions. And if you see the device the winterware category we are the only fruit factory in India. And even for the best sellers we are only the fruit factory in India. So our design portfolio strength is very very on a bigger size. So whatever my design team forecasts it really converted into a good amount of sales at the retail points. So this is the reason.
Samarth Pachchigar
So what would be the size of our designing team? If you can say.
Rajesh Kumar Mehra
Currently we have around 40 people who are into the product development team design and product development.
Samarth Pachchigar
Okay. Thank you sir. Thank you. Thank you sir. I’ll join back in the queue.
Operator
Thank you. Next question is from Ashish Soni from family office. Please go ahead.
Ashish Soni
So regarding this growth plan. So is it backed by a confirmed contract with the customer or it’s only right now your ambition.
Rajesh Kumar Mehra
We have like we are providing this sketch to store business. So the GTM that go to market process for starting from the concept phase and to the Delivery it takes 15 months. So at any given point of time we have a visibility for the next 15 month business. So we have a clear visibility that in FY26 we will be doing a turnover of 400 crores. So because all the designing has already been started, the forecast number has already been in place with us from the brands.
Ashish Soni
And in terms of this tech driven excellence in slide 40. So can you explain like what is different thing you are doing? Like you said, AI power design, smart manufacturing and data back marketing. So what are the new things we have tried or implemented in last one or two years?
Rajesh Kumar Mehra
That’s we started with the first, we started with the 3D and once we get a design brief and my team starts co creation with the brand’s design team then the first presentation is on the 3D presentation without wasting any raw material and without consuming any time for the manufacturing or PDF. So on these 3D designs the customer selects and creates the final line. And then it goes to the making first protos and other things. So where the actual time is consumed. This is the first part. And all latest software we are using in this.
Then we are using also a software when which is a tech enabled where brand design team who is sitting in a say UK or USA and they have. They are also having the same software and they open and if they do want to do any kind of corrections simultaneously my design team doing the corrections on the screen. And if they say you have put the red color now make it more redder or less redder.
Every screen is pantone calibrated and you see the actual color of the fabric on the screen of the computer. So it is very easy and very fast. Agility is there because no physical samples are going. When these all things are finalized, then it goes to the production. This is the technological help what we are taking as far as the artificial intelligence in the designs you are concerned. So what we are mapping the data in our systems that what the brands are selling, which category they are selling more. Because it is about the forecasting and we are doing it from last 20 years. So that kind of experience and niche we have. Whatever we forecast, we assure that this much product will sell and contribute into their growth.
Ashish Soni
Okay, and in terms of your revenue expansion, whatever you are scaling, you’re talking about. So is it including only existing customer or you are planning to onboard some new customer like Nike or some other customers like that? Just an example.
Rajesh Kumar Mehra
We are already in talk with the negotiations with the other customers. Currently we have 15 brands with whom we are doing business. But negotiations are in the process with a few other globally customers to take them on board for the upcoming bigger capacities.
Ashish Soni
And do you think you can reach like 5% fat margin in next two to three years, aspiration wise?
Rajesh Kumar Mehra
Yes, we are trying on it.
Ashish Soni
And what’s. What’s our main competitor in this space in India. And are we getting benefit from Bangladesh like movement or consolidation from our global brand?
Rajesh Kumar Mehra
Yeah, we assume that Active don’t have any competitor within. No company in India is offering all services in under one rules. Someone is offering only design, someone is offering only sourcing and someone is doing one category. Here we are doing different different categories also and giving one stop stop solution to the brand.
As far as your question about the Bangladesh. Yes, we got lot of inquiries after the Bangladesh and even the all brands are moving out their business from China. So we are getting lot of shift from China also. And that is why the business is going up. And we have already tied up our increased manufacturing capacities majorly 50% with this current brand. And 50% capacity will be allocated to the new customers with whom we are already under the negotiation process. Their audits are in process, some evaluations are going under.
Ashish Soni
And just one last question. This thousand crore revenue aspirations. So does it require any land acquisition or something or do you think in existing facility?
Rajesh Kumar Mehra
Yes, yes, it will require. It will require. Okay. Okay. And approximately how much will be the capex for that 4000k revenue? We will. We’ll be requiring a capital land building and machinery would be roughly 150 crores.
Ashish Soni
Okay, thanks and all the best.
Rajesh Kumar Mehra
Thank you.
Operator
Thank you very much. Next question is from language Patel from Pinterest Capital. Please go ahead.
UD Patel
Hello sir. Am I audible?
Rajesh Kumar Mehra
Yes.
UD Patel
Congratulations on a decent set of numbers. Sir, I. I had a couple of questions. Primarily with the increase in capacity by 70% what is the peak revenue that you can generate?
Rajesh Kumar Mehra
What you said. Can you repeat the question with the.
UD Patel
Let’s say we are increasing our capacity by 70%. Correct. So what is the peak revenue that our entire facility can, you know, generate?
Rajesh Kumar Mehra
Peak revenue? Yeah, 500.
UD Patel
For our plans to, you know, achieve thousand crores. Do we have any other expansion plans coming up in the future?
Rajesh Kumar Mehra
Yes, definitely. There is expansion plan already papered and everything is done. So we will bring that expansion plan in at the end of 26.
UD Patel
Okay. And so currently what is our export percentage? And you know.
Rajesh Kumar Mehra
25% business is exports and 75% is our domestic.
UD Patel
And supposed our capacity enhancement. Will the export percentage increase or do you have any plans for that?
Rajesh Kumar Mehra
We are focusing more on export business because we’ll increase this export percentage and we target ultimate target is 50, 50, 50% domestic and 50% global business. Because the most of the inquiries and customers who are brands who are sourcing from other parts like China and Bangladesh. So they are shifting their orders in India with those vendors whom their India office is already working that upper as we are having. And so you know shoe uppers is a very interesting vertical. So can you throw some light on the opportunity size and you know are there any companies that you are targeting after Adidas? Because Adidas is a very significant player in this space.
We are apart from Adidas and It takes about 75% of our capacity in shoe. Of course what we are doing apart from that we are doing for sketches we are doing for Reebok. We are already doing for us for look and now new development under process for Puma.
UD Patel
Okay sir. And you know one last bookkeeping question. Sir, you know our cash conversion cycle seems a little stretched. So is there any particular reason or is this, you know a norm?
Rajesh Kumar Mehra
This industry goes like this only. The total cycle is about 200 to 220 days. Because 19 to 120 days we require give the credit to the brand. And 90 to 120 days depending on the product is the manufacturing cycle. From procurement of wrong drill till the Dispatch it takes 90 to 120 days if it is a basic product, 90 days if it is a value added product. So another 30 days as you added. So this is the industry standards of apparel manufacturing in sweaters or in outer gear.
UD Patel
Got it? Got it. Thank you sir. I’ll get back in the queue.
Rajesh Kumar Mehra
Thank you very much.
Operator
Thank you. Next question is from line of Samarth from Krijuna Research. Please go ahead.
Samarth Pachchigar
Hello sir. Thank you for once again the opportunity. Sir, in the manufacturing line of facility that we have, I would like to understand the value chain of the business actually that what how many processes are we doing in house and how many of them are exactly out? We are outsourcing right now.
Garvit Goyal
Nothing is outsourced. Every we buy yarn and deliver the garment. If knitting is done inside washing, we have a bigger laundry, we have dyeing, garment dyeing, we have printing. Everything is in house. Embroideries, everything is in house. Nothing goes outside the factory. Because the kind of brand with whom we are working so they they require a very strict standards of compliances. So the factory has to be approved. So we don’t do any outsource or any subcontracting things. We don’t do it Everything is in house.
Samarth Pachchigar
Okay. Okay. Now when sir, when I see that the current capacity that we have it is been utilized for sweaters is around 85%. T shirts is around 50%. So how much more can we do from the existing facility and from the new facility? What would be the revenue that can be expect and how fast it would be ramp up? It’s like we already have the orders or we will first have the facility and then we will go for orders.
Rajesh Kumar Mehra
Yeah, already, already you facility is under a completion stage. So building is already almost complete. Paint work is going on. Once this is completed, the machinery will be installed and we are expecting to commission the new expansion by next four months time. The question is already answered to Sharia.
Samarth Pachchigar
But sir, I am asking about the how ramp up do we already have the orders or we will be going for orders after the.
Rajesh Kumar Mehra
We have already booked the order for the new capacity to come. As I explained, this process is 15 months from concept to delivery. So we have all the visibilities in which one what we have to do. When the order will come, when the sample will go, when the production will is required. When the delivery goes happen. And then the goods go to the floor for sale. So clear visibility.
Samarth Pachchigar
Okay. And sir, in the last few quarters from June 24th when I see the material cost has decreased significantly whereas the significantly. So what is the possible probable reason for that? Is it like that we are doing more of value added or it is something else?
Rajesh Kumar Mehra
Different products like sweaters, T shirts, jackets, different products what we are doing. So depending upon the design, the cost of round trail changes. It’s. It can be 25%, it can be 40%, it can be 70%. Everything depends upon the product and the style what we are manufacturing.
Samarth Pachchigar
Okay. Sure sir. Thank you so much.
Operator
I request to come back for a follow please. Thank you. A request to all the participants. Kindly restrict to two questions per participant so the management can address all the participants questions. Next question is from Lanav Bhuvan MG from Tiger Assets. Please go ahead.
Bhuvan MG
Thank you for the opportunity sir. And congrats on good set of numbers. My first question is as you have been awarded as Steven supplier from Merida’s in Coma. How much part of revenue and growth you see contributing from these two companies? And can you throw some more light on the agreement which we have.
Rajesh Kumar Mehra
Year one in the year one we are expecting from these companies 10 to 15th row of business when we are on their T1 board. And that is all about outerwear business from Puma.
Bhuvan MG
Okay. What about Adidas?
Rajesh Kumar Mehra
Adidas. We. are currently developing the new category that Denny Beanies and gloves for them.
Bhuvan MG
Okay. Can you also throw some light on order book?
Garvit Goyal
Order book. Currently if you see we are having 130crores it approximately orders out of 130crores. 40, 45crores are from the global market. And rest are from the domestic market.
Bhuvan MG
Okay, so post expansion. Yes, sorry.
Rajesh Kumar Mehra
Getting the orders is a continuous process. Once your collection is complete, it is presented to the buyer. Buyer selects a line and then you make the samples. It’s a continuous process. Some brands run four seasons, some brand six seasons. Also in a year like yes, we are working. So we are working gas for the globally and gas is running six seasons. So every two months orders comes. Every two months new collection Goes.
Bhuvan MG
Okay, so one last question. As you said post expansion you will be focusing on export orders. Mainly our market would be US and Europe. So with the recent development on tariff of reciprocal tariff from US administration, what is your opinion on that and how it would affect us.
Rajesh Kumar Mehra
Since it see currently India will be more benefited from these tariffs. As of now the US government is not considering to put something on India. But if something comes also even then at that time we will be more competitive than the other manufacturing nations. Say Mexico is a landless exporter to. So 25% tariff is increased. So China again 10, 15% tariff is there. And moreover they are moving out. This is all static strategic decisions by the brand to move out from China.
And with the recent visit of Prime Minister Modi where they have discussed more about the business contracts, business relationship and the balance of currency business by importing more goods from us. So we think that tariffs in America will not affect us. But on the other hand my current business in US is very very small. We are operating in 30 countries and majorly they are from European market and other markets. Canada, Mexico, like that. Even Asian countries where there we are exporting sweaters to China also.
Bhuvan MG
Okay, okay, that’s good to hear. And then sir, can you provide any margin guidance?
Rajesh Kumar Mehra
Margin guidance? We have already I think told in the first question when Javit asked me that our bigger turnovers would help us in increasing our margins because our overhead will be spreaded and the additional customer portfolio, the new product developments, value added product developments, all these will help in building up the more margin percentage.
Bhuvan MG
So can you give us any quantitative number?
Rajesh Kumar Mehra
Our target is net profit post tax is 5%. Okay. Okay. Thank you and all the best.
Operator
Thank you. Participants, can you receive to two questions per participant? Next question is from line of Pratik from Karl. Well, please go ahead.
Pratik Kulkarni
Thank you for the opportunity. The question has been answered but I’ll phrase it in another manner. So sorry sir, is it okay now? Yes. Yeah. So I do see that on the balance sheet we have almost 72.8 crores of you know, equity and reserves. But the short term borrowings are almost 92 crores. So is it the nature of the business and are these borrowings expected to increase further as our businesses grow or can it come down?
Rajesh Kumar Mehra
This is the nature of business. As I explained that the total cycle is between 200 to 220 days. We are 90 to 120 days depending upon the product to product is required for manufacture the product and 90 to 120 days is the credit period. Into the market.
Pratik Kulkarni
Okay. Thank you.
Operator
Thank you. Next question is from line of Ankur Gulati from genuine capital markets. Please go ahead.
Ankur Gulati
Historical.
Operator
Or degree is not clear. Can you speak a little louder please? Is it better though? Slightly.
Ankur Gulati
How big is in 2002? 22 year old relationship. 775. What we are doing? Sorry. Out of 250 crores your annual levels must have 75 crore distribution. This.
Garvit Goyal
This year we are targeting 300 crore business. Out of that 75 cr would be from marketing business. We have license to distribute in certain geographies. Yes, yes, yes.
Ankur Gulati
And sir if you don’t mind your concert geography size. Is it only northern India or Pan India? No, it’s not Tan India. It’s the regional.
Rajesh Kumar Mehra
We are covering states from Punjab, Himachal. This is upper north of India. Approximately if we talk about from the retail price point. So the gross margin comes to about 8 to 9% and.
Ankur Gulati
Okay. And sir, earlier you said that you will send designs to let’s say all these clients. If they approve the design then they give the order. So God forbid if design is not approved then what?
Rajesh Kumar Mehra
Then we keep on making new designs. But when? Whenever we are developing it. I use the word co creation. So every time we are getting the activity with the meeting with the design teams. Also it’s a joint exercise. What we it depends upon product to product. So compared to distribution manufacturing it will be organic. Okay.
Ankur Gulati
All right. Thank you sir. All the best.
Operator
Thank you. Next question is from 9 of Nikki JS 1 individual investor please go ahead.
Nikki Jaiswal
Purchase of stock and trade material in house consumed. Purchase of stock in trade for marketing purpose. That is stock and trade is one of the very big company in from Germany. Then we are working for George which is Walmart owned. Then we are working with. Next we are working with Lyland Scott. We are working with gas. We are working with Skechers. So all these brands, we are working with them globally. Existing brands. Thank you sir. Thank you.
Operator
Thank you. Next question is from line of mother. Individual investor please go ahead.
Madhav
Hello. Am I audible? Yes, you are. Yes, we can hear you but it’s not here.
Operator
Can you speak a little louder please?
Madhav
My question is are there any initiatives focused on improving energy efficiency and resource utilization facilities?
Rajesh Kumar Mehra
Not. Not audible again not Mado.
Operator
Can you speak through the handset please?
Madhav
Am I audible now? Hello. So yeah. My question was are there any initiative focused on improving energy efficiencies and resource utilization?
Rajesh Kumar Mehra
Yes, we have already commissioned last month a solar power plant which is 50% of my current contract demand from the power.
Madhav
Okay, my next question would be what role does automation play in your production process and how are you leveraging technology to improve efficiency and reduce cost?
Rajesh Kumar Mehra
Yeah, the kind of machinery what we are having with us all are fully computerized machines. We are machine ratio is drastically gone down and as can be values we can easily see on the screen. Each machine is linked on a LAN and it can be controlled from one room. So the plant we have latest from Germany stole Germany and Shima Saki Japan. So this is the latest machinery in this category. What is available presently globally we have. We can see the how much this machine is stored. Which machine is running.
Operator
Okay, thank you. Yeah, that’s it for my side. Thank you very much, ladies and gentlemen. We’ll take that as a last question. I’ll now hand the conference over to Ganesh for closing comments.
Ganesh Nalawade
Thank you everyone for joining the conference call of Active Clothing Limited. If you have any further queries, you can write us@researcherinadvisors.com Once again, thank you everyone for joining the conference.
Operator
Thank you very much on behalf of Kirin Advisors Private Limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.
Rajesh Kumar Mehra
Thank you very much.