GHCL Textiles Ltd (NSE: GHCLTEXTIL) Q1 2026 Earnings Call dated Jul. 29, 2025
Corporate Participants:
Unidentified Speaker
Ravi Shanker Jalan — Non-Executive Director
Raman Chopra — Non-Executive Director
Marshal Rajendrakumar Sonavane — Chief Executive Officer
Manu Jain — Head Investor Relations
Parasuraman — Chief Financial Officer
Analysts:
Unidentified Participant
Garima Singla — Analyst
Jatin Damania — Analyst
Param Vora — Analyst
Raman KV — Analyst
Amey Chheda — Analyst
Dipesh Sancheti — Analyst
Ritesh Gandhi — Analyst
Saket Kapoor — Analyst
Aman Jain — Analyst
Presentation:
operator
Ladies and gentlemen. Good day and welcome to GHCL Textiles Q1FY26 earnings conference call hosted by Coindia Advisors. 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. Continue. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchdown phone.
Please note that this conference has been recorded. I now hand the conference over to Ms. Karima Singla. Thank you. And over to you, ma’.
Garima Singla — Analyst
Thank you. Good afternoon everyone. A very warm welcome to everyone attending the GHCI Textiles Quarter 1 Financial Year 26 Earnings Conference Call today. On the call we are joined by Mr. Harat Shalan, Non Executive Director, Mr. Raman Chopra, Non Executive Director, Mr. Marshall Sonavane, Senior Mr. Parsuraman M CFO and Mr. Manu Jain, Head Investor Relations. Please note that the discussion on today’s call may include certain forward looking statements. Therefore they must be viewed in conjunction with three phases. I now hand over the call to Mr. Arif Chalan for his opening remarks. Thank you. And over to you sir.
Ravi Shanker Jalan — Non-Executive Director
Thank you very much. Thank you very much. I would request Mr. Marcel to give the opening remarks.
Marshal Rajendrakumar Sonavane — Chief Executive Officer
Good afternoon everyone and a warm welcome to GHCL Textiles first quarter FY26 earnings conference call. I am Marshal Sonavane and as the CEO, I am pleased to address you today. As the operator mentioned, I am joined here by my leadership team and our investor relations team. Our detailed results and investor presentations are available on the stock exchanges and our company website. I’ll begin with an overview of the operating environment and our performance followed by key updates on our strategic projects. On the cotton front, domestic prices remain stable for several quarters but have recently firmed up up to around 58,000 per candy mug.
Global cotton markets continue to see volatility due to ongoing trade tensions. Demand for yarn was mixed. While the weaving segment remained stable, the knitting segment continued to face headwinds. Overall market sentiment was weakened by the US Tariff discussions which limited customer offtake to only essential and short term orders. As a result, yarn pricing and margins remained under pressure across the industry and we faced the same. Now turning to our performance for the quarter, our revenue was Impacted by the tough market conditions. Revenue stood at rupees 270 crores, seeing a decline of 6.5% year on year due to reduction in sales.
Yarn volume despite this, EBITDA increased by 10.5% year on year to 32 crores and PAT increased by 15% YOY to 14 crores. This is due to operational efficiency and savings in cotton cost. Our ability to maintain the profitability despite these challenges highlight the strength of our operations and the trust of our key customers. Beyond the numbers, I want to focus on our strategy and its execution. Since few years we have embarked on the journey of spindle expansion and vertical integration. I’m delighted to report the successful commissioning of our new State of the Arts 25,000 spindle unit.
First, production has commenced on schedule, a testament to our team’s excellent project execution capabilities. Second, the yarn produced is of exceptional quality and has already received very positive feedback and acceptance from our customers. Third, we are in the process of scaling up operations and expect a full ramp up by the third quarter of this fiscal year. Following this will be our vertical integration into knitted fabrics with installation of 15 machines from October onwards. We should see a full scale execution of this from quarter four FY26. These projects are a direct reflection of our long term vision and commitment to value creation.
Our focus remains firmly on key strategic priorities which consist of broadening our value added product portfolio, enhancing operational excellence and strengthening vertical integration. These priorities directly guide our capital allocation strategy as well. Our committed investment plan of over 1000 crores remains firmly on track out of which we have invested 570 crores so far. With the remaining capital being deployed towards further vertical integration opportunities in weaving and processing, our goal remains to become a premium ready to cut fabric manufacturer targeting a top line of 2x of what we achieved last year, a double digit ROCE and an EBITDA margin of 15% to 18% over the next 4, 5 years.
Backed by a strong balance sheet and highly capable team, we are confident in sustaining our growth momentum and delivering superior value to all our stakeholders. Thank you for your continued support. We would now be happy to take your questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask the question may press Sharon 1 on the Touchstone telephone. If you wish to remove yourself from the question queue, you will press STAR and two participants are requested to use answers while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of JATINDAMANIA from Swan Investments. Please go ahead.
Jatin Damania
Good evening sir and thank you for the opportunity. Congratulations on the different sets of numbers in the tough environment. So first I wanted to understand on expansion part now our 25,000 spindles of commission probably which will give us an incremental revenue of 250crores. Now when we move to a meeting where we are setting up our machines in two phases. So can you help us understand what is the capex that you will be doing it for a knitting and what sorts of revenue and margin one can get from a knitting site.
Marshal Rajendrakumar Sonavane
Hi Jatin. So basically overall capex for the knitting 40 machines is about 38 crores including plant building. And I think this 38 crores would generate an additional revenue of about 80 crores. 75 to 80 crores is what additional revenue would be generated. And I think on an overall basis on the fabric, on the yarn which will convert to fabric right. From end to end, from cotton to fabric, the margins would be in the range about 14 to 15%.
Jatin Damania
So 14 to 15% on the nicket. So that means incremental revenue for FY27 we should see 250 crores coming on from the yarn and near about 75 odd from the meeting. So 325 crores of the incremental revenue on the base of FY20.
Marshal Rajendrakumar Sonavane
Correct? Correct. Yeah, your voice broke in between. But yeah, I, I understand that you are asking whether you are correct on these. But yes, I think that is what we are projecting as well.
Jatin Damania
And sir, on the Greg Frederick fund, how do we see. Because our revenue and I mean if you look at the volumes are in increasing on quarter on quarter if compared to last year. Definitely sequentially it’s on downside. But are we increasing our outsourcing on the gray fabric and how should we look at the revenue contribution on that front?
Marshal Rajendrakumar Sonavane
So currently if you see this quarter, our total fabric as a percentage of revenue was about 9.3% almost at a similar level to last quarter. Right. So I think this number we are sort of working on improving further what we are expecting that probably by year end we would be about 12 to 15% on our outsourced fabric.
Jatin Damania
And in terms of the capex that we spent last year, we aren’t seeing any significant increase in the revenue in the first quarter. So is it that because of a realization or because of a lower demand, volume was on the lower end and probably we could see a pickup in second half.
Marshal Rajendrakumar Sonavane
The new 25,000 spindles commissioning happened in June. Right. So of Course this quarter there will be a ramp up phase for this new investment. I think the full value of 25,000 spindles can be realized from quarter three onwards.
Jatin Damania
And sir, more on the strategic and vision front. So as a company are we intend to remain focused only on the ready to cut fabrics or we are probably looking at one step higher in going to a garmenting also.
Marshal Rajendrakumar Sonavane
As of now, our sort of vision is to become a premium ready to cut fabric supplier. I think of course if there are opportunities available in garmenting, we as a company are always open to it.
Jatin Damania
And is there any other expansion which is lined up into a yarn in the yarn space, whether it’s a dye yarn or a premium yarn.
Marshal Rajendrakumar Sonavane
For at. Least the next two, three years. Our idea is to go stronger on our vertical integration journey. So as we have done in knitting, we probably will explore more on weaving segment as well.
Jatin Damania
Last question on the solar power and solar energy, definitely we are focusing more on the renewable power. So what sorts of cost benefit one should see coming in from second half of FY26 and full year of FY27 that will help the entire company to improvise on the margin.
Marshal Rajendrakumar Sonavane
You basically want to ask about our new investment in rooftop solar, is that so? Yes. So basically that what we are projecting is that because of our additional demand happening out of our 25,000 new spindles, the solar and few other arrangements which we are doing on power would help us save about one or two rupees per unit, which probably would translate to. About. Additional benefit about 4 crores because the new unit would consume about 2, 2 and a half crore units. Your voice breaks in between.
Jatin Damania
Yeah, that’s all from my side. If I have more questions, I’ll join back in a few. Thank you and all the best.
Marshal Rajendrakumar Sonavane
Thank you.
operator
Thank you. Participants who wish to ask questions may press star and one at this time. The next question is from the line of Parambora from three nets and asset managers. Please go ahead.
Param Vora
Hello, good afternoon and thank you for taking my question. So what I wanted to ask was how has the order book of the company evolved in the last quarter, especially from export markets due to ongoing geopolitical instabilities. So are there any strategic efforts underway to reduce dependence on specific geographies?
Marshal Rajendrakumar Sonavane
So I think we have given the export number in the earnings presentation as well. Our export for this quarter particularly was for about 6% of our overall revenue. Right. While last quarter it was almost at about 11%. Right. And overall last year we clocked about 18%. Yes, I think you got it right. Quarter one. Hello.
Param Vora
Hello.
Marshal Rajendrakumar Sonavane
Yes, From a geopolitical perspective I think quarter one was extremely challenging and that is the reason why the sort of dip in exports primarily came from the European markets where we saw particular sluggishness on an overall level.
Ravi Shanker Jalan
I think one request to someone who is this? A lot of background voice is coming. I would request all the participants please mute yourself. A lot of backlog are coming.
Marshal Rajendrakumar Sonavane
Moderator, can you help? I think there is a background noise.
operator
Due to this server. To the next question. The next question is from the line of Raman KV from Sequent Investments. Please go ahead.
Raman KV
Hello sir, can you hear me?
Marshal Rajendrakumar Sonavane
Yes, I can hear you.
Raman KV
So in the opening remark you mentioned that the domestic cotton prices was was at around 58,000 per candle which has increased over the previous quarter which you mentioned 55,000, is that right?
Marshal Rajendrakumar Sonavane
That’s correct.
Raman KV
So I just wanted to understand that you said your beta and pat improved mainly because of cost. Cotton cost. So I didn’t understand that the average domestic cotton prices have increased but your EBITDA and patterns are.
Marshal Rajendrakumar Sonavane
Yes, I think your understanding is correct. When it comes to the cotton prices it moved up from 55,000 per candy to about 58,000 per candy. From our operations standpoint we have been able to reduce our rupees per kilo cost for our cotton. Right? I think that is sort of. That is what we alluded to when we said because of our operational strength we have been able to sort of our rupees per kilo on our cotton on our final output has gone down. I think that is cotton cost as a percentage of final product. That’s.
Ravi Shanker Jalan
Sorry.
Raman KV
So my second question is with respect to the cotton gan spread, what is the current spread and do you expect any improvement in fynk? Hello.
Marshal Rajendrakumar Sonavane
Our current cotton spread in our cotton spread in Q1FY26 was 130 rupees per kilo. Q4 it was 132.
Raman KV
Yes sir. Hello.
Marshal Rajendrakumar Sonavane
Can you. Can you hear me?
Raman KV
Yeah, yeah. You said your current spread is 130.
Marshal Rajendrakumar Sonavane
130 in Q1 and current it is about 119.
Raman KV
In. 119 in Q4. Right.
Marshal Rajendrakumar Sonavane
In Q4 FY25 it was 132. In Q1, FY26 it was 130. Right. And current as in July we have seen it at about 119.
Raman KV
So the realizations have decreased.
Marshal Rajendrakumar Sonavane
Yes.
Raman KV
So can we expect margin to be getting back in coming to Q2?
Marshal Rajendrakumar Sonavane
So as of now I think the July has been a tough month and we do not. We foresee that Q2 would be a challenging quarter, particularly when it comes to no clarity on U.S. tariffs. I think that is primarily the reason why we see a lot of demand getting pulled back. Right. And which is obviously the cotton prices are going up and demand being muted. There is definitely a pressure on margins.
Raman KV
With respect to your fabric. What is your average realization for fabric? Hello sir.
Marshal Rajendrakumar Sonavane
So we are primarily the outsource model. Right. So there are different sort of margins for different fabric. Right. When it comes to knitting and weaving. So I think there are different sort of profiles here, margin profiles here, depending on the product.
Raman KV
Yeah. So can you at least give an average with respect to netting? And
Marshal Rajendrakumar Sonavane
so. At this point of time, since it being on an outsourced model, I think we have, we have not started giving out the numbers for on our fabric side. I think it would be much better to talk about our margin profile on fabric once this capacity is inside. We are expecting our knitting machines to be in house by about quarter three and in quarter four we should have them up and running. And I think that point of time it would be much better to talk and we would be in a much better position to explain as well what would be our margin profile on fabrics.
Raman KV
Thank you.
operator
Ms, are you done with your questions?
Raman KV
Hello sir, I have one last question. Yes. So with respect to the new capacity coming of 25,000 splinters, you said we can do an additional of 250 crores at optimum utilization. So can we expect a 40 to 50 crores run rate from Q2 onwards? Additional run rate?
Marshal Rajendrakumar Sonavane
So Q2 is difficult because there is a ramp up period you can expect from quarter three onwards.
Raman KV
So what I understand is there will be additional 100 crores of revenue this year from the new capacity.
Marshal Rajendrakumar Sonavane
Yes, I think that that is a fair assumption to make.
Raman KV
Thank you sir.
Marshal Rajendrakumar Sonavane
Thank you.
operator
Thank you. Participants are requested to use handsets while asking a question. The next question is from the line of Amaya Cheddar from Banyan Capital. Please go ahead.
Amey Chheda
Thanks for the opportunity. So, just wanted some clarity on the spread. So you mentioned that in Q1 the spreads were 132. Right. And this quarter it was 130. I think in a previous conquest you. Mentioned that the spreads were 119. That was in May.
Marshal Rajendrakumar Sonavane
So I think 119 when it was mentioned in the last call, must have been the current spread for that month. But what I can tell you right now is for our quarter one, for the entire quarter our spreads were at 130 rupees. Per kilo on a sort of quarter average basis. While in Q4FY25 they were at 132.
Amey Chheda
Okay. All right. Just one more question. So you mentioned that out of the thousand crores capex that you have planned 5 currency is already deployed. Right. So wanted some details on the 430crores. Which segments are you planning to do the capex into and what would be the revenue potential from that?
Marshal Rajendrakumar Sonavane
So the rest of the 430crores would be sort of spent on our vertical integration journey in weaving, knitting and processing. We expect that this would further result into minimum revenue upside of about 600 to 700 crores.
Amey Chheda
And what would be the margins on. This sir.
Marshal Rajendrakumar Sonavane
On an overall basis? I think once we become an integrated player we expect our margins to be in the range of 17 to 20%.
Amey Chheda
Okay. And this will take around three years from now, right?
Marshal Rajendrakumar Sonavane
Yes, yes. Three to four years is what we are projecting.
Amey Chheda
Oh, thanks a lot sir.
Marshal Rajendrakumar Sonavane
Thank you.
operator
Thank you. The next question is from the line of Aman Cheng from Aryan Capital. Please go ahead.
Aman Jain
Hello sir. Good afternoon. So the question is that do you expect the yarn in India to pick up an X2 FY26 and are there some early signs for it?
Marshal Rajendrakumar Sonavane
Aman, there was a disturbance in your line. I couldn’t understand your question.
Aman Jain
So do you expect yarn demand in India to pick up in X2FY26 and like are there some early signs for it?
Marshal Rajendrakumar Sonavane
So I think in as of now in July, we think the next quarter is going to be very challenging. Our expectation is that by then. Right by Q2 end at least the situation between the overall macro in terms of tariff and everything should should be resolved. And if that happens I think H2 definitely would be much better than H1. I don’t think there are early signs sitting in July.
Aman Jain
Thank you sir.
operator
Thank you. The next question is from the line of Dipesh Sancheri from Manya Finance. Please go ahead.
Dipesh Sancheti
Hi. Am I audible?
Marshal Rajendrakumar Sonavane
Yes, yes you are.
Dipesh Sancheti
Okay. My first question is regarding how much is the company’s U.S. exposure? Because I keep hearing that, you know, we are looking for the tariff relaxations. So how much is actually the company’s exposure in terms of the previous year’s sales as well as supply to companies who have a significant exposure to US exports? How much is it?
Marshal Rajendrakumar Sonavane
We don’t have a definitive number on this because we don’t look our sort of customer base in that direction. So obviously our direct exposure is minimal. Right. But when it comes to indirect exposure I think it’s difficult to estimate, but probably around 25, 30% is what we have.
Dipesh Sancheti
25, 30% of the total sales.
Marshal Rajendrakumar Sonavane
Yeah. I don’t have a definitive number on this, but I would assume that because India exports a lot of apparel to us. Right. And in that proportion we would also have an exposure indirectly.
Dipesh Sancheti
So if last year there was no exposure to us, I mean if there was minimal exposure of us, how would actually a US tariff relaxation or, you know, otherwise would affect the company in a very significant way?
Marshal Rajendrakumar Sonavane
I think the effect comes from the overall demand stabilizing. Right. For example, while we do not have an exposure to us, our competition definitely has. And if that demand goes away, then definitely wherever, let’s say domestic pressure on both volume and margins increases. I think that is how it affects us.
Dipesh Sancheti
Okay, and how do you see the. I mean, you have a slide in your presentation about the UK trade deal, which India got free access. When do you think the 0% duty comes into effect and how significant it will be for the company?
Marshal Rajendrakumar Sonavane
I think the details are still emerging on that in terms of when does the effect take place. But whatever literature we have gone through, I think there is a immediate benefit on dextiles which is supposed to be given. I’m sure the rules are to be notified for the FDA to take into action. Not sure when it would be done, but yes, I mean whenever it is, there is no sort of a lag in terms of reduction of duty from India to uk.
Dipesh Sancheti
Okay. So once this is this comes into. Effect as well as the US Tariff. We have some light on the US Tariff. Do you think that because we had a significant fall in exports from about 60 crores. I mean, I mean how much do you think that the export would contribute later on?
Marshal Rajendrakumar Sonavane
We are expecting that last year we clocked about 18% on our export earlier about that, I think we would be maintaining the same number or maybe increasing by another 1 or 2 percentage points.
Dipesh Sancheti
So this quarter you went around 6%. So you think I can come back to around 19%?
Marshal Rajendrakumar Sonavane
Yes, yes. So let me just explain it. We saw a significant reduction in Europe as a market, while our other markets have performed approximately the same. Or maybe there is some reduction here and there, but definitely we see the demand coming back on that front at least in the later half of the year. So as of now we think we would be able to do the same percentage points, percentage of our revenue on our exports as we did last year.
Dipesh Sancheti
Okay. Okay. And you mentioned about your expansion of about 25,000 spindles. Now what is that comes to the total capacity will become 250, 250,000 spindles. Right?
Marshal Rajendrakumar Sonavane
225,
Dipesh Sancheti
225 plus 25 or 225 inclusive.
Marshal Rajendrakumar Sonavane
Earlier it was about, it was 2 lakh spindles, another 25,000. So the total capacity comes to about 2 lakh 25,000.
Dipesh Sancheti
So when you, when you say that the implication of expecting to generate a revenue of about 250 crores that is an additional revenue or that is a revenue with the overall spindle capacity,
Marshal Rajendrakumar Sonavane
that is additional revenue,
Dipesh Sancheti
additional revenue every per year which will actually commence by quarter three, right?
Marshal Rajendrakumar Sonavane
Correct, Correct.
Dipesh Sancheti
Okay. Okay. And what about, is there any future capex also lined up?
Marshal Rajendrakumar Sonavane
So we had committed thousand crores of investments out of that 570 as I mentioned in the note as well. 570 is done. Another 430 crores is what we are going to invest in our vertical integration journey.
Dipesh Sancheti
And how are we going to fund this?
Marshal Rajendrakumar Sonavane
So primarily internal accruals and of course as I mentored, debt is required.
Param Vora
So right now our debt to equity is very low. So we have quite a significant, I mean we can, we can take a leverage. This last question on the roe, why is the ROE so low? I mean single digit ROE that was just low. Single digit roe. Where do you see this going? I mean do you think that in the next one year, two years after this capacity, I mean how would, what are we doing on increasing the roe?
Ravi Shanker Jalan
Basically Jalan here you see basically historically if you go, because right now at this point of a time, you know, the spinning per se or the six times per se, the margins are very low. If you look at our journey of last 20 years, every segment of five years, last five years, our EBITDA margin was around 14%. If you look at 10 years. My EBITDA margin was also again 14, 15% even including, if I look at 20 years also you’ll find that our EBITDA margin was including this two and a half years, which has been very difficult, our EBITDA margin has been 14 to 15%.
So we are first and foremost, we are assuming is this EBITDA margin or this bad period of this textile will go away and we will come back to this 14, 15% of the EBITDA margin soon, number one. And if that happens automatically your return on equity will also go up or return on capital employed will also go up and it will be definitely be a double digit. Historically also our return on capital employed was double digit. But we’ll come back to that double digit in any case. And over and above this since it is vertical integration, we are going this will further enhance our return on equity or return on capital implied.
And we are expecting this will be a kind of a 14, 15% of the return on capital implied. We will be able to achieve in a medium terms. But mostly we just want to clarify when you ask about this UK benefits or the US benefit, the duty advantage, See basically what will happen is this duty advantage to the UK or to the US or to any part of the world, even Europe. We are also expecting Europe will also happen soon. This will create kind of a big boost to the textile industry per se in India.
And this will ultimately we will be being the coal producer, we will be benefited because of that. It is not because of that we will be able to export more. It is because of the domestic demand of the yarn will go up because of the overall demand upside into the garments at the home textile. This will benefit to the people like us also.
Dipesh Sancheti
That’s exactly. I asked how much is your exposure to people who are exporting to us? How many of your clients? I mean, if you could just, you know, for your analysis only. But if we can have a difference that, okay, 25% of our customers are actually, you know, core exporters or something like that. And it will be very helpful for you also to analyze and for us. Also to analyze that how much would. Actually the US markets benefit you?
Ravi Shanker Jalan
No, no, let me, let me clarify this point also. See, overall, when the industry situation improves either because of the more export to the US or more export to the Europe or more export to the the U.K. overall, this will help the overall demand per se in India will increase, including the domestic demand. Though domestic demand will not improve, but supply restriction will happen and this will improve your overall pricing of the yarn also. So it is not that, okay, since our exposure Is to the US is 20% and therefore we will get an advantage or if we have an exposure on the yield UK 20% and therefore we will get an advantage overall textile per se will get an advantage.
So of course, like you rightly said that we should do the monitoring of this. But this benefit will not be because of that export to the US or export to the Europe or our exposure to those markets will help us. This will help to every textile industry per se.
Dipesh Sancheti
Okay, and just a follow up question on your operating margins. What you said that you know, your, you’re planning to increase the operating margins to, you know, 15% and what measures are we taking for increasing these margins? Hello. Hello, operator.
operator
We have connected.
Dipesh Sancheti
Yeah, my question am I audible I don’t think the management is still connected.
operator
The management is connected, so
Dipesh Sancheti
I can’t hear them.
operator
Just give me a minute.
operator
We have the management slides reconnected. Mr. Dipesh, please go ahead with your question.
Dipesh Sancheti
Yeah, my follow up question, sir was regarding your margins. You said that your margin, you’re planning to increase it from nine and a half percent, 10% to 15%. What measures are we taking for increasing the margins?
Ravi Shanker Jalan
See, two things, Mr. Pritesh. One, like I said that overall, historically the margin in the spinning of our at least I would say that 14, 15% has been there on a longer period of time. If you look at our five year data, you will find that our ebitda margin was 14 to 15%. So first and foremost we are assuming this scenario of two and a half years of the bad period of spinning of the textile will go away soon because of the certain, I would say tailwind which is likely to happen. US tariffs, UK tariffs and the Europe tariff.
The second is that like what our CEO said, that vertical integrations are the margin enhancer which will happen. This jersey has been started on the knitting side. And gradually in the next five years we have a plan to vertically integrate and offer to the customer ready to cut fabric. And all these things will have two advantages. One advantage is my turnover capital turnover ratio will be better. And the second is margin. There will be kind of an additional margin on this and this both put together. We are talking about the margin which we have projected.
We are very confident of achieving those margins on a medium term basis.
Dipesh Sancheti
In the medium term, what would medium term mean? One year, two years, medium terms mean?
Ravi Shanker Jalan
I would say that maybe 26, 27 when you see the number and maybe that tomorrow, suppose this tariff clarity comes from the US probably in the third quarter itself, you will see that improvement will start happening. One thing definitely we must understand and historically if you are tracking this company, you will realize that historically for a textile, particularly for a spinning, such a, I would say headwind of two and a half years has never been seen. Historically I have seen this industry for almost 20 years now. I have seen that maybe six months to one year there is a headwind and after that there is a recovery.
There is. This is the first time this long period, but definitely this long, this, what you call headwind is going to be over. So hopefully I would say that second half of this year onwards things will start improving. Once this clarity of the US status gets clear, definitely you’ll start seeing the improvement in the overall spending per se. Industry per se.
Dipesh Sancheti
The problem is, sir, that we don’t have the historic numbers because the company has just, you know, after corporate action, it has come into the stock exchanges. So we, we have very little historic numbers. But I appreciate that you said that this two and a half years has been difficult and you’re hoping for better numbers ahead. And if there are any other further questions, but I should, I. I really feel that you should work on your roe. Thank you so much.
Ravi Shanker Jalan
Thank you.
operator
The next question is from the line of Ritesh Gandhi from Discover Capital. Please go ahead.
Ritesh Gandhi
Hi sir, just want to understand, you know, given what’s happening with the MSPs, given what’s happening with US cotton prices and the limited discrepancy between India and the US is it that the major cause you think of the slightly lower margins which have been ongoing for an extended period of time and how does this get resolved in your view?
Marshal Rajendrakumar Sonavane
So I think that is one of the key reasons, of course, because the cotton prices of course are on a upward trend. The other part is also on demand. While the cotton prices have been going up on the demand side, there is no capacity to sort of accept the increased cotton prices. So obviously the processing cost, manufacturing cost is almost remaining the same. Right. Of course there will be an improvement based on operational excellence. But ultimately, if your demand side does not have the capacity to take up the additional cotton cost, definitely the margin will be in pressure.
And yes, the disparity between global cotton prices, Indian cotton prices plays into it as well, specifically for Indian spinners.
Ritesh Gandhi
So how does this actually rectify over the next few, let’s say quarters or whatever it may be?
Ravi Shanker Jalan
What is our expectation? Let me tell you one. First and foremost the US. First and foremost the US Tariff clarity. We are expecting, I would say one, we are saying, we are not saying GSL Textile. The entire textile industry is expecting a very favorable tariff for the US Visa vis the Bangladesh or the Vietnam. So that is the one trigger point will be there. Number one, in terms of the cotton. See, we are expecting, again, these are all wishful thinking or I would say that likely may happen or may not happen. Also once the US tariff gets finalized, maybe at the time that there can be some kind of a rethinking of the government on the cotton duty as well in the negotiation industry is presenting to the government on this duty.
And probably this tariff negotiation probably can bring some relief on the tariff of this thing. But once this US tariff gets clarified, I think demand upside will happen. That will support the price and that will improve the market.
Ritesh Gandhi
Okay sir, and the other question was given the extra 250 crores of revenue from the new spinning capacity which we’re adding, that I’m assuming would be even more incrementally accretive to margins. Right. So I mean that would be at how much EBITDA margin if you can say.
Marshal Rajendrakumar Sonavane
So I think the new unit is definitely a state of the art unit. Right. And assuming if some demand stabilizes, definitely it would be minimum 1 to 2 percentage points higher on our EBITDA margins compared to our other units.
Ritesh Gandhi
Okay. Right. All right, sir. Thank you. That’s awesome. All the best.
operator
Thank you. The next question is from the line of Saket Kapoor from Kapoor and company. Please go ahead.
Saket Kapoor
Namaskar sir. And thank you for this opportunity. So firstly the scenario for the cotton prices moving up and the depressed yarn prices correlation is the slackening demand. That is the only reason why we are why these thinners are unable to pass on the impact of higher cotton prices and the spread going down.
Marshal Rajendrakumar Sonavane
Yes, I think your understanding is correct. While the cotton cost is going up, there is no capacity on the demand side to accept additional prices and hence the spreads are getting compressed.
Saket Kapoor
And there is also differential between, as the earlier participant was mentioning, the differential between the the US cotton and the MSP support that we have domestically. So what is the arbitrage when we compare the international landed prices and the MSP being protective for the domestic producer.
Marshal Rajendrakumar Sonavane
On a pure play prices basis, yes. Indian cotton and US Indian cotton and US Similar quality cotton is at similar price levels. The problem or maybe the difference is just the import duty. With the import duty I think the difference sort of goes away. So as of now at a 56,000 level I think all the cottons are at a similar price on a landed basis. But yes, with the MSP increasing and the expected price increase in the Indian cotton there will be a difference and sort of Indian cotton will become expensive in a way.
Saket Kapoor
Come against the last point, I missed it.
Marshal Rajendrakumar Sonavane
So with the additional MSP increase and assuming and that’s a big assumption that the cotton prices goes in the same proportion increase as the MSP and the US cotton remains same at the current level on a landed basis the US cotton would become cheaper than Indian cotton.
Saket Kapoor
And what should be the differential in percentage terms?
Marshal Rajendrakumar Sonavane
Yeah, I think it would be 8 to 10%. I think that.
Saket Kapoor
In your presentation slide number nine, you did mention about quantum inventory at 10,000 MT sufficient to ensure production continuity and benefit from adverse pricing trend into Q2FY26. So taking into account that Dip in the realization, the inventory gain out of the existing cotton inventory. Will this keep our, will this keep the margin stable or this dip, a 5% dip which we have seen in the month of July will take a hit on the, on the realization and hence the bottom line.
Marshal Rajendrakumar Sonavane
I think this cotton inventory of 10,000 tonnes is probably one and a half to two months of our inventory. Right. So any additional inventory which will come in would come in at a higher price only. Right. So while yes to some extent there’ll be a protection on our cotton prices. But unless and until the demand scenario improves, definitely the quarter two would see a tough challenge on maintaining profitability.
Saket Kapoor
Okay. When we look at our employee benefit expenses that have also moved up Q on Q also and year on year also, the number being a 20 crore for this quarter. Previously it was 17 crore 30 lakh and last quarter it was 18 crore. So this incremental of 10% was what has led to this. And what should be the number we should look for the entire year?
Marshal Rajendrakumar Sonavane
So this is made up of two things. One is your annual increments which happens, right. For both wages and salaried manpower. The second is that we have, as you know, that we have added another 25,000 spindles and sort of the operators linked to and the manpower linked to it would get added in Q1 because definitely there will be a time of training as well which will be included. But on a per ton basis, right? Man days per ton basis. I think there is, there isn’t much increase.
Saket Kapoor
So you mentioned about 435 crore being the balance amount which is to be spent as a, as our capex. So where will this money get deployed? If you could give this segment, how much will go to addition in the spindle capacity, how much to be knitted, how much to be renewable energy if that ballpark number you can provide.
Marshal Rajendrakumar Sonavane
So I can give you an overall as in a directional comment on your question. We are going to spend primarily on our vertical integration journey which includes weaving, knitting and processing. Because the overall vision is to become a ready to cut fabric supplier. Our second pillar on that is that we want to have about 65 to 70% of our power coming from renewables. So whatever necessary investments which would be required on renewables to maintain this proportion, I think that is what would be done.
Saket Kapoor
Okay. So as we move into the value chain of the dyed fabrics, yarn and fabrics, there will be additional requirement for us in terms of the chemicals, chemicals also. So what will be what percentage of our cost will go into the diet, chemicals and what are the chemicals required? Is it only Costi soda or soda as requirement is also there.
Ravi Shanker Jalan
Chemical requirements are going to very minimal. I don’t think that is going to very relevant for any. Like even if the caustic soda is required, that is not going to increase the demand of soda. Don’t worry. Okay. So I think chemicals will be required and various type of chemical, caustic soda, soda and other chemicals will be required when we go for the processing side. Right. But that is not going to be very significant.
Saket Kapoor
Okay, but slide number six. Marcus, if you could just explain me. When we look at the yarn number for this quarter it is 8.4 metric ton. When we look at the knitted fabric that has moved up from 146 to 247. And whereas the revenue. If you could just explain this correlation that when the volume for knitted fabric has moved up but that has not commensurate to the revenue. How should one read this line?
Marshal Rajendrakumar Sonavane
No, I think the yarn sales volume is about 8,400 tons. Right. While last quarter it was 8,900 tons. And you can clearly see that from our fabric we derived about 25 crores of revenue this quarter which is about 9.3% of our overall. So it is not so obviously you have to understand we work on an outsourced model on our fabric. Right. So 8,400 tons was the overall yarn sales and knitted fabric sale was only 247 tons.
Saket Kapoor
No sir. Q on Q the number looks from 146 to 247. Whereas the revenue has gone down.
Ravi Shanker Jalan
8,900 tons. We have sold. Right. Fabric we have done from 146 to 247. Correct. There are certain fabric knitted fabric even we source the yarn from outside also. Okay. And this 8,900 out of this 8,900 or 8,400 from there also we are using the yarn for the knitted fabric also.
Saket Kapoor
Incremental increase.
Marshal Rajendrakumar Sonavane
I think just clarify the fabric revenue which we write on the down. Right. It is included including both knitted and woven fabric grade fabric. Right. So the 25 crores is derived from 247 tons of knitted fabric. And 36 lakh meters of grade fabric.
Ravi Shanker Jalan
Significantly drop from 46 lakh meter to 36 lakhs meter gray fabric. Right?
Saket Kapoor
Correct, sir. Clarification. And so thank you for this revamped investor presentation. Also explained. We hope for the continue to change.
Marshal Rajendrakumar Sonavane
Thank you.
operator
Thank you. The next question is from the line of Raman KV from Sequent investments. Please go ahead.
Raman KV
Hello. So thank you for allowing me to ask you a follow up question. I just wanted to understand currently in terms of the entire market, what’s the contribution of imported cotton to the total raw material used in the domestic market?
Marshal Rajendrakumar Sonavane
In the domestic market.
Raman KV
Important cotton usage in the domestic market.
Marshal Rajendrakumar Sonavane
Are you asking from a GFL perspective or overall?
Raman KV
Overall as well as from the company perspective.
Ravi Shanker Jalan
See if I have understood your question rightfully. What you are saying is that how much is consuming the Indian cotton and how much is the import cotton they are using it. Is it the right.
Raman KV
Yes, yes, yes.
Ravi Shanker Jalan
India is producing around around 3 crore bales. And this is largely. I would say that 80% of this debt consumed into the domestic market alone. And the export, the import of the cotton this year has been around 3034 lakh. So in a way you can say that the percentage of the imported cotton in the overall textile per se is around 10%. 10 to 15%. Right. And this also primarily I would say that it is more of a premium cotton like Egyptian cotton, Australian cotton, your Pima cotton, high quality of the cottons are getting imported. Some of the cotton this time has been exported imported from Brazil and other part of the world also.
But primarily these are all special type of cottons are being consumed. If you look at in our case, I would say that similar kind of a percentage will be there. We only import the three special kind of a cotton. One is Australian cotton which we import in a large volume and American cotton which is Pima and your Egyptian cotton which is Giza which is. So these are the three cotton. In terms of the percentage, my understanding this will also be around 10% of the overall consumption. What we do in the overall 10 to 12% kind of enough.
Raman KV
So basically just a follow up on this with current US India trade. There’s and if on the phone.
Ravi Shanker Jalan
I’m sorry, one minute. I think we are getting not getting your voice clear. So you are speaking. It looks like that you’re speaking on the hands off mode or some background UI are coming. We have not been able to hear you properly.
Raman KV
Hello? Okay, I. I’ll just use it. Speaker. I was using handset only. Hello, can you hear me now?
Ravi Shanker Jalan
Yeah,
Raman KV
Sir, I just wanted to understand that with. With respect to if, if, if and when India and US finalize their trade deal, the duty on imported cotton from us will reduce significantly. So this 10% share of imported cotton, will it increase to 15 or 20% in the coming years for you or not?
Ravi Shanker Jalan
You see again, cotton is such a Such a. Such a commodity. It all depends on the competitiveness of the price. How the Indian crop happens. What is the price of the Indian cotton? What is the US Cotton excluding the duty. All this will depend on the advantage overall in terms of the landed cost. But yes, logically if you ask me if the duty goes down or if the duty gets removed, at least the Indian spinning industry or the textile industry per se will become more competitive. And the chance of bringing more imported cotton will likely to happen.
Raman KV
Okay sir. And my final question is with respect to the again the capacity addition. Can we expect this the spindle to contribute fully in FY27 and like additional incremental revenue of 250 crores in FY27 and additional revenue of around 50 crores from the native facility which will be commenced in Q4 because it will be a first full year of operations, right? So around 300 crores of incremental revenue on base revenue of previous year FY25. Can we expect that.
Ravi Shanker Jalan
You are 100% right. And let me just add here is that in the third quarter of this year itself you will start getting the benefit of this new unit of 250 crore which is approximately around I would say 60 crore of the per quarter benefit. So that will start happening in the third quarter you should have that 60 crore. And then the fourth quarter also you should have 60 crores. Even in the knitting side also you will get an advantage in that in the fourth quarter of knitting knitted. Because by the time this unit will get start running and in the fourth quarter of this 50 crore of divided by 4 the benefit you will get in the fourth quarter of this year itself.
Hello. 26, 27 definitely will get the entire advantage. Even in this year also you’ll get an advantage.
Raman KV
Okay. Thank you sir.
operator
Thank you. Ladies and gentlemen, little time constraints. Please limit your questions to two per participant. The next question is from the line of Chetan Damania from Swan Investments. Please go ahead.
Jatin Damania
Thank you for the follow up. Such as couple of questions. Now looking at the current cotton prices as compared to the imported prices and the decline in the stress that we have seen from last three quarters, majority of the capacity must be in the stress and they will be reporting a loss. So given our balance is trend where we also want to expand and go for a diet or value added yarn product going down the line, are we looking at any acquisition of the stressed asset over an next couple of years?
Ravi Shanker Jalan
I don’t think we are right now looking at any such kind of stress assets. Because turning around stress asset itself is a task. So we are not looking at any such kind of stress asset to acquire in the near future. But of course we are always open. If something really compelling is coming and the size is coming, which size compels us to kind of look at. We will look at.
Jatin Damania
Sure. And next question now, since we are only will be into a ready to cut fabrics, so are we any point of time, probably 12 months, 18 months down the line, looking to expand ourselves into a technical textile front where we can get a better profitability, better margin.
Ravi Shanker Jalan
Again, we are right now we don’t have any such kind of a plan on table, but we will always be open to kind of a look at some opportunities which comes right now. Like our CEO said, our plans are very clear. We want to first go into the vertical integrated unit, ready to cut fabric, deliver to the customers. That is the first priority we have. Because we believe that if you have a consistency in the plan and you don’t switch here, here and there and probably work on a very clear cut focus, you will always be able to return a better capital, better return on your capital.
But yes, we will keep our options open. If we get some kind of an opportunity of some kind of a unit, which helps us to kind of take a forward few steps ahead of the curve, we will look at that possibility.
Jatin Damania
Thank you sir. And the last bookkeeping question, I mean just to solve it out in terms of can you help us in understand the broadly realization of of the knitted fabrics in a per ton basis and gray fabric or a woven fabric on a lack meter basis. The broad realization.
Ravi Shanker Jalan
See again here I just want to Japan just say that. See, right now we are in the outsourced model, right? In the outsourced model, the consistency of the product basket is not there. Sometimes we are producing coarser count, sometimes we are producing the kind of a medium counts. So therefore at this point of time, talking about a consistent what we call per meter will be kind of a misleading picture. But master rightly said, our CEO rightly said, once the knitting fabric which the unit which we are installing, once that gets commissioned, at that time you will get a clear picture of how the per meter realization that will become the most comparable order, it will be more making it more relevant for you.
Jatin Damania
Thank you Jalanji for the answers. Thank you. And all the best to the team.
operator
Thank you. The next question is from the line of Vipin Chahar, an individual investor. Please go ahead.
Unidentified Speaker
Hello sir, my question has been answered, but just wanted to confirm in the university presentation. You have said our long term EBITDA margin to win the range of 15 to 18%. While earlier we were guiding for 17 to 20%. So why that downward revision?
Ravi Shanker Jalan
Basically, we are still believing, internally, we still believe that 18 to 20% is the margin which we should be locking in. Okay. Like I said, I’m still maintaining that 14 to 15% margin. Historically, we have been able to manage, okay, we have been on a longer term, five years, 10 years, we have been able to manage. So on that, on top of it, 4 to 5% will always be possible because of all these vertical integrations. Okay? So we are still maintaining 18 to 20%. However, for a conservative number in the investor presentation, we have said 15 to 18%.
operator
Thank you ladies and gentlemen. Due to time constraints, that was the last question for the day. I would now like to hand the conference over to Mr. R.S. chalan for closing comments.
Ravi Shanker Jalan
Thank you very much. I think I must appreciate all the questions and one of the questions which I am taking home out of this entire question. Work on your return on equity. Okay? Rest assured, like I said always, the management is very focused on the value returned to the shareholders. We are working on the return on equity or the return on capital employed. And we will definitely deliver on that. In addition to that, just wanted to kind of give my perspective on the overall business scenario. Like our CEO said, second quarter looks to be challenging and this is only primarily because of one thing, certain uncertainty in the demand scenario because of the tariff uncertainty of the US because of this, a lot of hand to mouth orders are being placed and the people are not going long into that.
Once this clarity will come, we are very clear we are seeing that positive uptake into the textile and surely we will also be getting benefited out of this. And maybe if everything goes well, once this is duty because there are few advantages. I see one UK deal. Second, I clearly see a very soon likely Europe deal happening. US deal is also likely to happen. Industry is hoping a kind of a significant advantage which is the competition of Bangladesh and Vietnam, including China. So this will also help us the textile industry per se. So in the medium terms, again I’m repeating this definitely this industry has a kind of a reach out to the bottom and probably it will take a upside going forward once slice and clarity comes with this.
Thank you very much to all of your support.
operator
Thank you on behalf of Goindia Advisors. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.