GHCL Textiles Ltd (NSE: GHCLTEXTIL) Q3 2026 Earnings Call dated Jan. 30, 2026
Corporate Participants:
Unidentified Speaker
Marshal Rajendrakumar Sonavane — Chief Executive Officer
Raman Chopra — Non-Executive Director
Analysts:
Mehal Gogia — Analyst
Riddhesh Gandhi — Analyst
Raman KV — Analyst
Saransh Gupta — Analyst
Dewang Vishal — Analyst
Raj Lakhani — Analyst
Arun Chulani — Analyst
Deepesh Sancheti — Analyst
Saket Kapoor — Analyst
Resham Jain — Analyst
Karina Raghani — Analyst
Uday Kumar — Analyst
Partha Mazumdar — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to The GHCL Textiles Limited Q3 and 9 month FY26 earnings conference call hosted by Goindia 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 concludes. Should you need assistance during the call, please signal an operator by pressing Star then zero on your touch tone phone. I now hand the conference over to Mihal Gogia from Go India Advisors. Thank you and over to you ma’.
Mehal Gogia — Analyst
Am. Thank you. Good morning one and all. It’s my pleasure to welcome you on behalf of GSPL Textiles Limited. Thank you for joining us today for the Q3 and 9M FY26 earnings call today. On the call we are joined by Mr. R.S. jalan, non executive director, Mr. Raman Chopra, non executive director, Mr. Marshall Sunabme CEO, Mr. M. Parsuraman, CFO and Mr. Manu Jain, senior General Manager, Finance and Accounts. Please note that today’s discussion may include certain forward looking statements, therefore they must be viewed in conjunction with the risks that the company faces. I now invite Mr.
Marshall to present his opening remarks after which we will open the floor for Q and A. Over to you sir.
Marshal Rajendrakumar Sonavane — Chief Executive Officer
Good morning everyone and a warm welcome to GHCL Textiles earning conference call for the third quarter ended 31 December 2025. Our detailed results and investor presentation are available on the stock exchanges. I will begin with an overview of the operating environment on the cotton front. The new crop production is projected to be slightly lower at around 292 lakhs bales versus 300 lakh bales last year. Cumulative cotton arrivals for the season have reached 144 lakh bales an increase from 132 lakh bales last year. The overall supply is expected to remain comfortable in terms of consumption. Domestic usage has eased to 80 lakh bales compared to 94 lakh bales previously.
At the end of Q3 spinners held 35 lakh bales while the Cotton Corporation of India held 64 lakh bales. Global cotton prices have remained volatile, particularly New York futures due to international trade dynamics. Domestic prices have inched upwards and are in the range of 57,000 rupees per candy. Now turning to the demand side, global yarn markets continue to face volatility driven by tariff uncertainties. While there is no fresh clarity on the U S India Trade Agreement, other markets are opening up with the signing of FTA with Europe, New Zealand, Oman and UK earlier these FTAs will open up duty free access for India, leveling the playing field against global competition and create new avenues for growth across the textile value chain despite the current difficult times on the demand side, we have ensured maximum utilization of our units and continued our operational excellence journey.
Next, I want to update you on our strategy and execution. Our 25,000 spindle unit has stabilized remarkably well. It is currently operating at 98% utilization contributing steadily to our volume and efficiency. We are also making strong progress in broadening our value added portfolio on our vertical integration roadmap. The installation of our phase one knitting capacity comprising 15 machines is currently underway and will be completed in quarter four. FY26 we’ll set up phase two expansion in first half of FY27. Now turning to our financial performance Q3 FY26 continue to reflect our operational discipline. Revenue stood at rupees 351 crores, EBITDA at rupees 34 crores and PAT at R13 crores.
For the nine months, FY26 revenue came in at rupees nine hundred and sixty crores up by 9% same period last year and EBITDA came in at one hundred and four crores up by 23% same period last year. A key highlight this quarter is the strengthening of our financial profile. In January 26th, our credit rating was upgraded by Care Ratings from A A to plus to A A1A1. This update is a testament to our robust balance sheet, prudent financial management and the confidence that dating agencies have in our business model. Even in these challenging times, our focus remains firmly on our strategic priorities.
Broadening our value added portfolio, enhancing operational excellence and strengthening vertical integration. These priorities continue to guide our capital allocation. Our committed investment plans remains on track. GHCL Textile is well positioned to sustain its growth momentum. 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 questions may press Star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and 1. The first question is from Ritesh Gandhi from Discover Capital. Please go ahead.
Riddhesh Gandhi
Hi sir. Just wanted to understand when you incremented. Megawatts of renewable comes up next quarter, Approximately how much EBITDA’s savings should we be expecting from that?
Marshal Rajendrakumar Sonavane
I actually couldn’t hear you. Your voice.
Riddhesh Gandhi
Yeah, I’m thinking incrementally renewable capacity comes up next quarter over 10 megawatts. About how much cost savings would we expect from that?
Marshal Rajendrakumar Sonavane
Okay, so we have two renewable projects which are in sort of pipeline. There is a rooftop solar project which is 3 megawatt, which will be commissioned by February. And There is a 10 megawatt ground solar project which will be done by June 26th.
Both these projects put together, the saving would be about 7 to 8 crores. The 3 megawatt unit would have a saving of about 2 crores and the 10 megawatt unit would have a Saving about 6 crores. This is per annum.
Riddhesh Gandhi
Got it, sir. So the other question was, you know, just, just given what’s happening with pricing of the cotton, the msp, the, the Telid duty free imports being stopped from late January and the slight increase in prices. Yeah. Given all of these things, if you. Could just sort of highlight what your own outlook is on overall spinning spreads.
Marshal Rajendrakumar Sonavane
I think spinning spreads in quarter three definitely were under pressure and primarily because of two things is that there is no clarity on the demand side which puts a demand side pressure on us. And cotton, while it was benign at the beginning of quarter three has started to go up with the new crop and procurement by cci. But I firmly believe that I think the worst is over and quarter three onwards and we saw green shoots in December itself and sort of demand went up.
We saw good inquiries from export as well. And cotton price more or less is stabilizing. What we are sensing is that it is going to stabilize and with the demand side getting better with all your FTAs in Pipeline, I think the spread should start to look upwards from quarter four onwards.
Riddhesh Gandhi
But the FTA impact won’t be seen. Now I assume, right. Because you know, by the time the FTA is executed and all of that, it’s still a year away, right?
Marshal Rajendrakumar Sonavane
Definitely it’s a year away. But I think the overall thinking of buyers starts to align with the FDA’s. So they would start to look positively towards India as a market. Right. And you would hear more conversations going on with European buyers and wherever the FDA’s have been signed for a more longer term agreement and relationships will start to get better.
Riddhesh Gandhi
Okay, that’s all for me, thank you.
operator
Thank you. The next question is from Raman KV from Sequent Investments. Please go ahead.
Raman KV
Hello sir, can you hear me? Hello.
Marshal Rajendrakumar Sonavane
We can hear you. Please go ahead.
Raman KV
Yes, sir. So on sequential basis, the revenue from fabric has declined and as per the previous phone call, our Guidance was to have revenue from fabric by 12 to 15% by the end of this year. So sir, so can you comment on that? And does the sequential decline in the revenue from fabric also had an impact on our EBITDA.
Marshal Rajendrakumar Sonavane
On a quarter? On quarter basis our revenue from fabric has actually gone up. I think last year, last quarter our percentage of fabric revenue was about 11%. We are at about 11.8 12%. Right. On a nine month basis also if you see it is about 11%. Right. So what we had stated last quarter that a guidance of 12 to 15% of revenue coming from fabric we have, we are on track of that. So by quarter four and the year end you will see we will be clocking about 12% odds as a percentage of fabric revenue.
Coming back to I think the second question on impact on ebitda, I don’t think fabric had any impact on our EBITDA for this quarter. So as in from a fabric point of view, whatever we have committed we are on track for ramping up that volume.
Raman KV
No sir, I, I meant the fabric volume. So on sequential basis the fabric volume has declined.
Marshal Rajendrakumar Sonavane
See if you, if you see on a nine month basis our last year volume was about both put together, right? About 386. I think in the presentation it is there about 386 tons of fabric and 114 lakh meters of woven fabric. Compared to that we have significantly improved, right. We have done about thousand tons of knitted fabric and 142lakh meters of woven fabric. So you will have to see it on a more longer term basis. Definitely there will be a quarter to quarter variations but on a longer term we are on track of ramping up our fabric volume.
Raman KV
So the sequential decline in the EBITDA margin, what can that be attributed to towards?
Marshal Rajendrakumar Sonavane
So two reasons. Primarily if you see our power cost this quarter has been higher compared to last. Primarily because of the change in mix of power renewable energy proportion. Right. Generation is lower this quarter compared to last. And the second reason is a bit of a compressor in the spreads.
Raman KV
So if you can provide the. What is the current domestic cotton yard prices for the Q3 quarter and what, what’s the current cotton domestic cotton prices?
Marshal Rajendrakumar Sonavane
See I think we can talk in terms of spreads because that number we have been giving quarter in quarter, okay. Depend a lot on what product we are talking about, right? And similarly your cotton price will depend a lot on that. So spread I think last quarter we were at about 131 rupees per kilo before packing cost. This quarter we are at about 128. Our Q3 was 128 rupees per kilo before packing Cost.
Raman KV
And currently are you seeing any revival or is it still decreasing?
Marshal Rajendrakumar Sonavane
We are seeing a revival. I would not be able to put a number on how much would it be but definitely we think by December onwards situation has started to look up.
Raman KV
Unless I just want to understand how much do we. How much percentage of our total revenue is exports and if we can give a split between how much are we exporting into USA and how much are we exporting it to euro and on a follow up on that international cotton prices are technically are at a lower price than Indian cotton prices. So does this impact our exports any? By any margin.
Marshal Rajendrakumar Sonavane
So I think the percentage of exports is also there in our investor presentation which has been uploaded. So for 9 months FY26 it’s about 9% of our revenue is on exports, right? And I think this last year it was about 17%. But that was a conscious decision from our end because the realizations were better at least for our category of products in the domestic market. As a follow up question you had asked about how global cotton prices being lower affect our export potential. Yes, it does affect. But in our GHCL textiles case we are in very sort of customized high value added products.
For us as in the product quality plays a lot of role in our ability to export the product. Definitely higher cotton prices reduces the margin which would have got if the cotton prices were across market.
Raman KV
Understood sir. And so my final question is on the netting side you said by Q4 you will your netting capacity will be commissioned and you expect 14 to 15% margin. So are we on track of it? And can if you can throw some light on how much revenue, incremental revenue are you expecting in FY27 and will and with respect, and also the margins with respect to it.
Marshal Rajendrakumar Sonavane
Right. So see I think what we are saying is that quarter four the machines would be operational but definitely we would need few months for stabilizing stabilization of customers products and everything. I think from next year onwards like and let’s say on FY27 because we are also putting sort of a number of 40 machines being in house by quarter one quarter to maximum. I think these 40 machines and the entire Meenakshi project put together, we have said that the total margin will be accretive, right. In terms of 13 to 14 to 15% is where we will be able to get on that.
So that entire project I think the number will be between 250 to 300 crores at a 14, 13 to 14 margin.
Raman KV
So we can do 200 crores by an additional 200 crores. In FY27.
Marshal Rajendrakumar Sonavane
No, in FY27 because Meenakshi, as in our new 25,000 spindles has already been operational. Okay. So if you just want to talk about what would be my additional top line from the 40 knitting machines which will come up next year and assume for a full year operation it would be about 30 to 40 crores. Right.
Raman KV
Okay. Understood. Thank you.
operator
Thank you. The next question is from Saransh Gupta from Swan Investments. Please go ahead.
Saransh Gupta
Thank you, sir, for the opportunity. I have a couple of questions. So in this quarter our export contribution has gone up somewhere around 11%. If I’m right, which was, which used, which was 9% last month. So with such uncertainty in the group market, where do we see demand going up? And does that mean that in a domestic market there is some pain that we are taking?
Marshal Rajendrakumar Sonavane
So yes, I think what exports for this quarter have been better than last quarter. And our exports are well distributed across Bangladesh, Europe, Southeast Asia, East Asia. Right. A little bit in some of northern African countries. Once in a while it happens as well. So we are sort of seeing. Your question was where do we see the growth coming from? Is that, is my understanding of your question correct?
Saransh Gupta
Yes. And also is there some pain in the domestic market?
Marshal Rajendrakumar Sonavane
Okay. Okay. So two questions. Yes. From an export point of view, we definitely see demand moving from India to some of these other locations. Let’s say primarily Bangladesh and Vietnam. Right. And particularly the US Led demand has started to move, so to say. So definitely there is some better exports happening from these locations, particularly Bangladesh. And we saw that a lot in November and December when exports went up. In fact, I think India exported about 115,000 tons of yarn in December compared to a usual run rate of about 100,000 tons. So December, definitely the entire industry sort of exported a lot more domestic demand while it has remained muted. But we do not see a large contraction in the domestic demand. There are month on month variations for sure.
But largely I think domestic demand has remained the same, at least in our case.
Saransh Gupta
Okay, second one was that you said that our cotton spread were 131 rupees in last quarter. 128 to this quarter. What was the yarn spread this quarter? If it is sequentially down, if you can like we can compare it with the last quarter.
Marshal Rajendrakumar Sonavane
Now that is the spread, right? As in yarn minus cotton price, that is about 128 rupees per kilo this quarter. Last quarter was 131.
Saransh Gupta
No, I am asking like after December, like for January and for January how is it shaping up?
Marshal Rajendrakumar Sonavane
So it’s difficult to give you a number because we are just in the first month. But I can tell you that it has started to look upwards. At least between December and January things have started to look upwards.
Saransh Gupta
That’s good to hear. So sir, like out of the thousand crore capex commitment that we have done, we already deployed I believe 600 crores till now. So the rest 400 if you can give us a bifurcation and by when will we be deploying that.
Marshal Rajendrakumar Sonavane
So the rest 400 crores we have kept for our vertical integration journey. This would be primarily investment coming in fabric and processing capacities. Most likely between next two to three years processing. We are looking at PM Mitra park as a location or some other suitable locations where it could be put up. Depending on the execution of those projects this investment would also happen. But our internal number is like between next 2 to 3 years entire remaining 350400 crores will be deployed.
Saransh Gupta
So as you’re moving forward towards vertical integration do we have any plans to get into other segments also as such as like police or maybe governmenting? Going ahead.
Marshal Rajendrakumar Sonavane
We are into blended yarns, right? So we are into blended drinks pan yarn where we use a lot of these polyester, modal tencel and other fibers. If your question pertains to filament yarns we are, we do not have a plan to enter into filament yarns garmenting. Also as of now we do not have our first port of call to finish our commitment of thousand crore investment which is up to ready to cut fabric only.
Saransh Gupta
Okay, so just one last question. Like in the December the duty from cotton, imported cotton was removed and there is first of all is there any new news on that that will it be implemented again and if not do we see any impact from the quality of the cotton that we get and or the prices of the cotton candy which is which has been stabilized for quite good time. Can you see a difference in that?
Marshal Rajendrakumar Sonavane
So there have been representations from the industry and conversations with ministries on extension of duty waiver. But of course no decision has happened till now and duty has been reinstated from 1st of January. There is a difference between global cotton prices and domestic cotton prices and that definitely if your raw material is extensive it will have an impact on the overall industry as well. Probably we will see as in the conversations are going, we will see when the outcome of those Conversations come about second in terms of overall quality of cotton available in the domestic market as in the supply situation, because India, a lot of Indian spinners imported, almost about 3 million bales have been imported.
Right. And India’s domestic production itself is going to go to 92 lakh bales. So on a overall basis, I think the supply is comfortable. That’s what we feel. Quality. Of course, because of unseasonal rains which happened, quality concerns are there. But we have been able to procure with our relationships with the jinners and with our procurement approach, we have been able to secure good quality cotton, at least for our company.
Saransh Gupta
That’s good to hear. So just one last question. If I can squeeze in with the expand. With the 40 knitting machines expansion coming up in H1, H527, out of which 15 has already commissioned, will be commissioning in Q4. How do we see our revenue mix shaping up for the next at least 2 to 3 years?
Marshal Rajendrakumar Sonavane
Sorry I missed your last part. How do you see. Can you just repeat from that part?
Saransh Gupta
The revenue mix shaping up for the next two to three years?
Marshal Rajendrakumar Sonavane
Right, right. See, I think in. We have given a vision for last quarter as well and before that also Mr. Jalan has stated it. Once we complete our vertical integration journey, we will. We will still have. Your sort of yarn proportion would be about 40% and the rest will be sold as a processed fabric. I think this is the vision we have kept and that is how our revenue mix will also change.
Saransh Gupta
All right, thank you so much and all the rest.
operator
Thank you. Before we take the next question, a reminder to participants that you may press Star and one to join the question queue. The next question is from Devang Vishal from DB Enterprise. Please go ahead.
Dewang Vishal
Yeah, thank you for the opportunity. Am I audible?
operator
Yes.
Dewang Vishal
Yeah. Sir, my basic question is if our export is just 10% of the revenue, right. Then what. What will make it a difference for this FTAs and all?
Marshal Rajendrakumar Sonavane
So sir, I think we are. So let us. Let me just sort of elaborate our customer mix. Right. So we have. Large part of our production is customized value added goes to strategic customers, large buyers in India. The 10% which we export to other countries is also highly specialized and premium product only. Right. So definitely there is a scope of doing better on that. That proportion can go. Let’s say last year also we were about 17, 18%. Right. That proportion can go up to that level and that is where the FTAs will help some of the doors where we have not been able to go.
Right. And primarily we are an upstream value player. So we are yarn manufacturer. So our direct exposure on exports will be limited particularly to some of these areas like Europe, US or New Zealand for example. Primarily it will go to some of the countries where conversion happens and they will be exporting. So to say if India signs fta, the garmenters who are in India will be able to export more and ultimately the benefit will trickle down to us. That is how the FTAs are going to help.
Dewang Vishal
Okay sir, can you just get me on that? Like what’s the net depth we have and at what percentage the depth? Is it.
Raman Chopra
A big one? Hello, I think, I think the net debt at this point of a time is around 41 crores. So roughly around 8 and a half.
Dewang Vishal
Yeah, so it’s very negligible. Sir, is there any possibility that we can grow on the operating profit margin by double digit or high teens as.
Marshal Rajendrakumar Sonavane
In on a year on year basis? You are saying the growth.
Dewang Vishal
Yeah, can consider on both the sites because if quarter, one or two like half of the year has been completed. Right. So like is there any possibility like OPM to touch by like efficiency? Can we go on higher side by double digit or higher teens?
Marshal Rajendrakumar Sonavane
I think on a, on a EBITDA basis also we have delivered a double digit growth compared to last year. Right. And on PBT basis also if you compare nine months this year versus last year coming back to let’s say on a contribution margin basis or maybe on EBITDA basis if operational efficiency can help. Definitely. I think there are three, four levers where we continuously work on. One is how do I make my product better, how much of more value added can I do? Which sort of helps me differentiate from the competition. Second is can I reach out to the right set of customers? Can I improve the kind of customers I operate with enter into more premium categories.
The third is that can I improve on my utilization? We currently are maintaining about 98% utilization and that effort continues to happen on that. And how do I sort of make sure my power mix gets better and better and where we are investing in our renewable energy. Right. So all of these things are happening and we have actually delivered double digit growth on our profitability last compared to last year. So I think that effort continues to happen. We are hopeful the journey will continue on that. Right now putting a number that how much will be my growth as in the situation is changing month on month, quarter and quarter basis, particularly on the demand side and cotton side.
So it is difficult to give you a number. But yes, I think our efforts are in that direction only.
Dewang Vishal
Sir, the last question, like we are having a very good line of spindles. If I’m not wrong, it’s 2, 2.5 lakh spindles. We are having it right and the rotors are there. Then the we are coming up with the knitting plant also. So can you just define the perfect ratio like what’s the timeline like is the machine or the plants are older one or it’s like can use it for the next 5, 10 years with the same efficiency.
Marshal Rajendrakumar Sonavane
So I think the question, so we have, we do not have very old spendings every year we have been spending money on modernization so there is a significant modernization capex which has gone in already. We do not see a lot of modernization capex at least for the next three years to happen. Right. So whatever money we will be investing henceforth is primarily on expansion only.
Dewang Vishal
Okay sir, that’s fine. That’s all from my side. Thank you very much.
Marshal Rajendrakumar Sonavane
Thank you.
Dewang Vishal
And all the best for the coming years.
operator
Thank you. Before we take the next question, a request to participants to please limit your questions to two per participant. Should you have follow up questions we request you to rejoin the queue. The next question is from Raj Lakhani who is an individual investor. Please go ahead.
Raj Lakhani
Yeah, thank you for the opportunity. So I have two questions from my end. So over the next three to four year period, how do you see internal yarn consumption for the fabric segment? And second question is what are the key levers for ROE expansion going forward. During the same period? Thank you.
Marshal Rajendrakumar Sonavane
So on the fabric internal Yarn consumption, the 25,000 spindles which we have recently commissioned, that unit has been commissioned as entire like end to end from yarn to fabric it produces 21.5 to 22 tons per day. I think that would get consumed in this 40 knitting machines. For the Bowen we sort of utilize a mix of in house and outside yarn. Some of the yarns which we don’t produce, I think that gets utilized there as well. But overall if you see on a net basis probably it will be about 40 tons per day which we’ll get at when let’s say particularly for next year between 40 to 35 tons per day would get used once this 14 knitting machines and our woven fabric current production is happening.
So out of just to sort of clarify again we produce about 130 to 135 tons per day. Out of that about 30 to 40 tons per day would get used in our internal yarn consumption.
Raj Lakhani
Okay, and the second one like what are the levers for ROE expansion?
Marshal Rajendrakumar Sonavane
Yeah, yeah, sorry Sorry to remind, I actually forgot to answer your second question for our ROCE or maybe ROE expansion. See first of all, we believe the normalized EBITDA for spinning industry is about 14, 15%. And we have actually delivered. If you see our history for five years, seven years, I think that we have delivered that level of EBITDA percentage. I think with the demand side getting better, we should be able to reach that normalized EBITDA of 14, 15% which we were able to get on a standalone spinning along with our vertical integration which will be more margin accretive.
It is more profit maximization which happens on vertical integration. I think that will take us to a EBITDA margin of about 16 to 18% on a normalized basis. I think that lever definitely will help us on our profit maximization which will lead to your ROCE improvement. Also we are working on how do we adjust our working capital. Can we optimize it better? Right. And I think these two primary levers will help us on ensuring we are touching about 8, 10% RO.
operator
Thank you. Next question is from Arun Chulani from First Water Capital. Please go ahead.
Arun Chulani
Hello, can you hear me? Hello. Hello.
Marshal Rajendrakumar Sonavane
Yes, I can hear you but not that clearly. Could you speak louder?
Arun Chulani
Sure, one sec. Yeah, I want to ask about the cash situation. It seems like you’re operating on a very thin level of liquidity. How are you doing that? Like as of September it was 6 cr. How are you managing to operate as a business with such a low level of cash?
Marshal Rajendrakumar Sonavane
So Jalanji, can you or Ramanji take this question?
Raman Chopra
No, I think what Arunji you are asking is that how are we managing the working capital? Right?
Arun Chulani
Yeah.
Raman Chopra
Cash balance is 5 to 6 crore. Then in addition to that we have lot of credit line also with the banks. And our working capital deployment is already more than roughly around and 300 crores. Liquidity wise we don’t have any problem. And like you must have heard to our CEO that overall our debt at this point of the time is very thin. Only 41 crore of the debt on this kind of a balance sheet. So therefore liquidity I don’t see any kind of a challenge.
Arun Chulani
Yeah, but I mean most businesses don’t work on such a thing. As in like if there’s a liquidity squeeze or whatnot and lines are withdrawn, there seems to be very little for contingency.
Raman Chopra
No, but Arunji in our case is other way around. We are strongly. We have a very strong balance sheet with a very low debt. We have a possibility of raising the debt at a Significant level. Even if we want to go at a one to one level also one is to one also. Along with that the kind of a margin what we have at this point of the cash generation, what we do. I think frankly speaking this is one of the strongest point of GSCL textile that we have a large cash or the large ability to raise the resources and deploy the growth of the business.
400 crores is already deployed in the working capital. Against that and allowing with all other assets and things like that, our Debt is only 41 crores.
Unidentified Speaker
So 400 crore is a liquidity actually.
Arun Chulani
Okay, okay, that’s fine. Thanks a lot.
operator
Thank you. The next question is from Dipesh Sancheti from Manya Finance. Please go ahead.
Deepesh Sancheti
Hi. Am I audible?
operator
Yes.
Marshal Rajendrakumar Sonavane
Yes.
Deepesh Sancheti
Continuing from the question which the previous participant had asked about the about how your working capital is being done. I heard that you have been using a working capital of about 400 crores.
Marshal Rajendrakumar Sonavane
Yes. The working capital in the business is currently 400, 350, 400 crores and most.
Deepesh Sancheti
Of it from a credit lines, right?
Raman Chopra
No, not really. We don’t have any credit. Like I said our. Our net Debt is only 41 crore and therefore this balance, this money you can assume that is a. The internal money has been deployed in the business.
Deepesh Sancheti
Internal money. Because I. I saw the interest cost was hardly anything for to you know, support that kind of if there is any credit line.
Raman Chopra
So net Debt is only 4041 crore. Yes.
Deepesh Sancheti
Okay. And this cost would remain in the similar levels going forward Also because we are not doing any capex. We’ve already done our capex for the next three years, right?
Raman Chopra
No. Like what our CEO had just said that we have a growth plan. Like what we have this 15 machine. We have already kind of a in the process installation. Then another 25 machine needs to be installed the another 400 crores of the investment which we just said in the against 1000 crore we have already invested something around 600650 crore balance. 350 crore needs to be invested over a period of 34 years. And that kind of a some debt increase may happen but in the shorter term if you look at a few quarters from now, maybe the interest cost will remain in the range bound.
Deepesh Sancheti
Okay, so just want to understand which we have invested such a big amount and at such low roe. I mean how do you feel that you know you’re getting the right return on investments because your ROE is in single digit. That also lower single digit of around 4%.
Raman Chopra
See, there are two reason on this first and foremost is like you that if you look at our ROC, ROC at this point of time, ROC is around 5%. Master just said a couple of minutes before that normalized EBITDA in a normal situation this ROCE should be something around 7 to 8% should happen. Okay. And if your debts are on the same position, probably the ROC or ROE probably in the range bound of around 8 to 10%.
Deepesh Sancheti
No. So when do you see this ROE to come to around. I’m talking only about Roe. Roe to come about, you know, more than 8%. Because I mean below 8%. It doesn’t make sense for us to do business at around 3 of, you know, putting so much 600 crores into the business. Rather you put it into a FD and you’ll make more money. I mean that’s. I just want to know when the ROE you are expecting to again come back to around 8 more than 8% or in a double digit figure.
Raman Chopra
Yeah, like just we said in our discussion that over this business outlook which has been seen now the positive, hopefully next few quarters the things should start looking up. And in a normalized situation this ROE of 8 to 10% we will definitely be able to. And historically we have been achieving this 8 to 10% of the ROE. Do you know that the textile industry at this point of time is passing through a headwind and because of this ROE or any return on the capital is lower. But in a longer term basis definitely 8 to 10% of the ROE is achievable.
Deepesh Sancheti
How much are we affected from this current tariff situation? And what do we see that once the EU deal is signed, how much outlook do we look at? I mean how much benefit do we look from the EU exports?
Raman Chopra
Marcel, would you like to respond?
Marshal Rajendrakumar Sonavane
Because you’ve already said earlier, I think it is not. See, I think the down cycle is not just because of the tariffs. I think there have been multiple reasons and the down cycle has continued I think since 2324, so to say. Right. And probably that is why the reason the ROE ROCE are down and as Mr. Gilan said, historically we have been delivering that day to 10% of ROCE number. We have been impacted. And if you see on a normalized basis when we are saying we have been achieving 14% while we are at an 8, 11% EBITDA, definitely there is a drop compared to what a normalized EBITDA would be.
And primarily right now the reason is actually the demand uncertainty, so to say, once some of these demand triggers are falling place, I think and once these Deals are ratified and everything. It definitely would return to this 14, 15% EBITDA margin. Considering the operational excellence we have put in place, the focus on value added products and how much premiumness we have brought into our products, I think that would get us back to this 14, 15%. I think it is a time when textile down cycle looks to be ending.
Deepesh Sancheti
True sir, but then till that you should not do any capex. Because if point is if you’re doing any, taking any debt, you’ll be having a. You’ll be able to take a date around 8 to 10%. And for that, I mean 8 to 10% taking the debt. And if you’re not able to do that roe then I mean it doesn’t just doesn’t make economical sense. And frankly for 8 to 10% is not even a rosy number for investors. You know, there are companies who do 15 ROE also. So just want to understand, you know that whether our company is in line with that kind of thinking that till we achieve a better roe we will not be putting any capex or we are still in line with the capex situation.
Marshal Rajendrakumar Sonavane
See, I think in general we have a confidence on the situation getting better and textile industry coming out of down cycle. That is primarily the reason why we keep investing and preparing for the good times. Right? Of course, as in tough times, it is every crisis and opportunity ultimately. Right? So we are utilizing this. Most of the capex till now has been done from our internal accruals. And despite investing about 650 crores, our debt remains low. Right? We do not see significantly our debt to equity ratio getting higher. We will primarily be able to fund it either through our cash generation or maybe a little bit help from the debt.
So we believe definitely that the textile industry will get better and the down cycle looks to be ending and we are sort of preparing ourselves for the good times, so to say. Our entire vision of going towards ready to cut fabric is on ensuring we are able to deliver this double digit roce numbers to our investors and stakeholders.
Deepesh Sancheti
How much capacity utilization have we done over all the plants?
Marshal Rajendrakumar Sonavane
We are maintaining 98% capacity utilization across all our units now.
Deepesh Sancheti
And that kind of demand is still there. Right?
Marshal Rajendrakumar Sonavane
We have no problems in our sales. So we have been able to utilize our capacities, maintain our FG levels to our desired numbers.
Deepesh Sancheti
Great. Thank you so much.
operator
Thank you. Next question is from Saket Kapoor from Kapoor company. Please go ahead. Mr. Saket Kapoor, you may go ahead with your question.
Saket Kapoor
Yes, Namaskar sir. And first thank you for this opportunity. Sir. Sorry for the inconvenience, I joined late. My question may be repetitive, so kindly bear with me. Firstly, I think so you must have mentioned your opening remark. But if you would just allude to the factors that has led to the margin compression q 1 q and what according to you, are the factors that have been now negated and we will be improving on our EBITDA margin going ahead.
Raman Chopra
Marcel.
Marshal Rajendrakumar Sonavane
Sorry, I’m here. I was on mute. Satiji. On a quarter, on quarter basis, the profitability has dropped primarily for two reasons. One, change in mix of our power. So renewable energy generation is lower this quarter and it is a seasonal thing, right? If you compare our power costs last year as well, it would be in the similar number. The second reason is primarily what the entire industry is facing on spreads getting reduced. I think these are the two reasons why our profitability has dropped this quarter compared to last. The spreads I think are starting to look upwards.
I actually answered this in previous question as well, that while our spreads have dropped in quarter three, it has started to look upwards December onwards.
Saket Kapoor
Okay, enter the volume. The incremental volume of 25,000 spindles. We have utilized the same in at the. At the optimum level for Q3.
Marshal Rajendrakumar Sonavane
In quarter three, the 25,000 spindles achieved a 98% utilization. So we have been able to utilize it completely.
Saket Kapoor
Okay, and so going ahead, what would be the capacity addition, if any, for the next next financial year? And when will that be into commercialization?
Marshal Rajendrakumar Sonavane
We have few projects which are in pipeline, right? So we said that we are putting up rooftop solar and ground solar. We have knitting machines. 15 knitting machines which are under installation now, will be commissioned in quarter four. And we have phase two knitting machine which is coming up, right? So these projects are in pipeline already. Going forward. We have already said that we are going on a vertical integration journey where we will be going up to ready to cut fabric. Some of the fabric and processing capacities are under discussion, as in. As and when we finalize it, we will announce it.
Saket Kapoor
Going ahead. What should be the volume growth the next year that would be anticipating and taking into account the spread trends currently and the volume incremental volume expansion. We would be on similar lines for for the exit of Q4. Also, the same aspects of the margin profile will remain the same. Or can we see an uptick in the margin?
Marshal Rajendrakumar Sonavane
Because we saw things getting better in December and January, we believe that quarter four margins would get better compared to quarter three. The revenue would be similar because most of our units are already running at full capacity. So we do not Expect a lot of revenue bump except for price increases and because of that but no volume increase will happen in quarter four. But yes, we look as in based on December and January numbers looks that quarter four will be better than quarter three in terms of profitability. Right sir, thank you sir.
Saket Kapoor
And I hope sir that the the ROCE part, which I think so all the participants have been alluding to, including myself, we should be in a position to exhibit better ROCE once as Jalanji has mentioned that normal conditions prevail. So if you could just give a scenario of how and when we will understand that these are the factors that allude to normal normal situation. And we going back to those 16, 18% EBITDA margin.
Marshal Rajendrakumar Sonavane
Sakiji I think from let’s say demand side getting normal things looks to be falling in place with the entire FDA is at least getting signed. Right. And probably by next year all of these will get ratified and implemented as well. The second part is that on our vertical integration journey you we have already said that this knitting machines are going to be done by quarter one next year. The 14 knitting machines maximum by first half of next year. Right. And our vertical integration journey remaining on expansion of knitting wovens and processing we will be able to complete it in the next two to three years.
So let’s say just to answer and other participants questions also on Rosie, I think it will start to look upwards at minimum in FY27 and maximum we will be able to touch it by FY 2829.
Saket Kapoor
Correct sir. And thank you and all the best. To the team sir. Thank Dhanyavad sir.
Marshal Rajendrakumar Sonavane
Thank you. Sake.
operator
Thank you. The next question is from Resham Jain from VVD Asset Managers. Please go ahead.
Resham Jain
Yeah, hi Marshall Dean. So my question is with respect to the processing plant which you are planning to put out. So this is primarily for knitted fabric, am I right?
Marshal Rajendrakumar Sonavane
So we are looking to put up both knitting and woven because we are currently also doing woven fabric and knitted fabric. We will sort of take a decision which one to prioritize. I think that conversation we are having internally. Okay.
Resham Jain
Because in weaving then you need to buy the fabric from outside because you don’t have weaving fabric capacity. Right.
Marshal Rajendrakumar Sonavane
Recently I think when we go for vertical integration we are looking at both knitting and weaving and I think depending on how situation is there, we will sort of decide at all which one to prioritize early so to say. Right. But the plan remains to be in both knitting and weaving.
Resham Jain
So you will put up looms as well because as of today the whatever little fabric expansion which is happening is primarily the knitting fabric expansion. So you have to then put up. Looms for weaving capacity and along with it, you will put processing as well. Am I right?
Marshal Rajendrakumar Sonavane
Right. Right.
Resham Jain
Okay, understood. And the second question is with respect to this, because a lot of your yarn may get consumed in house once you’ll put up this fabric capacity and you will process it. So the existing set of customers to whom you are selling gray yarn right now, they have to then buy from someone else. So will you plan yarn capacity also along with your forward integration projects? Because. The set of customers which you will get after two years with forward integration will be very different from what you are supplying right now.
Marshal Rajendrakumar Sonavane
Right. See, I think when. When we are fully integrated, also a part of our production will be sold as yarn. Right? And I think the question that we won’t be able to service the entire gamut of customers we are able to do now because everything gets sold as yarn. Right? So definitely there, there will be a decision on which one to serve and where can we exit, so to say.
Resham Jain
Okay, understood. So your yarn portfolio will become more. Optimized in terms of margins and mix.
Marshal Rajendrakumar Sonavane
Yes. Yeah. I think it will all be on profit maximization. Right. So wherever you think that selling yarn is better, you would sort of only do that.
Resham Jain
Understood. Okay. Thanks. That. That. That was my question. Thank you. All the best.
Marshal Rajendrakumar Sonavane
Thank you.
operator
Thank you. The next question is from Kareena from SMIFS Limited. Please go ahead.
Karina Raghani
Yeah, hi. Thank you for the opportunity. I just had one question. What is the company planning to do with the freehold land of about 209 crops? In its books.
Marshal Rajendrakumar Sonavane
That freehold land is for the expansion of when we get into fabric and probably other things. Right. So that land is available for our expansion.
Karina Raghani
Right? So which is. There is no immediate plan to use it as of now. So like, is there a timeline for this?
Marshal Rajendrakumar Sonavane
I think our vertical integration journey is for next two, three years. I think that is what we have alluded to earlier. I think that land is available for that expansion only. So we are not looking at any other immediate use for that land.
Karina Raghani
Right? Okay. Okay. Thank you.
Marshal Rajendrakumar Sonavane
Thank you.
operator
Thank you. The next question is from Uday Kumar from Smiths Limited. Please go ahead.
Uday Kumar
My question has been answered, sir. Thank you for taking.
operator
Thank you. We’ll move to the next question. The next question is from Partha Mazumdar from Eastern Financers limited. Please go ahead.
Partha Mazumdar
Yeah. Hi. Thanks for the opportunity. Can you, sir, please, you know, guide me know what is the total capex amount and how much has already been done and how much is left?
Marshal Rajendrakumar Sonavane
In our vision, what we had given, we had planned for thousand crore investment. Out of that, 650 crores have been invested. About 350 crores are spending.
Partha Mazumdar
Okay. Okay. And next is, you know, our raw materials. How much do you import cotton? Do you at all, you know or you know totally. It is from domestic only.
Marshal Rajendrakumar Sonavane
No, it is, it is across. We utilize cotton from India, we utilize cotton from Africa, Australia, Brazil, us. So it is a very diversified mix of cotton which we use.
Partha Mazumdar
And in percentage terms, how would that be, you know, as total percentage in a raw material cost?
Marshal Rajendrakumar Sonavane
It sort of varies. Right? So but our 65, 70% of our cotton is domestic and that includes polyester also. And 30% is imported. Okay, yeah, sure.
Partha Mazumdar
And you already said that will not be directly benefited with this EU fda, but we will be indirectly benefited. Any ballpark numbers, you know what can. And besides, you know, our exports has actually gone down, which you said that it’s a strategic decision by the management to focus more on domestic. So will this, this whole thing change with now FDs? Although, you know, it is pretty early, but still any, anything on these lines.
Marshal Rajendrakumar Sonavane
So see most of the export which you see is direct export as yarn. Right. So with the FTA we so of course that see on the Europe particularly, right. The import duty on yarn is only about 5%. Right. While on garment it is 12%. Okay. So the garment exporters are the primary beneficiaries of this fda.
Partha Mazumdar
Okay, okay.
Marshal Rajendrakumar Sonavane
Indirect benefit would be much higher due to FDA compared to a direct benefit of yarn export.
Partha Mazumdar
Got it, sir. Thank you. Thank you very much. That was great.
operator
Thank you very much. That was the last question in queue. I would now like to hand the conference over to the management team for closing comments.
Raman Chopra
Thank you. Thank you very much. I just wanted to kind of give you some of my thoughts. First and foremost, this GSL textile of course was a part of the gscl, but has a long history of the performance. I just wanted to share the numbers in terms of the margins of EBITDA margin. In last year couple of years since 2018 till 2023, the number was range bound up around 15, 17, 18% kind of a number. Except in 22 that number was significantly higher to 28%. If I take an average of all these EBITDA number, these numbers are in the range of around 15 16% 23 onwards.
The downward trend in the textile industry has been, has been seen. Of course, 22 was a peak period. And after that there was a downfall. And in 23 our margin EBITDA margin was 7% went up to 8%. And in last year it was 10%. And like our CEO has just said, this year we are looking at numbers slightly better. And one thing which is very clear in our mind is a long term this business definitely has a possibility of 15, 16% of the EBITDA margin. And in addition to that, the changes which we are doing in terms of vertical integration.
Surely this number will be moving the needle from 15 16% to 18 20% kind of a number should happen. Number two, I think always I personally believe that you invest in the business when the things are not good so that you are ready when the opportunity comes. You can in cash that opportunity and you are not left out at the time. The right investment time is always the time when you have a downward. You also get an advantage in terms of your capital cost negotiations and things like that. This I have seen even in my other businesses also that always when we have done in the that period, we have always got major advantage out of that.
The second point in this business is that we have a kind of. Every business has its own strength and kind of this thing in this business roc of around 10% I think considered to be reasonably well because of the kind of a growth opportunity in business this business has. There are many other industries where the ROC, if you continuously grow your ROC will be in the range of this kind of a commodity industry. I’m talking about the third point I just wanted to kind of highlight here is like our CEO Marcel has just said that we are definitely looking at this scenario of the bottom is already kind of achieved.
And the things would start looking at from here onwards. And some of the logic what I have in my mind I just want to highlight first and foremost. Yes, US and India trade has not happened. But I personally believe this business moving away from India to the other part of the world. I’m seeing a kind of a not a big possibility of that happening. And region is very simple. Which are the other country which has the potential of supplying this opportunity. Bangladesh. You know how the geopolitical situation in Bangladesh is there. China has a priority now.
They want to kind of more on going for the value additions and they want to kind of. So they are also not having a big opportunity in terms of the. What you call the duty part. China and India has similar position left of this. There are only small countries like Vietnam or maybe Cambodia. And I don’t think they have a kind of a big possibility of kind of ramping up the production to beyond the level. The second, like this EU deal or the EU fta of course it will take some time, maybe around six to nine months time.
But this will create definitely a big opportunity for Indian garment manufacturers. And ultimately the beneficiary of that will also happen to to the people, the spinners as well. That will definitely happen. The third, my understanding is the rupee dollar the way at this point of time is definitely also helping will help the kind of a exporter from the Indian space. The overall and the last point I just want to highlight like the cotton, like Marcel said, that crop size this time is slightly lower than the last year. However, the quality of cotton this time is slightly.
I would say is even inferior as compared to the last year because of the unseasonal rain. And the people who had a strong balance sheet, who has a better working capital management will be able to secure the cotton at the right time and they will be able to get benefit out of this scenario as well. Overall, I personally believe that 2627 should definitely be better as compared to what we have been seeing since 202324 onwards. So with the hope that things will normalize and we are taking the right steps in terms of growth, like we said, we have a very clear vision that we want to move to the ready to cut fabric and we are moving now.
Knitting is already in place, some new machines has to be added. We are already actively working with getting the land on a PMITRA park. All those things will definitely make sure that our growth journey continues in this business. With this. Thank you for all of you for your support and we will continue to deliver on your expectation. Of course there are certain things which are not in our control, but the things which are in our control we are definitely making sure like our investment into the green portfolio I think has really done a remarkable cost competitive advantage to us.
We are almost around 75% of our power requirement gets covered from the green energy. All those things. The right steps are being taken by the management and we will ensure that get the benefit out of that. Thank you very much.
operator
Thank you very much. With that we conclude today’s conference. Thank you for joining us ladies and gentlemen. You may now disconnect your lines.