Gokaldas Exports Ltd (NSE: GOKEX) Q3 2025 Earnings Call dated Feb. 10, 2025
Corporate Participants:
Sivaramakrishnan Ganapathi — Vice-Chairman & Managing Director
Analysts:
Binay Sarda — Analyst
Manish Ostwal — Analyst
Dipen Shah — Analyst
Bhavya Gandhi — Analyst
Sundar — Analyst
Prerna Jhunjhunwala — Analyst
Heet Vora — Analyst
Mithun Aswath — Analyst
Raman KV — Analyst
Monish Ghodke — Analyst
Manish Sehgal — Analyst
Bijal Jitendra Shah — Analyst
Avinash Nahata — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Gokaldas Exports Limited 3Q FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touchdone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Bine Sarda from EY. Thank you, and over to you, sir.
Binay Sarda — Analyst
Thank you, Darwin. Good morning everyone. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with cause future results, performance or achievement to differ significantly from the expressed or implied such forward-looking statements. And the presentation and the same are available you can write to us…
Operator
Sorry to interrupt sir, but your line seems to be breaking up in-between.
Binay Sarda — Analyst
The same you can write to us and we’ll be happy to send the same over to you. To take us through the results and-answer your questions today, we have the top management of Gokaldas Exports Limited represented by Mr Sivar Amakrishn, Vice-Chairman and Managing Director; and Mr Sati Mutti, Chief Financial Officer. We’ll start the call with a brief overview of the quarter gone past and then conduct Q&A session.
With that said, I’ll now hand over the call to Mr. Over to you, sir.
Sivaramakrishnan Ganapathi — Vice-Chairman & Managing Director
Thank you. Thank you,. Good morning, everyone. Happy to have you at our earnings call for the 3rd-quarter of FY ’25. In the 3rd-quarter of this year — this financial year, Gokulas Exports reported significant jump-in total income, PAT and EBITDA. We have crossed the INR1,000 crore total income milestone for the first time this quarter. EBITDA margin improved sequentially, indicating a healthy performance.
In this quarter, our total income grew by 97% year-on-year and 6% sequentially. The total income for the company, excluding acquired entities grew by 19% year-on-year. Consolidated EBITDA is up 59% and PAT is up 50% year-on-year. This indicates the resilience of the company. While there is improvement in the margin in acquired entities, overall margin has been slightly lower due to cost buildup in our Madhya Pradesh unit to meet the steep ramp-up of the facility-based on new export orders executed in Q3 and subsequently in Q4 of FY ’25.
US retail apparel sales remain consistent, showing a 3% growth in calendar 2024. US and EU apparel imports have picked-up momentum since the second-half of CY ’24 on the strength of lower inventory with retailers. We see business volume picking-up with sustained stable performance of the company going-forward.
With this in mind, the company is planning to expand its production capacity with ongoing investments in three facilities. The first one is a new facility in Madhya Pradesh. This will increase the capacity by about 1,100 machines and is under-construction. The second one is an additional unit in Karnataka, which will add about 750 machines, which is also under-construction. The third incremental unit is expected in and lease from Micers. All these units are expected to commence operations at different points in FY ’26.
The last factory that we set-up in MP is producing at near-full capacity utilization. The operating parameters there are now at par with other locations, providing the confidence to expand. The company’s order book remains strong, securing robust near-term prospects. Fall with the order placements have been good, the production for which happens in Q1 and Q2. Early indications for spring/summer is also strong. All of our customers are seeing good business traction and we are engaging with them.
We are working on improving margins by better pricing and stronger operations management. The longer-term outlook is favorable, supported by continued shift in global sourcing away from China, Vietnam and Bangladesh, a trend towards supply and consolidation amongst efficient well-capitalized players and ongoing supply-side instabilities in various countries.
Our company Gopulas Export is one of India’s largest apparel makers exporting to over 50 countries. We employ about 50,000 people, a large proportion of whom are women. This is a sector that employs over a crore of people, has the potential to industrialize small towns, create more jobs per unit investment as compared to any other industry and has a high share of revenue disbursed as wages. In short, a highly desirable industry for social upliftment and for growth in the country.
Thank you for listening and I would be happy to address any questions that you have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. We have the first question from the line of Manish Ostwal from Nirmal Bang Securities Private Limited. Please go-ahead.
Manish Ostwal
Yes, sir. Thank you for the opportunity. And I have couple of questions on the macro as well as the company specifics. So first question on the — your comment on the trade shift from the China, Vietnam and Bangladesh to India. So I just wanted to see — I wanted to check with the — with respect to Vietnam, because what we are reading in the global newsprinter, the China trade is moving more Vietnam than Bangladesh. So we are confused from that comment.
And the second is, if I look at your slide number 16 with showing the trade — the share of the various countries in export to US and EU and the UK, the Vietnam share actually increased, whereas India’s share quite stable over this all three regions. So can you explain your comment on how the trade is shifting? What are the factors will drive this shift much faster this time than the past? Thank you.
Sivaramakrishnan Ganapathi
Sure. Thank you so much for your question. See, the costs in China, Vietnam are higher than India. If India is at $200 per month for manpower, the — for the workers, the cost in Vietnam is in excess of $300. That’s point number-one. And most of the players in Vietnam are people who have moved their operations from China to Vietnam.
So with rising geopolitical tensions, trade sanctions being threatened, et-cetera, there is a fear that it may impact Vietnam also because there is a lot of dependence in Vietnam for fabric from China. So brands take a cautious approach and start diversifying. So these are some of the trends we — very early days and we may see some movement going-forward to other regions just so that there is a reasonable amount of diversification there.
Even if you look at trade — trade balance between US and some of these countries, it is — you know, the trade imbalance with Vietnam is also very-high. Vietnam exports a fairly large you know, Vietnam enjoys a very large trade surplus with US. So all of this indicate that there is a little bit of a risk building up and some amount of diversification can happen, will happen. So there are options that open up for players like us.
The other factor is that we, unlike most other apparel manufacturers, also specialize in outerwear manufacturing, which is typically a product which gets produced in China and Vietnam. So we have a natural advantage of taking over some of the businesses from that region as long as we are cost-competitive. Of course, we still secure fabrics from Far East, from Taiwan, Korea, etc. But thanks to cost advantage, we are able to compete, but we will see growing traction from business which were earlier denominated there, which will move to India. So that’s as far as Vietnam is concerned, your specific question.
And as far as Bangladesh is concerned, there has been, of course, you know, political instability there, which is resulting in some suppliers or some retailers or rather many retailers trying to diversify away from Bangladesh, not a whole lot, but at least to reduce the dependence or reduced incremental businesses being placed there and they are seeking other alternative options and India is very much in the consideration. So overall, I think from a Gokulza standpoint, we are seeing some tailwind on account of all of these.
Manish Ostwal
Sure, sir. The second question on the overall outlook on the raw-material prices. So our gross margin, one is the factories, the acquired entity has some impact of lower margins and now we are ramping-up that thing and the new facility, there is some cost over there. But so on a medium-term perspective, where do you see our gross margin, EBITDA margin settle down and your outlook on the yarn or whether the yarn price and the cotton will remain range-bound and what is your sense on these two commodities.
Sivaramakrishnan Ganapathi
There is a slight downward pressure on the commodity prices. So that will — that will certainly help the business in terms of being able to reduce the overall price of garments. You know, thanks to raw-material price reduction. Our business, if I look at only the garmenting business, which is bulk of our business is really a conversion business. So we really do not — you know, our raw-material prices are really a pass-through. So if there is a price increase or price decrease, we tend to pass it back through to our customers.
Of course, if there is a price decrease, then it allows us some incremental growth and maybe an ability to incrementally improve our margins, which we try to secure. So the way I see cotton prices going-forward, it should — it has dropped a bit, it should remain — being agricultural product, there will be some degree of volatility of cost, but then I don’t see a rapid spike in those prices. And I think you know, the raw-material prices should be bound, which helps the business from a longer-term perspective.
Manish Ostwal
And sir, what is the volume growth in Nine-Month F ’25 25 compared to nine M F 24 in our business?
Sivaramakrishnan Ganapathi
One moment. 9m ’24 is only exports in FY ’24. And FY ’25 is inclusive of the acquired entity, we have been close to above 50 million pieces in terms of the quantities. As against 9m last year, we have done, if I recall 53 million.
Manish Ostwal
Okay, sir. Thank you.
Sivaramakrishnan Ganapathi
Last year is 20.808 and this year is 50.395 million.
Manish Ostwal
Okay, sir. Okay. Thank you.
Operator
Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. We have the next question from the line of Dipen Shah, an Individual Investor. Please go-ahead.
Dipen Shah
Yeah. Thank you for the opportunity. I had a couple of questions on the macro side. Sir, you mentioned about improving demand and destocking in the US and Europe. Now could you just give us some more color exactly on what actually is happening and whether you know, the summer season as you said is picking-up and what should it bore for FY ’26? That’s the first question. Hello.
Sivaramakrishnan Ganapathi
From second-half of calendar ’24, we are seeing US imports growing. Now the reason for that is that most of the brands have reached a reasonable — reasonable level of inventory destocking. They all were carrying or saddled with excess inventory in ’23 and they were continuously getting rid of that. US retail sales has been at a growing at a consistent clip at of about 3%.
And with US purchases being down in ’23 as well as first-half of calendar ’24, the inventory positions have reached an optimal level that now brands have started buying. So there has been a spot of imports into US across all retailers and this is also playing out in Europe too. So that is aiding demand bounce-back. And obviously, the supply-demand equation is being corrected. So we had a situation where there was an excess supply over demand till middle of 2024 calendar year and now that is changing.
So this is also helping us from a business growth standpoint apart from the fact that we are seeing some business movement from the Far East as well as Bangladesh to India. So there is a double movement in favor of, you know, India and we seem to get that tailwind in our business. I think this tailwind is here to here to sustain. If there are any tariff-related moves which US imposes, I — I don’t see any discriminatory tariff relative to other countries over India. So overall, I think we should be fine and we should see some incremental business growth from demand from those — from the primary importing countries for us.
Dipen Shah
Okay. And sir, any geographical diversification of new markets which you are targeting post the acquisitions, which we have made last year.
Sivaramakrishnan Ganapathi
See, we have enough opportunities to expand in other territories. So we are focusing a little more into Europe, though I would still say that the US market is far more resilient and robust than the European market. We have increased our share into UK by a few percentage points and are expanding our relationship there, but it’s not — is it’s not that significant. US still continues to be dominant with over 75% of our exports into that region while we continue to export about 50 countries.
Dipen Shah
Okay. Right, sir. Thank you very much and all the very best to you.
Sivaramakrishnan Ganapathi
Thank you.
Operator
Thank you. The next question is from the line of Gandhi from Brocha Stock Broking. Please go-ahead.
Bhavya Gandhi
Yeah. Hi, thanks for the opportunity. Hope I’m audible.
Sivaramakrishnan Ganapathi
Yes, you are.
Bhavya Gandhi
Yeah. Yeah. So sir, just wanted to understand on the macro-level, globally polyester is a major market and India largely being dominant in cotton market. So how do we intend to grow in the polyester because I think we don’t have a back-end ecosystem for polyester. So what is our thought process on this?
Sivaramakrishnan Ganapathi
Yeah. See polyester is about 50% of global fiber, whereas cotton is say about 25%, 30%, so it’s about double there of cotton. And India — India strength is in cotton, thanks to the raw-material being available in-country. People like us who also export a lot of outerwear and sportswear tend to tend to export a lot of garments, which has got a polyester content in it.
And the fact that we have operations in Africa where we enjoy a duty-free access to US and duties in synthetics being extraordinarily high in the US, we tend to have a little dominant product mix in favor of polyester. So most of the polyesters or synthetic fabric that we buy as raw-material comes from the Far East from various sources, various countries.
And since we have some of those technical capabilities and a cost-efficient production, we are seeing reasonable amount of traction in those spaces. Both athleisure is growing. Some segments in outerwear also, we are seeing now some growth after lull for some time, primarily because there was an excess inventory in the system for the last two years. So we are now seeing that traction coming back too. So we are seeing traction in the polyester segment, but fabric dependency is still on import.
Bhavya Gandhi
Right. Got it. And unit economics-wise, we are cost-competitive, right, when it comes to polyester as a product.
Sivaramakrishnan Ganapathi
And because we focus on highly technical products, yes, we are cost-competitive.
Bhavya Gandhi
Okay, got it. And just wanted to understand what would be the total capacity in terms of pieces first all this empty Karnataka Ranchi expansion.
Sivaramakrishnan Ganapathi
Total capacity in pieces.
Bhavya Gandhi
Million pieces.
Sivaramakrishnan Ganapathi
We really do not measure our capacity in pieces because it’s you know, very product-type dependent. So Ranshi, we are expanding for mix in Madhya Pradesh and Karnataka, we are expanding for. In movements, we do garments which may — which take anywhere from 18 minutes to 45, 50 minutes. And in the South, we make even garments which take 200 minutes to make.
So really denominating capacity in pieces is hard, but let me give you revenue-wise, because at the end-of-the day, that’s probably what you’re trying to look for. For and the incremental capacity in MP should net in about INR175 crores when it is fully ramped-up. I’m talking of the incremental new capacity. The one in would yield about INR125 crore INR130 crores. And the one in Ranchi would yield about INR55 crores INR60 crores. So overall, I would say it’s about INR2 — about INR300 odd crores.
Bhavya Gandhi
Got it. And have we got any form commitment for the incremental capacity that we are putting in, I mean, any visibility from the customer side?
Sivaramakrishnan Ganapathi
So at this moment, all our existing capacities are fully utilized and there is a fair amount of demand traction that we are seeing. Some of these capacities will come up towards the start of Q3. So we are seeing a fair amount of demand traction building up in anticipation. So we don’t foresee a big challenge. In fact, we have enough of inquiries and we are turning down demand because we don’t have enough capacity to serve. So I’m not so worried about the ability to fill-up these incremental capacities.
Bhavya Gandhi
Got it. And on the consol level, can you guide on the EBITDA margins?
Sivaramakrishnan Ganapathi
I’m sorry.
Bhavya Gandhi
On the consol level, can you guide on the EBITDA margins post the capacity expansion and the and Matrix merger, I mean on a full-scale basis.
Sivaramakrishnan Ganapathi
Keep in mind that whenever any capacity comes for a year, year and a half, the incremental capacities have a tendency to depress the earnings. In fact, our Madhya Pradesh unit has a tendency of reducing our EBITDA margin because it was on a serious ramp-up. We have now reached the manpower count of almost 2,200 there. And while we were ramping them up, training them, etc., we had far more people in training than we were — we had people in-production, so causing on overall cost being in excess of of revenue. So you know, it takes a while before that normalizes. So keeping all of this in mind, we are still aiming for a percent improvement in EBITDA margin going-forward at a consol level in the year ahead, year, year and a half ahead.
Bhavya Gandhi
Got it. And just wanted to understand what would be the total depreciation for next two years, if you can provide some number on that.
Sivaramakrishnan Ganapathi
For the current year, it is about INR125 crores. It has got two components. One is the India’s depreciation and regular depreciation. Going-forward for FY ’26 and ’27, the depreciation will increase by almost around INR15 crores to INR17 crores and an average you can take yearly.
Bhavya Gandhi
Got it. Got it. And if I can squeeze in one more question, just wanted to understand on the Japanese FTA, are we trying to tap into any of the Japanese customers? I believe the stickiness is much higher on the Japanese side, if you can throw some light on that as well.
Sivaramakrishnan Ganapathi
So we do have inquiry from that region. But at the moment, since our capacities are full, we are unable to open up any capacity for a new customer. So that’s one of the reasons why we have not been able to bring in — bring in any customer from other regions for now.
Bhavya Gandhi
Got it. Are we trying Australia or any other region for that matter, because I believe, again, we’ve signed an FTA on Australia as well.
Sivaramakrishnan Ganapathi
Not really, because the volumes there aren’t that large so — and you know there are a few customers where the pricing may be very sharp. So we are not that aggressively looking at that future.
Bhavya Gandhi
Got it. Fair enough. That’s it from my end. Thank you so much. Yeah.
Operator
Thank you. The next question is from the line of Sundar from Avendus Spark. Please go-ahead.
Sundar
Hello, sir. Thank you. Thank you for the opportunity. The first question is on the margins of the acquired entities. So there has been a remarkable turnaround from what we had last quarter to this quarter. So can we assume that all the problems that we had in was behind us and what is the impact of that Kenyan shilling decision to that in terms of margins?
Sivaramakrishnan Ganapathi
So I wouldn’t say everything is behind us. It’s a work-in progress. And I think this work-in progress will continue into Q4 as well and maybe even early Q1. The way we are combating that Kenyan shilling and Kenyan shilling appreciation is by focusing on operational improvements. So there is a considerable movement in operational efficiencies in our African units, thanks to good work done by the team there.
And secondly, there has also been some amount of price increases that we managed to secure on the on the basis of an appreciating shilling. So this has helped us. I would say that some of these newer orders, which are at better pricing actually kick-in from Q1. So in Q4, there is some blended impact. So the real benefits will start flowing in, in the next financial year. In the meanwhile, we tend to — we are trying to see all — explore all avenues to improve the performance of that unit.
Sundar
I’m coming back to this because you had earlier guided that 10% is the sort of margins that we should look for atraco. I believe given the blended number that you’ve disclosed, you’re far above that particular number. So do you want to revise the guidance as to what we can look in terms of margins the acquired entities?
Sivaramakrishnan Ganapathi
So I would say at TRACCO, if I get about 10% EBITDA margin in the next year, I will be happy. We are working towards that for sure and we will hopefully with achieve it. And for the other unit of metrics, I think they will be at par or a notch above exports, primarily because we’re not adding too much of new capacities there. So there is no drag on the P&L on account of new capacities in the — in that entity.
Sundar
So if you can just help with the current quarter split between metrics and ballpark number in terms of margins?
Sivaramakrishnan Ganapathi
So I think Matrix is at about 14-odd percent and is either proportionately, I think 7% or thereabouts.
Sundar
Right. So our track to 10% movements will be the trigger by Q1 is what we can expect.
Sivaramakrishnan Ganapathi
Well, we are trying and I don’t know whether it will be by Q1 or by Q2, but the effort is gone. Again, as I said, it incremental orders will slowly nudge up the pricing and hence the margins. It takes time to build-up. So you know, overnight, we may — we may not be able to move that much maybe if not Q1 by Q2, we are trying to do that.
Sundar
But my assumption is that by now all the order booking has been done by you only. So there’s no orders to be executed as of today.
Sivaramakrishnan Ganapathi
So that is — that is by and large correct. Though in Africa, we tend to book little longer-term orders and there are repeat orders, etc. So sometimes you may not be able to secure all the price increases in one-go. So — but you’re right, all the incremental orders are being secured by us now.
Sundar
Perfect, sir. Sir, just coming back to the business here, you indicated that there is some cost buildup on account of Madhya Pradesh. So are we referring this to Phase-2 buildup that we’re trying to do for that INR175 crores incremental revenues next year or is it referring to the Phase-1 cost that we did incurred?
Sivaramakrishnan Ganapathi
Phase-1 cost because what happened was we suddenly shot up to full capacity utilization in Phase-1 and bulk of that capacity ramp-up happened in Q3. So we went to full complement of workforce. Now the entire unit is working block and from a capacity utilization standpoint. So that massive ramp-up, which we did in Q3 also cost a faster cost increase than revenue realization.
Sundar
But on a standalone basis, if we were to just look at MP on a standalone basis, what would be the standalone margins of…
Sivaramakrishnan Ganapathi
So standalone margin which we will achieve in the future or standalone margin in.
Sundar
The future in the future, what is the potential of that unit given that we are also — that is also a PLA approved unit.
Sivaramakrishnan Ganapathi
My assessment is at least 2% to 2.5% to 3% over the standalone achievement.
Sundar
Yeah, and this should be after Phase-2 also stabilizes.
Sivaramakrishnan Ganapathi
That’s correct because while Phase-1 will stabilize starting Q1 onwards, I think Phase-2 will start you know, having that you know impact. That Phase-2, we are expecting the construction to be over in May. So somewhere in June, July, we will start the manpower ramp-up.
Sundar
So the incremental training would have already started for Phase-2.
Sivaramakrishnan Ganapathi
So we will be starting not now, we’ll be starting soon. I mean, we’ll be starting closer to-end of Q1.
Sundar
Right, perfect. And the Raj unit that you had mentioned will be under Matrix already under stand units.
Sivaramakrishnan Ganapathi
So now the integration of Matrix is strongly underway, operational integration I’m saying. So there is hardly any difference between Matrix and local dust. Yeah, under — as far as the legal entity is concerned, it will be under the Matrix subsidiary did the expansion in Ranchi.
Sundar
Right, sir, fair enough. And one last question here is that I presume that you gave out the margin or the potential margins of MP without the inclusion of PLI or the DBC that we were entitled to. Now what is the status update on both of that side?
Sivaramakrishnan Ganapathi
MTPLI. So see, the PLI is dependent on a product-type. And the product-type that we are currently manufacturing in MP does not qualify for PLI, PLI. PLI is restricted only to 40 specific HS codes. And those HS codes, the order flow into India is not very-high. So we are really at the end-of-the day, PLI is something where if you’re able to secure, it’s great. But our focus is to make sure that the business runs with or without VLI, right?
Sundar
And on the DBT part, sir?
Sivaramakrishnan Ganapathi
DBT?
Sundar
The direct benefit transfer that you had promised the state government in.
Sivaramakrishnan Ganapathi
That’s — that’s continuing. So that is available in MP.
Sundar
Okay. So that number has started slowing is what I’m trying to understand.
Sivaramakrishnan Ganapathi
So in terms of accounting we are taking and we are at we were told by the MP government that it will start going from the forthcoming financial year and we should — we should start seeing that. So we are on-track for it.
Sundar
Right, sir, perfect. But can there be a lever to margin beyond the 250 basis-points because of DBT coming through or is it already accounted for?
Sivaramakrishnan Ganapathi
So I think there is a lever to margin improving over that 250 basis-points. Yes, there is.
Sundar
Perfect. And one last one if I may, please, as to the current status on BRFL, given with the additional investment or the stake that you’re beginning to procure, what is the status now? Is that are we still going to go with that INR250 crore investment or where are we in that particular journey?
Sivaramakrishnan Ganapathi
So till this quarter, that is our quarter-ending December, we have invested INR110 crores in BRFL, BBPL. And subsequently, we have invested another INR65 crores. So it amounts to about INR175 crores of investments till-date. The unit is currently from nearly no orders. It has reached to about 40% to 45% capacity utilization. Incrementally, we will not be able to pull-up the capacity utilization until all the capexes which are underway are seen through to explosion.
So there is a lot of work going on, which will continue through till April in terms of debottlenecking capacity, repairs of machines, upgrade of the machines, etc., et-cetera. So in that sense, we have taken-up the capacity utilization pretty quickly and handsomely. So obviously, this meant that the losses have started coming down. There has been significant improvement in-production quality also. So for example, reprocess rates have come down.
The quality of production has started improving. We are starting to nominate this mill with various brands. So a lot of activities are going on as we speak and it’s been only since July that we took over. And realistically, we took — we — as when we say it took over, we started — started engaging with it. So realistically, we start — the activity started only in August. So the progress that we have made in the last six months has been pretty significant and that gives us the confidence and the encouragement to seriously consider merging this asset with us going-forward at the opportune time.
Sundar
So does the timeline change from what we had initially indicated in terms of when this entity would be consolidated within the standard?
Sivaramakrishnan Ganapathi
No, I think at the moment, the thought process is to initiate this sometime in the month of June 2025 and go through an NCLT process for merger and hopefully that will take another nine months or 12 months depending on how long that process takes.
Sundar
To come back into this, but what would be the total quantum of money that would be required from here to June 2025 for the acquisition of the center entity. So beyond the INR175 crores. So apart from the…
Sivaramakrishnan Ganapathi
INR175 crores, I think it will be about — we had earlier on indicated about INR588 crores to acquire 100% of the asset. So that’s — it will be — it will be that amount adjusted for certain working capital and there are some financial terms and conditions in the agreement. So that’s the amount that will be required as and when this event starts, it gets triggered.
Sundar
Perfect, sir. Sure, sir. Thank you and all the best, sir.
Sivaramakrishnan Ganapathi
You’re welcome.
Operator
Thank you. The next question is from the line of Junjanwala from Elara Capital. Please go-ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. Sir, just taking forward BRFL discussion only. One last question on that front. At INR175 crores, our stake is 13%. Is my understanding correct?
Sivaramakrishnan Ganapathi
No. INR175 crores is invested only through OCD. So we — this is a investment into BDPL for its you know, capex plans for performance improvement and so on and so forth, working capital, some amount of loss funding, et-cetera. So it’s only that. The 13% stake is in addition where we intend to buy some shareholders out and in the process to, you know to kick-start the consolidation of that entity with us.
Prerna Jhunjhunwala
Okay. So INR175 crore doesn’t include a 13% price cash consideration that you have mentioned in the press release.
Sivaramakrishnan Ganapathi
That is correct.
Prerna Jhunjhunwala
Okay, understood. Sir, second question on ATRACO. Is any expansion Atraco as well?
Sivaramakrishnan Ganapathi
So as we speak, the 500 machine expansion has been initiated and we have spent about INR35 crores in Indian rupees for that.
Prerna Jhunjhunwala
And what will be the revenue potential with the same?
Sivaramakrishnan Ganapathi
The revenue potential will be about, you know, in my opinion, about INR125 crores INR130 crores.
Prerna Jhunjhunwala
Okay. And I missed the Ranchi machine number. Can you just help me with that as well?
Sivaramakrishnan Ganapathi
No Ranchi is a lease facility. We have taken 200 machine facility, but it will work-in two shifts. So equivalent, it is 400 machines.
Prerna Jhunjhunwala
Understood. So sir, if I total, your total revenue would be around INR4,000 crore approx annualizing the nine months numbers. And your total revenue potential that is getting added INR300 crore-plus 100 for ATRACO 130, so around INR500 crores. So in the next two years, should we assume this INR500 crore additional revenue or how it should flow? And how will growth pan-out for the company to utilize the benefit from shift in supply-chain? Shouldn’t we be growing a little higher-growth rate? I mean, if I’m missing some — anything somewhere, can you can clarify? Thank you.
Sivaramakrishnan Ganapathi
Sure. So these are units and expansions which are underway as we speak. This doesn’t stop us from adding more capacity as we go along. So at any point in time, we are planning a lot of incremental capacities as well. This is point number-one. So we — in the next two years, we’ll be adding more factories and we’re not going to stop at the factories that are work-in progress as we speak.
Secondly, the existing units also do get debottlenecked and we are continuously investing in automation and productivity improvement. So a 3% improvement in existing units per annum itself on a, let’s say, a INR4,000 crores revenue yields additional how much about INR120 crores, right? So those kind of growth will also — also happen and as I said, we will also look at newer facilities for Brock.
Prerna Jhunjhunwala
Okay. So should we — should 10% plus growth rate 10% to 15% should be a decent assumption for assuming over a longer-term like three to three years time-frame, medium-term?
Sivaramakrishnan Ganapathi
I think it’s a very decent assumption. I would say the top-end of that range will be a more reasonable decent assumption.
Prerna Jhunjhunwala
Oh, that’s great. And consolidated margins should be around 12-odd percent on expanded capacities? That is correct. Though we are trying to improve our margins also as we speak. As I said, some of these growth in newer regions do tend to take longer before it stabilizes as you know, we don’t get access to train manpower. So we have to work harder to train them and bring them up to speed in terms of productivity and quality, et-cetera. But now that we have achieved it, incremental factories in some of the newer regions like Madhya Pradesh and all will be — will reach productivity and profitability sooner. So yeah, but despite all of that, in this first year, there will be a negative impact of new capacities, but we are looking to offset that and improve the EBITDA margin in the coming financial year. Okay, sir. Thank you and all the best, sir.
Sivaramakrishnan Ganapathi
Thank you.
Operator
Thank you. We have the next question from the line of Heath Vora from Guardian Capital Partners. Please go-ahead.
Heet Vora
Yeah, good morning and congratulations on a good set of numbers. I just had one question. And that’s per se to the tariffs, if we are going to see an increase in tariffs, would a track would be benefiting given it goes tax-free to the US?
Sivaramakrishnan Ganapathi
So we don’t know what is happening with tariff, right? There is so much of news coming from United States that it’s hard to keep up. One doesn’t know what exactly are the tariffs plan. But the ceiling one guess is that Africa may be spared tariffs and currently it enjoys a Goa benefit of zero tariffs. So unless for some strange reasons it’s pulled out, which I don’t see any reason and there is no competitive situation between US and African countries, nor do they enjoy trade surplus. So we don’t believe that will change.
And if there is a tariff increase from the regular exporting nations, then the tariff delta will widen, which will only make Africa more attractive. And that’s one of the reasons why customers who are here to also not very keen on Africa. So there are some customers who are also talking about it, saying that maybe we should explore there — at least we are having some conversations around it. So I feel that it’s going to be beneficial for us from an African standpoint in the longer run if tariffs goes up in other regions.
Heet Vora
Got it. That was it. Thank you so much.
Sivaramakrishnan Ganapathi
Welcome.
Operator
Thank you. The next question is from the line of Mitun Awast from Keva Advisors. Please go-ahead.
Mithun Aswath
Hi, sir. I think you’ve answered a lot of the questions that I had. You mentioned about 15% kind of overall top-line growth. I just wanted to understand you’ve embarked on M&A as a strategy to grow. In the next couple of years, would you continue on that path? Are you seeing more opportunities to consolidate? That was the first question.
And the second question was more on the BRFL acquisition. How would that kind of change the contours for you in terms of size because utilization is so low, what kind of revenues and profitability could that add to the company.
Sivaramakrishnan Ganapathi
So, Sira, would we look at acquisitions probably in the short-term? No. In the long-term, yes. We are open to growth in any form. And again, we will not acquire a company just to bulk-up or add revenue. Our intention is to acquire to get access to a low-cost geography, access to a new customer or access to a new product-type. And it has to — it has to make strategic sense in addition to simply a revenue gather. So that’s the strategy.
But in the short-term, we are not looking at an acquisition. We want to consolidate what we have. Remember, we have only taken-up some of these acquisitions nine months ago and there is tons of work required to be done to bring them to where we would like them — like to see them. So next year also will be consumed in bringing those units up to speed with Gopal operation. So we won’t — we won’t be indulging in any acquisitions in the meanwhile. That’s point number-one.
As your next question was on BDPL or the fabric unit. See, the fabric unit is strategic. It helps us secure raw materials. It helps us turn things around much faster for our customers from a lead-time standpoint and also improves our negotiating position with brands because the number of fabric mills are far fewer than the number of diamond companies.
So at the end-of-the day, if you do control fabric, you do have a better handle over specific orders and cleaner product types. So with all of that in mind, we went acquiring this asset. This asset is also — also has a great reputation from a technical capability standpoint and we need to now bring back that capability to the customer, which is what the work-in progress is.
So if the impact of BTPL, if I look at it on a standalone basis, its peak revenue could be about INR1,500 plus crores. But then again, a lot of it could be bought internally. So once it is merged, some of those revenues will get knocked off in consolidation. But then obviously, it may have an EBITDA improvement benefit.
Mithun Aswath
Right, sir. What kind of impact could it have on the EBITDA from FY ’27?
Sivaramakrishnan Ganapathi
So if I look at it as a standalone basis, this — the EBITDA of this unit should be about, 12%, 13% 14% going-forward. So if it is more or less in-line with the garment EBITDA, then again, if the revenue gets knocked off, then obviously there will be some sort of an EBITDA benefit which you can do your math.
Mithun Aswath
Okay. Thank you.
Sivaramakrishnan Ganapathi
But then I don’t see this consolidating before FY ’26. So effectively, if at all it happens, it happens in FY ’27 onwards.
Mithun Aswath
Correct. FY ’27 is what I was asking you.
Operator
Thank you. Participants who wish to ask questions may please press star and one. We have the next question from the line of Raman KV from Sequent Investments. Please go-ahead.
Raman KV
Hello, can you hear me?
Operator
Audible.
Raman KV
Sir, can you again explain the cost buildup in the MP unit, which led to lower margins that particular part of it?
Sivaramakrishnan Ganapathi
Can you are asking the cost buildup in MP unit?
Raman KV
Yeah, yeah. You said that there was a cost buildup in the MP unit, which led to lower margins. Can you explain that particular part?
Sivaramakrishnan Ganapathi
Sure. So the point here is that in the 3rd-quarter, we started adding people. We almost added about 1,200 people in the 3rd-quarter in MP. So now the manpower count has reached about 2,200 people. So most of them were under training during that period. And in the initial phase of production also since there are trainees who hit the production line their productivity will be low.
So we incur a full complement of labor costs through training as well as early production and then the corresponding revenue doesn’t materialize because it comes with a phase lag. So our incremental cost was about INR3 crore to INR4 crores on account of all of this and it has not manifested in proportionate revenue. So that was the point I was referring to.
Raman KV
Okay. Thank you, sir.
Operator
Thank you. The next question is from the line of Monish Godke from HDFC Mutual Fund. Please go-ahead.
Monish Ghodke
Yeah. Thank you for the opportunity. Sir, what would be the share of outerwear on an annualized basis in the revenue of each entity that is Gokulldas Metrics and Atraco?
Sivaramakrishnan Ganapathi
Yeah. So outerwear on a Nine-Month basis for GokulDas was about 20%.
Monish Ghodke
Annualized basis would be how much?
Sivaramakrishnan Ganapathi
Yeah. I mean it will be around similar percentage, 35% maybe.
Monish Ghodke
Okay.
Sivaramakrishnan Ganapathi
Okay. Yeah, matrix and is very less. It will be like low-single digit.
Monish Ghodke
Okay. So sir, this margin expansion, which we have got in acquired entities of 11.3% since Q3 and Q4 are generally summer heavy, do you expect this to continue in Q1, Q2 as well or there will be some reduction?
Sivaramakrishnan Ganapathi
There could be some reduction, particularly Matrix is spring-summer heavy. So where there could be some — some reduction in Q1 and Q2. But the aim is to offset that somehow by further improvement in as well. So there’s a lot of countervailing process as well, so we’ll try our best.
Monish Ghodke
Okay. And sir, one more question. So in this budget, there was an increase in duty and knits fabric imports. Does it impact us in any way?
Sivaramakrishnan Ganapathi
No. Most of the lit fabric that we use, we will you know we buy domestically. And even let us say we buy fabric for export manufacturing, we buy it under advanced license, so we don’t pay duty on those. So we will secure the raw-material at nil duty.
Monish Ghodke
Okay. Okay. Thank you, sir.
Operator
Thank you. Participants who wish to ask questions, may please press star and one at this time. We have the next question from the line of Manish Segal, an Individual Investor. Please go-ahead.
Manish Sehgal
Hi, sir. Thanks for taking my question. Just wanted to understand just purely from a production perspective, Q4 production at, as you said, is fully utilized. What would be the production in terms of revenue? And also if you could give an update on the knitted unit that we had commercialized last year, that’ll be good, sir.
Sivaramakrishnan Ganapathi
So we don’t give specific numbers or guidance of revenue going-forward. So suffice to say that even Q3 was working at full capacity utilization. Of course, what happens in Q3 is that towards the end of December, a lot of shipments get bunched up. They don’t move-out because of port transition and other things. So typically, some of those revenues tend to spill-over. But currently, the — if you look at revenue standpoint, we are — we are reaching that full capacity utilization across our units of — and incremental units will come and debottleneck that and provide additional growth opportunities.
As far as the knit fabric unit is concerned, the knit fabric unit is producing. We are getting nominations from a quite a few customers. In fact, at the moment, we have two or three customers who have approved that unit for fabric sourcing. We will be ramping it up through Q4 and Q1. And I feel that it will also reach a full capacity utilization somewhere in Q2.
Manish Sehgal
And what would be the output there, sir, in terms of revenue? Of course, it will be sourced internally, the fabric, but should add to EBITDA there. right?
Sivaramakrishnan Ganapathi
So exactly. So output will be about 400 tons a month that is the expected output and its revenue will be annually about INR150 crores to INR200 crores.
Manish Sehgal
Okay. Sir, you had a stated vision of moving towards the $1 billion revenue, say, down the line in three, four years. What do you feel now standing where we are on that vision?
Sivaramakrishnan Ganapathi
So see, I think that vision — you know, at the end-of-the day, that vision is quite attainable. The demand-side, I don’t — I don’t see that as a bottleneck at all. There is enough opportunity coming India’s way and there are many customers who are increasingly trying to source more from India. So as long as we can find lower-cost manufacturing locations within India and are able to produce it at you know high productivity, you know achieving that target should not be a problem.
Manish Sehgal
Any stated objective you have on this front? How many — how much time do you want to achieve this?
Sivaramakrishnan Ganapathi
So that’s I would say, but it will take a few years for sure.
Manish Sehgal
Okay. And lastly, sir, do you expect Q4 margins now given you have the bookings to be better than Q3, given the full ramp-up in NPA has happened and it’s a seasonally good period for all the acquired entities as such.
Sivaramakrishnan Ganapathi
Yeah. So see if Q4 is seasonally good. You know directionally it should happen because and again, let’s not speculate on those margin numbers. But yeah, directionally, we will be going-in that — you know on that trajectory.
Manish Sehgal
Lastly, sir, how will INR depreciation help going-forward?
Sivaramakrishnan Ganapathi
So INR depreciation will not benefit in the immediate near-future for us, primarily because we hedge most of our near-term receivables. So today for all the way up to-Q1 and even partially into Q2, we have hedged all our receivables at old rates. So — but INR depreciation in the longer run always helps us because it allows us some flexibility to absorb costs and offset some of the inflationary trends in the — on the cost side of the company. So it augurs well for next quarter and it will augur well for us. Thank you, sir. Thank you. Sure.
Operator
Thank you. The next question is from the line of Bijal Shah from RTL Investments. Please go-ahead.
Bijal Jitendra Shah
Yeah, hi. Thanks for the opportunity and congratulations on good set of numbers. I have two questions. One, we read lot of news items saying that buyers in US were increasing their purchases from across the world on account of expected tariffs. So I just want to understand that we have seen strong growth in local gas. Is there an element of preponement of purchase and which should reverse in the due course of time? That’s question number-one.
And question number two is on the Bombay. Once it is fully operational and once you have done all the capex, will it reduce your dependence on imports from Southeast Asia?
Sivaramakrishnan Ganapathi
Okay. So regarding the first question, is your question on, you know, how is tariff going to play? I could not fully understand your question — the first question. I did understand your second one and I can answer that subsequently. Can you restate the first question?
Bijal Jitendra Shah
See, there was expectation that tariffs will come. So to avoid tariffs, there was lot of news items saying that buyers in US, US is actually all the imports, so building the inventory, so at least for a few months that they are kind of protected from the tariff which probably come to the announce. So during the December quarter and probably in 4Q also, are you seeing that some of your buyers have actually preponed the purchases or the growth which you have seen is now.
Sivaramakrishnan Ganapathi
See the buying is very seasonal. So if I start advancing too much of my buy, these are all short-term play, which you can do for 15 days, 20 days. But every three months we are buying products with the American customers or European customers by-product, which are very specific to a particular season. So they will not go and production also happens for that reason. So they are not going to go by excess and then hold the inventory over one year and all of that.
So I’m not seeing much of that happen out of here and also the worry on tariff is more on the Far East. So there may have been some degree of expediting of deliveries from China, maybe even Vietnam and all of that. But then as far as India — the India denominated sourcing is concerned, we have not seen so much of that.
Bijal Jitendra Shah
Got it.
Sivaramakrishnan Ganapathi
And as far as your second question on BTPL becoming an import substitute for us, answer is no. Most of BTPL will still work on domestic fiber and it will become a substitute for domestic milk, but not really — and of course, growth, but not really a substitute for imported fabric. So synthetics, etc will still continue to be dependent on imports.
Bijal Jitendra Shah
Got it, got it. Thanks a lot and all the best.
Sivaramakrishnan Ganapathi
Thank you.
Operator
Thank you. The next question is from the line of Avinash Nahata from Parami Financial Services. Please go-ahead.
Avinash Nahata
Am I audible?
Sivaramakrishnan Ganapathi
Yeah, you are.
Avinash Nahata
Okay. So the first question pertains to across our facilities, all — everything put together. So where-is an opportunity wherein we can add additional shift and increase our production in terms of — I mean at an aggregate level. And what is the practical difficulties you face when you move from Shift 1 to Shift-2, if you can speak about it?
Sivaramakrishnan Ganapathi
So all the units except our Ranchi unit currently works on one-shift operations. And particularly bulk of our units are in the South and here getting manpower for an odd shift is extremely difficult simply because you know people are not available to work those late-night shifts. You have to transport women back to their homes.
We don’t work — we don’t work on a model where people are housed near the — in the factory campuses or there are no domitries that we build, etc. So we will have to pick-up and drop from their homes, which all adds to layers of complexity. So we’ve not been very successful at managing multi-shift operation. However, in Ranchi, we have done that. Of course, it’s a smaller unit and we have done that successfully.
In Bopal, the first shift operations works very early hours, giving us an opportunity to put in a second shift as and when we reach that phase. We have reached a full capacity utilization in unit one now. So we will experiment with the second shift and we will see how the labor market responds to that going-forward. But there is a theoretical opportunity there to explore second ship but in most of our factories it is not a possibility.
Avinash Nahata
Okay and if you can provide the in absolute terms women working at our facilities.
Sivaramakrishnan Ganapathi
It’s about 78% to 80%, you know of our labor forces women. Out of 55,000, almost 40,000 are women employees.
Avinash Nahata
Okay. And one more data point in terms of permanent employee and which are sorry?
Sivaramakrishnan Ganapathi
All are permanent.
Avinash Nahata
Okay. Thanks a lot and all the very best.
Sivaramakrishnan Ganapathi
Thank you.
Operator
Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Sivaramakrishnan Ganapathi
Thank you so much for asking the questions and giving us an opportunity to explain our position. We continue to focus on growth and with that intention, we have — we are working with the acquired entities where we have backward integrated, we are setting up new capacities. We are also working with many of our customers to expand our relationships. We are seeing most of our customers experiencing reasonable growth and they’re doing well, which would translate to incremental business if we continue to execute well for them. For us, execution is the key mantra.
And if we do execute well, obviously, business will come in a B2B business. We are focused on margin improvement along with revenue growth and we will continue to focus that. As newer capacities come on-board, it will have a have downward pressure on margins, but we intend to offset that and rightsize the growth metrics so that we are able to expand and seek improvements in EBITDA margins. We continue to be very focused on all the operational details of the business and hopefully, we will continue our growth journey. Thank you so much.
Operator
Thank you. On behalf of Exports Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.