Gokaldas Exports Ltd (NSE: GOKEX) Q3 2026 Earnings Call dated Feb. 02, 2026
Corporate Participants:
Kasturi Sharma — Investor Relations
Sivaramakrishnan Ganapathi — Vice Chairman and Managing Director
Analysts:
Rehan Saiyyed — Analyst
Kaustubh Pawaskar — Analyst
Vishal Mehta — Analyst
Ronak Shah — Analyst
Rohit Maheshwari — Analyst
Ashutosh Nimani — Analyst
Ankit — Analyst
Samay Sabni — Analyst
Prerna Jhunjhunwala — Analyst
Harsh Mittal — Analyst
Bhavin Chheda — Analyst
Varun Gajaria — Analyst
Jayesh Shah — Analyst
Sahil Sharma — Analyst
Raman KV — Analyst
Neeraj Jain — Analyst
Saurabh Srivastava — Analyst
Gunjan Kabra — Analyst
Bijal Shah — Analyst
Shradha Agrawal — Analyst
Unidentified Participant — Analyst
Hitaindra Pradhan — Analyst
Presentation:
operator
Sa. Ladies and gentlemen, good morning and welcome to the Q3 and 9 month FY26 earnings conference call for Gokulgas Exports Limited. Ladies and gentlemen, good morning and welcome to the Q3 and 9 month FY26 earnings conference call for Gokulgas Exports Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star or zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms.
Kastuli Sharma from EY’s investor relations team. Thank you. And over to you Ms. Kasturi.
Kasturi Sharma — Investor Relations
Thank you Swapnali. Good morning to all the participants on the call. Before we proceed, 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. Our business risks that could cause future. Results, performance or achievement to differ significantly from what is expressed or implied by. Such forward looking statements. Please note that the results and presentation have been shared on email and the same are also available on the company’s website. In case you haven’t received the same, you can write to us and we’ll be happy to send them over to you to take us through the results and answer your questions. Today we have the top management of Vocal Das Exports Ltd. Represented by Mr. Shivaramakrishnan Ganapati, Vice Chairman and Managing Director and Mr. Satyamurthy the Chief Financial Officer. We’ll start the call with a brief overview of the quarter gone past followed by the Q and A session.
With that, I’ll now hand over the call to Shivas Sir. Over to you sir.
Sivaramakrishnan Ganapathi — Vice Chairman and Managing Director
Thank you so much. Good morning everyone. Happy to have you at our earnings call for the third quarter of FY26. This was the first full quarter impacted by the steep 50% US direct on India and the expiry of AGOA which provided duty free access from Africa to the US. The UK FDA signed in July 2025 has still not taken effect. In the meanwhile, many competing countries in Asia had a relatively advantageous 20% reciprocal tariff to the US and duty free access to EU and UK. To combat this, we initiated several measures like securing our US business by strengthening our relationship with customers and offering discounts on US shipments from India to part offset the steep tariff.
Secondly, streamlining operations across India and Africa to extract further efficiencies to reduce unit cost of operation and thirdly striving to increase business from Europe by increasing volumes with existing customers. We’ve also initiated the onboarding of a new customer from eu. The expiry of AGOA impacted the order book for Africa in Q3 resulting in a dip in revenue from the region. Further, there were some supply chain disruptions in Africa which impacted the business in the region. Imposition of incremental reciprocal tariff on Asian countries further from August 25 resulted in Africa regaining its tardif advantage. There is a reasonable possibility of AGOA getting extended soon.
This has allowed us to rebuild the Africa order book for future periods. During the previous call I had talked about a transformation from seeing tariff as an enemy out to defeat us to recognizing it as a source of power and knowledge that would make us formidable. We continue to seek ways to invent ourselves and leverage our strengths to deal with demanding externalities. In the quarter we reported a total income of 998 crores, a flat year on year performance. Our India operations continued to maintain its growth momentum registering a growth of 8% YoY despite being impacted by the steep US tariff.
For the entire quarter we reported an EBITDA of 96 crores, a decline of 18% India year on year. This was primarily due to sharing a considerable portion of the U.S. tariff burden with our key customers. Adjusting for the burden share, our EBITDA should have grown by 17%. On the demand front, apparel exports into the US witnessed a continuous decline since July 2025 despite retail sales posting a stronger growth during that period. Most US Retailers have so far not increased the prices for their customers. This is likely to change in 2026 as retailers are seeking to pass on some of the cost increases to their customers.
Clearly, brands in the US are hesitating to build inventory at higher tariffs and or may be anticipating flagging sales in 26. Imports from EU and UK showed a higher growth in the period January to November 2025 over the same period previous year. For the quarters ahead, the company has the visibility of a good order book for both India and Africa business. On the margin front, we anticipate US Reciprocal tariff on India to continue to impact the next quarter. Any positive outcome on U S India trade deal would of course offset this impact. Africa business is seeing some tailwind.
Our strategic investments in btpl, which is a fabric processing unit, strengthened with vertical integration enabling better customer service, faster delivery and creates an opportunity to improve margins. Our fabric investments and diversification into Africa will support our ability to somewhat deal with a steep US Tariff burden. Significant progress is being made in These areas, we are also directing capital expenditure into areas that will support our future growth in the long term. The recently announced India EU FTA will open access to a significant market placing Indian exporters at par with key competing countries like Bangladesh, Vietnam and a 12% duty advantage with China.
This along with India UK FTA would accelerate sourcing from India. High US tariff continues to remain a source of concern. Thank you for listening. I would be happy to address any questions that you may 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 Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Before we take the first question, ladies and gentlemen, you are requested to limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we will wait for a moment while the question queue sembles. We have the first question from the line of Rehan Syed from Trinetra Asset Managers.
Please go ahead.
Rehan Saiyyed
Yeah, good morning to the team and thank you for being fortunate. So sir, my first question is around the margin structures have want to understand like while your investment explains the immediate cost pressures. So if you see out explicitly disturbed ballots. So do you believe the current gross margin profile reflects a new wave or is there any embedded operating level that is not visible at current utilization level?
Sivaramakrishnan Ganapathi
You know there is some sort of an echo. I’m sorry, I couldn’t hear you properly. Would you be able to repeat your question?
Rehan Saiyyed
Probably. Yeah, sure, sure, sure.
So like while ago one year investor presentation explains that immediate cost pressures. So if we strip out explicitly disclose one off. So do you believe the current gross margin profile reflects a new base so or is there any embedded operating leverage that is not received at current international level? If your question is is there any one off expenses impacting this. Yeah, Apart from the tariff effect whatever we have disclosed, we have also incurred taken heat of 3.4 crores on account of our graduate restatement because of the new labor wage code. So other than that as all regular whatever has been reflected.
Sivaramakrishnan Ganapathi
Was that the question? I’m sorry, really, I couldn’t really understand your question.
Rehan Saiyyed
So my question is basically that the one of that you have disclosed apart from the any other disclosed practice between.
operator
Rehan, I would request you to kindly use the handset mode to ask a question.
Rehan Saiyyed
Okay. Am I clear now? Yeah, you’re better. Yeah, that’s what’s my question that I’m asking, apart from the disclosed one offs, is there any, any other one off that we have to consider in the current margin level?
Sivaramakrishnan Ganapathi
No. As Satya said, you know, barring that labor code related gratuity provision which was mandated by the new labor code, that was one time to an extent of three and a half crores, there is no other one time. You know, the whole US Tariff burden is. That is the burden, that is the impact that we’ve had during this quarter.
And that amounts to about 40 crores, 40.2 crores. That the net cost of tariff burden that we shared with our customers. Okay, okay. And my second and last question is around just wanted to understand regarding the product mix as a margin lever. So what proportion of current revenue comes from program based or repeat orders versus business or special lead orders? And how does this mix impact margin stability? So you know, almost all our business comes from fashion order. We don’t do large program based orders as yet. In the future we may be doing it, but you know, most of the orders are sought and won every, you know, on a seasonal basis.
We do get usually a year round visibility from our customers at a macro level. And then specific style wise orders come at the beginning of each of the fashion season primarily to allow us to buy the fabric and convert them. The reason why we focus on such programs are that they are better margins as opposed to year round programs where we end up competing with Bangladesh or other low cost regions who may also play the tariff game. Okay. Okay. Thank you.
operator
Thank you. We have the next question from the line of Kosto Pavaskar from ICC Securities. Please go ahead.
Kaustubh Pawaskar
Yeah, good morning sir. Thanks for giving me the opportunity. So my question is again on the margins. I just want to understand that this quarter we have seen full impact of U.S. studies. And despite that on sequential basis, if you see excluding the other income you manage margins, you you were able to maintain the margins at around 8% or if you exclude the other account on consolidated basis. And again in this quarter we have seen the Africa utilizations were quite low considering, you know, the AGOA effect and there was some supply disruption. So I believe that, you know, the atraco margins would also be at the lower end.
So considering that in quarter three, should we expect, you know, the margins to remain at this level or better off considering the fact that, you know, we might see some utilization level improving in Africa. India is doing reasonably well despite the fact that the US tar, you know, continues to hit the margins. We have done so. Just an understanding from your end.
Sivaramakrishnan Ganapathi
Sure. So agoa impact while AGOA’s full brunt was faced in Q3, we also had some issues in Q2 because AGOA expired on the 30th of September 2025 and that is for shipments landing in the US on or before the 30th of September.
So even second quarter was impacted. In fact we did have an improvement in ebitda margin in Q3 in Africa thanks to a lot of operational initiatives we took and that will continue to sustain in the quarters ahead. In Africa we would see a margin improvement, good margin improvement, primarily because from Q4 we have built a solid order book primarily because in the month of August we saw Asian countries see their reciprocal tariffs go up to 20% while Africa remained at 10%. So we do have even without AGOA, Africa enjoying superior tariff regime as far as US is concerned.
So that has also helped us to build the business in Africa. There is a likelihood of AGOA getting restored, likely with retrospective effect. That’s work in progress and we will have to wait and watch when that happens. But if that happens, then there will be further business fill up to Africa. So with that in mind, we are strengthening the business prospects in Africa. In fact, operations are more or less well set. We will see some good EBITDA contribution going forward. So in some ways you could see say that region has bottomed out and performance will improve from Q4 onwards.
India our performance will really depend on when the US reciprocal tariff gets corrected. Until then we will continue to seek operational improvements to offset the steep reciprocal tariff that we are facing. Any ways to reduce cost, takeout, efficiencies, et cetera is on the cards and we are working on it. That partially explains why this Q3 we were able to pull some performance, good performance out of India and we will continue to seek that going forward. So I would think that Africa will see prospects improving because of macroeconomic improvement. India until the US added Correct. The macroeconomics will remain what they are in the longer run.
EU FDA will kick in and so will UK fda. But until that happens we may see some degree of status quo with improvements only coming in from internal improvements that we will usher in.
Kaustubh Pawaskar
So my second question is understanding of the India business. So this quarter we have seen 6% growth and you in your initial comment you mentioned that you are seeing a uptick in volumes from EU and UK where you are trying to increase the orders for your existing client and you’re trying for the new customers. Is that helping us to achieve this? Because yes, I believe there might be some decline in Sales for this quarter considering the overall decline in Apple or whether you were able to maintain whatever sales or the order was on the year on year basis.
Sivaramakrishnan Ganapathi
So we have managed to protect ourselves, you know, from an, from an order perspective, protect our business from, you know, from U.S. tariffs. We have maintained our business volumes even. I mean if you look at our revenues for Q3 which is more or less flat with Q3 of last year, you know, this is after accounting for discounts for US customers. So in some ways we have actually grown the business Y O Y and that is because we continue to serve our customers well. We continue to keep the business within our business fold and ensure that we deliver well.
So US consumers are continuing to repose faith in Gokuldas in in India. In fact adjusting for discounts. In fact there has been a minor growth and I look at our order book for Q1 of Q4 and Q1 of next Q1 of next financial year. We have a decent robust order book for both the quarters. So we are holding on to the business. The concern remains that if the U.S. reciprocal tariff remains strong for the incremental penal tariff remain for a long term, then what happens? We will have to wait and watch how that unfolds. But for now we are holding on to business.
We have in fact minorly increased our business with US Customers. With European customers, we are growing very fast. We continue to do that. We have also, as I said in my opening remarks, we have added one more customer whom we will onboard in the next one or two months. So that will also give a further incremental growth from European business side. So we are seeking ways to derisk ourselves. This is a journey that we will go through in the next several quarters where we will rebalance at least out of India, the business between US and Europe.
European customers generally are smaller in size compared to Europe US customers. So it takes a bit more time. But we are working aggressively on that strategy to balance our revenue between these two regions going forward. Hope that clarifies.
Kaustubh Pawaskar
Yes sir. So last one in earlier call you mentioned that diversification is one of the strategy. We are looking in terms of the product base, production base. So you were looking at Bangladesh as one of the option if this tariff issue continues for another quarter or so. So any, any comment on that front? Whether you are looking to shift some of the base or production bills to Bangladesh from where you know where the traffic rate is around 20% and you can benefit from there.
Sivaramakrishnan Ganapathi
So we, we do have some subcontract relationships in Bangladesh and we exercise that option all the time. And even now we do use those capacities for our benefit. Any investment in Bangladesh would be considered only after some clarity on the macroeconomic situation in Bangladesh. There is an election supposed to happen sometime in February and we will take a call post the that looking at how Bangladesh shapes up. In the meanwhile, we are also open to looking at other geographies. So all those are work in progress. It may take time. It all depends on what our final conclusion is on relative attractiveness of those regions as well as how the tariff situation plays out in India.
So we are working on it. Bangladesh at the moment is only a subcon kind of arrangement making investments in Bangladesh. We will wait and watch till there is more clarity on geopolitics in that region.
Kaustubh Pawaskar
Thank you and all the best for the.
operator
Thank you. A reminder to all the participants, kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Vishal Mehta from IFL Capital. Please go ahead.
Vishal Mehta
Yeah, hi and thanks for taking my question. And I would say a resilient performance in the tough times. You know, just to start with a clarification, these tariffs also have bearing on your revenues, right? So adjusted for these, your revenues also would have been up 40 crores. Yeah. Okay. And you know, wanted to understand on AGOA and Africa operations, apart from AGOA you called out, there were some supply chain challenges there. So what are these? And is the AGOA disturbance now behind us in Africa? Would it be safe to say that?
Sivaramakrishnan Ganapathi
Sure. So the agoa, the supply chain challenges, actually there was some port congestion in Mombasa port and that meant that, you know, a lot of fabric which we were importing from China, etc.
Got held up for over 25 days, sometimes even 30 days which resulted in operations getting impacted there. All that is behind us. There was also, you know, this AGOA impact. And AGOA impact was primarily because in the early phase of AGOA, you know, when it got got, when the US let it expire in September 2025, we had only 10% tariff in rest of Asia. But since then US has now imposed 20% tariff on rest of Asia while you know, Africa continues to have a 10% reciprocal tariff giving bestowing Africa 10% advantage vis a vis rest of Asia and a 40% advantage vis a vis India.
Now there is a talk of AGOA being reinstated. Now we will wait and watch as to when it happens. It’s going through the US Congress, House of Representatives have already passed the Bill, but it has to go through Senate and the President. So you know, let’s wait until that happens. But if AGOA is restored then you know we will see a massive tailwind for Africa. Primarily because the duty delta between Africa and rest of Asia will widen even more. It will widen by another 20 odd percent. So we’ll wait for that. In the meanwhile, even without agoa, we are seeing a fairly good traction build up for that region.
Vishal Mehta
Okay, so just a follow up here because last quarter probably we were expecting, you know, that there was a sudden disturbance in Africa order execution and we faced challenges there and then we were expecting it to pick up this quarter. But still we, we continue to see challenges. So now for, for the upcoming quarter, do you see order book all healthy and we should probably see better growth, better margins there.
Sivaramakrishnan Ganapathi
Yeah. So when I say last quarter there was a problem. I, I had said that last quarter and the rettle spillover to this quarter quarter as well.
So this was expected that even this quarter will get impacted because bulk of the impact started from October. So this quarter did get impacted. The subsequent 20% tariff for rest of Asia obviously helps Africa. Do I see improvement going forward? Absolutely, yes.
Vishal Mehta
Okay. Okay, thanks. I’ll join back in the queue.
operator
Thank you. We have the next question from the line of Ronaksha from Equity securities Private Limited. Please go ahead. Please proceed with your question.
Ronak Shah
Yeah, thanks for the opportunity. Sir. Am I audible? Yes, you are. Yes. So the larger part of the margin benefit is coming from the gross margin expansion. So despite we have passed on certain discounts to the end consumers. So can you make us understand what has led to this? Is it because of the realization mixed related gains or there is there something different in between?
Sivaramakrishnan Ganapathi
The gross margin improvement happened because of more productivity gains and also product mix changes. So you know we had usually in spring, summer, we do have a lot of India based fabric that we use and we also did a strong negotiation with fabric suppliers given the tariff related challenges that we had.
So all of that also helped us
Ronak Shah
from the tariff perspective. As per the earlier understanding that the penal part is largely getting absorbed by the manufacturer, is there any change in that part or is it still continued?
Sivaramakrishnan Ganapathi
Can you say the question again? Yes sir. So as per our earlier understanding, within the tariff part, larger part of the penal portion which is 25% is absorbed by the manufacturer. So is there any change in that part or is it still continue? It is still continuing. So penal tariff last portion we are absorbing, we are trying our best to pass on some of the cost increases to Our suppliers as well.
So. So we do that too. So you know, trying to recover some of those additional burdens from our supply chain.
Ronak Shah
Got it. And lastly from the volumes front can you call out the separately what is the Indian business and African business volumes in the third quarter as well as.
Sivaramakrishnan Ganapathi
Okay, I. I’ll give the total volume is 15.53 million 572 rupees is the realization. And for standalone for India. For India I have separately for Africa, Africa is 3682. 3.68 million 400 rupees. 402 rupees is a realization. The differential is Indian operations. Okay, got it. Okay. For nine months.
For nine months. Africa volume is 10.65 at 428 rupees. Okay. And the total volume is 41.13 million 650 rupees. 649.
Ronak Shah
Okay. Okay. Got. Thank you. That’s it for my sir. Thank you.
operator
Thank you. We have the next question from the line of Rohit Maheshwari from Tata aig. Please go ahead.
Rohit Maheshwari
Good afternoon sir. And congratulations for good set of numbers in this difficult times. So my first question is out of the 40 corrodes which you have taken. What what was the total impact of the penal tariff?
Sivaramakrishnan Ganapathi
I think the total impact of the penal tariff was closer to 60 crores. And we set off about 20 crores of it from our supply chain.
Rohit Maheshwari
Okay. And do you if this penal tariff does not go for next commit 2 or 3 quarters do you think this 40 crores will be will be there till the time this penal tariff do not get solved? Of course.
Yes. Okay. And because now it has been more than give me like five, five and a half months we have been talking about do are you finding any different attitude of U. S buyer towards now negotiating new deals with them or do you because you don’t want to lose a customer you have been negotia the way can make it to just customer stays with you?
Sivaramakrishnan Ganapathi
No. So we’ve been negotiating with the customers so that we can ensure and you know, assure the customers to stay with us. So that’s going on. We are hoping that there should be some resolution to the US tariff sometime in the near future.
We’re waiting for it so that. So that the playing field gets leveled up between India and rest of Asia. Until then these discounts are the panacea for the situation that we have. And that’s the best we could do. I think in the longer run we need to see a more equalized tariff between ourselves and the rest of Asia. So the other option for us is actually to increase, increase our business from Africa as well as increase European business in India. Both of which we are doing to combat this.
Rohit Maheshwari
Okay, the last question is do you, it’s an interrelated one is can you call quarter three as a bottom out for Gokul task in terms of margin, in terms of growth.
And second is, second is when you, when you’re looking for European business because the order quantities are small, the margin profile will be better than the US customer. Correct.
Sivaramakrishnan Ganapathi
So to answer your first question, is this a bottom out performance from an India perspective while it is a bottomed out performance, we will see that, you know, Q4 also somewhat similar because you know the tariff regime is not changing. So you know any improvement will only come through operational improvements from an India business standpoint. So yes, we have bottomed out and hopefully we should, you know, once the tariff situation changes or improves, we’ll see improvements.
But as far as Africa is concerned, we have bottomed out and we should start seeing improvements going forward. So on a console basis I think we can say it firmly that, that this is a bottomed out performance and you know, going forward things should better. Things should better from here on. Primarily led by international operations. What was the next question? Second question is when you are getting additional business from the European customers so the margin, the margin profile will be better than the US customer. Your margin profile is better than us now because we are, you know, we are in that regime of penal tariff and we are offering some discounts to US customers.
The European customer margin in these circumstances are better. But if you look at it From a pre U.S. freezer tariff standpoint, U.S. businesses are much better than Europe simply because of the size of the relationship, the scale of operations, et cetera that we get from US customers. So European businesses, given that the retailers are a bit smaller, we tend to have a little sharper margin. Also Europe gets duty free access from Bangladesh, Pakistan, Sri Lanka, Vietnam, so many places. So they tend to squeeze us and compare us with landed duty free price points that they get from other regions.
That can only be set off once the US European FTA kicks in somewhere in 2027. Once that happens, European margins will also improve.
Rohit Maheshwari
Okay. Thank you sir. Thank you. Sure.
operator
Thank you. A reminder to all the participants, we request you to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Ashutosh Nimani from JM Financial Family Office. Please go ahead.
Ashutosh Nimani
Yeah, thanks for the opportunity sir. My first question is could you please walk through the BRFL acquisition like by when it will be fully integrated and how much do we currently hold it and how much we have to spend more in the expected cash outflow.
Sivaramakrishnan Ganapathi
So the BRFL business if all goes as planned it should happen sometime in the second quarter of next year financial year. The exact timing cannot be stated here because it depends on the NCNT process and the regulatory process. So you know as and when it happens, you know it will. Our expectation is that it should happen sometime in Q2 of FY27.
As far as BRFL’s performance goes I think we have been making, you know we have been investing in that entity through ocds and extending support by buying you know fabric from them and connecting them to customers etc. But we have been you know seeing some business traction growth for vrfl. There has been a continuous improvement in its performance so far I think we have invested in OCD to the extent of about 175 crore in BRFL. We’ve also bought 19% stake in the company paying about 72 crores. The rest of the stake equity stake will be bought as and when the regulatory approvals come in in Q2 of Q of next financial year and and the business will get consolidated as and when that that happens.
Ashutosh Nimani
Second question is regarding the capacity expansion plan out of the 105 crore plan for FY26 new capacity. Could you please tell where is this, where is this deployed in what are the timelines and how ramp up of this would impact our margin profile going forward.
Sivaramakrishnan Ganapathi
So these are the there are two units in India, one in Bhopal. The second unit is coming up, the second phase is coming up the other unit in. Yeah as I explained we have invested in the capacity expansion in Bhopal, the second unit as well as one more unit in Karnataka.
These two are in advanced stages of execution completion and we expect the commercial production to happen the next financial year. Apart from that we have expanded the capacity in Kenya. That’s a substantial portion. We are also expanding with the new machineries and you know expanding bring up another unit additionally in the existing premises itself that will also come on stream in the next financial year in Q1 FY27. The second part of the question how it would impact the margin profile like the ramp up. Usually what you have seen historically whenever there’s a ramp up there is a margin impact.
We face to what we were most of the ramp up related challenges have already been absorbed as you know, currency expansions are all happening in the units which, where we have operations. So we don’t anticipate a significant margin setback on account of this.
Ashutosh Nimani
Okay, yeah, thanks a lot. I’ll go ahead with you. Yes, please.
operator
Thank you. We have the next question from the line of Ankit from Anand Bhati Ltd. Please go ahead.
Ankit
Hello. Am I audible? You are. Thank you. Yeah, thank you for taking up my question. So I want to be little bit negative on this side that if trade day does not happen, so what how it will impact our of top line hazel margin and we will, will we take a price hike and what’s our strategy going ahead? If you are saying if the tariff doesn’t correct. Am I? Is that the question? Yeah. Does not happen.
Sivaramakrishnan Ganapathi
Yeah. If the penal tariff does not get corrected. Right. So, so see we are, we are working on that assumption.
Right. Unless there is a clarity on penal tariff, we have to work with the assumption that the incident Indian tariff will be 50% and our order booking for Q4 and Q1 is on that basis. And we have already booked orders accordingly. So. And at the moment we are working on Q2 orders as well which is also going in the right direction. From an order booking standpoint we are not seeing so much of challenges. We are pursuing as much business growth as possible and trying to keep our factories full. Having said that, the margins will stay impacted until the penal tariff is in place.
On account of the tariff related discount that we may still have to extend to American customers. I don’t see any ability for us to increase prices in the interim. You know, with high tariffs as well as the, you know, the expectation of inflation in US etc. Our ability to increase prices is next to zero. So we will have to continue to seek ways to improve margins by operational improvements, supply chain related cost savings as well as continue to book business by giving tariff related burden share or tariff related discounts. Okay. And if, if we are diversifying our US operation to Europe as well as European Union.
So how it has performed like in last six, seven months. So our European revenue is constantly increasing. You know, quarter on quarter we were at about 13%. Now we know we are further increasing it going forward about you know, will be about 60, 70%. So we are, we are in the, you know, we are constantly increasing our European business going forward. That, that journey will continue continue for us as, as we progress we will be adding also European customers so that they know this is the way we, we will combat it. The other thing is we are also looking at pushing more American business into Kenya where there is a duty advantage and that region will also possibly grow faster with American business.
Ankit
Okay. And Agoa, there is likely chance extended. So when, when there will be a clear idea about that. So it’s going to the US Congress. My sense is we will get to know within a month as to the status of Agoa month of February. We will have a clarity. Okay. Thank you. Thank you so much. That’s it. Thank you.
operator
Thank you. A reminder to all the participants we requested to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again, we have the next question from the line of Samy Sablis from Heelys Capital. Please go ahead.
Samay Sabni
Yeah, good afternoon. Thanks for the opportunity. So my question is. So you just mentioned that despite the discounts that were given in Q3, your gross margins have improved because the benefits of like Indian based finance that was used and strong negotiations that were dealt with the fabric supplier. So I just want to understand is this benefit like a one off that will go in Q3 or could we see this benefit in Q4 as well? So basically I want to understand the trend of a gross margin.
operator
Sorry to interrupt. In between summer, I would request you to kindly use the handset mode to ask the question.
Samay Sabni
Hello. Am I audible now?
operator
Yes. Yes you are. Sanjay. The line for Mrs. Samy has been disconnected. We will take the next participant.
Sivaramakrishnan Ganapathi
Answer his question. Because I got his question. Unless you know, if he’s still online, I wouldn’t mind answering it.
operator
Sure, sir.
Sivaramakrishnan Ganapathi
So you know the, you know the gross margin is also a function of product mix and product mix in the, in Q3 and Q4 favors India. So we usually have a little better gross margin during this period. Having said that, you know our, you know we will continue to see gross margin improvements wherever possible. It will be possible through better negotiations with the supply chain, better product mix that suit our margins, gross margins, et cetera. And we’ll continue to seek it. Would there be a further gross margin improvement in the quarters ahead? It’s not that easy.
We will continue our endeavor but it’s going to be difficult to further improve. Prove it. We will. We will keep trying.
operator
Your line is unmuted. Please go ahead with your question.
Sivaramakrishnan Ganapathi
Yeah, so what I was saying is the Gross margins in Q3 you mentioned that despite the discounts given in Q3, they improved because the the benefits of Indian fabric that was used as well as strong negotiations that were did with the fabric suppliers. So what I want to understand is, was this benefit like a one time that you had in Q3 or do you see this benefit in Q4 as well? So basically I want to understand will the gross margins improve in Q4 or they like remain steady? See again, as I said, the winter negotiations have happened in Q3 and that benefit will continue as long as the tariff related pressures remains on us.
So will the gross margin improve in the quarters ahead or how will the gross margin change? I think it will remain steady on account of all the purchasing related benefits that we have driven in as long as the U.S. tariff continues. But it will vary based on the product mix, product mix to product mix. There are some gross margin variations that we will see. For now, I think the product mix, we are always trying to optimize the product mix so that we can drive up our gross margins. When we get into Q1 and Q2, the profile may slightly change because we switch to autumn winter wear where the gross margin profile is slightly different and the fabric becomes more important.
So there will be a little higher cost of fabric that we will incur. So the gross margins may drop. But during those times we get a better realization from cost of manufacturing. So we tend to retain our EBITDA margin nevertheless. So you know, there are nuances in the business which sometimes swings between gross margin to cost of manufacturing. Effectively, we tend to protect our EBITDA margins all the time. Coming back to your specific question on is there any one time benefit that we got? You know, the only one time benefit we got was our negotiations with supply chain as far as raw material is concerned, which is linked to US tariffs staying high.
So as long as that remains, that benefit will continue as well. Okay, thank you for this. That was really helpful.
operator
Thank you. We have the next question from the line of Prerna Junjunwala from Elara Securities. Please go ahead.
Prerna Jhunjhunwala
Thank you for the opportunity, sir. And congratulations on a resilient set of numbers. Just wanted to understand your revenue and profitability between standalone Africa and Matrix businesses. The EBITDA margin from ATRACO is about 1/2 percent. And then between Matrix and the India operations is more or less in the same range. Sorry sahib, I didn’t get your number. EBITDA margin from Atraco is 1 and a half percent, 1.5%. While the EBITDA margin for the India operations remains the same level. Okay.
Sivaramakrishnan Ganapathi
Yes. Okay. So you said one and a half percent in Africa. Yes.
Prerna Jhunjhunwala
Okay. And what would that be for nine months?
Sivaramakrishnan Ganapathi
I’ll let you know. So the rise is so low for Africa and with Agoa Agreement because the. Business volumes went down in Africa. We were unwilling to extend discounts in Africa to offset be loss of agoa. And you know these decisions were taken in January, February of 2025 because we could, you know we tend to book orders for Africa well in advance and we could see that AGOA could be allowed to expire by the current administration. And we were not willing to hold on to the business just by giving discounts. We wanted to also take some business corrections. Most of that is done and as I said once the volume kicks back in and in Africa we tend to do over 25 million a quarter.
So once that kind of volume kicks back into Africa, which will happen from Q4 we will see a surge in EBITDA margin because you know the fixed cost gets amortized over a bigger business volume. So EBITDA margins will swing back from the fourth quarter onwards. And in the nine months period we did a breakeven hardly about crore last but we did good numbers in Q1. But Q2 was the real impact, big impact we have taken.
Prerna Jhunjhunwala
Understood sir. So sir, how do we see the margins going forward in India and Africa businesses? And how are you treating, you know, the Europe orders whether it is more from India or from Africa right now.
Sivaramakrishnan Ganapathi
So my India business, if the reciprocal tariff remains at 50%, the India business margins will remain where they are. We will continue to seek, you know, seek improvements on the margin side by improving operational efficiencies. But that’s only how the margin improvement may happen. But in Africa we could probably see a good improvement. I am expecting Africa’s EBITDA margin for next financial year that is FY27 go by the second half of that year, cross 10% easily, maybe even stay at an average of about 10% in 27 based on the order volume that, that we anticipate.
So sir, if your Africa business is one and a half, that means your India business would be more than 10% in this quarter.
Prerna Jhunjhunwala
Yeah. Understood sir. Yeah. Okay. Thank you so much and all the best.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants in the question queue, we request you to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Harsh Mittal from MK Global.
Please go ahead.
Harsh Mittal
Yes, thank you for the opportunity and congratulations to the management for a decent set of results despite the challenging environment. My first question sir is that UKSC has been signed for the past Five months. So how have seen your interactions with your clients in UK and do you see some uptick in business from the UK region? So that is my first question.
Sivaramakrishnan Ganapathi
Okay, so UK FCA was signed in July 2025. However not seen the benefit of FDA flow through, it is awaiting implementation. So at the moment the exports UK are still and we have not seen zero tariff benefit flow through as yet.
So the challenge with such a situation is that businesses take commercial decisions, they would like to see a zero rated tariff before moving significant volumes to India. Else they tend to lose an opportunity of curing the tariff benefit. You know, moving the volumes from Bangladesh to India won’t happen until the tariff regime actually kicks in. So directionally now many UK customers are talking to us, exploring stepping up the business volumes, etc. But the real benefit of all of that will happen once the UK FTA comes into effect. It is awaiting Parliament ratification, it is awaiting implementation.
We are waiting to see how soon that will happen. Secondly, on the EU fta do you see any non tariff barriers which may impact India similar to what UK FDA is there in terms of compliance, cost, product mix? Do you see the same thing? So you know, whatever non tariff barriers exist, exists even today and we are able to address those, you know, from a compliance standpoint etc. We are very high up there compared to most Indian suppliers are whether it is an environmental compliance, social compliance, etc. Etc. We have zero liquid discharge, zero hazardous chemicals discharge, we have renewable power in most of our factories.
Our labor compliances are one of the best in the country or best among the suppliers. So we don’t see any non tariff barriers impacting us as you know, impacting Vakuda from actual tariff implementation perspective, that’s the only one. So when European countries start importing at zero duty, which is when the implementation starts, maybe it will Happen Sometime in 2027, you will start seeing good amount of business flow coming to India. In the meanwhile, you know, we have to seek business by continuing to have tariff disadvantage vis a vis Bangladesh, Sri Lanka or other regions. And we are still getting that kind of business growth from Europe.
It will, it will accelerate once the FDA comes into effect. One question more.
operator
Sorry to interrupt between Harsh, I would request one question. Thank you very much. Thank you. We have the next question from the line of Bhavin Cheda from Enam Holdings. Please go ahead.
Bhavin Chheda
Yeah. Sir, congratulations on maintaining good numbers in a very difficult environment. A couple of questions. As you said sir, your order book you must have already filled up for this quarter as well as you’re saying for next year, first and second quarter also mainly US client. So what my question was. I understand the tariff is implemented when the goods land in us. So whenever there is a reversal of tariff, any goods landing there after that date, the incremental benefits start coming to us. Because I don’t believe there is a three way sharing. Clients are sharing some part of the tariff, you are sharing some part of the tariff.
So whenever that reverse goes, we don’t wait till next order and the reversal starts coming from that day onwards.
Sivaramakrishnan Ganapathi
Good question. Just to clarify, we have secured business until Q1, Q2 is work in progress. And so far it’s directionally going going well. As far as the penal tariffs and the tariff related burden share, it will reverse the day the tariff or the penal tariff goes away. So that incremental 25% if it is reversed then we will have you know our discounts being adjusted from the next shipment onwards and not necessarily from the next new orders that we booked.
No, my question was. So basically it happens even if your shipment is gone from India. Normally it’s a 2025 day cycle. So even when it lands in US that benefit starts coming in, right? Yes, it will. So if our customer is able to take the goods at less than 50% tariff, let’s say the penal tariff of 25% goes away on. On a certain date 1st of May, then any goods which they are able to clear customs in US at 25%, not 50%. Our tariff for those, our. Our burden share stops from those shipments onwards. Sure sir.
My second question I understand is tariff is on incremental portion over raw material and any goods which are imported from us. So in any part of your business overall you have imports from US where already you are getting some benefit or there isn’t much imports from US into your company. Yes, of course. So if I use US Cotton for instance and as long as the component of us you know us source is greater than or equal to 20%, we can get a set off for that amount in the reciprocal tariff. So we are using US Cotton as much as possible in our raw materials.
Because we can get that 50% offset on US based raw materials. So we are using all those tools available at our distribution disposal to minimize or reduce the burden. Have you maximized it or. This keeps on increasing U.S. cotton imports every quarter. This is a function of product mix. Wherever we are able to use US Cotton we will. How much percentage of cotton is US cotton right now in your portfolio? Yes. So there are, you know I think should have about 20, little about closer to 25% of the FOB, you know in cotton based garments as US cotton. And sir, my last question, sorry the third one, what will happen in first quarter is that we will be switching more to synthetics. So that is when some of these benefits may come down because then we will be using synthetic primary from the Far east. Sure. And my last question sir, as UK it would be signed anytime but the announcement happened a year back and India you announcement has just happened.
So just taking example from UK announcement which happened last year, I’m sure you would be seeding that market because whenever, whenever the parliamentary approval comes directly benefits on margins and overall business comes in. So obviously the players will feed the market much ahead of actual tariff implementation. Can you give some example of how UK business has been performing and how many clients you must have added in last one year or so and how experience has been from the announcement till date in the year UK market? Because I believe the similar pattern will follow in the India EU also.
Right. UK is a much smaller market compared to EU and we have three customers from UK that we are supplying to. We are seeing fair amount of growth in the revenue from these customers. However at the moment the growth is coming without any tariff related benefit acquired to the customer or to us. So you know the growth will get expedited once the tariff kicks in. Until then it’s about onboarding a customer and preparing ourselves for a duty free future. As and when that kicks in, that’s when the real transaction will happen. See customers are also commercially oriented.
They would prefer to get zero duty. If they get zero duty imports from Bangladesh and it is still charged from India, they will not move significant volumes. There will be, you know, testing, Preparing the grounds, etc. Which has all happened. Now we are waiting for the actual tariff to get re rated before real volumes will flow. Okay, thank you sir. Yeah, thank you.
operator
Thank you. A reminder to all the participants, we request you to kindly limit your questions to two per participant in order to ensure that the management will be able to address all the questions from the participants in the question queue. We have the next question from the line of Varun Gujaria from Omkara Capital. Please go ahead.
Varun Gajaria
Thank you for the opportunity. Congratulations on it. So sorry. Yeah, so I just wanted to understand. We mean we have seen some media, some media commotion on, on Bangladesh, on Bangladesh facing some kind of internal crisis and also the factory shutting down probably in February. So is there any substance to this? And, and what, and if, if there is then what kind of impact are we, are we seeing on overall supply chain in terms of competition? Bangladesh,
Sivaramakrishnan Ganapathi
the production volumes from Bangladesh have not really fallen. So factories are working and the factories are continuing to export from Bangladesh.
So, so while there are some challenges brewing in that country on account of factor costs going up on account of geopolitical situation, we have not yet seen an impact on Bangladesh till date. Having said all of this, brands with whom we keep having conversations are also concerned about how the elections will play out. What kind of situation will be there on the ground. Now that visas for Indians are also restricted in Bangladesh, movement of people between these two countries have become a challenge. So, you know, a lot of brand people also are not able to visit.
So some of these challenges are becoming significant. From a ease of doing business perspective, this may have some impact going forward. We will also have to see how elections play out in Bangladesh and how the factory operations are, whether they are impacted or not. It really needs to play out for now, for in the next few months. Okay. And 60 crore impact, I mean net 45 crore impact. Is this the stable state tariff impact that we are expecting as long as the U.S. tariffs stay? Yes. Okay. Okay. And in terms of, in terms of European Union, if it’s the fd, whenever the FDA comes on board, what is the opportunity size for our company considering the products we are in when the European FTA kicks in? Yeah, so, so that’s that.
It’s a very significant opportunity. It is an immense opportunity. I would say Europe buys about 75, 80 billion of goods and once we get a zero tariff from India, that’s a very large opportunity. Even though European retail is more fragmented than US is. So we would see a lot more volumes move to India once that happens. Of course, these things take time to build up and I would anticipate that European fda, by the time it kicks in itself will be a year and a half. I, I would think that, you know, the opportunity scale can be massive.
Okay. I’m sorry sir, earlier I did not, I did not really get the number on, on the margins in, in India and in Africa. If you could just spell that out once more. Africa in Q3 is one. The expectation in Q3. Yeah. You’re talking of expectations. Yeah, the Africa for next financial year. We are anticipating at least in the second half going to 10% in the first half, staying at between 7 and 8% EBITDA margin. You know, our endeavor will be to see if we can get there faster, but that, that’s the expectation going forward. Okay, so 1.5% to seven and a half to 10%.
operator
I would request you to kindly rejoin the queue again as there are participants waiting for their turn.
Sivaramakrishnan Ganapathi
I’m sorry, let me just answer that question that that improvement will happen primarily because you know the order book is going to swell and that itself results in better capacity of See, in the immediate wake of agoa, you know, pull out. We did not deliberately step in with, you know, business discounts, etc. Primarily because the African margins were also low and we really did not want to go down that path. We were reasonably confident that AGOA will get restored and we did not want to participate with discounts and then get into a long term margin decline kind of situation in Africa.
So we took a conscious decision not to go down that path there. While in India we did take a conscious decision to quickly participate in tariff related discounts to hold the business in India. So in Africa we saw a business dip in Q3 and Q2 which is where we got impacted on account of fixed cost which will get reversed starting Q4 and India margins stay at 80%. Currently India margins will stay where they are until the U.S. tariff remains. Okay, thank you. Thank you.
operator
A reminder to all the participants, we request you to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Jaishya from Ohm Portfolio Equire Search. Please go ahead.
Jayesh Shah
Hello, am I audible?
operator
Yes sir, you’re audible.
Jayesh Shah
Thanks for the opportunity. My question again is related to the tariffs and the sharing of the tariff burden. How does rupee depreciation play out? Since we have seen a very aggressive rupee depreciation against the euro as well and GBP in the last six months besides US dollars. That is a related question here is that if I look at the sharing formula that you’ve been talking about, is my thinking correct that your US business is in very low single digit ebitda while Europe actually could be higher than double digit for overall company balance, company EBITDA to come at around 9%.
Sivaramakrishnan Ganapathi
Thanks. Yes, you’re right. And you know, in terms of currency, we hedge our receivables. So while the currency may have depreciated sharply to about 91 rupees to a US dollar, our realized currency will be a lot different depending on what we hedge. So currently we have, you know, our hedge rate for Q3 was about 88.5 or thereabouts. So you know, that prevents us from currency volatility in either direction at the Moment we are at the receiving end of currency volatility. We, if we had not hedged it would have helped us. But you know, we play a very prudent, we adopt a very prudent, you know, currency policy and hedge all our receivables for the next two quarters and most of the receivables for third and fourth quarter at any point in time.
So you know, we have a one year forward forward cover program that we closely implement. So from a currency standpoint, eventually the benefits will come through. Customers will also tell, you know, this is transparent. Customers will also try coming and try to take advantage of the situation. Otherwise the competition may end up giving some bit of it. As long as a steep US status remains. Maybe, you know, since we are bearing a significant burden, we may tend to hold on to some of those currency related benefits for now. But eventually in the longer run those do get shared.
Thank you very much. And a related thing is as and when the penal tariffs come down, is there a waterfall where the suppliers will get the first benefit and then you would get the benefit in terms of sharing of the penal tariff burden? No, no, no, no. So penal tariff, as soon as the penal tariff is, is brought down the, you know, the benefit has to flow through the supply chain. So, so you know, we will, from the, you know, from the orders that do not get impacted by penal tariffs, you know, we will save the discounts and our supply chain also we will tend to, you know, give them the benefit of that.
So you know, while we are, we are imposing certain costs on our supply chain that also will be taken off from that point. Thank you very much.
operator
Thank you. We have the next question from the line of Sahil Sharma from Dalmas Capital Management. Please go ahead.
Sahil Sharma
Hi, thank you so much. So I just, on the Africa business, I just wanted to understand that tariff advantage over other Asian counterparts, the related logistic cost with respect to raw material availability, etc. So if we consider all these factors, how does Africa stack up against countries like Bangladesh, Vietnam with and without a Goa?
Sivaramakrishnan Ganapathi
So so today Africa has a 10 tariff delta with Bangladesh. So so you know, the reciprocal tariff in Africa is 10%, Bangladesh 20%. Now if a GOA is restored, if you look at cotton garments the average duty is about 18% and if you look at synthetics it’s about 28%.
So if a GOA has restored, the underlying duty gets weighted to zero. So then for cotton garments at 18 plus 10 the delta will be 28% and for synthetic garments it will be 28 plus 10, 38% delta visa vis Bangladesh. That is when Africa power comes to play. If AGOA gets restored, at the moment we do not have the AGOA benefit, which means the delta vis a vis Bangladesh is 10%. Does that clarify? Yeah, understood. If say the penalty tariffs go away, so would we still continue on the strategy of diversifying customers and supply base or would be more comfortable with the US focused operations that we have currently? No, if the penal side goes away, we will be very comfortable doing U.S.
business. U.S. retailers are large. U.S. retailers have longer run sizes which allows us to operate efficiently and it’s a very good market, it’s a high consumption market. So we will be very keen on, you know, continuing our US business and you know, we will, we have very good relationships with U. S based customers. So that, that goes without saying that US will become a dominant buyer from US if we know tariffs. Okay, so it’s like if the penal tariffs go away. So we’ll continue with this strategy of, you know, focusing on the US and. Right.
But keep in mind, having seen tariff volatility, diversification will continue to remain a thesis for us. But that doesn’t mean that we will pivot out of us. We will take on more of Europe and if the European business gets FDA benefit, we will see a lot more growth happening on European side. So the portfolio may get rebalanced a bit for sure. But that, you know, wouldn’t mean that we will, you know, significantly reduce our exposure to us. If the penal tariff goes away, US will also have its reasonable share in the business.
Sahil Sharma
Understood, thank you.
operator
A reminder to all the participants, we request you to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Raman KV from Sequent Investments. Please go ahead.
Raman KV
Hello sir, can you hear me? Yes, So I just have one doubt with respect to the African operations. So given that you are confident that 25 million quarterly volumes will come from Q4 with respect to the African business, if we shift majority of our US shipment to Africa, our tariff burden will also reduce as well as the, the African business will ramp up which will help in getting 10% margin from Africa. African business is my understanding, right?
Sivaramakrishnan Ganapathi
No, it is not. Because you know Africa also has capacity constraints. You know our endeavor is for next financial year, try to push African revenues to 120,125 million or thereabouts next financial year.
And India’s revenues are much higher than that. So you know, we cannot move government or reroute it to Africa. Whatever is produced in India will get tariff based on the tariff application for India and whatever is produced in Africa will get tariff based on that region. So the amount of orders that we can ship from India to Africa will depend on how much capacities we have there. And we will tend to maximize that going forward. But since Indian volumes are pretty significant, close to about 300 to $375 million and of which about 70% is to the U.S.
we will, we will continue to see that that is being impacted here. We cannot reroute it to Africa. That is not an option. No, no, I don’t, I didn’t mean to reroute it but just to increase the capacity in the African entity and then try to, you know, bring down the orders from India to USA and replace those from African entity. That’s, that was my question. Yeah. So at the moment our aim will be to, you know, push as much business from India to Africa, fill more India with European business as far as possible. We will, we, we don’t intend dropping India volumes at all, you know, and grow our revenues from Africa.
That’s the, that’s the plan going forward and we may, we may be able to bring on board going forward. Understood, sir. And so just a last question. With respect to Indian entity, what is the total capacity in India and how much is the current utilization? Our current utilization is in Q3 and all. It is full. The man manpower and machine power capacity, it’s almost going full. So at the current rate in Indian operation we should be able to do around the top line in the range of 750 to 800 crores. This is without considering the new capacity which are coming on board and the volume figure.
So like what’s the quarterly volume from Indian entity approximately? Current capacity in India is around 850 crores. Yeah. And I think we will be able to add more because we have one more factory in Bhopal and an underutilized factory in, you know, in Karnataka which will. And plus, plus the unit in Jharkhand. So I think Indian capacity can be increased in my opinion by another 200 odd crore from where we are. We have not fully allowed that those capacities to be staffed with people. Looking at how the tariff is playing out and we wanted to see if we can get more European business or the correct right kind of business to expand. But I still see with the kind of capex that we have done in the past, we should be able to push up additional revenue annually to the extent of about 200 odd crores.
And how much this Bhopal, Jharkhand, Karnataka additional volume comes from these three ent. So these three entities put together can contribute about 500 crores annually. Having said that, we are already utilizing a portion of those capacity but very small. And we will probably ramp up by another 200 odd crores going forward. But the real test for that will be how the tariff plays out. How when will the European FTA kicks in? That is when some of these capacities we will tend to start utilizing more of. At the moment we have not started ramping up people there while the factories have been built out because these decisions were taken pre penal tariff.
And once penal tariff has come on board we are going slow on some of these capacity. On onboarding these capacities. As I said, we will have the potential to up our revenue annually by about 500 crores. But we will wait for the right timing before we bring the necessary staffing and ramping up the capacity decision is taken place. Understood sir. Thank you.
operator
Thank you. A reminder to all the participants we requested to kindly limit your questions to two per participant. If you have a follow up question, please rejoin the queue. Again we have the next question from the line of Neeraj from White Pine Investment Management. Please go ahead.
Neeraj Jain
So just wanted to clarify again thank you for the opportunity that you have run rate of almost 2600 crore on this standalone entity on Indian India side. So how much can that or is it fully utilized or is how much that can. What’s the revenue capacity? The right way to put it? How much? If you run full working with revenues for those. Hello. Hello. Sorry.
Sivaramakrishnan Ganapathi
As I said, the additional revenue that we can drive from India is to the extent of 500 crores. We do have the physical capacity. We have not really put in the workers there because we want to wait and watch as to how the tariff situation unfolds.
And when the European FDA and all kicks in. Right. So we will have to build up that volume for this additional incremental capacity that we have available at our deposit. But we have not ramped up the people there. So we will be doing it. Since these factories are already in the region where we are operational, our ramp up costs will not be high. We will be able to ramp them up faster. So when we ramped up Bhopal first unit it took us two years before we started breaking even and contributing to profits. But the newer units will probably start contribution contributing much faster.
Given that we have an installed base in all these regions, we have primed ourselves up for all of those. Having said that this incremental 500 crores. I don’t think will happen soon as getting additional business at these kind of tariffs will take time. We may also be cautious in building up additional revenues in these times. We will wait and see how, how all of these unfold in the quarters in the, in the months ahead. And sir, on the echo side including 4 of K and 150, you said 150 million revenue potential from that. What is the current run rate of 120 to 125 and what is the current revenue right now? Current revenue we, you know we will be at around 9200 crores.
Close 100 million. Sorry, last question on the margins of India. Can you just put the numbers please? I think if, if you remove the attractive margin, how many from India manufacturing? We are around 10% level in India. The operation margin. Is there a breakup you can give on how much percentage you would get on exports to Europe higher versus Europe versus US is there a Africa operation is only 1.5%. The remaining amount you can really arrive at it. That is the India operation from India. If you’re exporting to US or Europe, what is the difference in the margin today? Oh yours, US, Europe.
The US margins will be in the low single digits post tariff discounts. Whereas European margins are in the region of about 11, 12, 12 and a half percent from thereabouts. And you see further scope of increase in the Europe. So our aim is to increase the European business. We will continue to endeavor doing that. You know, the question is how do we rationalize the capacity between US and Europe and what is the timing up to which this penal tariff will remain. So we like to, you know, take a balanced call on some of these. We also have booked revenue from our US customers all the way to Q1 and including Q2.
So we’ll have to balance all of these capacities so some of these capacity allocations will unfold in the quarters ahead. We cannot pivot in the short run as we do book orders well in advance.
operator
Thank you. We have the next question from the line of Sourav Srivastava from Arista Consulting. Please go ahead.
Saurabh Srivastava
Good morning sir. Sir, am I audible? You are. Just now you said that the European and this India FTA deal is going to be a great opportunity. My first question is that how do you plan to navigate it? And you will be taking some eased out facilities or will be expanding. And second question is regarding the African operation. Africa sits in a very sweet spot given the static structure. So how do you plan to expand there? Especially reserve U.S. business. And third, if you can give me some idea about the US and European mix going forward.
Sivaramakrishnan Ganapathi
If European business comes, we will have incremental capacity in our system itself.
So we will onboard some new factories and take on additional European business. So we are not going to cannibalize US Business at all. In fact, those capacities are given and we will continue to hold on to our US business. So as far as Africa is concerned, while most of the business in Africa are American, we are also onboarding some European clients now as Africa goes beautifully to Europe as well. So that’s hitherto we did not have European customers there, but for now we are actually adding European customers into Africa as well. So that’s an incremental opportunity that we’re looking at in Africa.
As far as the US Africa mix is concerned, today US European business is closer to about 15, 16 odd percent of our total revenues. Intention is to take it up to 2025. But you know, these things do take time. These things take several quarters before the percentage of the revenue for Europe gets built up. Keep in mind that, you know, either for UK or for Europe, we still don’t have a zero rated tariff. We are paying full tariffs. Unlike Bangladesh, Vietnam, Sri Lanka, Pakistan and all these other competing countries enter Europe with zero tariff. So some of those European growth while it is happening will only get accelerated or the ratios will get rebalanced.
Only when actually these FTAs kick in with its zero rated tariff and there has been some DSP withdrawal from European Union, Indian operation as well as the Kenyan one, will it have some impact? That’s 20% of 12%, that’s 2.4%. That is, you know, operating in the margins that barely. It doesn’t make an impact at the moment.
Saurabh Srivastava
Thank you.
operator
Thank you. Thank you. We have the next question from the line of Gunjan Kabra from Nivesha. Please go ahead.
Gunjan Kabra
Hi Subhash, thank you so much for the opportunity and always a great insight on the sector and how the company is moving towards those dynamics. So one thing which I wanted to understand is that since the tariff has been imposed since long now and it’s not in our hands that you know when the resolution will come in. So and for the brands also, the inventory was also on the lower side. So when you talk to the players in the US and the brands of the US basically then is there an inclination towards supply chain shift? I know it takes a lot of time, but is there an inclination towards.
That, that, you know, we should shift. The supply chain a bit?
Sivaramakrishnan Ganapathi
See, if the high tariff continues on India, right. Then, you know, anything is possible, right. If at 50% tariff, it’s like everybody is bearing a pain, the supplier is bearing the pain, the buyer or the retailer is bearing the pain. So if 50% tariff remains for the long run, then, you know, there will be concerns. We are hoping that some resolution can be found or, you know, people like us will give some options of part sourcing from other countries so that we can bring the tariff burden on our customer. But India operations, you know, if 50% tariff doesn’t change soon, you know, change in the next several months, we may have brands looking at options to diversify their sourcing.
So these are early days. We don’t exactly know how brands are thinking because, you know, they are also finding it difficult to onboard capable suppliers in other regions. So they are continuing to buy from India. We are continuing to explore how we can, you know, support them and minimize their tariff burden. So all of those are going on. But as I said, you know, these things will play out in the next several quarters quarters depending on how the tariff regime unfolds.
Gunjan Kabra
Got it. And with respect to the EU fta, I mean the opportunity size is very. Large and it’s huge. That’s there. But considering the players that are already there in the EU market, like how. The bank are sourcing from Bangladesh or. Vietnam, so that share is also pretty huge. So basically for us as a country, how, how easy it is for us to, you know, compete in that market once the carrot is also resolved. So how are the brands thinking in terms of, you know, sourcing from India and not from other countries? And how is the onboarding cycle of customers in the eu considering the market is very fragmented and small order sizes.
Sivaramakrishnan Ganapathi
Okay, no. So most Europeans are buying a lot from Bangladesh. They are seeing geopolitical concerns in Bangladesh on one hand, they are also seeing an advantage of buying from India given that prospectively our tariffs will go down. So many of them are actively present in India trying to onboard suppliers in India looking at options to buy from India. Even for retailers who are hitherto not buying, buying from India, buying only from Bangladesh and other duty free regions. So there are lot of, lot of retailers who are now actively considering India. So that’s the good news.
And that will play out incrementally going forward as India EU FTA comes to fruition.
operator
Thank you so much. Thank you. Ladies and gentlemen. In order to ensure that management is able to answer queries from all participants, kindly restrict your questions to two at a time. You May join back the queue for follow up questions. The next question is from the line of Bijal Shah from RPL Investments. Please go ahead.
Bijal Shah
Hi, thank you very much and congratulations on good set of members in challenging tide. I have two questions. One is on on margin and another is on Europe and diversification strategy. So first on margin, see if I look at 40 crores of one off which is on account of tariff and if I adjust for that, if the India margin looks really, really good. I mean it, it just goes about 13% that we have not seen even in the years when there was no tariff and we were running at a high capacity. So is there something I’m missing here or not? And secondly within that that one tariff goes away, can we really go to 13 kind of margin? That’s for question one.
Question two is with respect to tariffs or tariff despite tariff impact. So you have 25 disadvantage when it comes to us now despite that you are able to make some positive margins in Europe. Your disadvantage is much lesser. So why not think of onboarding Europe and UK clients starting now itself and give them the discount and ramp up the capacity utilization and improve overall ebitda though margins would be lesser but overall EBITDA can go up even if you give like 1012 discount because the 21st and 5% kind of discount you are still making go to positive margining you us.
So these are the two questions.
Sivaramakrishnan Ganapathi
Okay. So yes the, you know, adjusting for margins, the India margins are strong and will continue to remain. This is primarily because we have also unleashed a lot of operational improvements and you know, some significant cost management here and efficiency management here. That’s one of the reasons the as far as rebalancing US Europe, while that continues, some of these orders are booked in the long term we also have strong relationship with customers. Our US customers are also persevering with us in the hope that the penal tariff will go away.
So we don’t also want to reduce their business volumes. Keeping a lot of short term considerations in mind and then hoping that once the tariff penal tariff goes away, you know, trying to build back the business. US businesses are generally a little more profitable than European given business volumes. So we also have to balance some of these considerations. When we look at the portfolio between US and European customers, we will, we will walk that path very carefully. While we will expand European business. That’s clearly an intent. We do not want to contract US business as if the tariff penal tariff is removed, we will see ourselves to be in an advantageous position with those US customers and we don’t want to lose that.
operator
Thank you. We have the next question from the line of Shraddha Agarwal from Asian Market security. Please go ahead. Yeah. Hi sir. So congratulations on a great quarter despite difficult times. And two questions. First is could you give the split between India and. Sorry between US And Europe exports from India.
Shradha Agrawal
From India, yeah. US And Europe only from India. Can you ask the next question while we you know give you that date answer related question. Because to my understanding India would still. US Exports would be still at a higher number. And despite making low margins from, despite making low margin in the, in the US exports from India we are still at a blended 1112 margin in India. So didn’t get the math. Well here. From India we are doing almost 70%. 70% was revenue from India and you Europe. Europe was. Europe was the balance. Yeah. So a pretty significant part of all 17, 18% will be Europe but rest of non US business will be at higher margins. Yeah, yeah. So Europe is. You’re saying margin of 1112 percent and US margin is mid single digit and your India blended margin is 11 12% is 10%. So despite 70% of your business coming in at low single digit margin, how is India blended margin so high at 10%. I’m sorry India. India business is around 62% blended. Because I have to include the other operation from matrix also. Sorry about it. 62. Yeah. 62% U.S. 62% is U.S. in the operation. Yeah. So sir, the question still remains right. 60 of the business operates at low single digit margin. Even then on a blended basis you’re getting 10%.
Sivaramakrishnan Ganapathi
Yeah, correct. So when I, when I say, when we say single digit margin, the. When I look at EBITDA margin for U. S it is in the order of how much? 6, 7%. 6, 7% for, for US and, and European margin margin or non US margin have actually kicked up because of the cost efficiencies that we drove. So that is at the, at a blended region of about 13 and a half or thereabouts. So that gives you the average, whatever average you have got it. And so just another clarification. So you mentioned that you could negotiate with your vendors because you had a higher proportion of India based raw material in the product this, this time. And I think on one of the questions you also mentioned that you had a higher proportion of US Imported cotton which might come off in the next season when you have a higher portion of synthetic which will be supplied from Far east. So I mean was it more of. India based raw material or Was it more of US based content and how do we see margins then progressing from here on? So when, you know again when we look at Q1 onwards when there will be possibly, you know, we have to look at the supply chain and I re look at what is the US component in the supply chain. But we may not have as much of us cotton in Q1. We may see some amount of tariff burden slightly increasing on that count. It may not impact margins much. It may affect affects us at about a percent percent and a half. But my sense is we will continue to look for ways to improve our margins in terms of either operating efficiency or supply chain sourcing.
How does that, how much of that we push back to our suppliers. All of that will have to play out. We will try to protect our margins as far as possible in that period.
operator
Thank you. We have the next question from the line of Nitin Bharat Shah, an individual investor. Please go ahead.
Unidentified Participant
Yeah, hello. Am I audible? You are. Okay. So the first question would want to ask is I present the US customers with reduced buying from us or some of them may would have stock to buying from us. In that case, where are they buying from? They have not. They have not. They have continue from us. None of, none of them. Right. Correct. And does the present numbers include the labor code cost? Yes. Okay. That’s all. That’s all. Thanks a lot.
operator
Thank you. We have the next question from the line of Bharat Agnihoti, an individual investor. Please go ahead.
Unidentified Participant
Hi. Am I audible? Yes. So my question is. So there’s some examination that the U. S. Supreme Court is making on the legality of these tariffs and they might pronounce the result this month. So is there a possibility that your customers get back the tariffs that they have paid and since most of the tariff has been absorbed by the company, is there a possibility that they pass on that recoup tariff from the US government to you? It’s a very good question. At the moment it looks unlikely because you know they have also borne the cost of of all those litigations, etc.
And that’s a refund at risk. It’s highly unlikely that that benefit will accrue down to the supply chain. So it will be unfortunate. But our retailers will get a windfall gain if that happens. Okay. And my second question is on the India business. When I say India business I mean selling to customers in India. Like what’s the volume on that and is there a strategy to improve the volumes and geographies at the moment we, you know, when we look at India business. It’s largely to the international brands operating out of India that we supply.
Sivaramakrishnan Ganapathi
We do not cater to domestic Indian customers at all.
What is the, what, what is the strategy for India India based revenue? At the moment we’ve not pursuing, we’re not pursuing India retail as an option. We want to see how the US tariff plays out, how the European and UK tariff plays out because that brings in a new opportunity. We find margins supplying to India retail is low given that we will be competing with a lot of small, smaller retailers, smaller suppliers whose compliance costs and you know all of those will be a lot less. So we’re not focusing on India retail at the moment.
operator
Thank you. We have the next question from the line of Manju Bhasini from Ask Wealth Advisory. Please go ahead.
Unidentified Participant
Hello. Greetings to the management. Am I audible? You are, yeah. So just one question on the yesterday’s budget announcement. Are there any changes on the export incentive schemes that have come through in the budget and anything that you would like to explain to us?
Sivaramakrishnan Ganapathi
So there are no changes to the scheme. However the allocation to rosc, TL and duty drawback has reduced compared to the actual spend in 20, 25, 26. So I don’t know how that’s going to play out. You know, unless the budget allocation is increased going forward we may find, you know, we are finding actually that the export incentives that we get and the budget allocated for that seems to have changed.
But in terms of actual pronouncements we have not seen any change. So we’ll have to see how that unfolds. Even in the past we observed that the allocation at the budget level was lower and then subsequently it was corrected. We hope that it will be done that similar way. Otherwise we don’t have any specific information at this point of time. Okay, sure sir. Thank you very much.
operator
Thank you. We have the next question from the line of Harsh Mittu from MK Global. Please go ahead.
Harsh Mittal
Thank you for the follow up. Just one question. In the starting of your call you have mentioned that there has been lot of cost efficiencies which has led to the margin expansion or the improvement. So do you see any further cost efficiency or headroom less for the FY27? So some of the efficiencies may come from a depreciated rupee.
Sivaramakrishnan Ganapathi
Right. We normally don’t take currency benefits to our advantage when we look at internal EBITDA margins, etc. At a customer level. So you know, some of that can also help us. As I said, since we hedge and we Are currently our hedge rates for the US receivables is close to 88.5 or 89.
And while the real currency is operating at closer to 91, there may be some upside sitting there, but it also gets eventually competed out in the longer run. But in the shorter run we may see some upside. Any product portfolio, product mix change, etc. Can also have a negative effect. All of these do tend to sometimes cancel off each other, but there is a small upside in terms of currency sitting there. We let us see how that actually plays. I wouldn’t go and take that benefit much. As you know, eventually these do get leveled out.
Thank you.
operator
Thank you. A reminder to all the participants. We request you to kindly limit your questions to one per participant. We have the next question from the line of Pradesh Gandhi from Discover Gap Capital. Please go ahead.
Unidentified Participant
Hi sir, just a question. You know, even if we lose the Russian like extra tariffs that are there, the other tariffs also India is, I mean it is a percentage compared to Bangladesh, Vietnam, Pakistan, Turkey, etc. So do we see any implications actually longer term? Even if, even if, even if this is 25% goes away? No. India is higher by 5%. You are saying that no. If India’s tariff is 25% while Bangladesh is 20% will that impact us? Answer is not much. That’s only a 5% delta. It may impact partially. We may have to give some degree of offset to customers for that 5%.
But since we are currently talking about a 50% versus 20% delta, that is not becoming a discussion point. But once the penal tariff goes away, that may come in as a discussion point and maybe we’ll have to, you know, partially support the customers for that 5% Delta, will that impact business volumes much? Answer is no. Got it. And the other question was that, you know, when we look overall at our margins, you know, historically, historically we haven’t had really this extra, extra 25% to really give back to the customers yet. We are ending up being profitable.
Just want to understand how that’s actually playing out. If we are passing on a lot of this and specifically for the American orders, are they at break even levels? Are we making a small amount? Are we losing? And how long can we actually, you know, hold up and actually continue to subsidize 25% penalty tariff?
Sivaramakrishnan Ganapathi
The US customers EBITDA margins have come down primarily because of the tariff burden that we are sharing. You know, depending on the customer, the tariff burden shared is different, different. And we keep negotiating with our customers. We get some offsets from Our suppliers as well because some of that tariff burden we in turn push it back to our supply chain and then we get some credit on account of depreciating rupees.
So we should not forget that internally we don’t consider rupee depreciation for our calculations because that’s an externality from our standpoint. But at a P and L level it does play out and we do get some offsets there. So our US EBITDA margin after factoring in some of those rupee depreciation benefits also goes from low single digits to mid to high single digits because that benefit also kicks in. But then these, these kind of situations do tend to, you know, tend to benefit us for now. But you know when the tariff burden goes away we will of course claw back on the burden share.
But then the rupee depreciation might then come back for discussion on sharing with customers. So all of these will play out. Let it play out when it has to happen. There are those many moving parts in the business, some to our favor, some to our disadvantage. And you know what you see is the net result. What we can focus on is to ensure that we execute well. We try to drive out costs as much as possible and which is in our control. And that’s what we do. Yes, it does, it does. Interrupt.
operator
Sorry to interrupt. In between the days. I would request you to rejoin the queue.
Sivaramakrishnan Ganapathi
Okay, no problem.
operator
Thank you. We have the next question from the line of Hitendra Pradhan from Maximal Capital. Please go ahead.
Hitaindra Pradhan
Thanks for taking my question. So my question is related to the other income. So sir, what does the other income constitute here at the consolidated income level you are looking at, right? One is. Yeah, yes, yes. One is the interest income. The interest on the OCD what we have classified separately. Other than that anything on the mutual fund investments and other investments what we are holding. That is the income what is shown there. It doesn’t take into account the currency, currency impact and the currency impact and all is shown separately. The below the line right There is a forex impact gain or loss on account of foreign infatuation we have shown separately which is not part of our like EBIT margin or it is part of our margin that we report.
It is part of the EBITDA margin.
Sivaramakrishnan Ganapathi
Okay. Okay sir. So sir, if like you know the tariff situation reverses so we can expect that the US business to you know again generate like say you know, 12, 13% of EBIT margin from the current like you know, low single digit. Yes. And this is like the inventory you Made a comment earlier that the retailers are also, you know, not stocking up because the prices are elevated and or probably, you know, we are anticipating some kind of slowdown. So if you can like, you know, give some clue to like who are the, who are our customers? Like are they in the premium segment, mid premium or you know, value segment and you know, what are the demand scenarios at the US customer side.
So when you look at the aggregate macro data, if you look at the retail sales, retail sales for calendar 25 now we have data even till November and we are seeing it go up a little above 4% and U.S. imports are down by 1%. So there is a delta there, right. If U.S. consumer, U.S. retailers are importing less even though the retail sales are going up, which clearly indicates that, you know, they are not allowing their inventory to build up. And on the contrary, they are allowing inventory destocking to happen. People are not wanting to buy at 20 to 50% reciprocal tariff regime or are loath to build up inventory at these levels.
They may be waiting for the Supreme Court order to see if there is a tariff reversal before they start coming back for buying more. So we will have to see how this plays out. They may also be worried about how inflation plays up in the next calendar year, that is 2026 in which we are and see how price increases which will go into effect this year will also impact US retail demand. So basis that and they will probably start building up inventory. But for now US imports are trending below US retail sales and that’s interesting to see because then there is an incremental tightness in inventory that you will see happen in the US which may reverse.
Now how does this play out at an individual retailer level? I think at the moment it’s across all segments that we are seeing it including mid premium, premium to mass market. Mass market retailers are where bulk of them are. We will have to see how they will play going forward. Mid premium and above are actually trying to pass on more and more price increases back to their customers whereas all the others are holding back as much as possible or passing on very marginal price increase to their customers. So it will depend on how their strategy plays out in spring 2026 which will, which is yet to happen.
The extended winter continues. US is seeing a brutal winter as we speak. So we will have to see from spring 26 onwards how the retail market unfolds. Okay sir, thank you. Sir.
operator
Thank you. We have the next question from the line of Sagar Makwana from Mac Security. Please go ahead.
Unidentified Participant
Hello sir, good morning. So my first question is a little bit long term. As we scale our presence in EU and uk, so do we anticipate any shift in working capital days and margins? As you said in Europe, they are higher. And also sir, please correct me if I’m. Since sportswear typically delivers higher margin, do we see any opportunity to meaningfully scale this segment to enhance overall margins over medium term or this category likely to remain low and subsidy dominated by China and Taiwan? So to answer your second question, you know our European customer is sportswear dominant.
And in fact that is one of the reasons why we were able to expand our margins also. So we are continuing to push more sportswear related business to offset some of the margin challenges that we have. Are we pushing up European business keeping long term in mind?
Sivaramakrishnan Ganapathi
Absolutely. Given that FTA is coming into effect, etc. We are pushing that European business up and we will continue to do that. Once European US fta, US penal tariff goes away, we will see some US business growth as well. So we’re not wanting to let go that opportunity. We are continuing to engage with us as well.
So in terms of customer portfolio perspective, we are calibrating it very closely. We are allowing European business to grow faster. For now. Given that there is a tariff benefit for us serving Europe, are we. How are we looking at sportswear? We are looking at it favorably. We are trying to expand that business and we are seeing good traction coming in from sportswear business. Even though the natural home for sportswear is Vietnam and those regions, we are seeing good amount of traction coming in that space for us. Okay, so and my second question is will ASP will get lower as we enter into nets and due to Atreco Heavy casual, where will what CSV? ASP sir, Average selling price it will not.
Average selling price, will it get lower? Selling price, will it get lower? Yeah. If atracos growth happens at a faster rate than India. Yeah, definitely. ASP average selling price will come down. Yes. Okay. And sir, my last question. Sir, if this ago get restored. Sir, is there any duty refund we will get as in one time gain if. If what gets restored ago? Oh no, no, no, no. So that all that will be prospect. I don’t think we’ll get a duty refund for past year. Okay. Okay. Thank you so much. That’s all from us.
operator
Thank you. We have the next follow up question from the line of Prena Junjurwala from Ilara Securities. Please go ahead.
Prerna Jhunjhunwala
Thank you for the opportunity. Just wanted to understand with so many cost control measures Undertaken internally and externally, how do we see a sustainable margins once this US trade deal settles and we enter into high growth. Period wherein. You know, FTA with UK and Europe are also signed. So just wanted to understand how things will move and how do you see business.
Sivaramakrishnan Ganapathi
So in the long run there are many moving parts. One is trade deal, US tariff, at what level will it settle? Will it settle at 25, you know, will it remain at 50%? Will it come down to 25%? Will it come down to 20% which is equivalent to, you know, other, other competing countries. Right. And, and the margins will depend on all of that. So, so let’s assume that the fta, I mean the penal tariff goes away, comes down to 25%. At that moment Europe, US customers may come in and start negotiating on that 5% delta with other regions which at the moment is being ignored.
Given that the delta is so wide between 50 and 20, what will be our margins at that point in time? I’m sure we’ll be in 12 to 13% India margin for all business, including us. Our advantage if we merge BTPL, which is the fabric unit with us, will also help us nudge up our margins by a few percentage points because fabric will become internal. So that’s another dynamic that we will see in the longer run. European business will probably also will also come in at good margins primarily because in the longer run there will be European FTA in place.
So that will help for the moment. We do have some currency related benefit coming into us. If the currency strengthens, it may have deleterious impact on the margins. We will have to see how that plays out. So there are all these moving parts, your guess is as good as mine. But on an average, if you, if you have to ask me if, let’s say currency strengthens or part of the currency benefit goes back to our customers, while US tariff comes down to 25% European FTA kicks in, we should be able to operate at 12 to 13% EBITDA margin in India and about 10 to 11% in Africa.
operator
That’s really helpful, sir, thank you so much. Thank you. We have the next follow up question from the line of Pradesh Gandhi from Discover Cash Capital. Please go ahead.
Unidentified Participant
Yeah, so just wanted to understand that, you know you had highlighted earlier when I asked you regarding that the impact of a 4, 5 percentage of benefits which maybe Bangladesh, Turkey, etc might have over us won’t be that much of an impact, but I understand it won’t be that much of an impact in lieu of 25% but I mean actually, wouldn’t this be at risk of our customers looking to potentially diversify away from India? Will they diversify away from India between 25 and 20%?
Sivaramakrishnan Ganapathi
Answer is no, because in India they do get some specific cap vulnerabilities, etc.
That is very difficult for them to replicate elsewhere. People also want a diversified sourcing these days given that tariff for any region can change anytime. You saw how South Korean tariff suddenly go up by 10% based on some announcement by the administration. So you know, people will stay diversified globally. US tariffs are super volatile across regions and will stay volatile and that really means that US customers will stay as diversified as possible. We as supplier also should stay as diversified as possible and hence look at sourcing from or supplying from other regions just to deal with this volatile tariff situation that we find ourselves in.
And just, and just the last question had was I would assume just given all the ambiguity, are the inventory levels that our clients end reasonably low and how is end market demand looking like? So just to know that in case we do see a reversal of, do we also see an uptick in demand and orders relatively no. So I would say I’m a bit cautious there. I’m worried about us you know, US inflation, you know, everything depends on US interest rates, etc. Going forward. But you know, if US demand in 2026, either due to price increases being passed on to customers or due to tariff related price increases impacting US customers, we may see some US demand coming down.
We also don’t know how geopolitics are going to impact us as there is enough on the boil globally and how could consumers tend to react to that situation in 26. So I wouldn’t say there is going to be a demand upswing. On the contrary, demand growth will stay muted till this geopolitics plays out in 2026. We will have to ensure that we consolidate the supply chain supplier base, which we always do when, whenever there are some such difficult situations and you know, hold on to our business or try to get business in lieu of other suppliers and we will continue to focus on that or think about that.
Understood sir. All the best. Thank you.
operator
Thank you very much. As there are no further questions from the participants, that concludes the question and answer session. I now hand the conference over to the management of Gokuldas Exports Ltd. For the closing comments. Thank you sir.
Sivaramakrishnan Ganapathi
I have elaborated a lot during the call. As you know, we will stay focused on trying to improve our cost as much as possible. You know, look at our supply chain wherever There is a possibility to extract more margins or optimize margins. The macroeconomic situation is still volatile. The only benefit that I see in all of this is a weaker rupee, which will help from an export standpoint. The tariff regime we hope, will settle down soon. It is required as US continues to be one of the largest markets and one of the most consumption driven markets for us, European FTA and uk.
FTA needs to come home as fast as possible. So while the announcements have had a positive effect from a brand standpoint, looking at India sourcing for it to take effect and business volumes to go up, we need to see the FTA being operational, which is some time away. But once all of those happens, the long term benefit for India will be immense as Europe is a fairly large market, almost as big as US is. And if US tariff comes down, I think it will be good for operations out of India. In the meanwhile, we will continue to diversify, we will continue to expand out of Africa and we’ll continue to expand out of other regions and seek margin improvements wherever possible.
Thank you.
operator
Thank you very much, sir. On behalf of Gokul Das Exports Limited that concludes this conference. Thank you for joining with us today. And you may now disconnect your lines.