Himatsingka Seide Limited (NSE:HIMATSEIDE) Q3 FY23 Earnings Concall dated Feb. 13, 2023.
Corporate Participants:
K.P. Rangaraj — President, Finance and Group Chief Financial Officer
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Analysts:
Prerna Jhunjhunwala — Elara Securities — Analyst
Kaustubh Pawaskar — Sharekhan — Analyst
Mithun Aswath — Kivah Advisors — Analyst
Venkat Subramanian — Organic Capital — Analyst
Jatin — RTL Investments — Analyst
Shashi Kant — Brighter Mind — Analyst
Rashkmik Ojha — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Himatsingka Seide Q3 and Nine Months FY ’23 Results Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Ms. Prerna Jhunjhunwala from Elara Securities Private Limited. Thank you, and over to you, ma’am.
Prerna Jhunjhunwala — Elara Securities — Analyst
Thank you, Seema. Good evening, everyone. On behalf of Elara Securities India Private Limited, I would like to welcome you all for Q3 and nine months FY ’23 post results conference call of Himatsingka Seide Limited.
Today, we have with us the senior management of the company, including Mr. Shrikant Himatsingka, the Managing Director and CEO; Mr. K.P. Rangaraj, President, Finance and Group CFO; Mr. Dilip Panjwani, Executive Vice President and CFO, Strategic Finance; Ms. Shilpa Shanbhag, VP, Strategic Finance.
I would now like to hand over the call to the senior management of the company, post which we can take Q&A session. Thank you, and over to you, sir.
K.P. Rangaraj — President, Finance and Group Chief Financial Officer
Good afternoon, ladies and gentlemen. This is Rangaraj, President, Finance and Group CFO, addressing the earnings call. On behalf of Himatsingka, we would like to welcome you all to the Q3 FY ’23 earnings call.
I will first take you through the business update, as always, and followed by comments on financials and after which, the floor will be open for Q&A sessions, addressed by our Managing Director, Shrikant Himatsingka.
I’ll now start off with a business update for Q3 FY ’23. Our Q3 FY ’23 operating performance has clocked the progressive improvement sequentially on the back of improved capacity utilization, reducing raw material prices, softening energy cost, and the continued easing of supply chain networks and network costs. As a result of the above capacity utilization across all plants witnessed sequential improvement during the quarter.
The capacity utilization levels for our manufacturing facilities during the quarter stood at — stood as follows: Terry Towel division recorded 65% capacity utilization in Q3 FY ’23 versus 56% in the previous quarter. Sheeting division recorded 58% capacity utilization in the current quarter versus 53% in the previous quarter. And the Spinning division recorded 90% capacity utilization in the current quarter against 75% in the previous quarter.
During the quarter, revenue streams from brands stood at INR448 crores versus INR556 crores during the previous quarter — sorry, during the previous year and INR402 crores during the previous quarter. So I correct — I repeat once again, revenue streams from brands stood at INR448 crores in the current quarter versus INR402 crores during the previous quarter.
Our Q3 operating performance witnessed progressive sequential improvement in line with our expectations. We remain focused on enhancing our capacity utilization levels, price optimization initiatives and enhancing market share across key regions and channels we operate in. In addition, deleveraging and improving working capital cycles continued to be central to our operating strategy going forward.
Key raw material prices continued to see gradual softening from the previous peak levels witnessed during the first half of the year. In addition, we also continued to see marginal softening of energy costs and supply chain costs during the quarter.
I now move on to the next section, which is comments on financials. Consolidated financial performance for the quarter. Consolidated total income for the quarter stood at INR750.04 crores versus INR792.68 crores in the previous year. This represents a decline of 5.4% year-on-year. Consolidated EBITDA for the quarter was INR117.04 crores versus INR131.76 crores in the previous year. The EBITDA margin for the quarter stood at 15.6%.
Consolidated EBIT for the quarter stood at INR75.58 crores versus INR91.57 crores in the previous year. Consolidated PBT for the quarter stood at INR3.25 crores versus INR43.83 crores in the previous year. And finally, consolidated PAT for the quarter stood at INR2.2 crores versus INR27.05 crores in the previous year.
Comments on debt profile. The consolidated gross debt as of 31st December ’22, stood at INR2,766 crores compared to INR2,898 crores at the end of Q2 FY ’23, which is the previous quarter. The total term debt stood at INR1,652 crores and the total working capital debt stood at INR1,114 crores.
The cash and cash equivalents stood at INR127 crores as of 31st December ’22. In addition, the total amount of unused RoSCTL scripts stood at INR103 crores as of 31st December ’22.
Consequently, the company’s net debt outstanding as of 31st December ’22 stood at INR2,639 crores compared to INR2,773 crores as of 30th September ’22, which is the previous quarter.
With this, I would like to complete my update. I would now request our Managing Director, Shrikant Himatsingka, to answer the Q&A session. Thank you once again for your patience.
Questions and Answers:
Operator
[Operator Instructions] We have the first question from the line of Mr. Kaustubh Pawaskar from Sharekhan. Please go ahead, sir.
Kaustubh Pawaskar — Sharekhan — Analyst
Yes. Good evening, sir. Thanks for giving the opportunity. Sir, my first question is on the capacity utilization. So far, we have seen sequential improvement in the capacity utilization for all our three divisions. So can you help us what led to this improvement in the utilization level? And how confident you are whether we should expect this kind of improvement in the quarter ahead or there was something one-off which came into this quarter?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. Thank you for your question. We’ve seen a slight uptick on our home textile divisions vis-a-vis capacity utilization levels. So the Terry division stood at 65% up from 56% and our Sheeting division moved up marginally to 58% from 53%. The Spinning moved up to 90% from 75%. We did see some encouraging signs on the horizon as far as the demand and offtake appetite is concerned, is what drove some of these utilizations up. We expect some incremental improvement, stability/improvement on the utilizations going forward, as what we currently foresee in line with what we’ve shared earlier that we will continue to see progressive improvement going into the second half. So we’ve seen some in Q3. And we should see a stable, if not incremental improvement on the utilization front going forward.
Kaustubh Pawaskar — Sharekhan — Analyst
Sir, can you give us some idea about the order book, order booking in your bedsheet and Terry Towel space, what is the current order booking? And how the things are panning out in the export market? Because there was a concern regarding the inventory pile up with the retailers. So now how are the things and when do you expect things to normalize in some of your key export markets?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
So listen, we cannot — Kaustubh, we cannot specifically share with you numbers of our order books. That’s not something that we usually do. But we have seen an uptick in order books in Q3 vis-a-vis Q2, as is visible in our numbers. We are seeing relative stability/some signs of improvement in our order books for Q4. So I think we should see some progressive improvement.
And as far as normalizing our performance is concerned, I think with this progressive sort of improvement in operating performance will head towards normalcy over a few quarters is what we think. It should be driven by a bunch of factors. On the one hand, the inflation has to cool down some more on the cotton front, on the energy front and on the supply chain front, all these three areas seem to be a little — still a little heavy on the inflation side and needs to see contraction. And parallelly, we are working to get our revenue run rates back on track. So both these things need to be happening parallelly for us to look at normalizing our performance, and that’s what we’re working on.
Kaustubh Pawaskar — Sharekhan — Analyst
Okay. Thank you, sir. Thanks for that.
Operator
Thank you. [Operator Instructions] We take the next question from the line of Mr. Mithun Aswath from Kivah Advisors. Please go ahead, sir.
Mithun Aswath — Kivah Advisors — Analyst
Hello?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes.
Mithun Aswath — Kivah Advisors — Analyst
Yes. Sir, just wanted to get some sense on what is the cost of debt because our interest costs have moved up beside the debt coming down? So just wanted to understand how you see the trajectory of that over the next couple of quarters as operational performance improves, but just wanted to understand on that part.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Right. So our cost of debt remain largely range bound. One of the reasons we’re seeing this upswing on interest numbers is because some of our subsidies had phased out, but some fresh subsidies will phase back in, in due course. So to that extent, this difference will stand substantially reduced. And the cost of debt, per se, of course, has inched up because of interest rates going up marginally, which is visible across sectors, and there’s nothing unique to us. So it’s a combination of these two factors. I repeat, there were some subsidies which were phased out and stood completed. There is a new pipeline of subsidies, which will come back in. And therefore, to that extent, we should not see this movement. And the other factor that contributed to this was the increase in interest rates across the board. Both of these factors contributed to the increase in interest costs.
Mithun Aswath — Kivah Advisors — Analyst
What would that subsidy amount be, sir?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
We can’t specify it, but it would be — the delta that you’re seeing between the increase in interest costs in total is largely contributed by that as far as this quarter is concerned. So we should get that back either by the next quarter or thereafter.
Mithun Aswath — Kivah Advisors — Analyst
Right, sir. And just wanted to understand in terms of — there has been significant improvement in the margins this quarter. Is this primarily led by the cotton price coming down? Or have we been either — have we seen any other movements in the operational side for us to achieve this? I just want to understand.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. The confluence of factors. It’s some improvement on revenues, it’s improvement on the raw material costs, which have started to cool down in the third quarter with the arrival of the new crop. We had some taming down on the energy front in terms of costs. And we also had some easing out of supply chain costs. So all of these in tandem contributed to the improvement in operating performance, generally speaking. And listen, we still have a distance to cover, vis-a-vis our normal performance metrics. So these were the factors that contributed to the extent of improvement that you saw in Q3.
Mithun Aswath — Kivah Advisors — Analyst
So just one last one, in terms of obviously some impact of the [Technical Issues]
Operator
I’m sorry to interrupt Mr. Mithun, we’re losing your audio, sir.
Mithun Aswath — Kivah Advisors — Analyst
[Technical Issues] improvement in these metrics or [Technical Issues]
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
I’m so sorry, you were not audible. I kind of follow your question.
Mithun Aswath — Kivah Advisors — Analyst
Can you hear me now, sir?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
A little better, yes.
Mithun Aswath — Kivah Advisors — Analyst
Yes. I was just saying that between Q3 and Q4 so far, are the metrics that we were working with in terms of cotton, fuel and other items improved for you or are they largely similar to what we saw in Q3, sir? Just wanted to get a sense.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
As I said to the gentleman earlier, we are seeing stability/incremental improvement across these metrics as things stand now. So that’s the direction we are currently seeing. So vis-a-vis order books/revenue streams vis-a-vis front rail costs vis-a-vis other costs, we are going — we are seeing stability/incremental improvements — marginal improvements at this point, that’s what…
Mithun Aswath — Kivah Advisors — Analyst
Sir, last one. I remember reading on the announcement — corporate announcement that you are looking to raise some equity. Is that via rights issue or some placement? Or this is an enabling provision that you’ve taken? So I just wanted to get a sense.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Just hold on, please. So we plan to raise a small amount of capital through FCCB, which is probably what you read about. We’ll be happy to take you through details vis-a-vis what we’ve shared in public domain with you offline.
Mithun Aswath — Kivah Advisors — Analyst
Sure. Thank you, sir.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes.
Operator
[Operator Instructions] We take the next question from the line of Venkat Subramanian from Organic Capital. Please go ahead, sir.
Venkat Subramanian — Organic Capital — Analyst
Hi. Thanks for the opportunity. You alluded to a certain hope that things will stabilize going forward. Out of various levers that you have, which are the ones that you think have better chances of resetting, what is the kind of landscape that you’re in the midst of?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
I’m not sure I get your question. So as I outlined, there will be a few factors that contribute to normalizing performance. So there has to be our revenue streams that need to be normalized. Our raw material input costs, which still remain high need to soften from their current levels, energy costs, supply chain costs have to also come down.
Venkat Subramanian — Organic Capital — Analyst
These are exactly the factors that I’m referring to. Out of all this that you’re listing, where are we in terms of a reset? Because it’s been a while that we’ve been at this kind of performance level. So when you’re hoping for a certain revival, where are we with respect to each one of these factors?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Well, I can — I’ll be happy to take you through more specifics offline, Venkat, because it’ll be involving…
Venkat Subramanian — Organic Capital — Analyst
No, Mr. Himatsingka, this has been the pattern. Every time we have a question, most of the times you are saying we’ll take it off-line because people don’t get the answer. This is a straight-forward question, right?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
No, it’s not actually. I beg to defer. Because to satisfy your query, I need to spend some time with you and explain to you —
Venkat Subramanian — Organic Capital — Analyst
No, there aren’t too many people in the queue, Mr. Himatsingka. I mean these are questions that I think your investors will need, right?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
So Venkat, I’m sorry, this is all I can share at this point. We need to correct — we need to take our revenue streams back to normal levels. We need to see cotton, which is currently at INR65,000 a pantry coming down a little further. Energy costs need to correct. Supply chain costs need to correct. These are the factors that will contribute to normalizing our performance. When you ask me where are we vis-a-vis a reset, I’m unable to understand your question.
Venkat Subramanian — Organic Capital — Analyst
Yes. I think you kind of answered now. So cotton, if you reset from INR65,000 down to maybe something like about 3%, 4%, 5% more?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
No, it needs to go down around 50 levels. There are challenges around the MSP on that front. So one has to see that. But it needs to correct at least another 20%-or-so, broadly speaking, which it will meet barriers after 10%, 12% corrections. Energy prices, as far as materials like coal are concerned are still up there. They need to correct a fair bit. We have seen some corrections on those fronts happening over the last couple of months, but it’s still way up from their normal levels. Supply chain has eased from all the various factors. I think supply chain is the one that’s eased quite a bit. freight rates and things of that nature, which works well for our clients also. And I would say of all the three operating costs, supply chains corrected the most.
And as far as revenue is concerned, as I said earlier, we have seen some positives as far as demand is concerned, we are beginning to see some green shoots there. So hopefully, over the coming quarters, we should progressively improve vis-a-vis our revenue streams heading back to normalcy.
And to your other comment that we have been in this level of performance for a very long time, it’s an incorrect statement. We’ve been in this performance level only for two quarters, Q1 and Q2, which were severely hit by inflation. And we have subsequently come out of that in Q3. And as far as the previous fiscal is concerned, the first half was perfectly normal and the second half was impacted by inflation, rather the beginning of the impact started in the second half. So I’m not sure what you mean by we’ve been in this situation for a long time.
Venkat Subramanian — Organic Capital — Analyst
No. To start with a couple of observations. I think you fully answered the question that you said we will take offline. I think this really helped. And as regards your finance cost, you said we are at INR70-plus crores for the quarter. You said a part of it is because of certain subsidies that probably are getting reset. So what kind of impact has subsidy had? And what can one can possibly pencil in?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
I cannot share the specifics of the subsidy numbers, Venkat.
Venkat Subramanian — Organic Capital — Analyst
Fair. Fair enough. That’s fair. We don’t want a specific number. But is the working capital intensity decreasing? I mean that’s really the gist of the question.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. That’s a fair question. Our gross debt has corrected from INR2,977 crores at the end of June to INR2,898 crores at the end of September, and we further corrected to INR2,766 crores at the end of December. So the total movement is close to INR210 crores on the gross debt front from Q1 through Q3.
A lot of this has been achieved through working capital cycle rationalization. So as far as that’s concerned, we’ve seen some improvement, and we’ve done some work on that front. And as far as subsidies is concerned, it’s — certain subsidiaries with the government phased out and certain other subsidiaries, which were in the queue will phase in and hopefully should be visible starting Q4/Q1.
And as far as total interest costs are concerned, if you see the movement, the movement is really more visible from Q4 FY ’22 starting out Q1 and Q2. As I said, these were for two reasons: increase in increased — interest costs and the second was this phase out. So the phase out part will sort of neutralize but the interest cost increases, of course, there’s nothing one can do about it at this point. So I would say that a substantial part of the increase in interest costs should be addressed.
Venkat Subramanian — Organic Capital — Analyst
Fair. And lastly, Mr. Himatsingka, I think a substantial portion of the pain is because of utilization, which is really the result of what is the inventory clogging that’s currently there and what kind of demand outlook that you foresee? Is that looking a little more promising just now, if you’re almost halfway into the last quarter in any case now?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
It is. Bear in mind, Venkat, that FY ’22, we clocked record revenues of INR3,203 crores, right? So we came out with FY ’22 with record revenues with record realized — with record capacity utilization. And the only challenge at that point was unprecedented levels of inflation vis-a-vis the materials we use and vis-a-vis our input costs. That’s when — so this started hitting — so our revenues were robust through the year FY ’22, it started correcting in FY ’23, Q1 and Q2 and has started seeing this journey back to normal, see, I’m saying it’s starting to see the journey back to normalcy beginning this quarter. It will take some time.
What’s spoiled the last four quarters in terms of operating performance was really the unprecedented levels of inflation. So now I think with that softening and all the other factors that I spoke about, we should see both the cost and revenues head back. But look, there is overall sluggishness in the markets, there’s no doubt in the matter. We are helped by the fact that we have a new Terry division. There’s market share to be captured there. It has broader market access vis-a-vis our Sheeting division. It gives us more categories to play in vis-a-vis what we had earlier. And so this helps us balance revenue streams when times are challenging. So both these divisions put together, overall give us more market access, more clients, let’s just say, a larger client pool to feed into and thereby enhances our probabilities to work on normalizing our revenue streams going forward.
Venkat Subramanian — Organic Capital — Analyst
Most helpful, sir. And in that context, given the current strength that we have with Terry Towel just now, how long do we think our journey could be towards actually getting back to our peak kind of revenue? Meaning, you’re seeing line of sight there?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Venkat, on a lighter note, I’m the managing director, not a fortuneteller. But…
Venkat Subramanian — Organic Capital — Analyst
No, I’m asking your feel, sir. I’m not talking about a number. I’m talking — I’m asking for your feel.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
I think we will progressively had to normalize our revenues, as I’ve said repeatedly, over the next few quarters, subject to broad normalcy prevailing in global markets.
Venkat Subramanian — Organic Capital — Analyst
Right. Helpful. Thanks, sir.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Thank you.
Operator
Thank you, sir. We take the next question from the line of Mr. Jatin [Phonetic] from RTL Investments. Please go ahead, sir.
Jatin — RTL Investments — Analyst
Yes. Hi. Good evening, sir. Thanks for the opportunity. Two, three questions. The first one is the three factors that you spoke about in terms of inflation, cotton, energy and supply chain. These would be applicable to our competitors as well, right? So why are we as an industry not able to get price hikes and pass these costs on to our customers?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
This industry has had this challenge, Jatin. I’ve always shared with investors that in this industry, at least this is my opinion and my point of view, pricing power has always been a challenge in this industry, if the volatility on the raw material front and other input fronts are extreme.
In that — in the backdrop of extreme movements, this industry is challenged vis-a-vis pricing power. Because most of our clients are global retailers, Fortune 500 retailers and they have challenges in resetting retail price points at the drop of our head. And so therefore, this is an industry-centric challenge, which is how I look at it. Ordinary cost movements, on the other hand, in this industry are handled as follows: if you have a 8%, 10% hit, you have to absorb it. If you have a 8%, 10% credit, you get to keep it. That’s — just — don’t hold me to the specific numbers. But what this means is that ordinary cost movements are not sort of tampered with either the client side or the supply side as far as who gets to keep it. It’s only when it gets extreme that these troubles begin as far as this industry is concerned. And that’s why it’s taking so much time for it to normalize.
At the same time, I must also tell you that what we’ve seen as an industry over the last year has been unprecedented in history. There’s never been a year of this nature in this industry’s corporate history. So therefore, it is a sort of extreme infrequent unusual extraordinary year that’s been witnessed over the last 12 months.
Jatin — RTL Investments — Analyst
Understood. Understood. One more question on the demand normalization. Now I’ve been reading a few articles where it seem to suggest that the U.S. home textile demand in our India kind of first half FY ’22 benefited a lot from the fact that there was COVID and people that were at home. So do you think that the industry will go back to that kind of peak revenue or — when you look at full normalization? Or do you kind of concur with the view that there was an excess there, which is unlikely to come back?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
No, I absolutely concur with the view that, that was, let’s just say, a more pointed increase in demand that one witnessed during COVID. It may or may not return in that shape and form. But the company has to continue to clock certain run rates on the revenue side given the fact that it has certain capacities. So if it’s not coming out of COVID-led demand, it will come out of channel expansion, market expansion and client exception-led demand. It’s just a theme that’s going to change. It’s not like before COVID, we didn’t grow, right? We continued to grow. That particular year, growth was exaggerated for reasons that were driven by work from home and all of the other factors that came with it. Once that’s done with, it doesn’t mean that the growth of the industry/any company operating in the industry is going to seize. It only means that, that doesn’t remain the theme of growth anymore, other themes take over. And the other themes are including — are include and are not limited to channel expansion, client expansion, market expansion, category expansion, enhancing of product depth in terms of portfolios and so on. So there are a bunch of other factors that will continue to lead the way as far as growth prospects are concerned.
Jatin — RTL Investments — Analyst
Understood. And a related question. In that phase, we also saw, at least in the data that we see, that the market share for Indian players within U.S. home textile, there was a very sharp market share increase, which also seems to be kind of normalizing now back to kind of pre-COVID levels. So is that also the right way to look at it that, that is also some excess, which is unlikely to come back?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. I haven’t studied the specific data on how the share has been over the last three, four months. But if it has increased, it could correct. I don’t rule that out. But look at the other aspects that are also playing out. I’m talking at 30,000 feet. It may not translate to quarterly movements but do bear in mind that there is still underlying China Plus One movement out there. There is a push for FTAs that’s playing out. There is also sociopolitical challenges and now sociopolitical and economic challenges being faced by Pakistan. All of these factors will also play out. So it’s not just COVID, right? As I said, that’s done with, new themes are going to play out. And the new themes not only include the first set of factors that I spoke about, which are company-centric factors of expanding its channel exposure or market exposure or client exposure or product exposure or category exposure. It’s also about these other macroeconomic factors which are the China Plus One and all the issues being faced by Pakistan and all the potential advantages that India is set to gain from should we be able to sign FTAs and so on. So these things are also on the horizon.
Jatin — RTL Investments — Analyst
Got it. Got it. One last question from my side. Does…
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Just to bear in mind, there is — the capacity in the industry is what it is. New capacities will not be coming up anytime soon, as we see it at this point. This is Himatsingka’s view. And it’s not like there’s a constraint on capacity. There is enough and more, but further additions at this point will — don’t seem to be coming about. And the entry barriers to setting up capacities also exist, vertically integrated capacities that is. So keeping all this in mind, I think if I look at the medium term, there’s a sound argument for India’s strength in this industry.
Jatin — RTL Investments — Analyst
Got it. Got it. Just one last question. This fundraise that you’re doing from IFC, any reason to choose the FCCB route rather than a straight preferential equity or something, because that would have straightway improved your debt-to-equity ratio?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes, I think we had some value propositions that we wanted to play out as well. So that’s what drove our decisions. But it’s a rather small amount, so it’s not going to materially change any of our metrics, but it will make us stronger, and we will — we’re onboarding a strong partner, a strong name, strong pedigree.
Jatin — RTL Investments — Analyst
Got it. Got it. Thanks a ton for patiently answering my questions.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes.
Operator
[Operator Instructions] We take the next question from the line of Shashi Kant from Brighter Mind. Please go ahead, sir.
Shashi Kant — Brighter Mind — Analyst
Yes. Congrats, sir, for your good set of numbers. So my two questions are: the first one is about the demand in U.S., how it’s improving or do you see any green shoot of demand coming back?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. As I said we see some green shoots, don’t interpret it to be anything more than that at this point, please. We are beginning to see some green shoots, and we are working on all the other strategies, as I said because there is no doubt in the fact that there is overall sluggishness that, that exists but there has been some opening up. There’s also been some movement on the inventory correction initiatives taken by — taken up by the key retailers globally during the first half of the fiscal, which seems to have eased out a little. So I think there are a bunch of factors playing out, right? The inventory correction initiatives sort of coming to head complete centric initiatives, which were led by market, client, category, product, channel, expansion, strategies. And then there’s the other macroeconomic bucket, which is the China Plus One and all of that playing out. So I think it’s a confluence about things which will sort of support element of improvement on the demand front.
Shashi Kant — Brighter Mind — Analyst
Right, sir. Sir, one more question. Can you elaborate about the competitive intensity in the key markets? I mean is it decreasing or sort of stabilizing at the same level that we saw in Q2, Q1?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
The competitive intensity is that what you asked?
Shashi Kant — Brighter Mind — Analyst
Yes, yes, right.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
So competitive intensity vis-a-vis our competition or what do you mean?
Shashi Kant — Brighter Mind — Analyst
Vis-a-vis competition, right, in the categories we are in?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. It’s only consolidating, Sashi. So the consolidation theme is on and as we see it. So there’s nothing new on that front. It’s not intensifying further or anything of that nature.
Shashi Kant — Brighter Mind — Analyst
Right. That’s all from my side, sir. Thank you.
Operator
Thank you, sir. We’ll take the next question from the line of Mr. Rashkmik Ojha [Phonetic], an individual investor. Please go ahead.
Rashkmik Ojha — — Analyst
Thank you, sir. Sir, question is on the utilization levels and the potential revenue we can generate? Because last quarter, we operated at 58% utilization in the Sheeting division and 65% Terry Towel with INR750 crore revenue, which gives an annualized number of INR3,000 crore. I just wanted to understand what is the optimum utilization levels we can reach in both Sheeting division and Terry Towel? And can this take the turnover to between INR4,000 crore to INR4,500 crore in future?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes, it can, Rashmik. And these utilization numbers — please differentiate between can and will. You asked me a question, if that’s theoretically possible? Yes, the answer is yes because the math is itself evident, right? But I’ve also shared with stakeholders before that our assets have been positioned to — if I look at our Sheeting assets, our Terry assets because Spinning is mainly a backward integration asset. So these two assets can clock revenues in that band, depending on the product mix, point number one. Point number two, we feel that the — to your question of utilization numbers, you see these are net capacity utilization numbers. So in theory, it can hit INR100 crores.
Rashkmik Ojha — — Analyst
Okay. Okay. Yes, sir, second related question is, if we do this kind of optimal utilization and with the economy of scale, can the EBITDA margins grow to around 19%, 20% because we have done 19%, 20% a few years back at optimum utilization, so can…
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Not can. I think if some of these macroeconomic challenges vis-a-vis inflation and things of that nature, which we just spoke about all this while. Should they be relatively normal banks. If you look at the company’s performance in FY ’17, FY ’18, FY ’19, just before FY ’20, when it hit COVID in the second half and annual numbers were disturbed, look at FY ’20 through H1, FY ’17, FY ’18, FY ’19, FY ’20 through H1. Those kind of EBITDA numbers in terms of consolidated financials were always there. So it will be our attempt to try to normalize performance going forward. So it’s not like 19%, 20% numbers have not been achieved. They have been achieved. So it will be our endeavor to sort of regain that sort of performance metric. It’s only a question of when.
Rashkmik Ojha — — Analyst
Thanks. That’s very encouraging, sir. My next question was on the debt repayment schedule. If you can just give some color of in the next two years, that is FY ’24 and FY ’25, how much is the debt repayment obligation? And against that, we have around cash of INR100 crores plus we’re raising INR100 crores. Will this INR200 crores be sufficient enough to take care of the needs of your cash flow management for the next one to two years?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes. So we have, including unsold scripts and all of that, over INR200 crores in cash. And we have debt obligations which are reasonable. We don’t see any — we don’t foresee any issue on that front. But if you need any further details, although Mr. Venkat may not like to hear this, but I’ll have to take it offline.
Rashkmik Ojha — — Analyst
No problem, sir. Sir, there was one more commentary from one of the competitors that they are also tied up with Disney for bedding in the Europe region, which we also had earlier. So was there any exclusivity which we had or Disney can tie up with any other players and…
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
This was not exclusive. Five players, yes.
Rashkmik Ojha — — Analyst
Right, right. Okay. That’s it, I’ll come in the queue, sir. Thank you.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Sure.
Operator
We take the next question from the line of Ms. Prerna Jhunjhunwala from Elara Securities. Please go ahead.
Prerna Jhunjhunwala — Elara Securities — Analyst
Hello, sir.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Yes.
Prerna Jhunjhunwala — Elara Securities — Analyst
Sir, I wanted to understand this global landscape on supplier based. Pakistan and Turkey, they are larger players to — suppliers to Europe and U.S. apart from India and China. So these two countries are facing issues with respect to cotton availability or their own currency being unstable. So do you think India in this entire situation can gain market share going forward or how are we seeing our suppliers or customers talking on this angle?
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Prerna, I think the theory around all this points to India gaining market share. Has it happened as yet? It has not. Is there talks and discussions around it all the time? There is. I think in the next couple of months, we’ll see how this pans out vis-a-vis the challenges, jurisdiction like Pakistan facing at this point, for example. It’s not just the currency and cotton, but there’s issues with movements at port and various other issues. So as I said, clients seem to be on alert, but how will it pan out in terms of movement of market share, we’ll see over the next few months. It will take that much time. And yes, that’s my view on Pakistan. And as far as China Plus One is concerned, I think that theme seems to be playing out slowly and steadily. It’s going to be in one way, country-centric, one way, company-centric, obviously.
Prerna Jhunjhunwala — Elara Securities — Analyst
Okay. Okay. And sir, in the U.S. also, we see many retailers closing stores and stuff. So how does that being seen from your customer base because we see Walmart, we see Bed Bath & Beyond, they’re all closing stores. So some color on the customers how they are managing within brands and mass segments? And how are they planning with inventories? Some color on that, that would help us to understand the landscape.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
They’re planning their inventory lean. I don’t think anyone out there wants to be heavy on inventories. That’s pretty certain. And chains like BBB are going through the turbulence that they are vis-a-vis Himatsingka exposures to BBB has been substantially reduced. It’s in the low single digits. And I don’t see any change on that front. They will rationalize. So the issues like, let’s say, or challenges like BBB, there will be larger quantum of store rationalization. But other retailers, it’s ordinary cost movements in terms of them wanting to shut down some less effective stores and less productive stores, it shouldn’t disturb the numbers as far as their offtake from us is concerned materially. I think what’s sort of — the inventory correction piece is still playing out a little although it’s advanced quite a bit, but it still has some time left to play out completely. And there’s generally a sort of air of caution around with all that’s being seen across industry and sectors, I think also as we all see every day.
So with that overall caution, they want to be lean on inventories. They want to make sure, at least in most cases, that unproductive stores, etc., are rationalized, to your comment. Given all this, at the same time, we are seeing some green shoots somewhere in some buckets for some demand to come back. When I say come back, it’s vis-a-vis what was lost, right?
So over the last two quarters, three quarters, as you all have observed, there was demand lost. And so when I say we’re seeing some green shoots, so of that total loss, we’re seeing some of it gradually claw back. That’s what we’re seeing on the horizon. But as I said, it will be led by not just — it’s not be — it’s not going to be led by same-store sales, it’s going to be led by a confluence of initiatives, which include all these things of companies like us pushing for market/client/channel/category expansion.
It’s going to be led by the macroeconomic themes like the China Plus One or issues that Pakistan is facing, etc., and the FTAs as and when it plays out. And it’s also going to be led by some encouragement that the retailers are going to face once the costs come down a little and their margins also normalize a little, that’s going to be encouraging for them as well.
So I think all of these things will play out in tandem in different proportions and ratios depending on the quarter, depending on the product, depending on the brand. There’s no one-size-fits-all. We can be different from competition and vice versa in terms of specific quarter’s performance. But directionally speaking, this is what we’re seeing.
Prerna Jhunjhunwala — Elara Securities — Analyst
Thank you so much, sir. That gives lot of clarity. I’m done. Thank you.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
Shrikant Himatsingka — Managing Director and Group Chief Executive Officer
Thank you, everyone, for taking the time this evening to join us on this call. I do hope I’ve answered your questions to our best possible levels. If there’s anything else that you guys want to know about and brainstorm about, just get in touch, and we’ll be happy to take you through. Thank you again.
Operator
[Operator Closing Remarks]