Indo Count Industries Limited (NSE: ICIL) Q3 2026 Earnings Call dated Feb. 16, 2026
Corporate Participants:
Mohit Jain — Executive Vice Chairman
Manish Bhatia — Chief Financial Officer
Analysts:
Rahul Jain — Analyst
Abhishek Shankar — Analyst
Amana Agrawal — Analyst
Gautam Srivedi — Analyst
Yash Tana — Analyst
Dolly — Analyst
Dwanit Savla — Analyst
Shraddha Garwal — Analyst
Sachin — Analyst
Surya Naran — Analyst
Presentation:
operator
The conference is now being recorded. Ladies and gentlemen, good day and welcome to Indo Count Industries Limited Q3 and 9 months FY26 earnings conference call. This conference call may contain forward looking statements about the company which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants line will be in listen only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing 0 on your Touchstone phone.
Please note that this conference is being recorded. I now hand over the conference to Mr. Mohit Jain, executive Vice Chairman. Thank you. And over to you sir.
Mohit Jain — Executive Vice Chairman
Thank you. Good afternoon and a very warm welcome to all of you joining us for the Indo Count Industries Limited Q3 and 9 months FY26 earnings call. I’m also joined by our group CFO Mr. Molidharan Manish Bhatia, our CFO and strategic growth Advisors, our Investor Relations Advisor. We hope you’ve had the chance to review the financial results and and investor presentation available on the stock Exchange and on our company website. Let me begin with great news that has come at the start of 2026. India concluded the FTA with Europe and a trade deal with the United States.
Developments that are truly transformative for the Indian textile sector starting with the United States. While we are still awaiting detailed notifications and finer aspects of the agreement, one thing is very clear. Tariff uncertainty has meaningfully eased with these trade developments. India is moving towards a more competitive position relative to other exporting countries. This is extremely necessary and it strengthens our business outlook going forward. Coming to Europe with the EU fta, textile exports from India to Europe will now become duty free. This is a significant structural advantage as it creates a level playing field for the Indian players.
Europe is one of the largest textile markets globally with imports of over US dollars 260 billion. Indo count already has a presence in Europe and works with leading retailers in that region. We must acknowledge that post signing implementation takes time and scaling up takes further time. Having duty free access combined with our existing relationships gives us a clear head start. There is no denying that this is a major development for Indian textile players. At Indo Count, we have already begun internal discussions putting pen to paper to study, strategize and evaluate how to best capitalize on this golden opportunity.
Okay. Although the trade deal will take time to get implemented, we expect customer confidence to steadily improve through FY27. In addition, some of the FTA signed earlier with countries like Japan, Australia and in the Middle east are beginning to show traction. As we have consistently communicated, geographical diversification remains one of our key strategic priorities. Today, non US markets contribute to approximately 30% of our core business revenue. Now coming to our internal developments, we started the year 2026 on a very positive note with the commencement of our commercial production at our new Greenfield pillow manufacturing facility in Kernersville, North Carolina, United States.
This is our third manufacturing unit in the United States and the largest amongst the three, having a capacity of 18 million pillows annually, taking our total utility bedding capacity to 31 million pillows per annum. Strategically, this strengthens our manufacturing footprint in the United States and presence in the Midwest, west coast and now the East Coast. It enables customer proximity, improves responsiveness and gives us clear operational flexibility. Our first two utility bedding facilities are currently operating at approximately 65% capacity utilization. With the third facility now operational and backed by this expanded infrastructure, we expect this segment to scale up.
I’m also pleased to share that Indo Count has been honoured with the Textprosil Export Award for the year 2324, winning the gold trophy for the highest exports of bed sheets bed linen in the cotton madeups category for the sixth consecutive year. This award is a strong validation of our consistent export performance, our leadership position in the category and the trust that global customers continue to place in us. Lastly, but certainly not the least, we have strengthened our ESG leadership position. Our S and P Global ESG score has sharply risen to 78 up from 45 over the last two years, significantly ahead of the industry average of 35.
We now rank within the top 3 percentile globally among textile, apparel and luxury goods industry peers in ESG performance. This achievement reinforces our long term commitment to sustainable growth, responsible manufacturing and value creation for all stakeholders. Now coming to our Q3 performance, despite operating in a challenging 50% tariff environment, we delivered a stable performance while continuing our strong belief on our long term growth. Importantly, there was no substantial impact on volumes. In order to sustain volumes and protect our market share, we undertook calibrated product mix adjustments and shared a part of the tariff burden to support our customers.
While our core business revenues were impacted due to tariff due to the tariff environment, this was largely offset by growth in our new business. As a result, we delivered stable overall performance on a sequential basis. Lastly, coming to our new business in the United States, our new business revenues have doubled compared to the same period last year. At this juncture I would like to pause and share with pride that utility bedding, part of our new business, began its journey just 16 to 17 months ago and today it is actively fueling our next phase of growth.
This business is expected to contribute approximately $175 million to our consolidated top line over the next few years. We believe this is just the beginning and there are still huge opportunities to scale further and create long term value coming to our brand business Another part of the new business segment, our newly relaunched brand brand wamsuiter continues to perform well. We are receiving encouraging customer feedback and strong product reviews reflecting the brand’s premium positioning and quality credentials. The response validates our strategy of building a differentiated branded portfolio alongside our core business. Our portfolio of licensed brands, Fieldcrest, Waverly, Gaiam will continue to be strong growth drivers supported by deeper customer engagements and increasing preference for end to end home textile solutions from Indo Count.
The ability to offer a range of collections across bed, bath, utility bedding, etc. Strengthens our value proposition and enhances the wallet share with our retail partners. The new business contributed 20% to our total top line in Q3 FY26. On a sequential basis it grew by 16% to 210 crores, achieving an annualized run rate of nearly $100 million. To conclude, the tariff uncertainty for our coal business is now behind us. Our US Manufacturing and branded portfolio are building scale and we expect improved traction in the coming years. Additionally, the evolving trade agreements are likely to open up growth opportunities for us.
With our presence across 50 plus countries spanning five continents, we are positioned to unlock the next phase of global growth while further diversifying geographically and strengthening our competitive edge. We remain confident in our strategy execution capabilities and in our ability to deliver sustainable and balanced growth as global trade conditions normalize. Importantly, we stay committed to our long term vision of doubling our revenues by 2028, supported by a well balanced mix of business and geographies, strong brands and an expanding global manufacturing footprint. With that, I now request Mr. Manish Bhatia to walk you through the financial highlights.
Manish Bhatia — Chief Financial Officer
Good afternoon everyone and thank you for joining the Q3 and 9 months FY26 earnings call. I will first provide a brief overview of our performance following which we will open the floor for questions at the outset. I would like to highlight that Q3 FY26 and 9 month FY26 are not directly comparable to the corresponding periods last year. This is largely due to two key factors. First, there was no US Tariff situation in the base period. Second, revenue contribution from the New business portfolio commenced only from Q3FY25 volume sales volume for Q3FY26 stood at 24.8 million meters showcasing a steady performance in this uncertain environment as compared to the volume of Q2FY26.
Total income total income for the Q3FY26 stood at 1,774 crore compared to 1082 crore in Q2FY26 showcasing STD performance despite full quarter impact of 50% US tariff coming to EBITDA. EBITDA for Q3FY26 stood at 102 crores rupees compared to Rs. 123 crores in Q2FY26 a decline of 16.8% quarter on quarter due to partial tariff absorption and new labor code impact of approximately Rs. 9.2 crores. Adjusted EBITDA for Q3FY20FI Q3FY26 stood at rupees 112 crores after taking one time impact of new labor goods. EBITDA margin for the quarter was 9.5% versus 11.4% in the previous quarter.
Adjusted EBITDA margin for the quarter was 10.4% which is 100bps regrowth quarter on quarter due to full quarter of 50% US tariff. We expect margin pressure to gradually ease off. PAT for Q3FY26 stood at Rupees 24 crores compared to Rupees 39 crores in Q2FY26. As mentioned earlier, the volumes in the core business will scale up going forward and new businesses will also show more traction. Therefore, we expect stronger EBITDA to PAT conversion over the next two years. EPS for Q3FY26 is rupees 1.23 per share. Coming to debt size, net debt has been reduced by rupees 215 crores as compared to March 25.
With this I open the floor for question and answer.
Questions and Answers:
operator
Thank you very much sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Jain from Seedims Wealth. Please proceed.
Rahul Jain
Thanks for the opportunity. A couple of questions. 1. How do we look at the scenario in US? Typically in terms of the demand at the Customer end and your end customer as well as your customer end. Given the tariff situation, was the stock at our customer much lower than the normal? Whereby in coming months can we see a spike in overall revenues? That is my first question.
Mohit Jain
Sure Rahul. So what we’ve seen in the US is retail sales during the holiday season have been decent. You know, having said that all retailers have increased their prices keeping tariffs in mind just after the holiday season which is towards the mid of December onwards. So we have to really. It’s early days to say anything, you know, we have to watch their sales because you know when prices go up there’s a little bit of an impact on demand. As you can see also on our volumes from last year Q3 to this year Q3. So we have to wait and watch.
But US is a very resilient economy and all the numbers on retail sales, on labor, unemployment numbers have all come in on the positive side in terms of inventory levels, yes, customers have not overbought anything. But it all depends on how retail sales go in the next one to two quarters. I would say.
Rahul Jain
Secondly on the margin side. So we have kind of given discounts to our customers. So once this the final tariff comes in play, you know, all the model is are getting completed. So will we kind of reverse the kind of discounts and accordingly because of this discount only, nothing else, what could be the margin uptick?
Mohit Jain
Understand while the benefit of the reduced tariff Raul may take some time to fully reflect in the reported numbers which will be gradually visible from our first quarter FY27 onwards. But the structurally the outlook has improved meaningfully. One thing is clear. We need to understand that the Indian textile industry is now competitively positioned and at par with other exporting nations, if not better. And the US is the largest textile importing market. This significantly strengthens our long term opportunity. We already hold, as you know, a very strong share in the US home textile market and expect to consolidate and grow the position further.
At the same time the recent trade agreements provide incremental tailwinds for expanding our presence in non US markets. Coming to your specific question of guidance at this point of time, we would not prefer not to provide any specific numeric guidance at this stage. However, directionally we expect improvement across volumes, realizations, margins going forward as the operating environment normalizes and competitive positioning strengthens.
Rahul Jain
Sure. So I do accept and appreciate the kind of opportunities which lie ahead in the medium to the long term. And I understand your part in terms of guidance on numbers. I just wanted to clarify. There is a certain discount which you must have given to your customers which is specific to the credit situation, which is, you know, kind of not a regular situation, regular business situation. So say the discount which has been given to the in terms of X amount or X percentage as this say. Another when things get clarified in terms of the final duty structures, assuming it goes to 18% then do you reverse that special discount related to Arif which was given to your customer?
Mohit Jain
You know, one thing you need to keep in mind is, you know between our Q2 and Q3 we have 100 basis point, you know, EBITDA margin hit due to the 50% Russian oil tariff. You know. Yes, we did give a case to case basis, you know, tariff discounts to customers which will start getting reversed. You know, we are in touch with all our customers as we speak. It’s too early. You know, this has all happened in the last seven, 10 days. So we have engaged with them. As this unfolds, it will all start resulting in or will start showing in the numbers.
Rahul Jain
Sure. My last question sir, in terms of your guidance on the top line you mentioned by FY28, our overall company top line will double and our new business which has reached a run rate of about $100 million by FY28, the new business which includes the bedding, utility bedding and also the USA brand business, both put together should be in the region of around $275 million. Was your guidance which was given in the previous quarter also. Do we stand by that?
Mohit Jain
Yes. Sure, sure, sure.
Rahul Jain
Thank you so much sir and wish you all the best.
operator
Thank you. The next question is from the line of Abhishek Shankar from ICSS Direct. Please proceed.
Abhishek Shankar
Yeah, thanks for taking my question. Congrats on the good set of results. Just two questions from my side. One is on the Europe market. So can you just highlight, you know, what is the total size of the home textile market in Europe and you know, how what is the share of India in that and how are we looking to grow there? My second question I’ll ask after this.
Mohit Jain
Hi Abhishek. Sure. So I’ll also give you a little bit flavor of where Indo count stands so that for everybody to hear this and clarify on the eu, FDA and on the European market. Currently our revenue contribution is in the mid single digit range from this market. We’re in active discussions with multiple customers and are engaged at various levels as we move forward. Once the EU FTA comes into full effect, it will significantly improve visibility for both Indo count and the retailers. Given our enhanced competitive positioning versus earlier we got to realize with this, India becomes on a level playing field with its other competing countries.
So we expect the EU market is roughly around $30 billion, which is similar in size specific to home textiles, you know, to the US market. And over the next couple of years, I would say next two to four years, we will be able to capitalize this market in a big way.
Abhishek Shankar
Yeah. Thank you sir. And my second question is more on the bookkeeping side. So you mentioned about the incubation cost of new businesses. I just wanted to know what was the amount of that incubation cost as.
Mohit Jain
We mentioned, Abhishek, it’s 150 to 200 basis points. So you can run the numbers. I mean, yeah, we’re not going to provide any specific number, but it’s approximately 150 to 200 basis points. We expect this to get over by end of quarter four.
Abhishek Shankar
Okay, great. Thank you sir. Thank you so much. I’ll fall back to the kids. All the best.
operator
Thank you. The next question is from the line of Amana Agrawal from Kareniel. Please proceed.
Amana Agrawal
Thank you for the opportunity. My first question was on the core business margins. Like well, you have already talked now about that there will be a reversal in margin but since the tariffs will come down to 18, so will Indocom be expected to take some hit out of that 18% or like do we expect our margins to go back to 15, 16%? Kind of a number which we used to do.
Mohit Jain
Sure. Aman, you know, so the reality, it’s too early to speak on this because this is a very dynamic situation we are in and we’re in discussion with all our customers and I’m sure we’ll get to a mutually beneficial conclusion with each other. Having said that, our objective is to get back to 15, 16%. I think we’ve been consistently saying, you know, that that’s our goal on ebitda. Let’s hope that we can get the soon.
Amana Agrawal
Understood, sir. Like now coming to the Europe business part with the FTA basically coming and like it might take another year to basically implement. So like how are we working internally? Like are we planning to put more sales team or like more offices in Europe so that our engagement with the customers improve and once the FTA is in place in a year, we are able to capitalize from the start only. Can you touch a bit on that? Like how we are thinking about capitalizing on the opportunity, sir?
Mohit Jain
Absolutely, Aman. And I think I addressed this early on in my opening speech. I’m not sure if you Heard that, you know, so we have a team in place. You know, we are putting pen to paper, we have a strategy in place, we’re evaluating, we’re seeing how we can improve our relation with each customer. We, we very recently in the month of January, participated in a show called Heimtextil 2026 in Germany, which happens in Frankfurt. It happens every year and it was one of the largest global home textile exhibitions which brings retailers all across the world under one roof.
And with this participation we’ve seen specifically this time a lot of interest from UK European retailers more than ever. And of course the EU FDA was already in the works. We all were hoping that it will happen, but till it didn’t happen, it didn’t happen. So even our retail customers were aware of this, who we already do business with. So they all came, they’re seeing new products. So I think the engagement level is very, very high, more than it’s been, you know, because they know at the end of the day for them also country diversification is important.
They look at India very, very well. You know, we also have Mr. Macroon here today. So you know, I mean, so it all shows how important India is, you know, for all the global leaders.
Amana Agrawal
Okay, so like from a medium term point of view, like three to five years, can we put some like internal target, like from 30% maybe you want to go to 50, 60 kind of diversification from non US savings. I know it is very early to say anything as of now, but like it might speak a bit about your ambitions to grow that business. Right. So anything can we say on that end?
Mohit Jain
I’ll be a magician to tell you that right now, you know.
Amana Agrawal
Yeah, Sorry sir, now again on the home text a little bit only like if I see us also like Indian peers are very strong on the cotton part. Right. Because cotton is dominant in India as well. But fyc, polyester and other aspects of the business like Indian players have lagged a bit in terms of gaining market share on those presence and that is also a big part of the overall textiles market. Right. So, so with more and more yarn players coming in India and like focus of Indian government also on the MMF category, do you think like there is a potential for us and players like us to go and target that non cotton pie also and like gain more wallet share in that category?
Mohit Jain
Sure. So you know, India is, you know there’s a product which is 100% polyester based product in the U.S. it’s called microfiber to be specific. That’s where you Know, it’s an opening price point product, really the starting price point where retailers would retail the product at $17, $19. So we as a country, I mean most of us don’t play in that segment. So we are playing more on the mid to high end. But even in the mid to high end, it’s not that all our products are exported with only cotton. We’re using fibers like Tencel Lyocell, a blend of cotton polyester.
So even when we are bending, blending cotton and polyester, you know, 60% cotton, 40% polyester. India is very, very competitive as we move forward, a lot of the cotton polyester products are used in the fashion bedding business. So you’ll see that business grow over the next couple of years. And I think we are competitive even today and we should see that growth happening further. As far as 100% polyester is concerned, I don’t think we are yet competitive.
Amana Agrawal
Now on the utility business. Like we have reached 65% kind of utilization facilities and the new facility, Greenfield One has also come on screen. Right. And we are doing a run rate of like almost $100 million kind of business from the new businesses. So like any soft guidance can we give for next year? Like how much revenue are we targeting from the new business, especially from the utility one since old facilities will ramp up and like also the new facility will ramp up for us.
Mohit Jain
As we mentioned, you know, like over three years. And this is our first year, so next year will be our second year and the year after that will be our third year. So we’ given a clear guidance of $275 million, you know, so I think we should all be very happy to where we stand today. You know, in less than nine months to 12 months, we already had 100 million run rate. So other than that it’s very difficult at this point of time to guide, you know.
Amana Agrawal
So all I can say, direction. Yeah, we would be targeting 10, 15% kind of Q on Q kind of growth which we have been getting. Right. Like would that be a fair understanding?
Mohit Jain
Not necessary. Some quarters could be higher, some could be flat, you know, so it’s not, there’s no, I mean it all depends on when, when does business fruitify with which customer, you know, and how the offtake is, you know. So our objective is more to stabilize the business and to grow from a long term perspective, you know, it’s not. Quarter on quarter is not the concern here.
Amana Agrawal
Understood, sir. So my final question was on Vamsuta, like can you speak about the performance of Vamsuta and like any rough numbers you can throw like how we have been terms of sales because that is a category where it is very exciting for us, right? And it can become $100 million kind of business. So how has been the performance? How has been the ramp up in that business?
Mohit Jain
Basically so the 100 million that we mentioned is with Wamsutta and the other brands that are clearly mentioned and it’s also an investor deck. It’s not only with Wamsutta loan and we got to all realize Aman that it’s only been six months since the brand has been. So we’ll come to you once we’ve achieved some scale and size, you know. But all I can say that it’s, it’s positively surprised us and we are moving in the right direction.
Amana Agrawal
Understood sir. Thanks for answering my question. Thank you.
operator
Thank you. The next question is from the line of Gautam Srivedi from Nipian Capital llp. Please proceed.
Gautam Srivedi
Yeah, hi Mohit and team. I think a pretty decent result given the challenging circumstances over the past about almost two quarters. I was looking at your slide presentation and I want to focus on number 22. Slide 22. Hello, can you hear me?
Mohit Jain
Sure. Hi Gautam.
Gautam Srivedi
Yeah, yeah, yeah. So slide number 22 was, you know it’s interesting that you’ve shown the extent of US imports of two of your major products, cotton sheets and cotton pillowcases and also thereafter cotton bedspreads and quilts. The first two have India with the lion’s share and of course within that is Indo count. And then you have slightly smaller share for sure in the cotton bed spread and quills. But here’s the interesting part, there’s no mention of Bangladesh. So question I have is, is Bangladesh absent in all these three categories?
Mohit Jain
Gautam, interesting question. You know, and we’ve gone through this little bit of a roller coaster in the last seven, eight days as we’ve all seen, you know, when Bangladesh got the duty free access using US cotton. So actually Bangladesh produces very, very low products, you know, which we would compare compete with them in the European market. In the US market we actually don’t compete with Bangladesh at all. So that’s why you don’t see Bangladesh on the map, you know, so you absolutely correctly pointed it out. And also our understanding from Pushi is that now India also going forward, of course we have to see the fine print, will have exactly the same benefits if you’re importing US cotton, India should have tariff free access to the United States.
Of course the devil lies in the details. So we’ll wait for. Even for Bangladesh. Bangladesh, the fine print has not come out as I mentioned. So as that comes out, I think this will also be a game changer for India. That’s a good question. To answer your question.
Gautam Srivedi
Yeah, that’s a good clarification. Because the thing is the Indian stock market puts all the textile exporters under the same basket and says, you know what, Bangladesh has got a preferential duty structure with the US and everything gets impacted from an equity market perspective at the same time. So this is a, this is a great clarification.
Mohit Jain
Yeah, I think this is great.
Gautam Srivedi
I just want to also ask you a question with respect to your domestic business and how’s that growing? Because you’ve launched a whole bunch of brands on the domestic front. And one of the things that we look at in Napier Capital is that with so many new residential apartments coming up across the country and that’s a big boom for the real estate companies when we talk to them, every new home is going to need pillows, blankets, you know, bed covers, etc. So how do you view the domestic market going forward?
Mohit Jain
Absolutely. So you know, the domestic market is very, very important for Indo count. We have two brands, a brand called Boutique Living, which is an aspirational brand priced at a mid priced and above, 3500 rupees on a bedsheet and above. And then we have an affordable brand which is opening price point, you can say, which is called layers. You know, we have a dedicated separate team of over 65 people running this business for us. India is a tough market, I must say, but we are fully committed to it. We are in over 2000 multi brand outlets as we speak and growing.
We are in stores like Shopperstop at home, so multiple of these large format stores. Also online. We are revamping our website, you know, making it more also from a D2C presence, you know, making the websites more alive and you know, showing the curated assortment, you know, so. And selling more higher end products on a website. So we’re in the journey of putting that also in place. So it’s a very important business. Currently it’s 2.25% of our revenue, you know, but it’s very important for us and hopefully in the next three to five years this will become a sizable business.
Gautam Srivedi
Understood. Okay, thank you so much.
Mohit Jain
Thanks.
operator
Thank you. The next question is from the line of Yash Tana from I thought pms. Please proceed.
Yash Tana
Yeah, hi team. Am I audible?
Mohit Jain
Yes, yes please.
Yash Tana
Yeah, so I had a Question relating to the guidance that you’ve given for FY28. Now we do understand that, you know, the medium to long term, the visibility is great, but if I just dissect the numbers, I think maybe this year the new businesses would be will be doing anywhere between 750 to 800 crores. And even if I assume that by FY28 they scale up to the $275 million, the base business, the core business, has to sort of grow more than 25% year on year for the next two years. So what is giving us this confidence of such a growth? High growth, which we’ve not achieved in the past?
Mohit Jain
Sure, yeah. So, you know, directionally we feel positive on this growth trajectory that we’ve laid out. You know, as the revenues improve currently with tariffs and fta, the target to double revenues is doable, you know, with these going away and we have the capacities and the capabilities and we are witnessing improved scale across all segments as we speak here.
Yash Tana
Sure, sir, got it. But in any case, I mean, is there a possibility where this could extend? Because it seems rather very aggressive and it’s good to be aggressive, but just trying to understand, we’ve never done this sort of a growth.
Mohit Jain
So yeah, of course we’ve got to realize that this is an aspiration that we all have, you know, so we’ve not changed the numbers. We around 12 to 18 months ago we declared our number. So we want to hold ourselves to it. Now if it moves by six months or nine months or one year here and there, it’s not the beginning or the end of the world. Right. I mean conceptually and how do you say directionally, we are very clear. And you got to also understand that now we have three levers that we are playing on. It’s not one lever, only our core business. In our core business now with all these FTAs, US opening up, I mean that we have 35, 40% open capacity there, we have the utility bedding business and we have the brand business. So we have all these three to support this growth for us, for the company.
Yash Tana
Sure, sir, I think that makes sense. My second question was on the margins. So the margin Decline from the 15, 16% if we dissect it into two parts, one could be due to lower utilizations, due to the external macro factors, tariffs, etc. And the other one, obviously that you had to give discounts to your customers because of the tariffs. So just trying to understand, to get back to this aspiration, 15, 16% margin, maybe the tariff discount will be immediate and the utilizations will be eventual. So can you break that up for us if possible? Like what’s the margin impact due to both these factors?
Mohit Jain
You laid it out quite well. I mean it would not be possible for me to break it up. Just one more point. I wanted to add that our US business that is yet at growth phase, we have a margin impact of 150 to 200 basis points on the overall consolidated revenue. And we have fingers crossed, we expect that by the end of March2026 that should be over. So starting Q1 we will not see a drag of that, you know, and then as the retail business in the US picks up and our capacity utilization starts improving again, that’s a big factor, you know, to get their margins back to the levels that you mentioned.
Yash Tana
Sure sir. Got it. That makes sense. Good luck.
Mohit Jain
Thank you.
operator
Thank you. The next question is from the line of Dolly from Nivsha. Please proceed.
Dolly
Hello. Hi sir. Thank you for the opportunity. I just had a few questions follow up questions on our previous participants. So first of all I wanted to know that out of our total cotton consumption right now, how much is sourced from us?
Mohit Jain
So us currently would be slightly below 10%. Our overall import is around 30, 35%.
Dolly
Okay, so if you can help us understand the working of this. Like we know that if we import the US cotton it will be duty free. But we also know that US cotton is comparatively expensive than other countries. So I wanted to understand that working how the net net is it beneficial or not for us to import the US cotton or it depends on like customers only demand for US cotton then only will use it.
Mohit Jain
So I’ll explain it to you first I’ll explain you from Indo counts perspective. You know, from our perspective the cotton that we predominantly import from the United States is a cotton called US Pima, which is less than 1% of the cotton grown in the world. So it’s a very high end cotton similar to Egyptian cotton. So this is specifically when our product development teams and sales teams go and show a customer a specific product, they like it, it’s on the higher end of the range. That’s the cotton that we import. Any cotton that is imported into India which is 32 millimeter in length and above has duty free access irrespective of country of origin into India, you know.
So most of the cottons that Indo count imports today are 32 millimeter and above in length coming to the US as we speak today when tariffs were put in place. If you use as we are Speaking right now, if you use US Cotton, the content of the US Cotton in your end product, if that is A above 20%, then on that much value you don’t pay tariff. So for example, if the cotton content is 30% in the product and your tariff is 25%, so you don’t pay, you’ll not pay seven and a half percent. Basically, you know, 20, 30% or 25%.
That law is applicable for any country, not only India. It’s the same law is applicable for any, any U.S. you can say content as long as it’s above 20%. What the government is working on is that if you use US Cotton and fiber from the US Then you get, then the tariff becomes zero. Again, we have not seen the fine print and any cotton that is below 32 millimeter in length, we have 11% import duty as we speak from anywhere in the world. So hopefully I’ve been able to answer your question.
Dolly
Okay, so, and like from where are we sourcing our raw material for US Facility.
Mohit Jain
Our US Facility, you know, where we are making pillows and quilts is a global sourcing model. Depends on the product that we are showcasing to our customer. And depending on what the tariffs and pricing is, we source it globally from China, Vietnam, Thailand, Korea, India, all across the world.
Dolly
What exactly facility we have in us? Like what exactly we are doing in us? Are we just doing the end product or. It’s from the start.
Mohit Jain
We manufacture pillows, the pillows that you sleep on. And we manufacture quilts in the United States in one of our. The quilts are made in our Ohio facility.
Dolly
Okay, so for that you do the sourcing from like all over as per.
Mohit Jain
The pricing and the demand for the raw material.
Dolly
Yeah, yeah. Okay. Thank you. And all the best.
operator
Thank you. The next question is from the line of Dwanit Savla from Savla family office. Please proceed.
Dwanit Savla
No, sir. Am I audible?
Mohit Jain
Yes, sir.
Dwanit Savla
This is with regards to this expansion or further below which you are putting up in US by when will it be operational and if and by way if, when it’s operational, what will be our total capacity by then? And based on that capacity, what kind of a top line are we actually targeting? Is it in line still in line with what used to be a few quarters ago? Sure.
Mohit Jain
Dhuani. So Dhuvani, I would suggest also to go through an investor deck, you know, where we have clearly laid it out. So we have, as we speak, we have three manufacturing facilities in the United States. The third one commissioned in January of 2026. Our capacity is 31 million pillows and if I’m not mistaken, around 2 million quilts. With this capacity we should be able to do 175 million in revenue. And we expect that to happen in three years. We are currently in the first year. And this is 107, 175 million in revenue. So I was talking about just from third facility. Is this just from the third facility. The third facility should give us 85 to 90 million dollars.
Dwanit Savla
Okay.Which is part of the 175.
Mohit Jain
Yeah. That I get.
Dwanit Savla
Thank you.
operator
Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on their touchstone telephone. I repeat, participants who wish to ask question may press star and one at this time. The next question is from the line of Shraddha Garwal from amse. Please proceed.
Shraddha Garwal
Yeah, hi. Am I audible now?
Mohit Jain
Yes, Shraddha.
Shraddha Garwal
Yeah, hi. Congratulations on a good quarter, Mohit. Just two questions. First of all, the tariff impact that we’ve booked, we’ve booked it on the revenue line or at other expenses of where have we actually taken the impact and possible to quantify the impact for both Q2 and Q3 separately.
Mohit Jain
So in terms of where the impact, it depends on the nature of the order. You know, if it’s an FOB shipment, the impact comes on gross margin, you know, and if it’s not FOB then it comes in, you know, it will come in the EBITDA margin. You know, we’re very difficult to quantify, you know, at this point of time.
Shraddha Garwal
But have we taken an equivalent hit on the revenue line or is it only in the cost line that it.
Mohit Jain
Is getting reflected even on revenue? Okay, so for most FOB shipments it happens on the revenue. I mean it’s all customer to customer specific, you know, how their accounting works, what they want. So it’s very honestly tailored to their through their requirements and in discussion with our teams.
Shraddha Garwal
And possible to quantify the impact here for Both the quarters Q2 and Q3?
Mohit Jain
No, that would not be possible because it’s all sensitive information that done on a.
Shraddha Garwal
No, but you’ve given the nine month impact. So 354 is your adjusted EBITDA versus 345 the reported EBITDA adjusted EBITDA impact.
Manish Bhatia
Of the labor code impact.
Mohit Jain
Yeah.
Shraddha Garwal
Okay, okay, okay, got it. And secondly, I mean how do cost dynamics change if we use U. S imported cotton versus locally sourced cotton currently? So any thought on whether will it be cost economical for us to go for US imported cotton, if at all, the tariff gets down to zero for that Kind of a product.
Mohit Jain
If the tariff becomes zero. Yes, for certain product ranges it will become viable. And we’re very familiar with the raw material sourcing base in the United States. It will all depend on what the Indian government puts. If the 11% tariff in India for import of cotton from the United States remain, then the equation changes. If the 11% goes away on the raw material, then it would make sense to import some amount of raw material from the US.
Shraddha Garwal
And currently, what is the content of cotton that is there in our products? General average content of cotton, as a.
Mohit Jain
Thumb rule, you can take 35% on a bed linen if you to take, if you have to put your finger on one number, but it could vary between anywhere between 30 to 42, 43%.
Shraddha Garwal
You know, because there are talks that the cotton content has to be much higher for us to be eligible for that kind of zero percent tariff. So I’m not sure nobody knows right now.
Mohit Jain
Currently the rule, as I explained earlier, if it’s above 20%, then on that content you’ll not get. But what the new rule is going to come out, whether it’s for India, for Bangladesh, The USTR has not laid down any guidelines. So any guesswork on our part or anybody’s part is only a purely a guess.
Shraddha Garwal
Got it. And for shipments after 7th of February, so this 25% penal tariff goes away retrospectively from the 7th of February. I mean, for whatever shipments land in the US after that date.
Mohit Jain
Correct.
Shraddha Garwal
So and the remaining 25 to 18%, that will be a gradual recovery on tariffs because probably you would have booked orders at certain rate and it will be a gradual negotiation with customers and that will get reflected in numbers gradually. Is that the understanding? Right, Fair.
Mohit Jain
I would say, you know, as I said earlier, that, you know, it’s too early. You know, it’s very, very dynamic and we’re in discussion with all our customers, you know.
Shraddha Garwal
Got it, sure. This is helpful. Thank you.
Mohit Jain
Thank you.
operator
Thank you. The next question is from the line of Sachin from Swan Investment managers. Please proceed.
Sachin
Yeah, good afternoon to the team and. I would like to congratulate you for good numbers in such a volatile and difficult environment. My question is on the margins. So we had two impacts on our margins. One was because of the tariffs and second was because of the investment in the new businesses. So you mentioned that from Q4, the more or less a drag of the investment on the new businesses and all will go away. So that will bring it to around 11%. So fair to assume that the remaining gap between what we Used to report at 1516 versus 11% is the impact of tariff.
And as and when, you know, slowly and gradually things normalize, that should come back. Is that the way to look at the margin trajectory over the next six to eight quarters?
Mohit Jain
So Sachin, more or less your thought process is correct. But you got to realize that this US business will, the impact will not. We expect that the impact will not be then quarter one of next year. There’ll be some impact yet in Q4 the impact, you know, but in starting Q1 we expect that it will go away. So as I said, you know, by March it will go away. And coming back to the regular margin levels is also dependent on capacity utilization. So as capacity starts getting utilized then there’s no reason why we shouldn’t be at a normalized margin.
Sachin
So but just to summarize, basically the impact that we are seeing on margins from 1516 to the current levels is primarily a function of the impact because of the tariffs and the investment that we are making in the new facilities and the brand building of which the impact of brand building industry probably will go in a quarter to two and slowly, gradually, as things improve for us as utilization improves, the remaining impact of tariff should also go away. That’s, that’s the way to look from a six to eight quarter percent. I’m not talking from quarter to quarter but a six to eight quarter.
Mohit Jain
Sure, absolutely.
Sachin
Secondly, if you could give us some sense on the investments that we are planning for financial year 27 and how in that case are we looking at our debt levels in the next year?
Mohit Jain
Sure. So you know, this year we had planned around 214 crores odd if I’m not mistaken, you know, and we’ve invested up to 9 months, 131 crores. In Q4 we should have another 20 odd crores. So let’s say 150 odd should be where the year ends. Some of this capex will spill over, especially the ZLT. We are in the final stages of choosing our technology partner. So that will spill over into next year and then there will be normal balancing capex maintenance. Capex as we say that will come into 26, 27.
Sachin
Maybe like 125 to 150 crores at best.
Mohit Jain
Yeah, that’s a. Yeah, yeah that’s fair number.
Sachin
But how do we see our debt levels? Because you mentioned that a debt level started to come down now that we are part, you know, past the peak investment cycle. So how should we look at that going ahead especially say FY 2010 maybe if you could give us a sense of one or two, three year period. How should we look at it?
Mohit Jain
I think as far as debt levels is concerned, the only reason we need debt is as revenues go up, we need a working capital to invest back in working capital, you know. So that’s the only balancing act. Yes sir.
Manish Bhatia
We don’t see any major changes or fluctuations in our debt. We have seen a reduction in first nine months and hopefully the worst is.
Sachin
Behind us ideally 27. We should see a reduction because we don’t have any major capex and we’re expecting performance to improve both in terms of revenue and margins next year. So should we not see a further the reduction in the net debt levels in financial year 27 from where we are today?
Manish Bhatia
Yeah, definitely it will, it should happen.
Manish Bhatia
And we have no major investment now lined up for the next maybe 18, 24 months till we achieve this guidance of doubling the revenues more as the large investments for achieving this guidance are in place. That’s the way to look at it.
Mohit Jain
No, as a company we are always looking at opportunities. Right. We have a very strong balance sheet, you know, so certain decisions that we’ve taken over the last three years, two years, those are reaping benefits now. So at the same time we are always evaluating so as and when opportunities come our way. Now as we speak, we have nothing on the table other than what we’ve discussed. And we are clear that we should be able to double our revenue with whatever investments have been made. But we’ll look at further growth in the business but depending on what opportunities come by, you know.
Sachin
Yeah, that I understand. But for the doubling of revenues, the large part of the investment is. My question was the most specific to your to double the revenues.
Mohit Jain
Okay.
Sachin
So. So if and when you look at any major investments that would be opportunity beyond what we already given a guidance for, it would be over and above that. Right? So yes. Okay, that clarifies. Thank you.
operator
Thank you. The next question is from the line of Surya Naran from Sunidi Securities. Please proceed.
Surya Naran
Yeah, thanks Mohit. For the opportunities. So congratulations for good set of numbers even in a challenging environment. Just, you know, just to understand the kind of trajectory in the US business, especially the onshore activities. So what is the idea that look, you are understanding that whether the U.S. greenfield facilities will have 50% kind of utilization, maybe achieving next year so that we will be getting less track A. And number two is that in Indian operation it is currently my understanding is, you know, it could be operating around 60 plus utilization. So will you see that? Not this year when FY27 there will be a ramp up in the utilization and third as you diversify away from the US market, you know, garnering around 30 share outside of us.
So are we saying that no, the non U S market are not that remunerative as U S market. And fourthly whether the consumer sentiment has improved off late what we understand from the media but are we seeing that the kind of consumer sentiment is like the Biden era? That is my question. Yeah, four questions.
Mohit Jain
Sure. So you know, very difficult at this point of time to give any guidance. Surya. We are of course expecting better utilization levels but it all depends on demand, you know from the countries that we are shipping to any FTA related countries which is specifically UK and EU you know none of these have been, even the UK has not yet been ratified. We expect all of this to happen in the next two quarters so that you know that business can flow. So once it gets ratified, of course we’re in touch with all our customers but they will only start taking major decisions once you know the tariff is behind.
Surya Naran
Right.
Mohit Jain
I mean because both EU and the UK have to get ratified by their parliaments and we got to remember us is part of the 78 countries, 27 countries that make up the EU as far as utilization in the US is concerned, we do expect, you know, as we said, our current utilization levels are 65% and we are positive about the business. So we are, we think our third facility has come up at the right time and we already at a hundred million dollar run rate, you know, so if we are currently at that, we would expect the business to grow from there.
Surya Naran
Okay, but my understanding is that no, because. And what about the consumer sentiment? As I asked if you compare the current era versus the Biden era where we were actually growing very well and doing very well, I mean is it that kind of sentiment reversing or some cautious optimism is still there?
Mohit Jain
I think, you know we got to all realize the US is a very resilient economy. But at the same time, you know, finally tariffs have come in. You know these are not small numbers. Whether it is 15%, 20 from China, it was up to 146% sometime last year. So finally it’s the US consumer who’s paying for it. Right? So retail goods, if you travel to the United States, even if you have a glass of juice today or a cup of coffee, you know, the prices have all gone up. So only time will tell what consumer sentiments remain and how robust is their Discretionary spending.
What we’ve seen in the last two quarters, even in the holiday season and right now it’s a little bit muted, but once everything settles down, we expect it to come back after two, three quarters, you know, the demand levels.
Surya Naran
Okay. And.
Mohit Jain
But it’s not like something just because India tariff has come down from 50 to 18, it’s not like going to be a hockey stick that it’s an immediate rebound, you know.
Surya Naran
Correct.
Mohit Jain
Yeah. What this does for, for customers, it gives them clear visibility, you know, on what basis to take decisions, you know, for our customers, which is very, very important for our country and for us as a company.
Surya Naran
Maybe initial stocks to be absorbed, then maybe as you rightly said, maybe around Q3 of next year some kind of, you know, rebound in the consumer sentiment to appear. That is what my understanding is. And regarding the imported raw metal, you said no, around 32% is your import content. So is it majorly related to the Pima cotton or anything else?
Mohit Jain
No, no, I said that our total raw material imported for our company is between 30 and 35%. You know. Okay, that’s what I said. And we import cotton from different countries, including Egypt and the United States being our two major countries.
Surya Naran
Okay. So. So in this case if I say if it will be beneficial, then still we will be raising the qu to beyond 35% what we are currently doing because, because our kind of raw material Requires a higher mm of maybe 33 mm kind of material rather than low loose length. So in that case it makes sense. So. And, and again the MSP issues are also creating issues. So do you think that now the even uh, we can go further?
Mohit Jain
I think at this point of time we are comfortable with 35% depending on what regulations come out of the United States by USTR and depending on what our customer needs are what the price of the raw material is. All those mathematical calculations, product everything will be done and then we’ll take those calls, you know, I mean we’re in a position to buy from anywhere in the world as a company.
Surya Naran
And regarding the brands promotion expenses, whatever the current rates that is currently going on, so is it going to be steady or it will come down as the sales ramp up happens?
Mohit Jain
Sure. So as I said that by end of quarter four, which is in the next 45 odd days, I mean by end of March, that should go away. So till today, including the brand promotion, we are taking a hit of 150 to 200 basis points on our consolidated margin margin number and the incubation that.
Surya Naran
You told about is it related to the brands or is it related to Greenfield? I mean, what is that incubation?
Mohit Jain
It’s a mix of both. Right. The, the. The EBITDA margin hit is coming for both for new businesses which includes brands as well as our utility bedding business in the United States.
Surya Naran
Okay, okay. And any, any understanding of guidance for the next year at least based on the inquiries that currently you could be getting for.
Mohit Jain
No, it’s too early for us, you know. You know, at this point of time to give any sort of guidance. Please.
Surya Naran
But it should exceed 100 million pieces for FY27.
Mohit Jain
What is pieces?
Surya Naran
We’ve not given any number of 100 million meters. Sorry, 100 million meters.
Mohit Jain
Very early to say that.
Surya Naran
You know.
Mohit Jain
Yeah. Our objective is always to do better.
Surya Naran
And with just one understanding is that. No, we were actually count. I mean understanding the realization of our sort of sequentially and YY and with the introduction of the new business from the U.S. so because that is also coming as a package because you know, it’s plastic quills and pillows. That is a package. So can we understand that we will just add up everything and whatever the seeds, you know, we are actually in exporting. So that will be the blended realization we can understand.
Mohit Jain
I’m not sure how you’re taking out realization. You know, if you’re taking realization by taking our revenue for example of 1074 crores and dividing that by 24.8 million meters, that will not get you the right number. Because I mean the 24.8 million meters is the goods that are produced in our coal business in India. That’s the. You can take out a utilization level because our capacity is 153 million meters. And we got to also understand that from a revenue standpoint some of that meterage is gone into the brand business. So the brand that Indo count.
That Indo count India is producing and shipping to its customers under the brand name falls under the branded business. You know, which are the four brands that we mentioned. So it might be a little complicated to take out exact realization per meter.
Surya Naran
Now because ultimately the brands, brands and the utility beading and the quilts and pillows, those are actually as a package to. I mean financially, if you understand it, it goes to fortify our margins. I mean realization as well as the margins. So that is the understanding.
Mohit Jain
Surya, maybe our team can take it up with you offline and try and explain it to you better satisfy your requirement.
Surya Naran
Okay, sure. Thanks.
operator
Thank you. Ladies and gentlemen. That was the last question for today. I now hand over the conference to Mr. Mohit Jain for closing comments. Over to you, sir.
Mohit Jain
Thank you everyone for joining us today. We hope we have been able to address all your queries. Should you have any further questions, please feel free to get in touch with sga, our investor relation advisors. Thank you once again for our continued interest and support. We look forward to connecting with you on our next call. Thank you.
operator
Thank you on behalf of Indo Count Industries Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.