Nitin Spinners Limited (NSE: NITINSPIN) Q1 2026 Earnings Call dated Aug. 05, 2025
Corporate Participants:
Unidentified Speaker
P Maheshwari — Chief Financial Officer
Dinesh Nolkha — Chairman and Managing Director
Analysts:
Unidentified Participant
Awanish Chandra — Analyst
Manish Ostwal — Analyst
Ankit Gupta — Analyst
Lakshmi Narayanan — Analyst
Madhur Rathi — Analyst
Vikram Suryavanshi — Analyst
Rahul Jain — Analyst
Dheeraj Thakur — Analyst
Vikas Rajpal — Analyst
Aditya Kumar — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Nippon Spinners Limited Q1 FY26 Earnings Conference Ball hosted by Smiths Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing 10. 0 on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Avneesh Chandra from Smith Limited. Thank you. And over to you sir.
Awanish Chandra — Analyst
Thank you very much, Manav. And thank you very much everyone for joining this call. On behalf of Smith Limited. I welcome you all to first quarter. FY26 earnings conference call of Nitin Smith Limited. We are pleased to host the top management of the company. Today we have with us Mr. Dinesh Nolka, promoter and Chairman and Managing Director of the company and Mr. T. Maheswari, CFO of the company. We will start the call with initial commentary on results and then we will open the floor for question and answers. Now I will hand over the call. To Mr. T. Maheswari, CFO of the company. Over to you Maheswari sir.
P Maheshwari — Chief Financial Officer
Thank you. Avnir Ji. Good evening and a warm welcome to all the participants to this Q1 FY26 earning call of Bethany Spinners Limited. I hope you have had a chance to go through the financial results and investor presentation available on the company’s website and stock exchanges. I will start with a brief overview on operational and financial performance for the quarter. Post act of CMD Sri Dinesh Nalkaji will give you an overview of industry and business scenario as well as company’s vision and coral strategy for future. Coming to the financial and operational performance, Total revenue for Q1FY26 stood at rupees 793 crores.
A marginal decline of 1% on year. On year basis, export contributed nearly 62% whereas domestic market contributed 38% for the quarter. EBITDA for the quarter stood at rupees 111 crores. A 6% decline on YoY basis. EBITDA margin for the quarter is 14.02%. That’s a decline of 77bps. As compared to last year same period, profit after tax for the quarter stood at rupees 41 crores. That’s a 3% decline as compared to last year’s same period. Eps and cash EPS for the quarter reached rupees 7.29 per share and rupees 13.85 per share respectively. On the operational front, our spinning capacity is currently operating at over 96% utilization while weaving and finishing division are operating at more than 90%.
However, revenue declined YoY and QoQ due to lower yarn prices in line with the lower cotton prices and lower export demand as the overseas buyers were cautious on account of uncertainty of Paris. That’s all from my side. I now request SRI Binesh to share his insights about industry and business scenario.
Dinesh Nolkha — Chairman and Managing Director
Good evening everyone. XR Industries is currently going through a transient phase. Global procurement and overall shipments have been slower than expected mainly due to ongoing tariff uncertainties and and geopolitical challenges. Despite this, the Indian textile industry continues to show some steady performance. Recently US government has announced 25% tariffs on imports from India at the government level. Talks are on and we hope the same would settle down at lower levels which will provide level playing field with other competing countries. However, we at Middle Spinner would not face any major impact due to US tariffs as we have very limited direct exposure in this market.
Trade agreements with major countries are also expected to improve India’s competitiveness, although the full impact will unfold gradually over the next few years. Texas Fin has already had presence in UK and EU exporting both finished fabrics and yarn and will try to build upon for increasing export to these geographies. On the demand side, we believe inventory levels across brands and retailers are at historic lows. Over the past few months the buyers were very hesitant to place large orders and instead relying on just in time procurements. We see this as a positive sign for integrated manufacturers like us.
As the business cycle revives we shall be in a good position to reap the benefit we have as we at Nazim Senate have consistently crossed the 800 crore revenue mark for almost last five consecutive quarters and this quarter we came just short of that milestone which was mainly caused by uncertainty prevailing in global markets. As we just explained an introduction in yarn prices due to lower prices of cotton as middle standard, our well diversified product portfolio, customer base across different geographies focus on value added products, optimum utilization of capacities and cost efficiencies allow us to withstand the challenges and capitalize on the opportunities.
As announced earlier, we are steadily progressing on the capital investment plans as to maintain our growth momentum. We are also increasing renewable power footprint by increasing capacity within our premises and also through strategic investment in hybrid power SUVs. These initiatives of capital expansion as well as solar power are aimed at strengthening our market positions, expanding our product portfolios and introducing high value specialized products to meet driving demand for quality fashion fabric from domestic and international brands and also lowering our cost of productions. These initiatives should improve overall margins and return ratios for the companies going forward.
While some short term volatility may persist, we remain optimistic for the medium to long term growth. With this I would like to open the floor for question and answers. Thank you.
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 the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and two Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Manish Otswal from Nirmalbang. Please go ahead.
Manish Ostwal
Yes sir. Thank you Nitinji for taking my question and a couple of question on the business. So first we have a export business of 64% of sales in F25 and your comment on demand is low in export market given the tariff related uncertainty and weak consumer demand in export markets. So how do you see the revenue. Shape of the rest of the current financial year? Whether we’ll be able to similar revenue. Of last year or we will see some decline. What is your assessment Currently?
Dinesh Nolkha
at this point of time we expect to reach the last year revenue for sure. Our production capacities are running at full stream and we are having production more than what we were producing last year by about 3 to 4%. That should take care of our average revenue decline and as far as export sales is concerned, I think that should be compensated with the domestic sales. And further, just for your information, as with US tariffs being lowered for various competing countries to India where we are also exporting, our exports primarily should not get affected.
Manish Ostwal
Secondly, some mentioned that the government has signed FTA with UK so should incrementally positive for export demand for Indian textiles. How does Nathan benefit from it and. When we can see the meaningful benefit for the industry?
Dinesh Nolkha
First of all, since we are already at the moment exporting some yarns as well as we are also exporting some fabrics to various brands for UK market, we should have a positive impact on this. We would try to capitalize this opportunity we will try to increase our share of exports into this market. Just for your information, this FTA will rectify fully by the 1st of January of 2027. At the moment there will be a graded reduction in the duties which should start to kick in from next calendar year. And I think we should have India as a country should have a meaningful advantage in this due to this fda, especially in textiles.
Manish Ostwal
Okay, and then lastly on check on the current realization trend compared to the last quarter, what is the moment in the realization and the raw material prices. Outlook currently what you guys are
Dinesh Nolkha
raw material prices at this point of time in India is higher than the international market because of a couple of reasons. Number one, we have a lack of crop this year. So that’s why we had there was minimum support price being taken care by the government. So at the moment also it is prevailing more or less near that minimum support price only. But this minimum support price in India is higher than the international market. So we expect the Indian cotton to remain at similar levels going forward as well. There should be no major decline here.
Internationally also the cotton has quite bottomed out and there is not much scope left there. So I feel and for the yams also this is what these levels are one of the lowest levels which we in dollar terms which we have seen in last, I think last seven, eight years in that last one decade I would say. So that is so more or less we feel that the downside in the prices is very, very limited. And of course there are no triggers also for the upside. So this should remain like this in steady state for next at least one or two quarters and then we should see how the demand kicks in and how the things shape up.
Manish Ostwal
And very quick clarification, there’s no plan of slowdown our capex program given the demand uncertainty.
Dinesh Nolkha
Sir, at the moment like there is no. I would not say there is a demand uncertainty. There is only the geographies are going to change. It is a transient phase where today various brands will be relocating their all the, let’s say plants where they should source, what they should source. And in that process, of course we are yarn manufacturers which are intermediate suppliers. So we are definitely going to be present. If they are going to buy more from Vietnam or Bangladesh, we should be able to export to those countries also. So this is only a transient phase.
Ultimately demand will remain and as I highlighted that the retailers are having very low inventory. They should ultimately kick in good demand going forward.
Manish Ostwal
All right, thank you very much for answering all my questions and all the very Best for the coming quarters.
Dinesh Nolkha
Thank you.
operator
Thank you. A reminder to all participants, if you wish to ask any questions you may press star and 1. Anyone who wishes to ask a question, you may press Star and one. Now we have a next question from line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Thanks for the opportunity. On the on the cotton prices trend, you know our prices in the domestic market because of the higher MSP are much higher compared to what is the pre building rate in the global markets. So how is that expected to, you know, impact the margins of the company and the sector.
Dinesh Nolkha
So this is already, this particular scenario is already prevailing since last one one and a half years. And in that scenario we are at. We have maintained our margins at this level. So I do not expect that it should further bend our margins from here.
Ankit Gupta
So you expect that we’ll be able to maintain around 14, 15% margin going forward in FY26 as well.
Dinesh Nolkha
Last we have been able to maintain these margins for last six, seven quarters and I hope we should continue to do that.
Ankit Gupta
Okay, thank you.
operator
Thank you. A reminder to all participants, if you wish to ask any questions you may press Star and one. Anyone who wishes to ask question you may press Star and one. Now we have a next question from line of Lakshmi Narayan from Private Limited. Please go ahead.
Lakshmi Narayanan
Thank you for the opportunity. Sir, I just wanted to understand in our export mix the top five countries which we are exporting would you be able to provide that information?
Dinesh Nolkha
Basically the top five countries and that will be I think Bangladesh, that is one. Vietnam is another country. Then we have Egypt, then European European Union. In the European Union we have different four or five countries that we are exporting. So this should be the top profile.
Lakshmi Narayanan
Okay. So is it possible to give granular? Is it possible?
Dinesh Nolkha
No sir, would not like to for competitive reasons will not be able to declare declare on that part.
Lakshmi Narayanan
Okay sir, my next question is you’re saying because of cotton trading at low it is affecting our yarn prices. Also I was not able to like catch like what is the trigger here? Could you explain it a bit more deeper sir?
Dinesh Nolkha
Generally when the raw material cotton prices goes down, we see that the yarn price also falls. And when it goes up the yarn prices of course with the lag or maybe sometimes in a similar period. So that is what it means. And the cotton, raw cotton prices have gone down. Here in India as well as in international market, the finished goods prices have also fallen. So if you see the we have seen that about raw material prices have fallen by about around 1.5 1.6%. And yarn prices have fallen by about 1.7 or 1.8%. So similar in the similar range.
It is like.
Lakshmi Narayanan
Okay, so it is not like if raw material prices fall, the yarn will also. Yarn will go. It’s not that big, correct?
Dinesh Nolkha
No, it can. It can. Of course sometime it has happened that way also. But in this particular quarter it has both have fallen together. Because normally yarn prices do not fall in a straight line. But because of the uncertainty prevailing this. This has happened particularly in this quarter.
Lakshmi Narayanan
But this is not the trend. Like it happens like we cannot predict like how it is going to be or some more thing.
Dinesh Nolkha
No, it is not that. It is not a linear kind of thing. It changes as the market demand and supply.
Lakshmi Narayanan
Okay, understood. Sir. The last question is, could you just tell me what was the yarn spacer?
Dinesh Nolkha
Basically, yarn spread was about 95 rupees a kilogram. Am I right? It is in this range. Exact number.
P Maheshwari
100 rupees. 100 rupees.
Dinesh Nolkha
It was 100.
Lakshmi Narayanan
Okay, thank you. That’s it from my side, sir.
operator
Thank you. A reminder to all participants, if you wish to ask any questions, you may press star and one. Now anyone willing to ask any questions, you may press star and 1. We have our next question from line off. Madhur Rati from Countercyclical Investments. Please go ahead, sir.
Madhur Rathi
Thank you for the opportunity. Should I look at your investor presentation? And sir, we have lined. We are doubling our fabric capacity and increasing our spindle capacity. So what would be the incremental revenue from the same?
Dinesh Nolkha
It will be about 1000 crores and.
Madhur Rathi
On the margin trends or do we expect some margin improvement from that?
Dinesh Nolkha
Basically we are having out of this thousand crores about 60% will be from the fabric business directly. And fabric business normally has better margins than the yarn business. At the moment the product mix is like 20 to 23% of fabric and rest is yarns. In the expansion it will be about 60% on fabrics and 40% on. So technically we should have a better margin scenario.
Madhur Rathi
Sir, could you give me what is the margin differential that you are currently making on our fabric versus yarn segment?
Dinesh Nolkha
Actually we do not make a separate kind of balance sheet. So I will not be able to exactly use the numbers. And giving just approximate numbers would not be right on my part here.
Madhur Rathi
Okay, got it, sir. And just like one of our competitors recently mentioned that they are getting a lot of government subsidies on Government subsidies for these capexes or are we getting some kind of pli benefits or subsidies for these capex?
Dinesh Nolkha
We are not getting. We are not under PLI Spinning business and this fabric business is not under pli. Only technical textiles and some special kind of fabrics is under pli. However we are getting the state subsidies. So in case of ours we have two subsidies which is there. One is on the interest subvention which is about 3% of our outstanding loans. So we get a interest subsidy from the state government and then we have a capital subsidy on the capital expansion which is linked with the employment and the investments. So this capital. So we are our interest subsidy as I explained it is about 3% of our term loans and capital subsidy is about 21.6 crores for next 10 years.
Madhur Rathi
Got it sir. So that was from mine sir, just a final question sir. What is the IRR or payback that you expect for this 1120 crore capex?
Dinesh Nolkha
It is in the range of about 14 to 15%. That is what we are targeting.
Madhur Rathi
Got it. So that was from Manchu. Thank you so much and all the best.
operator
Thank you. A reminder to all participants, if you wish to ask any questions you may press star and 1. Anyone who wishes to ask a question, you may press Star and one. Now the next question is from the line of Rina and individual investor. Please go ahead.
Unidentified Participant
Hi. Thank you for giving me the opportunity. I just. Could you help us understand, you know, the tariff situation. Like what is the impact on orders, any talks on, you know, the burden sharing, anything that you know, you’d like to clarify or you mentioned government talks are on and the percentage is expected to be lower. So just, just want to understand, you know, your thought process on how, you know, you tackle that or just how much any update on that front that you can give on the public platform.
Dinesh Nolkha
First of all, as I explained my opening remarks also that we are not directly impacted because our exposure to the US is very limited. So that is one part. So directly we have not shared or any on the tariff part of any reduction or rebate on that part to our customers in US So that has not happened. So that is one part. Secondly, as far as studies are concerned, I think the industry associations are continuously meeting the government officials, including the Commerce and industry Minister and evaluating the situation, how to tackle this particular direct situation.
Earlier as per the earlier negotiations which were happening, we were expecting much lower tariffs. In fact lower than most of the countries. So the situation has just reversed and now we are evaluating exactly what would be the damage and how that could be mitigated. Still, government officials are very hopeful that they have some deal discussions on the trade deal already happening. In the middle of August in US so they are expecting that they should settle, but that, that should take another month or so maybe. So that that’s why they are not, they do not want to give leverage to the counterparty of backing up, backing down on that particular part.
So whatever negotiations are going to happen is going to happen going forward. So for some period of time India will be hit by these tariffs. Our exporters will be definitely affected by these tariffs. So in the, in India, from India we have a lot of exports of branded apparels as well as home textiles. So those particular segments could have an impact also because of this.
Unidentified Participant
Understood, thank you. Can you quantify your exposure? Like you mentioned, it’s limited and like considering, you know, the discussions are still on, like how, for how long do you see this impact or uncertain impact on demand or uncertainty going to last like a couple of quarters longer than that. Just trying to understand, you know, the like for how many quarters do we expect this to continue?
Dinesh Nolkha
Actually in industry we feel that whatever will happen will happen within this calendar year. So this should settle down by the end of this year. Deal or no deal or whatever impact will be there. And major impact at this point of time is on the running orders, the new orders, what, whatever will come will, will come with tariffs. The customers also know the what tariff they are going to pay and how that is going to be mitigated. And we, so that is going to be then accordingly norm of the business which will start from the next, let’s say next calendar year.
So whatever is going to happen is I think this is going to continue for next three, four months. The impact should last for that much time.
Unidentified Participant
Understood. Okay, thank you. Just one more question. On Slide 8 of the investor presentation, you mentioned capacity expansion for FY27. Like can you give the bifurcation of how much would we expect in 26? And it says 20% and 88% increase. So how do we see that in 26? Like what is the bifurcation between 26 and 27?
Dinesh Nolkha
In 26 we are not going to have any major capacities. Coming up on screen, it will be all work in progress. Some modernization which is going to be there of around 50 crores will be spent during this particular calendar year. Rest the major capacity expansion will come in the next financial year. Only.
Unidentified Participant
The incremental revenue we would see only in 27.
Dinesh Nolkha
Yes.
Unidentified Participant
Okay. And the power saving initiative, can you quantify on the margin front what would be the improvement? Just the ballpark figure.
Dinesh Nolkha
Actually this power capacity, what we are adding up is Also going to happen over a period of time in the next few quarters. So it should start to kick in some capacities from the. In the second half, let’s say from the third quarter. And then in totally we have done agreements and the new capacity of about 20 megawatts, 18 megawatts is outside FPV and about 5 megawatts our in house capacity we are creating. So this is the capacity which we are already creating here. So we should start to see the benefits going forward. In general, typically we see that our power cost reduction for these kind of initiatives is about 30% from.
So our. That’s. That’s what we are expecting to happen going forward. But it is not on the whole capacity. It is on this 20 megawatt capacity.
Unidentified Participant
Okay, understood. Thank you.
operator
Thank you. We have our next question from the line of Vikram Suryavanshi from Philip Capital India. Please go ahead.
Vikram Suryavanshi
Decent export to China, Bangladesh in terms of cotton yard. So is that currently restrictions are there to this market or how that is impacting.
Dinesh Nolkha
As if there are no restrictions over there.
Vikram Suryavanshi
Okay, so but the entire happening or it is like deliberately cut down.
Dinesh Nolkha
It is happening. It is happening as you as usual, there is no change in Bangladesh exports. The only cut down is that the road road exports is not allowed from both the sides. So that doesn’t impact the volumes as such. It is happening as usual.
Vikram Suryavanshi
Okay, understood. And for the utilization rates are relatively much better. But given the yarn speed, how is the industry utilization for the India broadly industrialized?
Dinesh Nolkha
Broadly industry utilization is going down only in India at the moment. As I. I do not have very authentic figures with me. But as we understand from various sources about 15% of the capacity is down at the moment. And we are having only utilization in the range of 80 to 85%.
Vikram Suryavanshi
And we have seen significant buying by CCI this year which have given a lot of comfort in terms of cotton pricing. But does one I think the relatively supply from CCI comes down. Is there a chances that cotton prices in domestic market can go up and impact spinning companies in India? Or how do you read that situation?
Dinesh Nolkha
I think as far as I am informed CCI still has about one third of their whatever they have sold out from the country. Let’s say which is about more than 10% of the total production of the country. And we are left with only about two months of the season, less than two months of the season. And from October onwards we expect the new crop to come in. So we are not expecting some hike in spike in prices or something like this as well. As lot of imported cotton is also coming in from the southern hemisphere, the crop of which has already come in.
So price hikes on the front of cotton is not at all expected at the moment. Major price hikes I would say.
Vikram Suryavanshi
And last question about since our exports are increasing, does it impact working capital or how is the working capital in export compared to the domestic.
Dinesh Nolkha
Working capital? I think we are adequately funded and does not have major impact on the working capital side. I think because of this.
Vikram Suryavanshi
And in terms of quarter end stocks, how many months you have covered?
Dinesh Nolkha
Normally we do not declare the cotton stocks and we have a flexible policy on cotton stalks. But we are reasonably covered for this season at least.
Vikram Suryavanshi
Got it. Thank you very much sir. And all the best.
Dinesh Nolkha
Thank you.
operator
Thank you. We have our next question from the line of Rahul Jain from Credence Wealth. Please go ahead.
Rahul Jain
From first question on the industry side, in the previous participant, did you mention that home textile would be one of the most effective sector with regards to this tariff thing going on? Is that your understanding?
Dinesh Nolkha
Yeah, home textile as well as the apparel apparel companies which are exporting to directly to the US brands in the US retail sector.
Rahul Jain
And this is based on your reading about the tariffs or your understanding from your customers who could probably who are from the home textile segment.
Dinesh Nolkha
Actually this is from the data which comes out regularly. How much is our exports to us from the home textile companies? And also what is the. So we have a total exposure of about $9 billion on the export side to us of this 9 billion dollar majority is comprised of these two articles only that is apparels and the home textiles. So that they are going to have and there the 25% tariff is going to kick in. So that is going to impact.
Rahul Jain
Okay, interesting. Now the question from our company with regards to Yan Kazu also in your initial commentary you mentioned we are somewhere at the lowest end in last seven, 10 years. Is that right?
Dinesh Nolkha
Yes, yes.
Rahul Jain
So and the spreads are very around 100 rupees currently on the yarn and the cotton. So how have the spreads moved in last one or two years? Typically because previously that you had cotton which had gone up to almost more than 100 000. But in post cotton collecting say last when 4 to 6 quarters the spreads moved up in or how the spreads Trend been in last 4, 6/4 the.
Dinesh Nolkha
Spreads are more or less in the similar kind of range. First of all, in last four, five quarters. Now coming to our basic first part of the question that how the spreads have moved in last some of the years. I think we Would be very happy with this spread which we are having in year 2000. Since then there is a lot of cost increases on part of wages, on part of transportation costs, on part of the power costs. So that has impacted our net margin level further. The capital costs have also increased. So all in all put together on an absolute basis, these margins look reasonable.
If you Compare with last 5, 6, 7 years on $ terms they look quite low. And also on the capital on the side of how much capital we invest to get this kind of margins also is relatively lesser. So we feel that these margins should be in the range of about 120 to 125 rupees to get a reasonable return from our investments as well as on the facilities.
Rahul Jain
So do you expect the spreads of about 105 which have been averaging for last 4, 6 quarters to move up their average?
Dinesh Nolkha
Our average has been 95 to 100 rupees has been our average differential.
Rahul Jain
With regards to the sales for volumes. So currently we are operating at optimum capacity.
Dinesh Nolkha
Yes.
Rahul Jain
Or is there some growth or is there some scope for volume growth this year FY26?
Dinesh Nolkha
Not much. We are doing some debottlenecking, some modernization. So that should that will kick in. But that is not something major to talk about or have a major impact on the production facilities production capacities. At least our spinning, weaving, processing all are operating at nearly top capacity at the moment.
Rahul Jain
Given the current situation as we speak today, we will probably be almost at similar kind of revenues with similar margins. Unless you know, either the yarn prices move up or the spreads change as we speak today we should be at around 14, 15% margins on EBITDA and probably similar kind of top line. Is that understanding right?
Dinesh Nolkha
That is your summary. I cannot comment on what is what is going to be. We try to do our best and lot of it depends, lot of uncertainty is there new crop is going to come in, how that is going to behave. If the price is there, falls and benefits the Indian spinners, that is again going to have advantage. Currencies also become volatile recently. So that is if that goes, that depreciates again it can have a different dynamics altogether. So all this we need to look at it as it comes.
Rahul Jain
I do understand the kind of volatile environment we are living in and we really don’t know how things will become normal and also the time it might take. Now coming to the playfix part, sir, we are doing roughly about one 100 core Scapex currently. And you mentioned that in the incremental thousand crores of top line, 40% will be fabric. Fine, 60% will be so.
Dinesh Nolkha
Reversals, 60% will be fabric and 40 will be.
Rahul Jain
Okay, so on an overall basis at the top line of roughly 4,003 at today’s prices again of everything, first it is somewhere like 3,300 crores is the top line of the last four quarters, sorry last year. So if we add about thousand, so that is about 4300. So the overall fabric portion which is roughly about 23, 24% currently on the existing top line, that should move in the range of about 35, 40%.
Dinesh Nolkha
That, that should be more than one third at least.
Rahul Jain
And what is the differential margins between fabric and yarn? For us
Dinesh Nolkha
it is in the range of above. If we see on the absolute basis it is about 8 to 10%.
Rahul Jain
Absolute basis. Okay, so now I didn’t get it. When you say absolute basis would mean what X percentage is yarn. So fabric will be how much?
Dinesh Nolkha
X plus because there is investment. X plus x plus 7, 8, 10% depend on kind of fabric, kind of product you make. It will depend on that.
Rahul Jain
Sure. And with this Capex coming in that should start kicking in some kind of sales in FY27.
Dinesh Nolkha
Yeah, of course.
Rahul Jain
And typically what kind of or what is the time schedule of the Capex being done? Should we be run through?
Dinesh Nolkha
We are expecting the complete Capex to start in the second half of the next financial year. Second be able to complete
Rahul Jain
probably one. Quarter of Capex benefits could come in FY27, maybe more. But at least 1/4 should be there.
Dinesh Nolkha
Yes, at least.
Rahul Jain
That is quite helpful. Thank you so much.
operator
Thank you. We have our next question from the line of Dheeraj Thakur from Ilara Capital. Please go ahead.
Dheeraj Thakur
Hello.
operator
Yes, we can hear you.
Dheeraj Thakur
Yeah, good evening sir. As most of my questions have been already answered, I have two questions left. The first one is what are the key levers or strategies that company is focusing on to improve the gross margin going forward.
Dinesh Nolkha
So first there are as I highlighted that we are focusing on value added products especially on the fabric side and also on the yarn side. So that is one strategy where we can, with a higher value addition we can have better margins. On the cost side we are trying to reduce our energy costs. Also we are opting for since modernization and upgradation is going to happen. We are also trying to reduce our labor costs as well. So we are working on all the cost fronts which are there and trying to improve some bits over there so that we can improve the margin.
Dheeraj Thakur
Understood. And currently how much percentage of Our total revenue comes from the value of added product which would increase our margins in future.
Dinesh Nolkha
At the moment in the value added product, as you. As you can see that 22% is our fabrics itself which is value accretive in comparison to the yarns which are producing. And we are making some specialized yarns which is which could be in the range of 15 to 20%. So overall about nearly 35 to 40% of our total sales is in higher value margin. So we are trying to improve upon that.
Dheeraj Thakur
Okay, so going forward we are targeting around 50 to 60% revenue to become from the value added products. Right.
Dinesh Nolkha
As I explained in my earlier. In our earlier explanation also that we aspire that one third of our revenues should be from the fabrics. And the value added portion also is in a good remain same. We should reach 50% later.
Dheeraj Thakur
Understood? Understood. And how does the profitability compare between domestic and export markets currently?
Dinesh Nolkha
Currently at this point of time more or less balanced. Last year for most of the year it was. It also depends a lot on currency part as well as the imported cottons are also when you have to import cotton then that is again another part which helps you in maintaining the margins. So more or less at this point of time I would say they are evenly balanced.
Dheeraj Thakur
Okay, so if we remove the forex part then it would be on even terms, right?
Dinesh Nolkha
Yes, exactly.
Dheeraj Thakur
And could you share your view on the domestic demand environment? Particularly particularly for the women and network subjects.
Dinesh Nolkha
Our demand scenario for the domestic market is pretty reasonable. And with the upcoming festive season coming up, we expect this to pick up also going forward once maybe post this rainy season, I think we will have a better demand pickup in the country itself. And we are seeing a steady growth. We are seeing a lot of brands also coming up in India. New brands as well as existing brands also doing reasonably well. So demand scenario as far as domestic market is concerned is quite robust.
Dheeraj Thakur
Understood. Thank you so much sir for answering the questions.
Dinesh Nolkha
Thank you.
operator
A reminder to all participants, if you wish to ask any questions you may press Star. And yes, we have our next question from the line of Vikas Rajpal from Growth Readily Ventures. Please go ahead.
Vikas Rajpal
Hi sir. Thanks for taking my question. So my question is more on the tariff part. So from seventh, you know, since the contracts will get renegotiated because of the higher tariffs, how do you see the industry wide volume shaping up? Because you know one thing would be increase in realization because of higher tariffs. And second would be there’ll be some effect on the volumes because the OFFT would be lesser. So that and plus, you know, companies have to take any, you know, hit on the margin. So how do you think the, you know, demand environment will be shaping up for direct.
Dinesh Nolkha
At this point of time? Frankly, I would not be able to answer your question because this is a development which has happened just three, four days back. How the government, of how the government, what kind of reaction government is going to do in this context. Plus also with the customers, how we are going to discuss and negotiate with them. This is something which is still, we are just contemplating on that. So I would not like to speculate anything on that particular part. This is, this has happened just three, four days back. So we need to see, see and evaluate how the industry works out this kind of this challenge.
Vikas Rajpal
Okay. And secondly, sir, as you mentioned that majority of the capex would be towards fabric. So how do you think that, you know, the margin profile of the company would be, you know, going ahead in 27 and 28? Because right now we are at around 14% margin. So would we move to higher teams or will the margin profile go above 20%.
Dinesh Nolkha
Normally it should and with more value addition the margin should improve. Definitely. That is what the objective of this capacity expansion is. So definitely it should be better than what it is today. And then there are a lot of other factors which are also playing out. The geopolitical factors, also these kind of fiscal factors, tariffs and other things which are happening all around the world. So all these will impact us definitely. So we will need to still see how it pans out going forward. But the effort is towards improvement in the markets. Okay.
Vikas Rajpal
So lastly, your view on global cotton production and expectation price movements.
Dinesh Nolkha
If you have global cotton crop is reasonably good and it is projected that it will be slightly higher than what it was last year. We are expecting prices to remain at these levels or slightly. I think even cotton prices internationally is also reached a level where below this it is not sustainable for most of the countries. So we are, we are in the lower side of that bracket. But because of the sluggish demand environment all around the world, because an uncertainty prevails, most of the retailers and the pipeline is getting destocked, we feel that prices should remain at these levels at least for next six to eight months till these kind of uncertainties get cleared out.Focus.
Vikas Rajpal
Thank you so much for taking my question, sir. Thank you. All the best.
Dinesh Nolkha
Thank you. Thank you.
operator
Thank you. We have our next question from the line of Ode Kumar from UK Capital. Please go ahead.
Aditya Kumar
Hi sir. Am I audible?
Dinesh Nolkha
Yes, very well,
Aditya Kumar
sir. in our presentation we see nitric fabric production is down 15% almost IOI. And are there any specific challenges impacting this segment currently and what is the recovery trajectory going forward? Native fabric segment.
Dinesh Nolkha
Fabric segment for US used to get exported into US with the tariff kicking in, we had to slow it down. We are trying to, let’s say trying to spread this in the domestic market as well as in the other geographies. We have to restructure this particular segment in a manner that we are able to utilize it better.
Aditya Kumar
So we are redirecting it into other geographies or what is the plan?
Dinesh Nolkha
We are already redirecting it to other geographies also increasing the domestic market. But it takes a bit of time to establish, re. Establish these products. So maybe in going forward, in coming quarters we’ll be able to improve upon this.
Aditya Kumar
And sir, even though you don’t have direct exposure to the U.S. i mean any, any indirect pricing pressure from the countries like Bangladesh, because you said Bangladesh has a major export percentage of your kitty. So anything from this Bangladesh, because Bangladesh.
Dinesh Nolkha
Already the prices have come down substantially. Mentioned. From what it was about a year back. From there it has already come down. Margins have also come down. Not much scope is left on the prices front unless the raw cotton prices go down further.
Aditya Kumar
So from here we can say that our prices will be bottoming up, sir.
Dinesh Nolkha
Looks like that.
Aditya Kumar
So after taking in the renewal energy thing and the labor cost reduction, so maintenance is achievable from FY27, you can see that?
Dinesh Nolkha
Yes, of course.
Vikas Rajpal
Thank you sir. Thank you and have a great day.
Dinesh Nolkha
Thank you.
operator
Thank you. We have a follow up question from line of Rina, an individual investor. Please go ahead.
Unidentified Participant
Hi. Thank you for giving me the opportunity. Again, I just want to understand a couple of more things. Are we seeing any, like, is there any scope for inorganic growth for the company? Are we seeing any corporate actions on the horizon? Also, just so that I understand better, like is it right to say that, you know, considering uncertainties on the global front or do we see, or is it right to assume 26 and maybe first half of 27 would be, you know, slow on the financial performance or on the business side of things?
Dinesh Nolkha
First of all, let me take the second part of your question. We see that it should remain steady. We should be able to maintain the pace what we have been maintaining for last few quarters going forward. Yes, we’ll not see any major growth there since our capacities are fully utilized and the raw cotton prices are at lower end. And then there are uncertainties prevailing in the market. So improvement in Margin, substantial margin is not possible. So it should remain in a steady state. This is what the understanding is at the moment for revenue side. Now coming to your inorganic growth kind of thing.
There are opportunities coming in always. It keeps on coming. But it needs to fit in in our psychology as well as our growth plans. So if something proper comes in, we are open to it. But as of now we do not have any anything on the plate.
Unidentified Participant
Okay, understood. Also just you mentioned about, you know, exporting geographies might change to. In an answer of an earlier participant. Do you have specific markets in mind for that? And I just want to understand how would it be different operationally? Maybe on the cost front, would it be very different?
Dinesh Nolkha
Actually what is happening today we are seeing that us being a very big textile and apparel market and they have imposed earlier that duties were uniform for most of the countries except some least developed countries. And that to the differential was only about 3, 4, 5%. Now with these duties and tariffs coming in, the differential has become enlarged. There are some countries where there is only 10% tariff and there are some countries which has 20 to 25, 30% tariffs. So the countries with 10% tariffs will have an advantage. So we will like to divert since it is not at all a restriction on us so we can divert our capacities towards those countries where there is a 10% tariff.
So that that’s how you can reduce the impact of the tariffs. And those countries will be exporting more to us. So this is how the whole geographies can change. So this is. And those countries may tend to buy than the finished goods from the countries like India and China. So that way because they do not have any restriction on their own domestic consumptions. So this is how it can pan out going forward. And this is how the geographies will settle. The businesses will settle going forward.
Unidentified Participant
Understood? Understood. Thank you so much and all the best.
Dinesh Nolkha
Thank you.
operator
Thank you. Due to time constraint, we’ll take one last question from the line of Dhiraj Thakur from Ilara Capital. Please go ahead.
Dheeraj Thakur
Thank you so much for giving the opportunity to ask the question again. Sir, I would like to understand what proportion of our exports currently go to Bangladesh. As recently there was this news that Bangladesh may receive partial tariff exemptions on governments made using U.S. raw materials. And could you help us understand how this development might affect our demand?
Dinesh Nolkha
So primarily does not have any effect on our demand. As I understand this has come very recently. I think yesterday or a day before that if they have 20% of the US cotton content in their garments they may get an exemption but I think that is going to be available to all the countries, not only to one country but this may be applicable to all the countries here in India. Since our cotton is expensive, imported cottons are slightly cheaper. We are already importing from US cotton and we are using and we are supplying this to our various customers all around the world.
So rather this could become an advantage for us since they are an importer of the US cotton we can supply to our customers and they can get the advantage of the tariff advantage. So this may be applicable to India as well. I don’t know. This is being said that this is being made applicable to most of the countries. If there is a US content in the product, you may get an exemption. Raw material in the content then you can get that exemption. That is what it is at the moment. Now coming to your first, first question that what is the percentage overall? About 30% of our sale goes to Bangladesh and so that is an important country for us.
Dheeraj Thakur
Understood. But sir, as I can understand we don’t export currently to usa. So if we are not exporting to USA we won’t be getting this advantage. But Bangladesh would be getting this advantage if they import from. If they import cotton so from usa. So that way I was thinking will it impact our demand?
Dinesh Nolkha
They can. Since there is a full traceability available. If we produce the yarn with US cotton and then supply to Bangladesh cleaner, he can still take that Bangladesh, he can still take that advantage. As of now, for your information, India is importing more US cotton than the total Bangladesh does.
Dheeraj Thakur
Okay, understood, Understood. Thank you so much sir for clearing out.
operator
Thank you ladies and gentlemen. That was the last question for today and I now hand the conference over to Mr. Avnish Chandra for closing comments. Over to you sir.
Awanish Chandra
Before ending, just one question. Despite uncertainty, he looked very confident and you talked about that you are moving ahead with the CAPEX and all. Any situation or any further uncertainty you. Can think of which can delay our CAPEX or in any case we will move ahead with the plan.
Dinesh Nolkha
I mean frankly at this point of time, I do not mean we have already seen a lot of uncertainties in last six months since we announced our CapEx. And with this I’m very confident that going forward a organization which is a integrated one will have an advantage over the rest of the players. So in that direction we are moving again with a complete integration, maybe more towards the fabric that was our approach when we started. And all these uncertainties which has been created over a period of time has further. Let’s say made us believe in this that our we must go in for better and better value addition yes as on today spinning business does not look very attractive but rest of the things looks quite okay so we are going ahead with the expansion as of now and if any any other challenges which may come in we will be open to share with you all
Awanish Chandra
okay sir. Okay sir thank you very much Denis sir and Maheshwari sir for giving us this opportunity to host the call. Anything for closing comments sir
Dinesh Nolkha
yeah sure I’d like to thank everyone for taking out time to join the call I hope you have been able to address all the queries. I would also like to thank Smith’s team and Avniji for hosting the call. For any further information unanswered kindly get in touch with our finance team and our investor relations advisors. Thank you once again.
operator
Thank you sir on behalf of Smiths Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines. It.