Nitin Spinners Limited (NSE: NITINSPIN) Q3 2025 Earnings Call dated Jan. 27, 2025
Corporate Participants:
Purushottam Maheshwari — Chief Financial Officer
Dinesh Nolkha — Managing Director
Analysts:
Awanish Chandra — Analyst
Analyst
Falguni Padhariya — Analyst
Chirag Shah — Analyst
Akshay Kothari — Analyst
Manish Ostwal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Nitin Spinners Limited Q3 FY ’25 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Avresh. Thank you, and over to you, sir. Thank you.
Awanish Chandra — Analyst
Thank you very much everyone for joining the call. On behalf of SMIFS Limited, I welcome you all to quarter three FY ’25 earnings conference call of Nitin Spinners Limited. We are pleased to host the top management of the company. Today, we have with us Mr. Dinesh Nolkha, Promoter and Managing Director of the company; and Mr. P. Maheshwari, 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 to call to Mr. P. Maheshwari, CFO of the company.
Over to you Maheshwari, sir.
Purushottam Maheshwari — Chief Financial Officer
Thank you Awanishji. Good evening and warm welcome to all the participants to this Q3 and 9 months FY ’25 earnings call of Nitin Spinners. I hope all of you had a chance to look at the investor presentation that is uploaded on the company’s website as well as stock exchanges. Before Dineshji elaborate on the present industry scenario, I’m giving below the brief financial highlights for the quarter and nine months ended 31st December, 2024. Revenue for Q3 FY ’25 was INR839 crores against INR822 crores during Q2 FY ’25, that is an increase of 2% Q-on-Q basis.
On year-to-year basis, revenue increased by 11.7% from INR750 crores in Q3 FY ’24 to INR839 crores in Q3 FY ’25. Revenue for nine months ended 31st December 2024 is INR2,464 crores against last year’s revenue of INR2,105 crores, that is an increase of 17%. EBITDA for the quarter stood at INR117.16 crores as compared to INR115.15 crores in Q2 FY ’25 and INR102.73 crores in Q3 FY ’24. EBITDA for the 9 months ended 31 December is INR351.11 crores against INR260.87 crores in the same period last year. That is an increase of 34.6%. EBITDA margin for the quarter is 13.9% against Q3 FY ’24 margins of 13.69% and Q2 ’25 margins of 14%.
Profit after tax for the quarter is INR44.78 crores as against INR42.16 crores. in Q2 FY ’25 and INR31.75 crores in Q3 FY ’24. That’s an increase of 6.2% quarter-on-quarter. Profit after tax for 9 months ended December 31 is INR129.06 crores against last year PAT of INR92.35 crores in the same period. That is an increase of 39.7%.
EPS and cash EPS for the quarter is INR7.96 and INR14.59 per share, respectively, and cumulative EPS for 9 months is INR22.96 and cash EPS is fixed. Coming on the company’s operational performance. Overall, the company has delivered steady performance during the quarter in view of favorable raw material prices, though low selling prices impacted margins slightly.
On the operational front, our spinning capacity is currently running at over 95% utilization, while the weaving and finishing divisions are operating at more than 90%. Given the current capacity constraints, it is felt that achieving further revenue growth will require strategic investments in expanding the production capabilities.
To maintain our growth momentum, the Board of Directors have approved a significant capex plan of approximately INR1,100 crores across the existing verticals, that is yarn and fabrics mainly focusing on value addition and cost efficiencies. The expansion includes addition of approximate 66,000 spindles in spinning boosting our production capacity by about 22,000 metric tons per annum. About 60% of yard produced will be used for fabric activity. In weaving, we will be adding 250 as yet rooms against — along with enhanced dyeing and finishing capacity of about 35 million meters per annum.
Additionally, we will expand our renewal energy footprint with addition of about 11-megawatt power — solar power capacities aligning with our sustainability goals. The expansion will be funded by approx INR800 crores of debt and remaining by internal accruals and will be implemented over the next 24 months.
That is all from my side. I now request Dineshji to appraise about industry and business scenario.
Dinesh Nolkha — Managing Director
Thanks, Maheshwari. The textile industry is showing signs of resilience and growth with increasing developments across key markets. Despite some challenges, the overall momentum remains positive with exports recovering into 2024. This growth reflects the industry’s ability to adapt and overcome the impact of high inflation and rising interest rates in major markets. Despite challenges like price deflation, trade disruptions, the spinning segment continues to show strong momentum, reinforcing India’s position as a key player in this segment in the global textile market.
On the domestic front, the cotton prices have stabilized with expectation of reasonable crop. The prices are expected to remain stable towards lower end ensuring more predictable input costs moving forward. Although domestic prices are still marginally higher than the international level, the overall demand scenario is gradually improving. Additionally, we expect spreads to improve in the coming quarters, further supporting profitability and our operational efficiency.
Looking ahead, the prospects for the textile industry are optimistic with growth expected at a decent pace in 2025 driven by stable cotton prices, favorable forex rates and a continuous focus on operational efficiencies. Various expected initiatives by Government of India to boost textile manufacturing and exports add to the positive outlook. With these developments, the Textile Industries well positioned for reasonable growth and expansion in the coming years.
To maintain our growth momentum, we have announced capex across all our existing verticals details of which are shared in investor presentation and Mr. Maheshwari as well. The expansion will enable us to strengthen our market position, broaden our product portfolio and introduce high value-added and niche products and also increase our renewable power capacity which will lead to the cost efficiencies.
With these investments, we are confident the company is well positioned for sustained growth and to meet the increasing demand for quality fashion fabrics from both domestic and international brands.
With this, I would like to open the floor for the question and answer session.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Saransh from SDI Investments.
Analyst
Sir, just wanted to understand, in the opening remarks, you highlighted that the cotton prices have stabilized and domestic demand is back into a traction with the export recovery. So can you throw more light in terms of how the export has picked up in the last 9 months? And how do we see exports picking up in short to medium term from here?
Dinesh Nolkha
Here, I would like to highlight first that in the year 2023, our average exports of cotton yarn from the monthly average exports of cotton yarn in the range of about 60,000 tonnes per month. I’m talking about the whole country. Now this has recovered to about 100,000 tonnes at this point of time. At the peak, it has gone to about 120,000 tonnes as well. So slowly as the markets are recovering, we are seeing that there is a demand coming back. Also the lower prices of the quarter as well as the other fibers is inducing customers to go for more purchasing as well.
Analyst
And sir, how do we see that demand growth as far the domestic market is concerned?
Dinesh Nolkha
Domestic market is steadily growing. There is a steady demand in the domestic market. We see various organized and unorganized players, both moving in the right direction. Also, some of the exporters of the finished goods are also seeing a good demand. They have a good order book in the exports, especially on the garmenting side. So they are also doing reasonably well.
Analyst
So sir, if you indicated that domestic cotton prices, it’s still at a premium to the international prices — so if I want to take a short to medium-term view, how do you see the yarn prices or the spread moving up for the industry because we, as a company, has announced the capex, the uprates also around the capex in the spinning. So how do you see and the current spending industries, what is the status of the industry going up?
Dinesh Nolkha
First of all, industry, the spinning industry especially is passing through one of its rough phases. A lot of consolidation is happening. We have seen a lot of smaller capacities to the tune of — if you talk about the total capacity, about 12% to 15% of the spinning capacity is already closed or on the verge of closures. So there is some traction due to that as well because the demand supply situation has already balanced there.
Plus there is also — as far as your question was that we see there is a demand. So we see that the going forward demand particularly will be better in the export market, seeing that we foresee that was, wars, etc, which is the geopolitical tension which has happened all over the world will settle down going forward. And that may percolate to a better demand scenario as well.
Also, we are seeing the demand recovery coming back in markets like U.S. as well as in Europe. So overall, the scenario looks reasonably okay for us to go in for this kind of capacity expansion. As far as spinning is concerned, we are not going for any major capacity addition, which is if you want to see from the point of view of sale, it will be a very small capacity addition if you compare it because most of the capacity which is being created will be used for our fabric division only.
Analyst
The last question from my side before I jump back in the queue. Now the much awaited capex that you were waiting for and we have announced on the INR1,100 crores of capex. So just wanted to understand the IRR that you are expecting on this? And second is in both this, all this capex is likely to be come by in the next 24 months. So from here to next 24 months, what is the growth drivers for the company and the levers that company has in terms of the improvement in our margins?
Dinesh Nolkha
First of all, as far as — I’ll answer the second part of your question, First of all, we feel that we are trying to do a lot of cost optimization part. So that has been a continuous process with us and due to which we have been able to hold steady our margins also. So we expect that those results — that will be also fructifying going forward. Also, as there is a stability in the international prices as well as in that means not the state, I would say it is at the lower end of the international prices are at the lower end of the cycle. We feel that any uptick in that as well as stability in Indian cotton prices will lead to a better margin scenario for the delta from yarn to fibre will also be better. So going forward, we see that should improve our margins going forward. We are at the lower end of the margin, I would say. So that is one part.
Going forward, as you say that for the next two years’ time, it is — we’ll be seeing that these projects which we have announced that the total will be completed within less than two years. So we expect that it will partially operational performance will start to kick in going forward in next one year’s as well. So accordingly, that will be the revenue business for us. As far as the IRR of the project is concerned, I think the IRR should be in the range of 14% to 15%.
Analyst
Okay. So this indicated in terms of the margin that you alluded to cost optimization, so last 2 quarters, we are seeing 14% margin and 15% margin. So do we expect 100 to 150 bps improvement in the margin at least in the coming quarters or probably it will be on the lower end of that number?
Dinesh Nolkha
I would not like to comment on the exact because we do not know how the market scenario will behave. But definitely, on the cost side, we are having quite tight cost controls, which will help us to control our costs. The margin is a factor which has been decided by the market conditions as well. So I’d not like to comment on the forward margins. But definitely, as you see, we have been able to hold steady to our margins in last nearly 1 year’s time. Any improvement should be — we expect an improvement as such.
Analyst
Sure. So I have a couple of more questions. I’ll come back in the queue. Thank you and all the best.
Operator
The next question is from the line of Falguni from Arrow Financial.
Falguni Padhariya
I just have 1 question. What percentage of our revenue is derived from fabric at the moment, meaning annual revenue?
Dinesh Nolkha
At the moment, our revenue is about 25%. And with this capex going forward, we are expecting that it will be a third of our revenues, the expected revenues.
Falguni Padhariya
Okay. Sir, and 1 more on the cotton yarn spread, how are they now? And what do you expect them to be in the coming quarter, let’s say, how would Q4 be versus Q3 as regards cotton yarn spread?
Dinesh Nolkha
It is definitely better than what it was in the last quarter, but I’ll not be able to give you the exact number. I can just tell you that in the last quarter, our raw material prices were about INR161 a kg and our yarn prices were about INR265, INR266 a kg. So delta was about INR100. We expect the similar delta or maybe a higher delta slightly higher delta to be maintained in the coming quarters.
Operator
[Operator Instructions] The next question is from the line of Kaushal Karia, individual investor.
Analyst
Sir, I want to understand what is the debt profile of the company right now? What is the debt outstanding as of today?
Dinesh Nolkha
Maheshwari, can you highlight on the debt side?
Purushottam Maheshwari
Yes, sir. So as on 31st December our total term debt is about INR850 crores and working capital another INR400 crores, so total INR1,250 crores as of now.
Analyst
And so out of the INR1,100 crores, how much of the debt do we plan to increase?
Purushottam Maheshwari
So for the project, we are proposing INR800 crores of term loans.
Analyst
So debt will go up to around INR2,000 crores plus?
Purushottam Maheshwari
This — but repayment will be there over a period of 2 years, so about, say, about INR250 crores of loans will be repaid over the next 2 years.
Analyst
How much of the?
Purushottam Maheshwari
INR350 crores of loan will be repaid over the next 2 years.
Analyst
Okay. So we will come down to around INR1,700 crores, so INR1,650 crores, INR1,700 crores?
Purushottam Maheshwari
There might be a slightly increase for working capital so by March 27, we’ll be close to about INR1,900 crores percentage.
Analyst
Okay. And this debt also is under the same state subsidy scheme, the new debt that we will be taking on?
Purushottam Maheshwari
Yes.
Analyst
And sir, the previous subsidy, have we got that until now or not because the interest numbers are not showing that the finance charge?
Dinesh Nolkha
No, I think.
Purushottam Maheshwari
The finance cost is net of subsidies.
Analyst
So this finance cost that we’ve showed at almost INR20 crores, INR21 crores is net of subsidies you’re saying?
Purushottam Maheshwari
Yes.
Analyst
Sir, this works out to around INR80 crores per annum. And our debt as of today is INR1,250 crores, so that’s roughly 6%, 7%, 67%. And so the subsidy received for the previous quarter, which we received late that has also been accounted for?
Purushottam Maheshwari
Yes.
Analyst
So where did that come in the financials, which quarter?
Purushottam Maheshwari
So it is — it was accounted in the last quarter only.
Analyst
Okay. Under which head?
Dinesh Nolkha
Basically I think the previous — we have not accounted for any early quarter subsidies. We have — as the subsidy accrues, we have accounted for it accordingly. We have not considered any subsidy for the prior period, so it has to be considered somewhere else.
Analyst
No, because for December ’23 and March ’24 quarter.
Dinesh Nolkha
We were not able to get the subsidy for that. We were not able to get the subsidy. The period started with this year on year.
Analyst
This year, okay. And second question is what would be the cost of the new debt and what is the cost of debt as of today after subsidy?
Dinesh Nolkha
At the moment, I think the blended cost — our total blended — our cost is about 8.7% and for the term loans, I’m talking and the net of subsidy, so 5.7%.
Analyst
If I take 6% also roughly, it should be about — it should be about — 6% should be about INR72 crores a quarter, but we are showing a tad a bit more.
Dinesh Nolkha
I think — we have working capital costs as well. So that is not subsidized.
Analyst
Understood.Understood. Okay. Okay. And the new debt will also be subsidized in the same way?
Dinesh Nolkha
Yes, in the same way.
Analyst
And sir, are you seeing any issues in Bangladesh because I think we supply about 16% to Bangladesh, 16% of revenues in Bangladesh, so are we seeing any issues there?
Dinesh Nolkha
No. I think no, we are not supplying. Our 60% revenues are not there in Bangladesh. Our revenues are about 30% of our sales, total sales is in Bangladesh. So first of all, let me correct you on that, yes.
Analyst
No, I thought 16%, I think previously, it was reported from a 16%, 16%.
Dinesh Nolkha
No, you are talking 60%.
Analyst
No, 16, 16.
Dinesh Nolkha
Yes. Yes, — it is about — in total, about — it is about 28% to 29% for this quarter.
Analyst
Okay. So we are not seeing any issues in the regular supply chain at Bangladesh or any disruptions of that?
Dinesh Nolkha
As it is. No business change.
Analyst
And sir, what do you feel on the entire Bangladesh issue will — what kind of an impact will it have — will it have on the textile or government industry in India? Positive impact or?
Dinesh Nolkha
First of all, political disruptions in any country definitely impacts the business in the long term. Short term, there may or may not be having any disruptions. But definitely, the new business which is supposed to come to Bangladesh is moving out of that country. They may be able to hold to the quantity volumes which they are doing but new business is definitely coming to India as well as to other competing countries. So to that level, we will have an advantage definitely, first of all.
Secondly, also the new — because of their capital crunch, the new investments also have stopped, especially on the back end of spinning and fabric manufacturing, which they were doing in a big way during 2019 to 2022, ’23. So that augurs well for us, although their garment capacity is increasing. But due to their working capital cycles as well as on the capex side, they are not able to grow their — take more loans on that side and increase the capacity. So that should be — that should help the Indian players.
And we are 1 of the closest suppliers to them by road, the goods can reach within less than 2 weeks to them. And by seasonality, the goods are reaching within 3 weeks’ time. So that is an advantage which they cannot avoid. So they have — they are rather dependent part of the textile industry is depending on the supply chain from India as well. So I don’t foresee any major issues coming from India, and we should have rather some advantages only.
Operator
The next question is from the line of Chirag Shah from White Pine Investment Management Private Limited.
Chirag Shah
Sir, just 1 question. Sir, are you a bit late in announcing the capex? Because you are fully at capacity for next 12 months, there will not be any capacity available. If I take current quarter as a base, you got — if yes, then what was the consideration why you believe the announcement of the project?
Dinesh Nolkha
First of all, I don’t think we are late. We are not at all late. We have to look at the various options available to us. What are the areas where we can grow our products. So being in a very challenging environment in the spinning from last nearly 2 years’ time. So we would just wanted to see that there is a stability in the demand coming in. And then we are able to decide the kind of product ranges, the kind of new products which we can do, then only able to do it. So we had very cautiously evaluated our options and then 1 for them. Instead of going in for investments without the thought, we thought let us spend some time on the drawing board first and then go ahead with the project.
Chirag Shah
And sir, second is the new — your IRR that you indicate on the projects are similar to what you made earlier despite having more value addition image, right? So are you a bit conservative in your IRR guidance? Or is it based on current market environment and should you just share some way because you are increasing your weaving capacity, your spinning is going to be consumed fabric capacity maybe etc, etc. But your IRR number that you’re targeting seem to be a bit low?
Dinesh Nolkha
First of all, with this more and more value addition investments al go more. So your capex allocation also increases. So EBITDA can be improved. Definitely, EBITDA is a different number, could be a different number. But IRR, we have to look at IRRs, what we have seen in last 1 or 2 years and remain conservative on that side, it is better to remain conservative on that side because you have to go with your past experiences and also factor the worst conditions. If it comes better than this, it is good for all of us.
Chirag Shah
Yes, I was asking the same question, sir. So it is more based on the recent the demand dynamics and pricing dynamics or IRR. If things turn out to be better because I’m not going back to the best period, but we have had better periods than what we had in the last 2 years, right?
Dinesh Nolkha
Yes, I agree with you.
Chirag Shah
Okay. So would it be possible for you to indicate what kind of margin assumption you are building in the sir? Would you like to share that — it will help us to understand what could be our normal IRR in case scenario is better than what we were in the last 2 years?
Dinesh Nolkha
Basically, as far as overall margins are concerned, this kind of this project, particularly what we are envisaging. We are envisaging an EBITDA levels of 20% plus. So 20% above, yes. So we are — because it’s more from end to end. It is from yarn from — from fiber to fabric, not — so instead of dividing it in various parts. So that is the area where we are targeting.
Chirag Shah
Great. And as such would be like it in the past, right, or it would have a lower effect?
Dinesh Nolkha
Yes, asset will be 1 to 1, I think.
Chirag Shah
Okay. And sir, lastly, you said some of the capacities coming within 12 months or around a year.
Dinesh Nolkha
No, in this particular — in this particular capex plan, what we have discussed, we have also putting certain upgradation and cost efficiency plans also for our existing plant, which is to the tune of about INR50 crores. So that will be — that will be taken care within next 1 year. Also some small capacities on the weaving and finishing side could also be — can start within this — by the end of next financial year. So some small top line can also be achieved there as well. So some of the capacities in part will be start to come in.
Chirag Shah
Okay. So basically, our volume growth story would happen 2 years from now?
Dinesh Nolkha
In FY ’27.
Chirag Shah
FY ’27. There is — are you — is there a newer increase the volumes over the next 12, 18 months or what we are doing. So what is the peak utilization that we can go? That’s what — my question was. We are 95% right now, around 90-95%.
Dinesh Nolkha
Some small — I mean we are already running at nearly peak utilization in spinning, not much things left there, some small debottlenecking or something may happen in next 1 or 2 quarters. So that may add to very small capacity. On the weaving and finishing side, we are running at nearly the top capacities. Knitting can add something more utilization can improve there slightly, so back to that. Other than that, only the cost efficiency will play out.
Chirag Shah
Yes, because I land production in plus around 27,000 metric tonnes on production. So it should stay in that ballpark, maybe 5% plus.
Dinesh Nolkha
Yes.
Operator
The next question is from the line of Amit Kumar from Digomi Investment.
Analyst
Can you hear me?
Dinesh Nolkha
Yes, we can hear.
Analyst
Sir, just 1 question. So on 1 side, we are basically saying that 15% of the industry capacity is basically going out of the system or getting shut down. But when you look at the major players, Wadhwan, yourself, you are sort of adding a lot of capacity, fairly strong capex from both the companies really. So just sort of trying to understand this thing, is there not an opportunity to sort of grow inorganically?
Or what’s the constraint there in terms of — I mean you are looking to sort of add capacity if somebody is looking to basically shut down capacity. I mean it’s very safer to assume that a transaction can be potentially made here. So what’s the reason, why you would not look at inorganic growth opportunities rather than organic?
Dinesh Nolkha
First of all, the major capacities, which are going down today are due to their uneconomical operational sizes also. Major capacity like 5,000, 6,000 or 10,000 spindles, capacity, which are — which are not an economic size. So they are not able to manage the cost at that level. That is 1 of the reasons.
Secondly, certain technology has become very old. So that technologically, they have a disadvantage in terms of their operational costs. So someone, the company which has continuously upgraded their infrastructure, their machineries has been able to maintain a float. Otherwise, some of the capacity they have to stop because even they are not able to recover their operational costs.
So these are the 2 major reasons. And thirdly, insufficient funds to run the mills because of lack of capital with them. So that is also 1 of the major reasons why most of the companies have gone out. So any company which is in the third category could be there, which can be acquired otherwise there is no point in acquiring or going in for acquisition of a company, which is or an asset, which has low because the high operational cost. So that will not be margin accretive to us.
Thirdly, also on the quality front, also, most of the older units, which are more than 15, 20 year old have much — a lot of disadvantage in the present quality terms. Today, most of the yarns which is sold is contract labs. They have hired given the stringent quality requirements, which was not the case for the units, which was about 15, 20 years old. So this is 1 — and thirdly, economic size, as I told you. So it’s some good opportunity comes in. Definitely, we can evaluate that. And accordingly, going for inorganic growth as well. But at this point of time, we do not find any such asset basis.
Analyst
Okay. Okay. Interesting. My only sort of surprise here is the fact that I mean 15%, spinning is a pretty big industry in India, in domestic demand and export opportunity as well. That’s going to grow even further.
Dinesh Nolkha
I mean, this particular capacity which is down, has been over a period of time, it is not that they have suddenly stopped. It is over a period of time. Let’s say, the installed capacity today is about 55 million, 56 million spindles. And the operational is about 48 million. It is not that this capacity of 6, 7 million spindles have stopped all of a sudden. They have stopped over a period of time. Some spindles have stopped maybe 3, 4 years back itself. Some units stopped in COVID and not started only. So it is the total capacity I’m talking of. I’m not talking what — what was the capacity 2 years back and what is the capacity today. Overall capacity utilization is only 85%. That’s what I’m saying.
Operator
The next question is from the line of Akshay Kothari from JHP.
Akshay Kothari
So just wanted to know the breakup of the capex. So around INR700 crores would be for the fabric, INR300 crores for spindles and INR50 crores renewable power, right?
Dinesh Nolkha
No, no, no. Our breakup is spinning at INR400 crores. This includes the renewable power for the spinning. Then Fabric is about INR550 crores and INR50 crores is for the cost efficiency or improvement plans in our existing units. This is INR1,000 crores and another INR100 crores is for margin money for working capital.
Akshay Kothari
So sir, excluding the power side, capex per spindles is around 55,000 or 60,000?
Dinesh Nolkha
It should be in the range of 56,000, 57,000.
Akshay Kothari
Okay. Okay. And sir, I recollect, where are we putting this plant? Is this to Begusarai?
Dinesh Nolkha
It is in — most of the capacity is coming in our Begu plant, the plant which you start in Chittorgarh district in 2018/’19 at the same place it is coming in.
Akshay Kothari
So last time I recollect, we did the capex in much lesser time. So is there any chance that you may complete it in much lesser time?
Dinesh Nolkha
Cannot — it’s a reasonable size capex wherein a lot of construction — civil construction also has to happen. So keeping the things simple, we would like to start by the delivery of the kind of schedule which we have given, and we’ll try to improve as it is possible.
Akshay Kothari
So the numbers will start coming in from FY ’28 onwards, right?
Dinesh Nolkha
FY ’27.
Akshay Kothari
The ’26, ’27, 24 months, so.
Dinesh Nolkha
As I told in my earlier — 1 of the earlier questions also, that this will be implemented to the pass part. So parts will be getting started. So considering that we will be able to — the numbers will start reflecting. If you want to see the full year — full capex number, yes, full year number would be in FY ’28, yes.
Operator
The next question is from the line of Rahil Shah from Crone Capital.
Analyst
So considering this new capacity full impact or even partial impact coming from FY ’27. Any outlook or guidance sort of for the next year coming financial year ’26? What kind of revenue?
Dinesh Nolkha
Normally, we do not give any financial guidance for the next year. So that is not real for as attractive.
Analyst
Directionally anything, better than FY ’25 or something? Do you expect like given the market conditions and the demand?
Dinesh Nolkha
Markets, the revenue guidance definitely is a delta of the kind of cotton prices and the differential with the yarn as well. So a lot of it depends on the raw cotton side. We expect the root to remain at the similar level what it was there in this financial year. So expect similar kind of revenue numbers going forward has been.
Analyst
But you definitely expect improvement in margins given your cost efficiencies and optimizing activities?
Dinesh Nolkha
Yes, optimization activity should add to our margin and less depend on the market condition.
Analyst
Right. And can you just please reiterate the IRR you’re expecting? I missed the number for the new capex you’re doing.
Dinesh Nolkha
In the range of about 14% to 15%, that is the IRR.
Operator
The next question is from the line of Reena Rathore from KB Capital.
Analyst
Am I audible?
Dinesh Nolkha
Yes, you are audible.
Analyst
I had a couple of questions regarding the capex update. So this INR1,100 crores that is the total cost. How are you bifurcating this for FY ’26 and ’27? You’ve given across verticals, I was just wondering, based on the years, the next 24 months, how do we segregate this? And regarding the capacity being commissioned, can you throw some light on the time lines for the capacity being commissioned? Like I’m assuming it will be in a staggered manner. Could you help me understand that?
Dinesh Nolkha
First of all, there is no such breakup at the moment available with us, how much will be doing in FY ’26 and ’27. Most of the — if you see normally the capex is back-ended initially because only the construction and the advances are being placed. So normally, the major capex comes in the last 6 to 7 months of that project. Of course, they will be divided in 3 parts. We have spinning, finishing and weaving segments working in this direction.
So broadly, you can — for the number of purposes, you can divide it, the total capex in 2 parts, half in the FY ’26 and half in FY ’27 as such. So that is broadly — it’s a ballpark number which I talked about. And as far as the completion date, we are assuming that we should be able to complete this in the last quarter of FY ’26 — in the calendar year ’26, maybe somewhere in October to December of 2026. We are expecting this to complete — the complete project.
Analyst
Okay. Also, could you elaborate more on the benefits, like you mentioned, interest subsidy, capital subsidy, electricity duty benefit and dips. So could you elaborate more on that?
Dinesh Nolkha
Normally, electricity duty benefit in Rajasthan state is about INR60 per unit. So — which is nearly 10% of our power costs. Then about — we will be eligible for about 5% of the interest subsidy interest subject to about 2.5% of the total capex, total eligible investment, something like that. So this works out to about 2.5% — about 2.7% to 3% of our rating. And there is a capital subsidy of about nearly INR180 crores to INR200 crores spread over the next 10 years. So that is equally divided every year we get.
Analyst
Okay. Just a couple of more questions. How do you see the current cotton season coming along like in terms of crop size arrival quality? And how much inventory do we see in quarter 4?
Dinesh Nolkha
First of all, cotton crop remains — we feel that the size should be same as last year. There should not be a major deviation from where plus minus 2% to 3%. That’s all. There should not be a major deviation. Quality-wise, this year’s crop is definitely better than what we have seen last year. It is very well irrigated and rains are also appropriate. So the quality is also good. And the prices we are — and MSP operations are on in India, nearly 45% of the crop is being taken up by the Cotton Corporation. We expect that the cotton prices should remain at this MSP levels of INR54,000 are. Can you hear me?
Operator
The next question is from the line of Keshav Car from Countercyclical PMS.
Analyst
I want to know your thoughts about forward integration into garments in the future? Any plans or will expand only in fabric and yarn?
Dinesh Nolkha
At the moment, it is only in fabric and yarns. As far as garmenting is concerned, in my past discussions also I have highlighted that this will be a completely new arena for us. And we are — we want some major kick in like a good PLI scheme or something to venture into this particular area. We want to go with a reasonable size whenever we go in this. And want to be a reasonable player also. So looking to that, we are waiting for some good initiatives and incentives coming in from the government’s side. If something of that sort comes up, definitely, we can look ahead. Otherwise, the routine goes at the moment for next 2 years, Yes, we do not have any plans for the garmenting.
Analyst
And also, sir, regarding this for the next 2 years, so what kind of volume growth can we expect from the existing operations unless new capacity comes? So can you give us some idea in terms of percentage or absolute numbers?
Dinesh Nolkha
It has been highlighted clearly in our investment presentation also that we are running at nearly 95% plus capacity. In fact, in spinning, we are running at 97%. So spinning, we do not expect any major volume addition. Part of it small, very small can come by debottlenecking or something like this, but which is very, very insignificant, I would say. So as far as volume is concerned, I do not see any major things coming in, in the next 12 months at least.
Analyst
And sir, what about the fabrics over there, it’s mentioned 85% utilization. So can you go to 100% over there?
Dinesh Nolkha
We are above 90% in our fabrics. In our weaving and processing division, we are running nearly 90% plus capacity utilization. So there, we can expect it to slightly improve, which we are targeting as well. That should slightly improve by 5%, 7%, maybe.
Analyst
And sir, also, are we into the processing and dying or we are only making the fabric and that’s all?
Dinesh Nolkha
We are dying, finishing, printing, everything, completely.
Operator
The next question is from the line of Manish Ostwal from Nirmal Bang.
Manish Ostwal
Most of the questions already asked. I have only 1 question. In terms of the trade shift from Bangladesh to India, is there any inquiries or any trends you guys are picking up for the medium term for — in India and that we can benefit or outperform that trend? So can you comment on that thing?
Dinesh Nolkha
Basically, what we’re seeing at this moment is the garmenting capacity at the moment in India, garmenters are getting very good orders from overseas customers, especially on the knit side. So there are good orders with most of the knitting players today. So that has shifted — not shifted, I would say. The additional new orders are not going to Bangladesh and coming to India. So in this India is quite strong in fashion kind of product, so capacity-wise utilizations and improvements should happen in that particular segment. Knitting was quite down for last 1.5 years. Now it has come back in a proper manner.
Manish Ostwal
Okay. And secondly, sir, you made a comment just now in the next 12 months, there’s no possibility of volume growth. So in terms of earning trajectory for us for next year, what would be driver, it will be margin expansion due to cost reduction measures or value-added category adding the margin, so earning for F26 earnings growth driver, what are — what will be those drivers, sir?
Dinesh Nolkha
Basically, I have already highlighted that in my earlier comments also that we should be seeing better cost efficiencies. We definitely will go ahead with better product, try to do better product mixes also. And going forward, since we are also expanding in various product in our new capacity. So we will try to implement them in our old plants also. So it should be a mix of better product mix, cost efficiencies and some slight debottlenecking, also cost efficiency in terms of new modernization or the cost efficiency improvements what we are doing in our — this plan as well.
Manish Ostwal
And the new capacity, what will the incremental margin profile?
Dinesh Nolkha
It will be — if we — like the new capacity, if we see if that is today, our fabric is about 25% of our — fabric is about 24% to 25% of our sales. Going forward, this should become nearly a third, 33% plus. So that should lead to the improvement in the margin by 150 to 200 basis points overall, if conditions remains as it is. So margin profile should improve going forward.
Operator
[Operator Instructions] The next question is from the line from Falguni Datta from Mansarovar Financial.
Analyst
I have 1 more question, which is on the volume. What was the sales volume — yarn sales volumes for the quarter? Sales also we should resume similar almost?
Dinesh Nolkha
Yes, sales.
Analyst
Sir, can you give me the sales volume figure, if possible?
Dinesh Nolkha
It’s there in the presentation in.
Analyst
Okay. And this is including of the captive consumption for fabric?
Purushottam Maheshwari
No, no. It’s outside sales.
Analyst
Outside sales. And what would it be including that? Would it be similar to the 27,000 tonnes or more including captive consumption?
Purushottam Maheshwari
Pardon me.
Analyst
Yes, sir.
Operator
The next question is from the line of.
Analyst
I just wanted to check what would be the capacity utilization for the kitting unit, knitting fabric unit?
Dinesh Nolkha
It is about 60% at the moment.
Analyst
60%. Okay. And how much likely for Fabric, you mentioned that the capacity is about 40 lakh meters about — on the knitting side, how much is the capacity?
Dinesh Nolkha
That is in the kgs and the tonnes, the knitting capacity is about 28 tonnes a day, about that is 11,000 tonnes every year, and we are at about 60%. That is about 1,700 tonnes for this quarter.
Analyst
Okay. Secondly, on the project IRR, the IRR that you mentioned for the new capex of 14% to 15% that’s for project IRR?
Dinesh Nolkha
Yes, exactly, yes.
Analyst
So given that your debt will be at about 6% and the debt equity is more like 3 is to 1. The equity IRR will comfortably be about 20%.
Dinesh Nolkha
Yes, exact number, I’m not having. So it should be better definitely.
Analyst
Okay. And lastly, any expectation from the coming budget?
Dinesh Nolkha
We cannot comment on expectation. We have a lot of expectations, but we have been discussing and dealing with the government at various stages. Our associations are also engaging. So I do not want to speculate on that particular front. That is something they will do what they want to do, but we have been requesting them for a lot of things.
Analyst
My query was particularly on the custom duties, which has been a burden for the industry. So do you expect any changes there?
Dinesh Nolkha
I don’t know. I do not, to be very honest with you. This is something which is involving farmers community, the minimum support price operations and various multiple factors. So government will take a holistic view and then accordingly decide. So no comments with that.
Operator
[Operator Instructions] The next question is from the line of Uday Kumar from UK Capital.
Analyst
Am I audible?
Dinesh Nolkha
Yes, you are. You are.
Analyst
Sir, what was the realization for and knitted fabrics in this quarter? Are we observing any signs of demand improvement in that segment?
Dinesh Nolkha
The realization was in the range of about 160 in the woven fabric, it was about INR161 per meter. So it is more or less stable what it was there earlier. Means that decline, there is a slight decline, which is similar to the raw material costs, not a major decline there. So demand definitely is better. Demand in that segment is definitely better. That is why we are targeting to increase our capacity in that segment.
Analyst
Okay. Sir, the — 1 more thing on the cotton price parity, the international and the domestic and so what is your view on the cotton price going forward?
Dinesh Nolkha
First of all, I think international — firstly, let me highlight on the international. International cotton is that means the New York futures, which defines the cost normally for most of the people is at the lower end of the cycle. It is most — the cotton cost which is there with various countries, it has already breached some of the levels.
So — that is 1 basic thing. It’s a very good crop this year, much higher than last year, about if you see in U.S. as well as in Brazil, also Australia is stable. China, there is a higher cotton supply. So altogether, the cotton prices, we do not see a downside of more than 5% to 7% from here in the raw cotton internationally. As far as — so — and of course, there is not a very big demand improvement as well to take it to a very high level. So it should remain range bound at the lower end.
As far as Indian cotton is concerned, we are at the minimum support price level. Today, as we see nearly 45% of the crop is getting garnered by the government agency Cotton Corporation of India. So the second half will be decided — the second half prices of this cotton season from April to September will be decided by the Cotton Corporation.
We have made a lot of representations with government to keep it industry-friendly and not — and should do the parity with the — have a parity with the international pricing. And accordingly, the cotton should be made easily available to the industry. We expect that the government is very sympathetic on this front as well. So we are — in view of that, we are thinking that cotton prices will remain as it is there today.
Analyst
Okay. And sir, what is our average cotton price and the inventory level we have right now?
Dinesh Nolkha
To be — I think I’m not having the exact number of cotton inventory level, but last quarter average cotton cost was about in the range of INR161 a kg. So it should be lesser than this definitely.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Awanish for closing comments.
Awanish Chandra
Sir, we are hearing a lot of things from U.S., especially from the Trump tariff side. So any read into from our business perspective, our overall textile industry perspective? That’s the first. And second, anything which can concrete comes from the budget side on the industry?
Dinesh Nolkha
First of all, the effect of the — on the tariff side should be positive only for the industry. We already — a government of U.S. has already removed the GST benefits, which were available to our Indian textiles. So we do not see any further — that was removed about 2, 3 years back itself. So we do not see any further tariffs coming on that side. Yes, if the tariffs are imposed in general on the Chinese imports, then that should benefit. And relatively, we would be in a better position to supply the garments and as well as the home textiles over there. So there is going to be some advantage only from the Trump tariff era which we are supposed to see going forward.
As far as budget is concerned, to be very honest, we do not have any concrete thing known to us that what is going to come in the budget. We have, as an industry, from the associations and from our companies as well, we have represented many things. We hope — we are expecting that government is sympathetic to this industry. We are understanding very well that this is an industry which is very important for overall employment in the country as well as for the growth of the manufacturing as well. So they would be considering certain benefits for sure. Let’s hope for the best, it is just 3, 4 days ahead now. So I do not want to speculate anything there.
Awanish Chandra
Okay, sir. Okay. Thank you very much, Dinesh, and Maheshwari for giving us this opportunity to host the call. Anything for closing comments?
Dinesh Nolkha
Yes. Thanks a lot, Awanish, for hosting the call and also the place for organizing this call. I’m hopeful that we have been able to take care of all the queries which have been there. If anything is not done, maybe you can write through our investor relationship adviser at finance team. And thank you all for taking out the time and joining this call. Thank you very much.
Operator
[Operator Closing Remarks]