RSWM Limited (NSE: RSWM) Q3 2025 Earnings Call dated Feb. 13, 2025
Corporate Participants:
Rajeev Gupta — Managing Director
Nitin Tulyani — President & Chief Financial Officer
Analysts:
Unidentified Participant
Aditya Sen — Analyst
Tanush Mehta — Analyst
Saket Kapoor — Analyst
Madhu Sharma — Analyst
Rohit Ohri — Analyst
Reuben Mathews — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to RSWM Limited Q3 and 9M FY ’25 Earnings Conference Call. 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 star then zero on your just on phone.
I now hand the conference over to Rick Capital Investor Relations team for the introduction of the management. Thank you, and over to you.
Unidentified Participant
Thank you, Jacob. Good evening, everyone, and welcome to RSWM Q3 and Nine-Month Earnings Conference Call. Today from the management, we have Mr Rajeev Gupta, Joint Managing Director; Mr Nitin, President and CFO; Mr Rakesh Jain, General Manager of Corporate Finance; Mr Surendra Gupta, VP, Legal and Company Secretary. Before we proceed with this call today, I would like to take an opportunity to remind everyone about the disclaimer related to this conference call. Today’s discussion may be forward-looking in nature based on current management’s current beliefs and expectations.
It must be viewed in conjunction with the risks that our business faces. That could cause our future results, performance or achievements to differ significantly from what may be expressed or implied by such forward-looking statements. Today, we pleasure to introduce Mr Rajiv Gupta, our new Joint Managing Director, a distinguished industry-leader with over 30 years of strategic leadership experience in textile and home textile, pulp and paper industries, renowned for his expertise in business transformation, revenue growth and operational excellence. Srigupta has a successful led turnarounds and driven significant improvement in EBITDA across the various leading organizations.
A firm believer in efficiency, he has leveraged lean and Six-Sigma methodologies to improvise operations and reduce cost. Gupta’s vast experience in result-driven approach makes him a transformative force in the industry. We welcome you, sir, on-board. I now hand over the conference to Mr Rajiv Gupta, JMD of RSWM Limited for his industrial outlook. Post that Mr Nitin, President and CFO, will take-over — over the financial overview. Thank you, and over to you, sir.
Rajeev Gupta — Managing Director
Thank you. Thank you for the introduction, Richard. Good evening, everyone, and thank you for joining today’s investor call. I hope you had got an opportunity to review our investors presentation, which is available both on stock changes and our website. I’d like to highlight the current state of textile industry and the challenges it is facing. Indian textile industry is a pivotal movement at this point of time, poised for the growth in-spite global economic uncertainties.
India’s strong heritage, strategic positioning and expertise in specialized segments such as spinning,, home textile, man-made fibers are driving this expansion. Domestically, cotton prices have been stabilized in last couple of months, ensuring more predictable input cost, while improving demand environment is expected to enhance profitability and operational efficiencies in the coming quarters as well. Looking ahead for 2025, stable cotton prices, favorable forex rates and government initiatives to boost textile manufacturing and export strengthen industry’s positive outlook.
The Government of India has increased the Ministry of Textiles budget from 3,342 CR for the FY ’25 to 5,272 CR in FY ’26 to support growth and global competitiveness. A five-year mission on enhanced cotton productivity forced on long steple ELS cottons as we say to reduce import dependence on these particular cottons, promote cultivation in the suitable reasons and introduce advanced forming technologies as well as training our farmers, aligned with five vision of our Honorable PM form to fiber, fiber to factory, factory to fashion and fashion to foreign.
This initiative aims to improve raw-material equality in terms of quality and this will help in boosting exports. Globally, the trade conditions are improving with the easing of recessionary fears and geopolitical stability that we expect. Supply-chain disruptions are gradually resolving and the higher US tariffs on Chinese goods are shifting trade and investment flow towards India, creating new or export opportunities for all of us.
A structural shift in retailer preference towards integrated sourcing is driving industry consolidation, benefiting larger, more efficient players who are bigger in size. With these positive developments, Indian textile industry is well-positioned for sustained growth. We at RSWM remain committed for leveraging emerging opportunities, while maintaining operational excellence and value-creation. India is expected to maintain its position as one of the fast-growing major economies with GDP growth for the year 2025 Estimated at about 6.5%. India’s economic outlook remains positive, supported by strong domestic fundamentals, favorable government policies, inflation is also showing sign of moderation with RBI actively managing it through effective monetary interventions. India’s textile sector is poised to double its contribution to GDP from a level of 2.3% to approximately 5% by the year 2030. To achieve this, we must focus on all discussed last quarter embarrassing ourselves using Industry 4.0 to ensure efficiency, leveraging on AI-driven forecasting for the smarter commodity procurement and optimized financial management. Machine-learning and agile supply-chain tools will improve flexibility, so RSWM, as has been discussed last quarter, is working on this. While AI-powered the demand and supply planning will enhance forecasting, inventory management showing our regions and dynamic markets. With these industry updates, now I request our CFO, Mr Nitin Suryani, who will take-over for the financial overview for quarter three and nine months performance of. Over to you, Nitin.
Nitin Tulyani — President & Chief Financial Officer
Thank you, Mr Rajiv. Good evening, everyone. Coming to our financial performance for the 3rd-quarter of financial year ’25, the business continues to demonstrate resilience despite market fluctuations. In-quarter three financial year ’25, we achieved revenue of INR1,196 crores, reflecting an increase of 2.5% quarter-on-quarter basis compared to INR1,166 crores in Q2 FY ’25. Year-on-year quarter three financial year ’25, our revenue increased by 22.3% from INR977 crores in Q3 FY ’24.
For the nine months ended, 31, 2024, our revenue stood at INR3,569 crores, marking an increase of 23.7% compared to INR2,886 crores in December ’23. EBITDA for the quarter reached INR58 crores compared to INR42 crores in Q2 FY ’25, representing 36.3 quarter-over-quarter increase. Quarterly improvement in EBITDA was mainly on account of the cost-control measures that has been taken. Year-on-year quarter three financial year ’25, our EBITDA increased by 2.6 times from INR22 crores in Q3 FY ’24 to INR58 crores in Q3 FY ’25.
The nine-month EBITDA stood at INR154 crores versus INR76 crores, an increase of nearly 100% over the same-period last year. For the quarter was 4.8% compared to 2.3% in Q3 FY ’24 and 3.6% in Q2 FY ’25. The profit-after-tax for the quarter stood at a reduced loss of INR8 crores, showing a significant improvement from a loss of INR24 INR21 crores in Q2 FY ’25 and INR32 crores in Q3 FY ’24. For the nine months, PAT reflected a loss of INR43 crores, a notable reduction from INR65 crores in the previous year, primarily attributed to the higher finance cost.
On a quarter-on-quarter basis, our ongoing efforts to reduce debts are yielding positive results as reflected in the declining finance cost. We remain committed to implementing effective measures to further optimize our financial position. As we reflect on our performance, we are encouraged by the strong recovery in-demand on the export side. Though we remain mindful of the challenges ahead, while our spinning business continues to face pressure due to elevated raw-material costs compared to the international prices.Our fabric segment remained resilient and continues to drive positive momentum.
With this, I would like to conclude and open the floor for any questions you may have.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the attached on telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. The first question is from the line of Aditya from Rover Capital. Please go-ahead.
Aditya Sen
Hi, thank you for the opportunity. Sir, first, can you shed some light on the present demand and pricing scenario of, that is the premium one.
Rajeev Gupta
Okay. Thank you, Bhatja, for the question. This is Rajeev. Milanjarn demand scene has improved a little bit in last quarter. Most of the spinners who are producing, the capacity was not used exactly on Milan production. It was on other products rather than Milanje. In this quarter, we saw this increase in capacity utilization being better on Milanj. And as on today, if you look at demand-side, then within India is having some slight improvement trend, whereas in export, it is still having lot of challenge in terms of pricing where we have to compete with other countries with more competitive in terms of pricing. So to sum-up, it is slightly better and next quarter, which is the quarter starting from January for Q4, I believe overall capacity utilization will be better than Q3.
Aditya Sen
All right. And any revenue and EBITDA guidance for FY ’26 and FY ’27?
Rajeev Gupta
I can only say that the trend is positive. We could reduce our losses and EBITDA has improved quarter-over-quarter. And as a management, we will try to keep this trend on and I expect performance to be slightly better than Q3 and Q4.
Aditya Sen
All right, you got my answer. Thank you.
Operator
Thank you. For participants to ask a question, you may press star and one. The next question is from the line of Anuj Mehta from JM Financial. Please go-ahead.
Tanush Mehta
Hello, sir. Thank you for the opportunity. Sir, as you know, cotton prices remain higher than the international prices due to factors like MSP and import duties. So how is the company managing this cost at disadvantage?
Rajeev Gupta
Okay. So first of all, I think this is a very valid question. Indian cotton prices as on today, first time we are experiencing this for last couple of months now. International prices of cotton are operating at highest-level of INR67 68. So there is lot of overproduction in international cotton, especially in US and Brazil, reflecting the cotton prices are at the lower level internationally, whereas in India, because of MSP being a reality, the prices are not coming below a level. So that is a challenge. And with the import duty in cotton other than long stappled cotton being in-place, so this may is a challenge.
This challenge is for across industry for all the spinning mills in cotton yarn production area. So we RSWM to the extent we are present in cotton segment are impacted by this challenge, which we are trying to do whatever best we can do in terms of internal efficiencies and better replacement of our product.
Tanush Mehta
Understood, sir. Sir, next question is on financials that our EBITDA has shown a significant growth of 2.6 times Y-o-Y. So what are the key drivers behind this growth and how sustainable is this trend in the coming quarters?
Rajeev Gupta
Okay. I’ll request Nitin to respond to this.
Nitin Tulyani
Okay. So the key drivers behind the increase in the EBITDA is primarily the capacity utilization, the better product mix and management of our cost. So we have been monitoring the cost very effectively. Through this, we have been able to reach to this EBITDA levels, which you are seeing in the financials.
Tanush Mehta
Okay, sir. And sir, the company has reported a PAT loss of INR8 crores in Q3 this quarter. So when do you expect — expect to return to profitability and what measures are being taken?
Nitin Tulyani
Okay. So if you would have seen the investor presentation, we have created a trend for the PAT. And if you would see this PAT has reduced from INR32 crores to INR8 crores. Now to return to the profitability, we are targeting to cover-up our cost of depreciation, so which is nearly INR38 crores for a quarter So our target is to turn EBITDA-positive soon, to turn PAT positive soon. At least for the coming quarter we are targeting that we will be PAT positive.
Tanush Mehta
Sure, sir. And sir, given the increasing finance cost as I can see, what is the current debt position and are there any plans to reduce debt?
Nitin Tulyani
Okay. So as of December ’24, our balance sheet has a debt of around INR1,600 crores, out of which primarily INR700 crores is for the term-loan and we have a repayment plan. So what we are doing as a strategy is we are not focusing on the capital expenditure. We are doing only normal capex and the capex that has been done in the recent past, we are trying to leverage those — leverage the ROIs being generated through those capital expansion. So this we are targeting to control our finance cost.
Tanush Mehta
Okay, sir. And sir, can you share what our normal capex?
Rajeev Gupta
Is the normal capex are basically for maintaining the machine health so that we can get the required level of efficiency and productivity. So at this movement with PAT and active, we are not going for any major modernization plan, but the routine capex to make machine health effective and continue to produce good-quality product. So that normal capex we are ensuring that all plants are sustained.
Tanush Mehta
Okay, sir. Thank you, sir. Thank you very much.
Rajeev Gupta
Thank you.
Operator
Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Saket Kapoor from Kapoor; Company. Please go-ahead.
Saket Kapoor
Yeah, Namaskar, sir.
Rajeev Gupta
Navaskar. Sir.
Saket Kapoor
Oplet, we also acquired an asset from Filament. So how have that acquisition gone through? And are — where are we in terms of we were — we were trying to put some capex to set-in new machines and remove the older one to improve the yields. So if you could just throw light on how the Guinea asset has start — has been contributing to the top-line and bottom-line?
Rajeev Gupta
Yeah. Okay. So you must-have observed increase in revenue for the nine months. One of the major contributor to that is additional revenue we have generated because of this acquisition of Guinea, our Chata operations. So that being said, in fact, this acquisition had two portions. One was spinning and other was knitting. Fortunately, in knitting operations, we have been able to stabilize significantly and certain new customers are also added and the capacity utilization of knitting side of this acquisition is improving on day-to-day basis. In spinning, being cotton particularly, as such, there is a challenge of margins as we discuss cotton prices and overall geopolitical situation and Vietnam and China being competitive sources for the supply of cotton yarn. So that still remains under the stress and Guinea flument operations to the extent of spinning are impacted by that.
Saket Kapoor
Okay,, can you give some color in terms of utilization levels from — especially from these two assets of Guinea, whether — how — where are we in terms of spinning and knitting?
Rajeev Gupta
In terms of knitting, we have improved. So today we are having to the tune of 70% 75% utilization for knitting. Spinning, that varies whenever it makes sense in terms of running, considering the profitability and the cotton prices. Spinning is something which you can improve or reduce depending upon the count and depending upon the availability of orders and making sense. So that we are more or less at the same level. There is no significant change in terms of operations for the spinning division of Guinea in this quarter.
Saket Kapoor
Right. And sir, [Foreign Speech] So if you could just outline to us and Guptaji, what are the key tasks which you have taken on-board in terms of your implementation and we congratulate you also this is a maiden call for you, if I’m not wrong. So what are your thought process for the same?
Rajeev Gupta
Okay. Let Nitin respond to your first question and then I’ll take on the second.
Nitin Tulyani
Okay. So as you mentioned that we are working on multiple cost optimization initiatives and we are also targeting on the production improvement initiatives. The first thing is focusing on our order book and ensuring our capacity utilization percent is more than 90%. So this is what we are targeting as a first step. Thus we have a very strong annual business plan being prepared and approved by the Board yesterday. And there are certain strategies which we have captured in that ABT, our annual business plan and one we will be coming to the next quarter. We’ll be definitely working along with those strategies and we’ll also be sharing what other steps we are taking to be more profitable and improve our losses which are coming at present.
Rajeev Gupta
Okay. So to add-on, Nitin, you know, first of all, thank you very much for your wishes. So I take a lot of pride in taking this role as a board member for RSWM, one of big legacy of more than six decades, which is inherited. And this company has been performing in terms of introducing new products and being a predominantly value-added company over the years. The challenges that I have with me is the financial performance at this point of time and last two years. So as a team, my first priority would be to come to a PAT positive and then ensure that we are running this unit efficiently, both internal as well as product placement and this raw-material sourcing and converting efficiently.So I think like all prudent management, we would like to focus on all areas of business and ensure that we do our business effectively and deliver to our shareholders as expected.
Saket Kapoor
Two points, sir. Firstly, what portion of our sales is export-oriented? And how much of the total sales are we is diverted towards export?
Rajeev Gupta
Okay. And second.
Saket Kapoor
And secondly, sir, how are the — when we are into the value-added yarn in terms of. But when we look at the entire textile chain, yarn is the most commoditized product and the lowest yielding if we say. So what — where are — what can we do as an organization to shield ourselves from this commoditized part of the story. We have been long in this business and a very successful story. But again, it is all about the commodity play specification and for.
Rajeev Gupta
I got your question. Reacting to first question, our current percentage of revenue which comes from export, it is around 30.5% of total revenue that comes from export. Now coming to Yarn being at the lowest step of value chain in textile, absolutely. And realizing that only as on today, RSWM have two other businesses, which is and Knitting, which are on downstream in terms of value addition. And we have our own yarn, which is produced and then shared with these two divisions for value-creation. Now second, within the gamut of yarn, we have this and other value-added yarns, so which we try to work on and this is the total plan we have, one, continue growing in the areas which are on the downstream. And second, within the yarn framework, we try to work on rather than less commodity yarns and try to see that we generate value there rather than eroding value there.
Saket Kapoor
Right, sir. And lastly, sir, on the power and fuel part, I think so some more efficiency in terms of sourcing of more renewable power and thereby lowering the input cost. What are our investment plan in terms of lowering the power and fuel expenses as a percentage of sales? And if you could just highlight? And also on the The cost optimization on the employee benefit expenses also, if you could just explain how these two.
Rajeev Gupta
Coming to the — coming to the first question on the power cost, there has been the reduction in the power cost if you see quarter two numbers versus quarter three, there has been a substantial reduction in the power cost and we have been able to drive the savings. And as far as the employee cost, we have been monitoring the employee cost aggressively and the increments also we are doing is just equivalent to the normal inflation rate and not more than that. And our CHRO is working aggressively to control this employee cost from the past five years. And if you see the overall cost of the company, it has been constant in terms of the employee payroll cost.
Operator
Thank you. MR. Kapoor, I would request you to come back-in the question queue for any follow-up questions. The next question is from the line of Madhu Sharma from Capital. Please go-ahead.
Madhu Sharma
Good afternoon, sir, and thank you for the opportunity. Sir, my question is with the Bangladesh facing economic and politically challenges. So do you see export opportunity shifting toward Indian textile players the book?
Rajeev Gupta
Yeah. Madhu, you are absolutely right with the uncertainties around Bangladesh. Indian garmenters, especially the parallel manufacturers have got an opportunity. Bangladesh being very strong in those areas areas. So I agree with you, some amount of business definitely will be shifted to India. And as Indian textile, we expect better orders as a result of that.
Madhu Sharma
Okay, sir, thank you, sir.
Operator
Thank you participants to ask a question, you may press star and one now the next question is from the line of Rohithori from Progressive Share PMS. Please go-ahead.
Rohit Ohri
Hi, sir. A couple of questions from my side and heartening to see that the losses are reducing. I hope you continue with this trajectory., a few questions for you. First one, I know it is early days for you, but what are the immediate short-term and long-term goals, which you intend to focus and the focus being more towards making the system more lean or maybe having more positivity on the bottom-line.
Rajeev Gupta
Thank you, Rohit. First of all, for your wishes. I do need that. And second, coming on the priority areas, first and foremost is to clock full capacity utilization, you know, that is the one priority that we have. Second is working on the product mix and try to see that if we are working on certain articles which are not yielding the required value generation to shift that to the products which are able to generate some profit. And third, making an organization which is agile, effective and able to live on the modern day of speed. One area which I’m personally driving is sustainability initiatives, which includes working on the products which are for sustainability and we as an organization have decided to move on from the traditional coal-based boilers to the bio-based fuel boilers and then energy generation from the solar and other green sources is another area which we are working on.
So overall, the thought of the organization is focus on sustainability and also generate sustainably results in terms of financial performance. So this is sum-up of most of the areas that we want to cover on.
Rohit Ohri
Rajiti, two-parts to the statement that you made. First one been you’ve been known for having lean organizations and-or maybe TPM or TQM, which are slightly Japanese kind of culture. How much of do you think that these kind of productivity enhancement projects can be undertaken in RSWM currently?
Rajeev Gupta
So we have businesses say and Darling, which can go to the lean management way of working, the pool system and then ensuring that we produce as per the demand from the market and ensure that you deliver in time, working on the on-time in-full concept and then for my other businesses, which are traditional businesses within. So taking the implementation of 6 Sigma and creating a culture of going to the gross route and doing the Y-by analysis in some of the areas which we are targeting to improve overall efficiency and create an environment of business excellence in the organization.
Rohit Ohri
Sir, our ROCE, that is somewhere in the range of 3.5% to 4%. By when do you think you’ll be reaching somewhere around 10% or 12% ROCE?
Nitin Tulyani
So Nitin, this side. So coming to the return on capital employed, we understand that last year it was nearly 4%. But if you see the past year trend, they were definitely around 8.5% and 16.3%. So as we are working on reducing our debt, we are also working on many off-balance sheet financing nowadays. We are moving towards factoring, we are moving towards channel financing, vendor financing. With these kind of initiatives, we intend to reduce our finance cost, which will ultimately add to the return on capital employed. So if you’re looking for an exact timeline, it will be difficult to comment now, but the coming quarters will definitely show the results.
Rohit Ohri
Nitin, that range of 8% to 14% ROCE, that was somewhere during the pandemic time when everybody had a glorious time, but you did also mention that there are certain off-balance sheet changes which you are looking at. So are you looking at probably consolidating some of the businesses of the 12 manufacturing facilities, do you think that there is.
Nitin Tulyani
Let me just explain you. So in terms of financing what we are doing, there is a platform called as so that basically is for MSME vendor financing.
Rohit Ohri
Okay.
Nitin Tulyani
So it’s just primarily reducing our overall finance costs. So we want to just get benefit out of interest.
Rohit Ohri
Okay. Okay. But there is no scope for probably shutting down some of the manufacturing units and consolidating them at one place and improving the capacity utilization because also said that we want to achieve somewhere like 90% capacity utilizations.
Nitin Tulyani
So doing consolidation of multiple units, we are not targeting in the near to — in the short-to-medium term. But definitely in the long-term, we can think our as doing this activity will again involve a huge amount of capital expenditure, which we want to avoid considering the past few quarter results. As we mentioned that we are focusing only on the normal capex as of now.
Rohit Ohri
You don’t see any scope of reduction of fixed costs or maybe variable-cost by doing this exercise, is it?
Rajeev Gupta
So we have to evaluate and work on this. Saying that in immediate quarter, we are not targeting this. And it will be premature to comment on any such point at this point of time.
Rohit Ohri
We are looking at higher horizon maybe two, three years or maybe five years from here. So that was the thing. You also did mention about biofuels. We had invested somewhere around INR35 crores or INR36 crores in this initiative. So what sort of benefits are already coming in this quarter, maybe the next quarter or maybe the next year? Do you see those things already reflecting?
Rajeev Gupta
There are two-way gains on this. One is in terms of lower operational cost and less steam cost, that is one which we — wherever we have implemented this initiative, that is already — we are getting that benefit, which you saw in this quarter results. Now around 50% of that will be implemented in the current quarter and we will see in the first-quarter of next year. As a second benefit is more that many of our customers now from the social compliance point-of-view, sustainability initiatives put this as a condition.
So to fulfill and serve to those customers, you need to have a fuel which is a sustainability driven. So I think the investment was targeted to serve both the leads, which I’m sure we’ll get advantaged in coming quarters.
Operator
Thank you, Mr Ori, we quest you to get back to the question queue for follow-up. The last question is from the line of Reuben Mathews from Equity Intelligence India Private Limited. Please go-ahead.
Reuben Mathews
Yeah, hi. Congrats on your assignment as the CEO. It’s been a very exciting time coming Ahead with you on-board and on a great set of numbers this quarter, very strong performance. I just had just one question. Seeing that RSWM is undervalued at this point, are there any plans to raise funds to maybe reduce that debt? That’s the only question I have.
Rajeev Gupta
If I repeat your question, you are — you are asking about whether we have any plan to raise the funds. This is what you’re saying?
Reuben Mathews
Yes.
Rajeev Gupta
No, we do not have any plan to raise the funds. We are canalyzing our existing businesses, turning them profitable and we are focusing on the very strilliant cash flows to maintain the working capital. So there is no such plan to raise the funds.
Reuben Mathews
Okay. Thank you.
Operator
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Nathan for closing comments.
Nitin Tulyani
So in closing, I would like to thank our employees, stakeholders and partners for their continued support. Together, we will drive innovation, expand our reach and create long-term value for all stakeholders. The journey ahead is promising and I’m confident that we will continue to grow and excel in the coming years. Thank you.
Operator
Thank you. On behalf of RSWM Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines