Sutlej Textiles and Industries Limited (NSE: SUTLEJTEX) Q3 2025 Earnings Call dated Feb. 10, 2025
Corporate Participants:
Rajib Mukhopadhyay — Whole Time Director and Chief Financial Officer
S.K. Khandelia — Advisor
Analysts:
Aditya Sen — Analyst
Kanishk Jain — Analyst
Vikram Suryavanshi — Analyst
Prerna Jhunjhunwala — Analyst
Amit Aggarwal — Analyst
Rahul Shah — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Sutlej Textiles and Industries Limited Q3 and Nine-Month FY ’25 Earnings Conference Call. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
This call may contain some of the forward-looking statements that are completely based upon our beliefs, opinions and expectations as of today. These statements are not a guarantee of future performance and involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made.
I now hand the conference over to Mr. Rajib, Whole-Time Director and CFO. Thank you, and over to you, sir.
Rajib Mukhopadhyay — Whole Time Director and Chief Financial Officer
Thank you. Good afternoon, everyone, and welcome to the earnings and conference call of Sutlej Textiles and Industries Limited for the 3rd-quarter and nine months ended 31st December 2024. I trust that you are all doing well. With me on the call today is Mr S.K. Khandelia, Advisor to Chairman of Sutlej Textiles and Industries Limited and IR Advisors, our Investor Relationship team. We have already uploaded the investor presentation and I hope everyone has had an opportunity to go through the same.
Let me start the call by giving you the financial highlights of the quarter, after which will update you on the business highlights as well as the industry highlights. Our spinning capacity used in current nine months was 97% against 91% in the corresponding period for nine months FY ’25. Our consolidated income came in at INR2,012 crores, gross profit improved by 15% to INR865 crores and EBITDA came in at INR48 crores against a loss of INR26 crores for the corresponding period last year, which is nine months FY ’24. We are continuing — continuously working on the cost optimization and strengthening the balance sheet. We have consistently maintained our debt-equity ratio below 1 presently, which is at 0.85. Our efforts are continuing in the direction with long-term prospects, which is envisaged in our results and will be more visible in the upcoming quarters.
For Q3 ’25, our consolidated total income came in at INR658 crores. Gross margin was at 42%, which was higher by 4% on a year-on-year basis — year-on-year basis. EBITDA is at INR77 crores from minus INR1 crores for the corresponding period. We are optimistic about the prospects of the Indian domestic prospects. The Indian domestic market is expected to boost up on the benefits given in the budget, but the situation at present remains muted due to wait-and-watch approach regarding the geopolitical landscape post Trump administration’s uncertainties and its implications for the trade. Positioning of key countries like Turkey has been worsening due to continuous increase in interest rates and consequent negative impact on the demand of the idea. Further, the positioning of tariff may take some more time to stabilize. The 4th-quarter will be of particular importance as it will be — it will set the tone for the next financial year. We are cautiously optimistic that the positive cycle for the textile sector may start in the next financial year.
Those were my opening remarks. I now request Khandelia team to please take it forward with the business and industry updates.
S.K. Khandelia — Advisor
Thank you, Rajib, and thank you all for joining us on this conference call today. As we look at the global landscape, today we find ourselves navigating through a period of significant uncertainties. Major economies worldwide are experiencing profound transitions is bringing its own set of challenges. It will be interesting to see the strengths of other countries that are important to us for the global textile trade. We are hopeful that after the dust settles, some of our major demand centers will have more clarity and order flow should start improving.
Coming to the domestic market, the recently-announced budget has recognized the strategic importance of textile sector, which contributes nearly 2.5% to India’s GDP. And the measures, some of the measures which I mentioned here, announcement of technology mission and that will boost production and improve quality of cotton and cotton is a major raw-material for industry. Another step taken by government is the imposition of custom duty of, let 20% or INR115 per kg, whichever is higher on imported knitted fabrics. This will restrict such imports from China and is a very positive step for domestic yarn manufacturing.
These textiles is predominantly in MSME sector and all the schemes amount for their benefit will directly help textile manufacturing. Further, most important is higher spending inspired by lower taxes and lower interest rates should be tailwinds for discretionary consumption-life textiles going-forward. Our strategic focus on fungible production capabilities, coupled with targeted cost optimization measures have already started yielding some benefit and are likely to continue going-forward also. We also have our ears to the ground to the changes which are happening to the industry and are taking appropriate measures to deal with such changes despite the overall subdued sentiment. We remain focused on optimizing our cost, product mix, production, etc., in line with emerging trends to stay ahead of the curve.
With that, we can now take your questions.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Aditya Sen from RoboCapital. Please go ahead.
Aditya Sen
Hi, thank you for the opportunity. Sir, my question is about EBITDA margins, which has been quite low since quite some time. So is there any strategic move that we are planning to get back to the previous margins or with — or will the margins be only driven by the macro events?
S.K. Khandelia
Yeah. As you know, as we have been explaining in our conference calls and you might have seen the result of other yarn companies also, which are manufacturing yarn that the EBITDA margin has been unfortunately coming lower since last two years because the has not been doing good worldwide, particularly the yarn industry. So that type of the margins which we have today will definitely appears to have to go up because these things cannot continue for the long. And I think people feel that now, as I mentioned that there has been positive steps for the domestic market and once the touch settles in the export markets after all these policy resigns and other things comes to the foray and the demand improves, it is the question of the demand and supply because demand is not emerging and supply pressure continues to be the same and that is the — and we are operating at full capacity. So that is the reason that the EBITDA margin is low at present and that is — that should go keep on improving going-forward. But the demand has to emerge and for which we are optimistic.
Operator
Aditya, does that answer your question?
S.K. Khandelia
Yeah. Thank you.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Kanishk Jain [Phonetic] from AK Investment. Please go ahead.
Kanishk Jain
Hello?
S.K. Khandelia
Yes please, continue.
Kanishk Jain
Yeah. Am I audible?
S.K. Khandelia
Yeah, yeah, please.
Kanishk Jain
I wanted to know about the strategy which you are planning or you will be adopting to stabilize our margins going ahead? Any specific plan I’m thinking of?
S.K. Khandelia
No, as I explained to you that there are two, three things. First thing is that demand is not emerging, supply is more. That is the basic region of EBITDA being lower. Second thing, whatever new things are coming, we are looking to the many things. You see, we are looking at any new product, new technology or any new thing, which we can do to improve our margin despite the subdued demand. But since the visibility is not there, we are not clear which products are to take forward, which technology to take forward further and what should we do to improve our margins in the new products or anything. So onwards the visibility is there, we can do many things. But of course, we are doing many things like — as I mentioned, we are optimizing our cost further. We are reducing our cost. We are changing product mix to some extent like from April to non-April, we are increasing. We are going-in value-added products like Laikra, like. Wherever there is demand of any specialty and by the specialty buyers, we are trying to cater to them and there we are getting encouraging results. So once the demand — demand emerges, we are fully geared to take benefit of that and the EBITDA margin should improve.
Kanishk Jain
Understood. Understood. That was very well. Sir. And also wanted to know about the marketing spend on different like card services and other products.
S.K. Khandelia
Can you please repeat your question?
Kanishk Jain
So I wanted to know marketing spend sir.
S.K. Khandelia
You see, we have a deep marketing team and we have never this type of — whatever we are producing, we are able to sell. You must-have seen the data that our inventories are not increasing, our sales are not increasing. We have different marketing centers and international markets, we are selling to 70 countries. And every corner of the country we are selling and we are selling for different applications, whether it is nickeling, weaving, garmenting, gray, dye, apparel, apparel, technical textile. So we are present everywhere. So we have the huge marketing extent. The only thing is that the overall worldwide demand is low for — for the particular type of things at present. So once the demand improves, the things will improve.
Kanishk Jain
Okay. Okay. Understood, sir. And also just wanted to know as if we are volume up pretty well, capacity or utilization is pretty good. So how long will it take to revise completely any target or anything you have in your mind?
S.K. Khandelia
See, we hope you see the — you might have seen the retailers Association of India, Government Association of India that when the demand started coming down, they thought it is a temporary blimp. But after two years, they say they also are not able to predict when the demand will re-emerge. So you see the uncertainty is there, geopolitical concerns, lot of conflicts, Red Sea crisis, so many things have been happening worldwide. And whatever happens in the worldwide, that definitely impacts Indian market also because 20% of textile is being exported. And if they — out of earlier, it used to be one-third of the total production. So that pressure is coming on domestic market also. So naturally, now we are seeing that the last year was a heavy election year. In that 20 of the major economies of the world, there were election in 20 countries. So that has created some sort of election mode and other things.
And then lot of geopolitical, as I mentioned, it was the entire period of 2024 and ’24 ’25 financial year has been struggling for the demand and some — of course, there has been certain shift towards certain products in which we are also adopting new type of products like recycled fiber and other things. So — but you see one can only hope that from the next year, all the dust will settle. Domestic demand should also improve because government has given income tax exemption. Now the rate of interest has also been cut. We are expecting the cut in the interest-rate going-forward in the USA as well as further interest-rate cut in India. Inflation is also settling down. So that will improve the purchasing power with the Massach. And once it improves, of course, it because after all, it cannot continue like this. So we hope that next year should be better than this year.
Kanishk Jain
Understood, sir. Understood. Thank you so much for answering my question. Thank you.
Operator
Thank you. We have the next question from the line of Vikram Suryavanshi from PhillipCapital India. Please go-ahead.
Vikram Suryavanshi
Yeah, good evening, sir. What was our production from the green fiber this quarter and are we seeing the improvement in that business also or how is it?
S.K. Khandelia
So far production is concerned, we are running at of our capacity. Production was good. Our capacity is 120 tons per ton, whereas we have basically produced 130 tonnes per day. But the point here is that the business basically this unit was set-up for the domestic captive consumption to have the better-quality of yarn ourselves because otherwise when we used to purchase from outside, there used to be variation in the supply of the fiber. So that was basically meant for our own fiber.
But having said — having said so, there has been an increase in the pet bottle prices before many applications of that bottle has been increased and like B2B, there have been requirements that even any plastic manufacturer has to use for the pet bottle manufacturers to do recycled portion also with the virgin. So the demand of pet bottle has gone up. And because that the pet bottle prices has been going up and some in winter season the supply also reduces. So because of that, there was mismatch between the fiber price and pet water price because the recycled fiber price is basically governed by the price of the fresh fiber, virgin fiber of the reliance and other manufacturers. So there were pressure on the prices, otherwise plant is running well and we had done 110% of our total production in Q3 was 12,000 tons. Okay, 12,000.
Vikram Suryavanshi
And this pet bottle prices, if you compare last year to this year, what kind of increase could be there or if you can give broad number per kg basis if it is possible?
S.K. Khandelia
You see, it is basically the delta between the pet bottle and the fiber price. So the last delta used to be higher by INR3 to INR4 per kg. And this year in this quarter particularly, delta has been lower by that much amount. So it is basically the delta which impacts. So I think that’s maybe a temporary feature and other thing. Let’s see how the year now because now the summer season will start and availability of hotel will increase and demand for recycled fiber should also improve. So we are selling something in-market also because we are buying from something from market also and selling also. So I think going-forward, it should improve.
Vikram Suryavanshi
Got it. And out of our total spindle, how much would be 100% cotton?
S.K. Khandelia
100% cotton is very — total we have about 40,000 is on which we run normally gray yarn, cotton grey yarn and rest are all on diet or something like that. But because at times when the demand for the or other things is lower, we have to run more of the gray yarn. But in gray yarn cotton, it is not 100%, absolutely. Sometimes it is polished cotton, sometimes it is 100% cotton. So maximum out of 4 less 13,000 normally about 60,000 sometime, but normally it is 40,000 only. On blended years, great.
Vikram Suryavanshi
Got it. And lastly, our home textile business also seems to be impacting the profitability, but are we seeing not seeing some benefit of lower raw-material cost in-home textile or is there something else in-home textile business and we need to improve?
S.K. Khandelia
You are right. You are very much right. What happened that since there were problems in the Middle-East, our exports to Middle-East suffered very much. Secondly, we intentionally reduced our domestic sales to some extent and particularly through the wholesalers because we find that the payment issue is coming there. So we have to remain — we have tightened our credit to the domestic wholesaler, not for other things. While our exports are continuing at the same level and our main issues — another issue since that we have the job processing also. And since the job processing was — Fabric was doing well, job processing is inward traffic was low. So in the job — job processing, the turnover was down by INR6 crores and naturally you know the extending charges is always there and that impacted the results of this quarter.
Vikram Suryavanshi
Okay. Understood, sir. Thank you very much.
Operator
Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.
Prerna Jhunjhunwala
Hello, sir. Thank you for the opportunity. So just wanted to understand what — how much percentage of your yarn volume would now be value-added yarn and you had poured into knitted fabric as well. So is vertical integration helping you do much better than being solely yarn or is it still very small.
S.K. Khandelia
So we have a very small capacity of knitting. We have only 18 knitting machines and that were put out basically only to test the waters for the. So unfortunately since the market has been not been doing well, we could not expand that capacity and we could not put the process house per knitting also. So that’s a very small capacity. So knitting downstream, we are looking into once the visibility is clear, we may put more knitting with the processing. So that was the one part of it. So for value-added yarns are concerned, it depends upon season to season, time-to-time and application to application. But the overall market has been down on throughout on each and every segment. So that’s very difficult to say how much is the value-added at this point of time.
Normally, we used to have about 20% of the value-added yarn, but it is fluctuating now because in such type of — in such a recession types of the — when the demand is low, people want the cheapest type of yarn. They don’t need those type of yarn except for specific application. So demand of those type plants, yarn is little lower at this point of time, but we hope that as the things improve going-forward, the demand will again come. Otherwise, we normally use 15% 20% of value-added yarns. And what — if you see, if you compare with the yarn, Milan, 100% Milan is the value-added that way. So it’s a relative term.
Prerna Jhunjhunwala
Okay. Okay, understood. So sir, but if I look at your numbers three years, four years back and today the profitability has taken a huge hit. Is it the market supply of blended yarn wherein more-and-more cotton players have started doing getting into blended yarn impacting your profitability or is it largely more a demand concern, part one. And second, whether we can get into newer products or be more cotton intensive because if I look at the numbers of other cotton yarn manufacturers, they have value addition as such. I understand, but their profitability as compared to last year has improved. So is your cotton capacities is also doing better versus blended yarn capacities? Could you help us even give some color on that?
S.K. Khandelia
You see, if you see — let me take your question in two, three parts. If you see the died yarn synthetic yarn, everybody is in the same boat. There is no — nobody is doing better than what we are doing. Rather we may be doing something better as we have entered to certain different type of yarns. And fortunately, there has been good demand in the market. So we have been able to run our full capacity of synthetic diary ions. So that was the one part. We have the highest capacitive synthetic among all of our peers. Now coming about the value addition in cotton and cotton blended gray yarn, if anybody has a downstream activity in cotton or say there are different, say, if you talk of the fine count of the South mills, that’s a different setup.
So we have always been traditionally in, Milan and other things. Milan is doing well. We are doing better than our competitors in. But since the overall demand say, Bangladesh situation came into in-between, so that affected the demand for Milan yarn, which is one of the value-added yarn. So in gray yarn, nobody — I don’t think anybody except new established mills, which have been established under the subsidy and have been new plant fully automated and they are meant for the yarn production. Their expenses are for the automated plant. So they may be doing better and they might have done better. And if you will see our results, we have done much better than the last year.
Prerna Jhunjhunwala
Yeah. Okay. Understood, sir. And sir, in-home textiles, we had acquired companies in the US for a marketing purpose. And how is our share of outsourcing versus brand and supplying to our own units in US and how are we progressing over there?
S.K. Khandelia
No, we are supplying very little quantity there. Basically that is a distribution company and they are purchasing from worldwide. And that’s a small company and but since the US market has been struggling because you know the interest-rate on the home knew how much about 7% there, which used to be 2% and 2.5%. So because of that, the home sales is less there. And due to that, there has been less demand for the type of home textile, which they have been distributing. So that company has been suffering. So from our — from here, we are supplying to other retailers and other converters in the US and our export to North-America is very good. But from our — to our company ASM, they are in different price break at much higher price bracket and they are supplying to specific products and specific customers.
Prerna Jhunjhunwala
Okay. Understood, sir. All the best, sir. And I’ll come back to the questions if required.
S.K. Khandelia
Thank you.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Amit Aggarwal from Leeway Investments. Please go ahead.
Amit Aggarwal
Hello. Yes, good afternoon. I read the same question last year. I’m repeating the same thing. A last conference that our employee cost to turnover is still very-high, 15%. All of the yarn companies have employee costs around 10% of the turnover. So last conference you said that we are doing something taking steps to reduce it, but I don’t see any change compared to the last quarter. Any comment on your — on that part?
S.K. Khandelia
Yes, you are very much right. Unfortunately, what has happened that our efforts are going on and we have reduced certain number of employees and number of employees have reduced, employees postal to that extent in absolute terms if you take the volume and other thing. But what happened that the market has not been that good. So revenue has not increased in that line. So until unless revenue — our efforts are going on there. So since we have been always in and says if our capacity in terms of number of hispanic cities, okay, we are 100%. But in terms of quantity, we can produce much more, but there is no demand to that extent, say, for the count and other thing. On the same produce finer found, the production will be very low.
So our strategies for say a particular number of average counts at 28, 27 and whereas the average count coming is higher. So because of that particular set of things, the employees cost is coming higher and definitely our employee cost, as I mentioned last-time, and we are taking steps and we are rationalizing the workforce and it has been the particular type of setup. So now we are going for some sort of wherever the automation is possible, wherever rationalization is possible. But you see, it is not a one-day affair. It’s a continuous way we started the process and you will see the result going-forward and it will be quarter-after-quarter, we’ll hope to see some improvement.
Amit Aggarwal
And do we expect a significant change in next 3/4 or it will take one or two years.
S.K. Khandelia
If the revenue changing, it may immediately come down. You see, if the rates improve, if the found demand comes in, if the entire capacity in terms of the quantity is also used, not only in terms of, which we are already using, the revenue will automatically increase. So earlier we even — we have even achieved revenue of INR3,000 crores. Now it is coming to about INR2,600 crores, whereas the increase is always there, whether it is the wages, whether it’s the staff, increments are always there. So — but we are continuously rationalizing our workforce. And during last few months, we have rationalized a number of workforce. And you will continuously see the result, but it will not be that in last two, three years, it will be one year affair, it may be two-year upper. So but continuously the revenue goes up automatically 2% like 2.5% can come down immediately even if the revenue goes up.
Amit Aggarwal
So do we need to automize more and modernize machinery compared to the other competitors or we are as good as other competitors regarding the same?,
S.K. Khandelia
You see, there are two type of things. We are in the IDR. In the IDR, we have the — we have been continuously modernizing our machinery. This year also we spent even INR50 crores for different type of wherever the automation and other things can be possible and something like that. We always keep modernizing to the extent required. Others where anybody has the gray yarn and also with them. But in the gray yarn, the question is 5% even today. In the — if anybody is manufacturing on, the employees cost will be only 5%. If anybody has, let’s say fabrics with them, the cost will be lower. So these type of things are there with the same type of cost we have been earning good — good EBITDA. But definitely we are continuously working on that. We have persist of this problem as I explained to you last-time that there are two-parts. One-side is that how we can improve our revenue. Another thing is how we can reduce our employees cost. So on both fronts, we are working and quarter-after-quarter, but quarter may be even a shorter period. But if you will see the next year, say, ’24, ’25 compared to that in ’25, ’26, I am — we are hopeful that the percentage will come down.
Amit Aggarwal
Okay, my last question is regarding currency exchange. So the dollar has increased compared to Indian rupee in last three to three months. So should that help in our margins or the cost would be adjusted as per the exchange rate?
S.K. Khandelia
You see a depreciation of rupees will definitely improve the margin, but in the products which we export to USA. If you talk to other countries like South Korea or any other country, the depreciation in their currency has been much more than our currency. So there we don’t get benefit. So it is the competing — competing countries currency, we save is rupee per se dollar. So wherever it is a US — whatever we are exporting to US, we will get benefit there. Similarly, in some say specialty products where we have the bargaining power, there we will get benefit, but most of the things we will not get benefits.
Amit Aggarwal
And I imagine that our biggest competitor can countrywise is China. So is there any uptick in the Chinese market or is it struggling or is it also struggling like Indian market?
S.K. Khandelia
No, no, we are not exporting to China. We are not exporting…
Amit Aggarwal
Our competition is, I think competing country maximum is China only, China and Pakistan…
S.K. Khandelia
It is depreciated much more than us. So suppose China is exporting to USA and we are exporting to USA. We are in the same boat. And if China is exporting to some other countries, we are also exporting to some country, we are also on the same boat. So Indian market is concerned, it’s a different story. In Indian market, how the imports can do. Sir, recently, as I mentioned in my opening remarks, there has to be huge import of the knitted fabrics, which has spoiled our entire winter yarn garment market in the Ludhiana NCR. But now the government has come out with the rupees INR115 minimum import due to. So that will stop that. So those types in domestic markets, China comes through different countries also, say Vietnam, they will through Vietnam, they will through other countries. So government is aware of that and government is taking care that the imports will not be there. So in domestic market, it will not impair.
Amit Aggarwal
Okay, thank you. That’s my last question.
Operator
Thank you. [Operator Instructions] We have the next question from the line of Rahul Shah from DD Associates [Phonetic]. Please go ahead. Rahul Shah, your line has been unmuted. You may proceed with your question.
Rahul Shah
Hello.
S.K. Khandelia
Yeah, please.
Rahul Shah
Yeah, am I audible?
S.K. Khandelia
Yes, please. Yes. Very much.
Rahul Shah
So sir, I had one question, sir. Regarding, sir, like what is the like volume growth in both yarn and home textile segment and like how do you see the contribution in volume from both the segments going ahead.
S.K. Khandelia
So as I mentioned to you, if you compare Q2, Q3, since we have operated all the spindles in Q2 as well as in Q3, so there has not been any volume growth because until unless the demand pattern changes, volume growth can happen with the account, which has not been there. So that is more or less it is the same. If you talk of the home textile in exports, our volume growth has been the same and volume was the same. And in domestic, of course, intentionally we have reduced our volume there. And in processing, of course, since I mentioned to you, since the business is not doing well, processing job work was less. So there some volume has decreased. Otherwise in yarn, the volumes are almost same.
As if as compared to last year, if you will talk, last year we cleared the inventories into FY ’23, ’24. There was huge stock in the beginning of ’23. So we cleared those sales invent — sales will be more, but the production is more this year as compared to last year nine months, this year production is much more.
Rahul Shah
Okay, sir. And like going-forward, how do we expect the like volume like after like macro conditions if you consider?
S.K. Khandelia
As I mentioned to you that we hope that the consumer purchasing power has improved because of the change in the tax-rate at the bottom. Secondly, rubby and creep crop has been good. Third thing is the interest-rate has also come down. So many EMIs would come down and the inflation is also coming under control. Say last year, our GDP has gone down very much as compared to previous year. And this year, I hope that the capex and other things would happen by the government and others. So if the GDP improves and all these measures taken together, we are hopeful that the next year should be better than this year.
Rahul Shah
Okay, sir. Thank you so much, sir.
Operator
Thank you. [Operator Instructions] Ladies and gentlemen, we have no further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
S.K. Khandelia
Thank you. Thank you. We are optimistic — optimistic and but cautiously for the coming year and we hope that the next year should be better than the current year. Thank you.
Rajib Mukhopadhyay
[Operator Closing Remarks]