Vardhman Textiles Ltd (NSE: VTL) Q3 2025 Earnings Call dated Jan. 22, 2025
Corporate Participants:
Neeraj Jain — Joint Managing Director
Rajeev Thapar — Chief Financial Officer
Sagrika Jain — Executive Director
Analysts:
Roshan Nair — Analyst
Awanish Chandra — Analyst
Keshav Garg — Analyst
Pankaj Bobade — Analyst
Vikram Suryavanshi — Analyst
Rupam Jaiswal — Analyst
Nirav Savai — Analyst
Mohammed Patel — Analyst
Ritwik Seth — Analyst
Monish Ghodke — Analyst
Prerna Jhunjhunwala — Analyst
Anik Mitra — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Textile Limited Q3 FY ’25 Post-Results Earnings Conference Call hosted by Batlivala &arani Securities India Private Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phones. Please note that this conference is being recorded. I now hand the conference over to Mr Roshan Nair from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Roshan Nair — Analyst
Thank you. Good evening, everyone, and welcome to Q3 FY ’25 Earnings conference call of Limited. On behalf of B&K Securities, I welcome all participants and management of Textiles to the call. We have with us today Mr Neeraj Jain, Joint Managing Director; Ms. Sagrika Jain, Executive Director; Mr. Sushil Jhamb, Director, Raw Materials; Mr. Rajeev Thapar, CFO; Mr. Mukesh Bansal, Head, Fabric Marketing; and Mr. Varun Malhotra, Head of Finance. Without further ado, I would like to hand over the floor to Mr. Neeraj Jain for his opening remarks, post which we can have a Q&A session. Thank you and over to you, sir.
Neeraj Jain — Joint Managing Director
Thank you. Good afternoon, everyone. Welcome for Q3 conference call on the — our quarterly numbers. So we had a Board meeting today and I’m sure the numbers you would have seen by this time. So the business continues to be — there are all ups and downs in the business. On one-hand, spinning business still struggling with the higher raw-material compared to the international prices, whereas the fabric business is doing better. So as a result, the overall results of the company compared to the Q2 are a little low, but if we compare it with the corresponding quarter, they are definitely far better than the corresponding numbers. So in terms of the utilizations, I think both businesses, we are doing good, both the businesses in terms of the customer-base, product base or the utilization, the company is doing pretty good. We have announced lots of capital expenditure last two quarters. That’s all-in place. And I think as per — that’s all going as per the plan only. So there are a few fresh CapEx which has been announced for the modernization as well as for some sustainability, etc., etc. So we can stay come to the QA and we can we can delegrate and we can discuss all the issues which comes by way of a viewer one-by-one. Thank you very much.
Questions and Answers:
Operator
Thank you. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Awanish Chandra from SMIFS. Please go-ahead.
Awanish Chandra
Thank you very much for taking my question and congratulations the whole management team on decent performance continuation. Sir, my first question is on the margin front. I mean, I understand that spot spread and the company performance cannot be related to one-on-one, but cotton prices has gone down in-quarter three and yarn prices, whatever industry data we look for and there was a good spread versus quarter two, there was a good improvement in the spread, but that is not getting reflected at all-in sequential margin improvement. So could you sir, highlight this thing that whether we will have better improvement in-quarter four, with some delay or any other reason?
Neeraj Jain
Yeah. So if we look at quarter two versus quarter three, we — when the quarter two started, the lease of future was also far better and the international prices were also better. Over a period of the last two, three, four months, the of future continued to came to come down and it is now ruling in the range of about 67, 68 US cents per pound. About the Indian prices, point is right that Indian prices have come down from because if you look at two, three, four months back, it was almost in the range about INR58,000, INR60,000 a candy, which has now come down to INR54,000 rupees. So from that perspective, definitely there is an improvement in the Indian cotton prices. But as far as our company is concerned, that was not the case because we had bought the cotton last year and the cotton which we were using in the second-quarter was bought almost about a year back and our average cost was in the same range of INR54,000 only. So though the market prices of cotton was higher, so people were losing money whosever was buying cotton at that stage, we were not losing money, but at the same time, the margins improvement did not happen for us because our actual cost was almost same in the second-quarter versus 3rd-quarter. So that’s why this is not showing any improvement. Two, the overall yarn prices also tumbled to some extent because of the near-future. So I think since the yarn prices did not increase, cotton prices remain same. So I think that’s the reason the numbers would not be improved.
Awanish Chandra
But we can hope for quarter-four, right, because the lower cotton prices which is now that will get reflected somewhere in our number, right?
Neeraj Jain
Not really, not really, because we go by the — the — let’s say, last six months versus next three months going by today’s cotton position, there is no change in our cost of raw materials. So we were — we bought the cotton, as I mentioned in the last season at an average cost of INR53,000 INR54,000 a candy, which we have been using for last six months. The current prices are also same. So whatever we are buying today, even if we continue to use in next three to four months’ time, there is not likely to be any major improvement in the margin unless new future increases or the yarn prices improves.
Awanish Chandra
Okay and last thing on this front, how much cotton inventory we are carrying.
Neeraj Jain
So it’s a starting of the season in India, starts somewhere in October, November only. So I think it’s only about last two months, two two and a half months where the cotton is coming to the market. So to that extent I think we have started buying it slowly. I’m not saying, I mean generally typically we have a six month stock or seven month stocks by the end of the 31st of March. So it looks like going by today’s pace we may be close to that figures only.
Awanish Chandra
Okay fine. Yeah okay.
And sir you have talked about Capex in various conference call and various press release also you have highlighted all the Capex in bits and pieces just for clarity purpose. If you can just talk about this much Capex in yarn fabric and modernization and at what state all the projects are that will be very helpful.
Rajeev Thapar
So the total Capex announced by the company is almost in the range about 3400 crore. And out of that all these schemes we are working in except one of the project where the government approvals are still not there that’s close to about 400 or 500 crores. So the work which is going on as of now is almost close to about 2800 crore rupees. And that’s all going as per schedule only and we expect that within this calendar year maybe by November, December this Capex will get completed.
Awanish Chandra
Okay, thank you very much. I will come back in queue.
Operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Keshav Garg from Counter cycle pms. Please go ahead
Keshav Garg
Sir, I’m trying to understand that you alluded to the fact that yarn prices also declined quarter on quarter. So if you could quantify that on a per kg basis what was the average yarn realization in the third quarter and what is the average yarn realization at present? And what is our cost of cotton? I think you already answered that. It’s around 54 rupees kg if I understood it correctly. So that’s the first question.
Neeraj Jain
So if we look at six months back, the yarn prices were almost touching in the range of about $3.25 cents or so per kilogram. And slowly, depending upon the position of the company, it kept coming down. And as of now the current prices of yarn are in the range of about $3 per kilogram of yarn.
Keshav Garg
Okay, answer. How has it changed? Quarter on quarter,
Neeraj Jain
Second to third quarter?
Keshav Garg
No sir. So from third quarter till today that is fourth quarter.
Neeraj Jain
No, no. So this price is third to fourth is only 15, 20 days has gone. So the prices are almost same today.
Keshav Garg
Okay. And so how is the demand situation? How is the demand supply situation for Yan? I mean basically globally and as well as in India. And sir, by how long you think that the demand will take care of the excess supply so that our yarn spreads can go back to the pre Covid level and where we used to do around 20%, 16 to 20% EBITDA margin which is now come down to 13%.
Neeraj Jain
So I don’t know where are you seeing this 13%?
Keshav Garg
No sir, I’m saying that right now our standalone EBITDA margin is around 13%. And sir, pre Covid if we look at FY16, 17, FY. So it used to be around 20% operating margin. Even in FY19 it was 18%. So what I’m trying to understand. And then this margin shot up during FY22 which was an aberration and now it has come down to low to mid single digit, low to mid teens. So what I’m trying to understand that when will the our yarn spread? When will they normalize?
Neeraj Jain
Okay. Okay. So first question is on the demand and supply overall demand is okay. There is not much of a concern on the demand side. So I think in terms of international demand or domestic demand, it’s reasonably okay. On the supply side because of the very bad margins in last two years. I think there are lots of small capacities which we understand as the industry estimation has already stopped. As per the estimation done by one of the large textile players. It is understood that almost six, six and a half million spindles have already stopped in India on a permanent basis which is almost like 15% of India’s capacity. And to that extent also I think demand supply is getting adjusted. So from the demand side I don’t think there’s really A big issue as of now coming to the margins. While margins are lower for Indian textile cares, our raw material cost today is much higher than the international prices. If you look at the Indian cotton cost in India for last 15, 20 years will always be on an average $0.04 to $0.05 higher than new York future. But this is the time. Even today New York Future is at 67, 68 cents. Indian cotton is available at 80 US cents. So we have 12 cents higher than the New York future. Yarn prices get established based upon the New York future that anyone who is getting a cotton, let’s say in Vietnam or in Bangladesh or in Indonesia, what is the cost of cotton for them and how do the pricing happen? So to that extent Vietnamese spinner is still making money. But when it comes to India we have two issues which we have explained or discussed earlier also. The one issue is our cotton prices have become higher because of the minimum support price where the CCI is buying the cotton at a minimum support price from the market. As a result of that, our cotton cost today or the market size of cotton is today 54,000 rupees which is equivalent to 80 years time. So these situations once in a while have come earlier also. But at that stage we used to import cotton in India and which will utilize all the excess cost over here. Unfortunately we have a board duty on import of cotton almost 11% which was imposed by the government in the budget 21st 2021. As a result of that, being bought in the cotton in India is going to be 11% higher. These are the two reasons. The Indian cost today is much higher compared to the world market. So the situation will not improve by demand and supply only till the time our raw material crisis comes down. And this is the reason our margins are low. The moment our dominated price comes in line with international markets, I think the margins would improve immediately after that. So it’s nothing to do with the demand supply. It’s more to do with the raw material cost which is much more expensive in India compared to any other part of the world today.
Keshav Garg
So if we see pre Covid so then was the situation different like I mean than what is today? Because I understand the MSP used to be then also and Cotton Corporation used to buy cotton then also. This was basically what has changed from pre Covid to now.
Neeraj Jain
So there are three things which have changed. One, New York future used to be in the range of 7580 US cents. So even if the MST was increasing over here the Indian MST was still lower than the international parity so as a result it was not impact acting as today New York future is at 68 cents. Whereas the Indian cotton or the MSP of Indian cotton is almost equivalent to 80 cents today. So our cost has become higher. So one, New York future has come down. Two, India is increasing the MSP every year from 5 to 7%. So three years we have increased it almost by 18, 20%. And the international price is not going up. We have become costlier compared to the world markets. And the only course for corrective course for the Indian spinning industry was to import cotton. So that your our cost is not higher than the world market even though the MSP could be higher. But unfortunately 2021 there is an import duty which was imposed by the government in the budget of 2021. So we can’t import also. So last three years our situation of raw material actually gone against us. So all three factors are forcing spinning not to do good in India.
Keshav Garg
Right sir? Understood. Thank you very much.
Operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question is from the line of Pankaj Bobade from Affluent Assets. Please go ahead.
Pankaj Bobade
Thanks for taking a question. Am I audible? Yeah. Yeah. How is the situation in Bangladesh? Is Indian textile industry benefiting from the turmoil out there?
Neeraj Jain
So Bangladesh condition is okay. There have been some instances where there are some disturbances in different parts of the country. But if you look at their sport figures, their overall production or our sales, the Indian yarn going to Bangladesh, there is no reduction in that. And we understand from our various customers we are running full capacities. So as such there doesn’t seem to be any major concern from the Bangladesh perspective.
Pankaj Bobade
Thank you. Thank you.
Operator
The next question is from the line of Vikram Suryavanshi from PhilipCapital. Please go ahead.
Vikram Suryavanshi
Yeah. Good evening sir. Obviously we understand the impact of very high cost of raw material for cotton. How it has impacted our yarn export which used to give on monthly basis. How is our export volume? If you can share that view, I think would be helpful. And second, should I ask second question now or after time?
Neeraj Jain
So Indian yarn export, we used to do almost 100 million kg of exports from India as a country. So in this period also if you look at last 10 months, 15 months, our average export from India is in the range about 100 million kg only. So there’s no reduction as far as the export is concerned from India.
Vikram Suryavanshi
Okay. So basically volume has remained but margin is under pressure.
Neeraj Jain
Correct? Correct.
Vikram Suryavanshi
Okay. And in terms of capacity utilization in fabric, how much it is and how we can look at the export opportunity in fabric going forward.
Sagrika Jain
One second. Fabric utilization currently going forward. So currently our fabric utilization is at almost 100%. And as you rightly know that we’ve already plan for our line for another production line expansion in plant, in our plant. And the expansion should be coming at around September this calendar.
Vikram Suryavanshi
Okay. And would it be possible to share what would be the mix within fabric in terms of raw material between cotton and say synthetic?
Sagrika Jain
New production line expansion, our expansion, the one that I just spoke about would be more cotton and cotton based.
Vikram Suryavanshi
Okay. Expansion is also important. And within our spindle is there an ability to convert some of the spindle into synthetic blends? The way we are seeing demand is growing for particularly some of the blends and all…
Neeraj Jain
We are already doing that. But unfortunately even on the blended glass there is a problem because we have a law in India now where any import of polyester or viscose we require to get approval from BIS Bureau of Indian Standards as a result and which has to be certified by the government or bis even for the factories which are situated outside. As a result of that there is no registration the government is doing. As a result of that there is no import of polyster or viscoses coming in India. So today the Indian prices of polyester or viscose are almost costlier by about 10 to 15% compared to any spinner which is getting it either in Vietnam or in China. So unfortunately the non tariff which has been imposed and as a result of that we are not really very very competitive on those products also in the world markets.
Vikram Suryavanshi
Understood sir. But sir, I think while listening to you then if you look at when we are talking about increasing the export for India and we have disadvantage of almost 11% in cotton, again 10 to 15% disadvantage in synthetic. Don’t you think it will be major bottleneck for the our target for export and how industry is looking to address this issue?
Neeraj Jain
It’s a big concern because exports can happen only if the if the manufacturing sector keeps improving. So on the spinning side we are very clearly looking at there’s no expansion happening. And if you look at the machinery manufacturers today, they are all running at an average utilization of 40, 50% only. So one, there is no expansion happening. Two, as I mentioned earlier, as per the industry estimate, only almost six, six and a half million spenders have stopped and remaining. Also since we are not making money, most of the spending sector, the modernizations are also not happening. So I think as of now there seems to be a concern till the time the government decides on the basic raw material.
Vikram Suryavanshi
Okay, and last question on how is the cotton production outlook?
Neeraj Jain
So Kodaksha cotton, the cotton cultivation came down by about 7,8% last year. But at the same time I think the weather has been favorable. So it looks like last year the total crop was almost 31 million bales in India. It looks like though the government has given or the CAI has given an estimation of 29.8 million bales. But there could be a possibility this going to almost 31 million bales as well. So in terms of crop size we can be comparable to the last year. It looks like as of now.
Vikram Suryavanshi
Understood. Yeah. But because the prices are below MSP is there any fear of diversion to farmers can divert other crop next season?
Neeraj Jain
Not really because the prices are lower than MSP. Farmer doesn’t have any impact of the same because CTI is buying. So example today this season the total 17 million bales have come to the market till now and almost 50% has been, if not 50, 45% has been preferred by the CPI only. So farmer, there is no, no issue or a concern to the farmer because they are in a position to get the MSP whether the market buys or CTI buy so has been buying and today they’ll have one of the biggest stock available to them. Almost 7.5 million bales or so. So out of 17 million days which have come CK procured 7.5 million and they’re all holding it into their stocks as of now. That itself shows the market is not ready to buy at these prices.
Vikram Suryavanshi
Got it? Yeah, that was very helpful sir. Thank you very much.
Operator
Thank you. A reminder to all participants, you may press Star and one to ask a question. The next question is from the line of Rupam from Investwell Agent Private Limited. Please go ahead.
Rupam Jaiswal
Hello.
Operator
Yes rupam, please go ahead.
Rupam Jaiswal
Hi sir. Actually I missed the part regarding the CAPEX plan. So could you just provide in detail what kind of capex and what is the ongoing capex and upcoming capex plan and with the timeline.
Rajeev Thapar
So we announced a normal capex of 850crore rupees. One of the schemes which is going on as per schedule and we expect it to be completed by September this year or maybe June this year. In addition to that we announced 100% fabric synthetic filament based product. That’s about 350 crores. That’s also as per the schedule and we expect it to be commissioned within this calendar year itself. In addition to that we have announced almost 600 crore rupees for the sustainable or the green power. All that capex is also likely to be completed within this calendar year. In addition to that we announced a fourth line of our fabric processing with a cost of almost about 400 crore rupees. Thus they’ll also get completed within this calendar year itself. In addition to that, today we have announced another capex of almost 400 crore rupees. And that also we are expecting it to be completed within this calendar year. So except one open end project of almost about 450 crore rupees where we get to get the approvals from the government, I think all remaining 2,800 crore rupees is going as per schedule. And within next eight to nine months time or 10 months time, most of this will be completed.
Rupam Jaiswal
Okay, thank you sir. That was my question.
Operator
Thank you. The next question is from the line of Nirav Sawai from Abacus. Please go ahead. Nirav, please go ahead.
Nirav Savai
Hello.
Operator
Yes, Neera, please go ahead.
Nirav Savai
Yeah, so my question was the total capex you said is about 2400 crores. Right? 2400. And of that 850 crores is. Can you just give us a breakup? As in you said green power is about 600 crores. And filament yarn. He said about 400 crores. Right.
Neeraj Jain
So the normal capex of yarn and fabric is almost about 1200 crores. Okay. 600 crores is the green power. Okay. 400 crores for the fabric expansion of weaving existing lines. Okay. Another 400 crore for the 100 synthetic fabric business. Okay. And another about 500 crores on the open end project which I said as of now is on hold.
Nirav Savai
Okay, so if I look at this ongoing 1200 crore capex which is behind the fabric and yarn, what kind of capacity do we see this post completion or is it replacement of existing machines?
Neeraj Jain
So on the spinning side it’s all replacement of the existing machines. Except maybe some marginal improvements can come into that. On the fabric side the weaving capacity of 400 crore will add about 30, 31 million meters per annum capacity. And the 100 synthetic product will have 15 millimeters per annum capacity.
Nirav Savai
Okay, so synthetic is about 15 million meters. Right?
Neeraj Jain
Million synthetic, 31 million cotton line.
Nirav Savai
And this fabric expansion which you said separately 400. So how different is this?
Neeraj Jain
No, that same existing
Nirav Savai
Part of the 1200 crores only. Okay, got it. All right, thank you.
Neeraj Jain
Only modernization capex.
Operator
Thank you. Nirav. Yeah. The next question is from the line of Mohammed Patel from Care Portfolio managers private limited. Please go ahead.
Mohammed Patel
Yeah, hi I just wanted clarity. You said procurement cost of cotton for current year is almost similar to last year at 53, 54,000.
Neeraj Jain
Yes.
Mohammed Patel
Okay, my next question is related to margins. So with the ongoing capex which is focused on modernization and green energy which is going to lead to cost benefits. So can this lead to the margins improving from current 13% to 15% by FY27?
Rajeev Thapar
We are hoping because all this capex which is being done definitely there should be an improvement in the margins on two accounts. There will be cost reduction because of the modernization and also things will be more flexible and there could be a possibility for us to do more value added products as well. So hope is this only that with this kind of modernization our beta should improve by 2, 3%. Let’s look at that.
Mohammed Patel
It should happen starting FY27. Yeah. Yeah. Thank you.
Operator
Thank you. A reminder to all participants, you may press Star and one to ask a question. The next question is from the line of Ritwik Sheth from One Up Financial Consultants Pvt Ltd. Please go ahead.
Ritwik Seth
Hi, good evening sir. So just one question, sir. What is the cotton Yarn spread in Q3 versus Q2?
Neeraj Jain
So it can be we spread, if you look at the Indian cotton, almost in the range about 70 per kg.
Ritwik Seth
70 US cents per kg of yarn for us in Q3. Yeah. And that would be Q2 would be closer to 60.
Neeraj Jain
So YouTube was almost, I mean a little better or I’ll say almost comparable.
Ritwik Seth
Okay, so around 70 cents only. Yeah. And sir, earlier you had mentioned that at $1.
Neeraj Jain
Yeah. So if you look at 321, it used to be the benchmark always used to be about $1.
Ritwik Seth
Okay. So basically at $1 you would make enough money to extract fund in spinning capacity like you would be incentivized to. And, and that would get corrected if the cotton prices are in line with the New York features as they were earlier.
Neeraj Jain
Correct.
Ritwik Seth
Okay. Okay, so that’s it from my side. Thank you and all the best.
Operator
Thank you. A reminder to all participants, you may press Star and one to ask a question. Participants please press time one to ask a question. The next question is from the line of Monish Ghodke from HDFC Mutual Fund. Please go ahead.
Monish Ghodke
Sir. In the opening remarks you highlighted that polyester prices in India are expensive 10 to 15% as compared to global prices. And since we are doing a capex in man made fabric. So how do you plan to price this product? Will it be at par with global prices or it will be higher? And what kind of segment are we targeting here.
Sagrika Jain
Hi. So regarding raw material for our filament for our synthetic project. So yes, as compared to the rest of the world prices in India can be higher. So we do plan to have a local base and an import base as well. So we are currently exploring what options are like Taiwan is there, China is there, Korea is also there, Japan is there. That exploration is happening. At the same time we will be working alongside the domestic players and developing certain products which may not be available. What was your second question?
Monish Ghodke
So what kind of segment are we targeting? Is it for export, I mean garmenters who will be exporting or it will be for domestic and I mean many a times when we speak with garmenters they say that you know good quality processed fabric is not available in India which is at par with global standards. So are we striving for that kind of segment? You know maybe athleisure wear or something like that.
Sagrika Jain
So woven synthetics would more be outer wear. So the jackets that we have, wind sheeters, that would be the segment and it will be a mix of domestic and export both.
Monish Ghodke
Okay, okay. But the pricing will be at par with global prices right?
Sagrika Jain
30% is out of BIS so we should be okay. And also apart from that there is weaving and there is processing so we will be selling high value added products so we will try to counteract and mitigate the impact of raw material prices.
Monish Ghodke
Okay and so pardon me if you have answered this questions before that this modernization capex of 330 crores we have, we are doing. Are there any spindleage addition which is happening?
Neeraj Jain
Not really. So some small changes. There is more of a modernization where the existing machineries are being replaced with the newer one to take advantage of utility cost or maybe automation, reduction of manpower, reduction of power, etc. Etc.
Monish Ghodke
But sir, this will be a part of your regular maintenance capex, right? I mean
Rajeev Thapar
Normally our regular maintenance capabilities do about 150 crores per year this time since it was much larger than a normal capex. So that’s why we have disclosed this to the stock market.
Monish Ghodke
So this is like our maintenance 250 plus. This is 330. Right. And so you don’t. Hello. Hello. Yeah okay now I’m saying is this continued to be there? I mean is it expected to be like could you throw some light? Like what is the average age of our spindles and you know how much maintenance capex now we have to do going forward? No, due to modernization
Neeraj Jain
Average age of a spinning machine part would be in the range of about 10 years now. So normally I think going forward the normal capex or the replacement cost capex to my mind should not be more than 150, 200 crores per year.
Monish Ghodke
Okay. Okay. Thank you sir.
Operator
Thank you. Participants please press star and one to ask a question. Participants please press time one to ask a question. The next question is from the line of Prerna Jhunjhunwala from Elara capital. Please go ahead.
Prerna Jhunjhunwala
Thank you. Thank you sir, just wanted to understand what will be the revenue addition and profit addition that you are looking from this entire capex of around 3400 crores.
Neeraj Jain
So on the spinning side I don’t think there’s any revenue addition which is likely to happen. Even the green power, I don’t think there’s any, any top line increase will happen. So the top line increase will happen only with the 45, 46 million meters capacity which will be thrown at to our existing capacity. So 150 rupees per meter versus 45 million meters.
Prerna Jhunjhunwala
Okay, so 45 million meters is the processing capacity that we are adding. Yeah. 31 was the number right? Or it is
Neeraj Jain
31 plus 15 of synthetic. Okay.
Prerna Jhunjhunwala
Okay. Synthetic. Okay. Understood, understood. And sir, with this replacement what kind of efficiency improvement margin improvement 200bps margin improvement that you mentioned earlier in the call Is it. Is is it doable or eventually you know because of market forces it will be. It can be passed on to the customer.
Neeraj Jain
That’s animal guess. I can’t really comment on that. What would happen with the market forces and showing in the today’s circumstances had whatever we are doing, had that been available today our margins would have been better by 200, 300 basis points.
Prerna Jhunjhunwala
200 is surely possible.
Neeraj Jain
But what will happen to the market? We really comment, we can’t really comment on that. It can be better, it can be worse also. So that’s beyond our control.
Prerna Jhunjhunwala
Okay, Understood sir. And sir, at current in, in the synthetic business what kind of margins are we looking at? Because this is a specialized product that we’re doing for outerwear, jackets and all. Is the margin better than the existing fabric business or, or is it in line with that?
Neeraj Jain
What I understand there are two segments to that. One is the basic replacement of apparel fabric. Second is a specialized products. If we are going to be the new entrant in this and we have to learn this business as well. So my feeling is as we keep understanding the business we will start moving towards more and more value added products. And on the technical textile definitely margins can be 25, 30, 35% as well. But it will take us some time to learn it, develop it, create the market for that. And it’s only beyond that on the basic product. It could be in line with our additional our existing margins of the fabric apparel business.
Prerna Jhunjhunwala
Okay, so that’s really helpful. Thank you and all the best.
Operator
Thank you. The next question is from the line of Mohammad Patel from Care Portfolio Managers Private Limited. Please go ahead.
Mohammed Patel
Do you expect quarter neon spread to improve in near term? So are there any factors which can turn favorable?
Neeraj Jain
So basically There are only two, three factors which can help us. One, if the New York future goes to about 7475 cents, things will start improving in India. That could be one figure. Second is rupees goes to the rupee goes to less than 90 rupees. And in US cents are cost cotton prices comes down. That could be another trigger. Third is government take any view on allowing the import of cotton beautifully. Even then our margins could be better in other than our overall demand improves much better than the existing demand. So these are all macro level issues. Two are macro level and two are related with the government of India. It’s really, really very difficult for me to comment. I think the only only doable or a possible thing looks like if a New York future improves by about 500, 600 basis points, definitely things will start improving in India also.
Mohammed Patel
Okay sir, thank you.
Operator
Thank you. Participants, please press star N1 to ask a question. The next question is from the line of Anik Mitra from Finnomics. Please go ahead.
Anik Mitra
Good evening sir. Am I audible?
Neeraj Jain
Yeah, yeah.
Anik Mitra
Thanks for the opportunity sir. What is the current year and cotton spread in Indian currency term?
Neeraj Jain
So the even in the Indian cotton or the yarn spread is what I mentioned, 70, 72 cent. And if you calculate it with the rupee of 85 rupees we closed about 60 rupees. 60 rupees.
Anik Mitra
60 rupees. Okay sir, considering the current Bangladesh situation, so do you think that the garmenting opportunity like the gar Bangladesh is a major player in the garmenting. So is it like is there any opportunity? If Bangladesh loses market share in US Indian companies can capture that market share.
Neeraj Jain
You know, first of all as I mentioned earlier also if we go by the Bangladeshi numbers of exports there, there is no reduction and rather they are improving it only. So it looks like there is doesn’t seems to be any concern on a macro level basis. Maybe some ideas, some companies the issue could be there. But if you go by their numbers, I think it’s not reducing at all. Bangladesh has become a very big player and their exporters already touching almost 40 $42 billion as of now. Whereas the Indian garmenting export is only about $15 billion. It looks like Bangladesh next five to six years can touch maybe about $75, $80 billion. Also because of two major reasons. One, they have an advantage of GSP where the Europe allows them to for the duty free exports too. In governmenting the labor cost plays a very very important role. And it is almost about 25% in the government. 20 to 25% is the labor cost only. Indian labor cost today is close to about US$200 per person per month. Whereas the Bangladesh is still ranging about US$100 or so. So they have a huge advantage of much less. Much less labor cost as a result they are comparative compared to India. Third, for any business to create capacities, one is opportunity, second is the margins. I think we do not have those capacities which are required by the world markets as of now. So if there is a major concern happens in Bangladesh, probably that opportunity can come to India. But as of now they are continuing to grow in big way. Because of the two advantages. Advantages which I mentioned to you. But yes, if situation goes out of control or goes very bad over there. I’m sure the branch starts looking at the different countries. And amongst those countries India could also be one of the participants to take advantage of that. But that’s not visible as of now at least.
Anik Mitra
Got it. Sir, thank you so much for your elaborate answer. Thank you.
Operator
Thank you. The next question is from the line of Awanish Chandra from SMIFS. Please go ahead. Please go ahead. Avanish. Kindly unmute your line in case.
Awanish Chandra
Am I audible? Yes, thank you very much for taking my question again. Sir, we are hearing lot of good sound bite for textile industry in the budget. People are talking about the budget. 15% higher budget for textile. And then government may reduce some duties on man made side raw material. So any assessment on those budgeting and any benefit that Vardaman can draw from the budget.
Neeraj Jain
I think it’ll be too premature for me to comment on what the government is going to do in the budget. We are left with only less than two weeks as of now. So let’s wait and watch this.
Awanish Chandra
Okay sir. Thank you.
Operator
Thank you. Participants, please press Star in one to ask a question. A reminder to all participants, you may press star and one to ask a question. Participants, please press Star and one to ask a question. Participants, please press Star and one to ask a question. Ladies and gentlemen, as there are no further questions for today. I would now like to hand the conference over to the management for the closing comments.
Neeraj Jain
Thanks all the investing community which have shown confidence in us and being a part of the company for a long period of time, though there is concern on the overall spinning industry specifically, but at the same time our fabric division is doing very, very good both in terms of utilization and the profitability also. Also hopeful going by the industry situation, government will take some decisions sooner or later and in the meantime, whatever best can be done in terms of the internal efficiencies, operational efficiencies or the customer base of the Dharma, the company is really, really working very hard to achieve that so that even in these kind of difficult times we can pass through this time profitably or with better margins compared to the industry peers. I’m sure as the situation improves or as any favorable decision comes in suddenly we look at a better improvement in the margins also. But in the meantime we are preparing ourselves notwithstanding with a difficult situation. Our capex is one of the highest this year because we believe that sooner or later things will be better and definitely going by the patronage of our customers products, we are surely much more hopeful for the future and we believe we can add lots of value for the overall textile chain in India. So thanks once again for your patience as well as your stability in the company with your shareholding and I’m sure as management will not leave any stone undone to pass through this difficult time also. Thank you very much.
Operator
Thank you ladies and gentlemen, on behalf of Bartliwala and Karani securities India Private Limited that concludes this conference. Thank you for joining us and you may now disconnect your line.