Vardhman Textiles Ltd (VTL) Q3 FY23 Earnings Concall Transcript

Vardhman Textiles Ltd (NSE:VTL) Q3 FY23 Earnings Concall dated Jan. 27, 2023.

Corporate Participants:

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Mukesh Bansal — Senior Vice President, Fabric Business

Rajeev Thapar — Chief Financial Officer

Analysts:

Abhishek Nigam — Batlivala & Karani Securities India Private Limited — Analyst

Anik Mitra — Wallfort Financial Services — Analyst

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Prerna Jhunjhunwala — Elara Capital — Analyst

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

Rushabh — RBSA Investment Managers — Analyst

Surya Narayan — Sunidhi Securities — Analyst

Awanish Chandra — SMIFS — Analyst

Nikhil Agrawal — VT Capital — Analyst

Nirav Savai — Abakkus Asset Management Company — Analyst

Monish Ghodke — HDFC Asset Management Company — Analyst

Keshav Garg — Counter Cyclical PMS — Analyst

Resham Jain — DSP Investment Managers — Analyst

Bharat Chhoda — ICICI Securities Limited — Analyst

Sandeep Baid — — Analyst

Deepak Varma — Individual Investor — Analyst

Abhishek Jhunjhunwala — KAM Capital Services — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Vardhman Textiles Limited Q3 FY ’23 Earnings Conference Call, hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhishek Nigam from B&K Securities. Thank you, and over to you sir.

Abhishek Nigam — Batlivala & Karani Securities India Private Limited — Analyst

All right. Thank you so much, Dhawan. Good evening, everyone, and thank you so much for dialing-in to Vardhman Textile’s nine month FY ’23 earnings call. Today, we are joined by Mr. Neeraj Jain, who is the joint MD; Mr. Rajeev Thapar, CFO; Mr. Mukesh Bansal, Head of Fabric Marketing; and Mr. Sushil Jhamb, Director of Raw Materials.

And now without any further delay, I will hand it over to the management.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Hi. Thanks, Abhishek. Good afternoon, everyone. The results were declared day before the yesterday, I’m sure you had the opportunity to go through the same. In terms of business scenario, as we discussed on the numbers, as we discussed during the last call, we were expecting lots of devaluation of stocks. We were also expecting the margins to be low, because the utilization was very less at that stage. The exports from India was not happening, because of the global pressures of no demand and especially from Europe and USA. And very high prices of cotton in this quarter also were the reasons, where the margins are relatively much lower compared to the immediate preceding quarter.

We had the situation today, the prices of cotton has started coming down, but it’s still much higher than what it should have been in our view. But if you look at it from the perspective of near future, near future is about $0.85, $0.87 as of now. And historically, the Indian cotton is about $0.04, $0.05 higher than the New York Future. So it should have been in the range about $0.90, $0.91 per pound as against that, it is close to about $0.96, $0.97 as of now.

Number two, the overall crop size seems to be quite good. The quality is seasonally okay, but this is the first time in the history of India where the farmers have provided lots of cotton in anticipation that they are likely to get a better prices as they got in the last year. So the farmers are expecting the last year prices that they got almost INR9,000 INR10,000 and even for a smaller period higher than that, prices also for their normal. So their expectation is also that this year also they should get better. So that’s why they are holding on to lots of stocks. But at the same time, I think the last year New York Future was almost at about $1.20, $1.25 against that $0.35 from that perspective one is still a bit and rationalize what should be the right level of prices in Indian context.

Third, in terms of a the quality. As I mentioned, the quality seems to be quite good. But the overall arrival of crop is much less. Till now the new crop has come only to the level of about INR110 lakhs bales or so, out of the total expectation of close to about INR330 lakh sales. And after this time last year, the crop was almost INR175 lakh bales or so. So we are short by about INR65 lakh bales till now in terms of prices compared to last year. But it’s not because of the non-availability of cotton, it’s more because of the pricing expectation by the supplier where the [Indecipherable] they will get a better price going forward. So let’s see what happens.

The next in terms of the demand and utilizations, this period has seen a little better situation in terms of demand, especially the export demand. With China after almost seven, eight, nine months has come back to start buying, because of the COVID, there were lots of restrictions in China, which just started opening up, and it is expected — or it’s an expectation that after they’ve had the immunity, so maybe they have more difficulty for next one or two months, but eventually after that there’ll be lots of opening up and lots of pent-up demand which could come in, so they’ve started buying — they started buying the other materials, which is giving some push, some improvement to the spinning industry worldwide.

It is still expected, our estimated worldwide spending this utilization is not more than 75% as of now. And Indian cotton spinning utilization, the worst time I think it had come down to about 50%. So our estimate was — the spinning was running close to about 60%, 65%, but the cotton spinning had come down to 50%, remaining 10%, 15% people shifted to 100% fall year and put some request on the products, but we are not making money, but at least we — at least the spinning was in a position to get it’s partial fixed cost. So that’s why they had typically auto made products.

Going by day-to-day situation, our estimate is — cotton spinning is back to the level of about 85%, 90% as on today. Of course, the full cotton rate was not there, but then last three, four weeks the utilization of spinning has definitely improved based upon the orders from the international markets, especially China. And I think it looks like the — since the utilization is improving, the losses would be coming down and the pressure would come down to the extent — to that extent and we might get the 100% utilization also in the times to come, though still the Europe, USA has [Indecipherable].

And demand I look at it from three perspectives. One, the general slowdown of demand, which was there because of the oil prices, because of the gas prices, because the overall discussion perception or the interest rate increasing EMI increase and that continues to be there — that confirm continues to be there. The second was most of the brands they had lots of inventories. So they’ve suddenly decided not to buy anything and they wanted to reduce their stocks because the supply chain started improving and as a result of that, whatever material they have over booked they had started reaching them, demand was less. So as a result of that, their overall stock was much higher than what it should be. And they decided that unless you saw some entering normal levels they’ll not be buying.

I think if you look at last few weeks, over there definitely the improvement has started coming, and any brand where they’re liquidating, they’ve liquidated the stocks and they’ve come down to a reasonable level of stocks, they have started buying. So there is some improvement on account of their wholesome in the overall buying. The third as I mentioned, China could be one factor where it’s a big country, huge population, good per capita income and the expectation of the China turned out, so their local or the domestic demand can definitely be much better. So I think in that hope lots of yarn they’re started buying and they’ve started converting into the break of the government. So that’s definitely will be one that can beat us to the spinning industry in India as well.

So this is on the — and as far as Vardhman is concerned, we’re running 100% capacity utilization for last about and 9.5 months or two months, initially, it was a little less, but I think as the opportunity came in, we started running with full capacity, of course, the challenges as I mentioned are still there, but I think in terms of utilization, it looks like the worst is over. And also that also converted about 12%, 13% of our capacity to the alternate products, which as of now has come down to 2% 3% 4% only. So majority of the capacity is back to our conventional — started coming back to the conventional products rather than the 100% poly or 100% liquid kind of a products. So this is on the spinning side.

Now I’ll request Mukesh to give some idea on the fabric side also. And then we can start the question answers. So, Mukesh, to you.

Mukesh Bansal — Senior Vice President, Fabric Business

Good evening, everybody. Thank you very much. Most of these points as far as the overall outlook of the textile industry [Indecipherable]. On fabrics standpoint, I think say that last quarter represented a slowness in demand on two scores one was the slowdown in the retail sales in the U.S., Europe and Asia during the [Indecipherable], on two scores nearly one was the inflation concerns, because of all the commodity prices are high and the branch they’re sitting on these inventory, which was with highest price carried over from the previous quarters. So in order to generate demand, so the average of hefty discounts which would have impacted their cash flows and the profitability. So that has been another concern.

The correction on the inventories on the retail side still continues because given the future outlook so I am not looking at resurgence in demand in the immediate future so that till we are trying to manage the inventory from the peak carried over inventory so the demand slowness continues for the time being but the moment if you look at the next three to four months then the inflation concerns start to ease and US may not increase interest rates further if the inflation rates within their target and then the resurgence in demand can start happening so if the retail still bounces the inventories are relatively lower levels and then we can see good amount of demand coming up and in Europe the situation is linked to Russia Ukraine War and also the energy crisis and renewable energy crisis so the moment that settles we may see normal level of demand coming up. Once the stronger demand picks up the inventory is at the lower levels then [Indecipherable]resurgence in demand happens the question is the time.

Similarly in India unexpectedly the last quarter has been a little slower as far as the retail demands are concerned but this quarter we are seeing a better demand coming up from India given the marriage season and the [Indecipherable] so we are seeing that demand will start happening and the next bigger market was Japan so one is Japanese retailers they had a big retail market in China so now the Chinese government has given instructions and Chinese economy is opening up so there is a possibility that the demand from China will also pick up so as a whole we can only hope for better future regarding the sluggishness continues and that is it from my side. Thank you.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Thanks, Mukesh. We can start with the Q&A and the remaining queries we can answer as the question comes in.

Questions and Answers:

Operator

Thank you. We will now begin with the question-and-answer session. [Operator Instructions]. The first question is from the line of Anik Mitra from Wallfort. Please go ahead.

Anik Mitra — Wallfort Financial Services — Analyst

Sir, am I audible?

Operator

Yeah, you are audible sir. Please go ahead.

Anik Mitra — Wallfort Financial Services — Analyst

Yes. Thanks for taking my question, sir. My first question is sir cotton and yarn spread were quoting negative for quite some time so what is the current situation? And sir what percentage of yarn produced means I am saying from your perspective what percent of yarn produced by you is sold outside?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Whatever we produced almost 60%, 65% is sold outside. So our internal consumption is only about 35%, 37%.

Anik Mitra — Wallfort Financial Services — Analyst

Okay, okay. And sir, what is the current scenario of cotton and yarn spread?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So the current spread is still in the range of about $0.60, $0.65 only.

Anik Mitra — Wallfort Financial Services — Analyst

Okay, sir. I am asking in terms of cotton and yarn spread not the international one Indian cotton and yarn spread like it was quoting negative for quite some time?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, it is not negative now. If you look at the Indian cotton the clean cost comes to about INR220 to INR225 a kg I am taking the December at rate of INR63000 a candy price and that the yarn price will be in the range of about INR270 or so.

Anik Mitra — Wallfort Financial Services — Analyst

Okay, got it sir. Sir, my next question is what is the inventory situation in the industry now?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Our estimate the cotton inventory with the mills sector will not be more than one month as of now.

Anik Mitra — Wallfort Financial Services — Analyst

Okay. Sir, from a few call with a few management of some retailers I got to understand like around 30% of inventory is carried by US at this point of time and around 50% to 60% of inventory is carried by UK at this point of time what is your take on this ground?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

I think my call is a little different so one is that the brands have lots of stock, two I simply look at whether we have started getting the orders from the brands or not and frankly wherever we are working almost 70% to 80% brands we have started getting back the orders in small quantities and they will be buying only if they have exhausted the inventories so maybe brand-to-brand it could be different what kind of stocks are they having but surely couple of brands I think they have started buying so which gives me one surely a confidence that the situation is not that bad we have 50% to 60% inventories so definitely things have improved from that perspective.

Anik Mitra — Wallfort Financial Services — Analyst

And sir, in terms of fabric —

Operator

Sir, if you do have further questions, we request you to rejoin the queue.

Anik Mitra — Wallfort Financial Services — Analyst

Sure, sure, sure. Thank you so much.

Operator

Thank you. The next question is from the line of Abhineet Anand from Emkay Global Financial Service. Please go ahead, sir.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Yeah. Thanks a lot. Sir two questions. First is that you indicated that exports have picked up one of the things being that purely Indian cotton has corrected compared to 2Q so what are the key regions Bangladesh used to be one of the large ones and you indicated China so for this quarter typically what are the key reasons of yarn exports for us?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No the Q3 which we are discussing at that stage there was no improvement so I said the improvement is in the current situation where the spinning utilization has improved it started improving in the month of December and definitely it is better as on today. Two I think as I mentioned earlier also the overall worldwide it is expected that the utilization of spinning sector will not be more than 70% or so and this was for the India situation also now the Indian situation is a little better so I think we have started touching 85% to 90% in my view going by surveys we do internally and the biggest reason for improvement in this period last one month or so has been additional buying from Chinese market which earlier they were not doing because of the COVID restriction and there were lots of sentimental issues over there where people were not sure when the opening will happen so since now they have started relaxing the conditions of COVID I think there is much more optimism in that country as well from that perspective.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Okay. And One of the reasons I think in 2Q you had highlighted that because of the fact that Indian cotton was at higher price some of the yarn importers from Russia and Bangladesh imports yarn from India they were not buying because of the fact that our cotton was at high price so our yarn would also be at a higher price so that situation has improved sir?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yeah. That situation has improved that is why China has come to buy from us otherwise they were buying only from Vietnam because our cotton was much more expensive than even the imported cotton or American cotton which was available in Vietnam so we could not export at all, so definitely Indian cotton today is better compared to that, of course not at what level it should be but it is definitely better situation compared to when we had the Q2 call.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Sure, sir. And second on the capacity side we were to add 65000 spindles what is the status and second is that sir when you indicated that we have started hitting 100% so we had that medium term plan of putting another 2 lakh spindles what is the company thinking about when you have already started hitting something like 100% so any thoughts on placing orders or any change in that thought?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So the first question on the 65000 spindles we have already started the commercial production partially and it is likely to be completed I think the next may be two, three to four weeks or so the full production should be available by end of February in my view partially it has already started. Two though we are starting in the full capacity but I think still the margins are much less. And we are waiting or we will still like to wait for some more time before the situation becomes normal, because still with the 85% utilization and the worldwide utilization is much less. We are not in a hurry to take all the orders — to place all the orders to date. Three, we’re also looking at what stage — because we are talking to the government for the import duty of cotton et cetera. And I still feel because we take a very big expansion, this issue must be solved. Otherwise, this issue will keep coming up primarily whenever the crop is short, whereas on today, we are likely to get lot of surplus in India for the current year. But I think for the long term of the industry will be better that these issues get resolved and then only we should take up very big expansions we want to take.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Thanks. Thank you. Thanks a lot.

Operator

Thank you. [Operator Instructions] The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead.

Prerna Jhunjhunwala — Elara Capital — Analyst

Thank you for the opportunity, sir. Sir, in light of maker arrivals this year, what will be your cotton procuring strategy?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

We always look at it from two perspectives. One is the — we have to buy the quality cotton, two is the — what will be the commercial. So in this scenario, because the quality cotton means — earlier whenever the prices are lower — lower indices and lots of cotton, they will get exported. And the later on, the good quality of cotton is not available. So that’s one of the considerations where we normally have a stocking at the much bigger levels compared to our assumption in the full season. And — so that we don’t require to buy in the off season. This year, because of the high cotton prices in India, that situation is not there. So the export from India is not happened at all. I mean, it’s only about two lakh bales, or three lakh bales till now. And, I mean, if the cotton — good quality cotton is available in the country, then at least that pressure is not there, the cotton will vanish. So you have to buy to run your operations or to give the right service to your customers, that pressure is over. Second is the commercial that what is — what we feel is the right price. We feel these are the prices, which are still higher than what it should be and cotton is available. In case, the prices do not come down to the normal level, which we feel is always New York Future plus $0.04 kind of a pricing. I think we are not really going to have a 6-month talking at the end of March. That cotton is in any date available. So we’ll keep buying as we require or as and when we want to buy. So there is — at these kind of levels, this kind of spreads for the Indian cotton compared to the New York Future, I think there is no intention for us to buy a very big quantities. So we’ll keep talking because in many cases the good quality cotton is available in the country.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay. And sir, we’ll have — is there any hedging loss, et cetera, in this quarter? And are we doing any hedging for — [Speech Overlap]

Neeraj Jain — Joint Managing Director & Head of Yarn Business

We do the hedging only whenever — whenever we have to buy big quantities at that stage to cover Acrylics, we try to hedge it one or the other ways. This time our cotton stocks are bare minimum. So it’s hardly any — many feel like have ended. I don’t recall. But overall, there is no, I think because there is hardly any stocks available to us.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay. And our last question if I may ask on profitability. Now that you know our units are at around 100% utilization in Sydney, and we are recovering in Fabric. So do we see returning back to normal profitability in towards the quarter?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, surely not. Because it’s only the running of the full capacity, where we are either covering our full cost or maybe sometimes covering not full cost even. So the decision has to be better, we should stop the capacity or we should keep running where the losses are less. So, since the losses by running is less or there is a small profitability, so that’s why the capacities in India have started utilizing better capacity. But in any case, the margins are not normalized at all because that won’t happen till the time the entire world is running with only 70% capacity utilization. So I don’t think that the situation where we can say the normalization of profit will happen in the fourth quarters. It may improve. The situation overall may improve from the earlier periods. But I don’t think today — as on today, there is a situation, where we can say we have become normalized, no.

Prerna Jhunjhunwala — Elara Capital — Analyst

And sir, last question on the segment-wise demand scenario knit versus woven versus denim versus home textiles. Can you give some color on [Speech Overlap]

Neeraj Jain — Joint Managing Director & Head of Yarn Business

It’s not — because we supply to all the four segments. And in our view, if you look at the home textiles, I understand their worst capacity utilization had come in the ranges of about 45%, 50% from where they’re improved to I think, now 65%, 70%. Same way if you look at denim export situation continues to be about 50% utilization, whereas the domestic demand for the denim has improved. So the overall utilization by the denim mills also has improved from 50% to about 70% or so. Woven, we feel most of the mills are running into capacity utilization about 80%, 85%, and knit also — the — in between had come down to about 50%, 55%. They’re improved about 60% to 70%. So there’s an improvement in every segment. But again, it is sub optimally utilized even today also. So it looks like only I can say for most of these segments, probably the worst is over, but I don’t think anyone can make really good money till the time, the entire value chain starts utilizing the full capacity for our optimal capacities.

Prerna Jhunjhunwala — Elara Capital — Analyst

Okay. Thank you so much, sir. I’ll come back in the question queue if required. All the best.

Operator

Thank you. We have the next question from Falguni Dutta from Jet Age Securities Private Limited. Please go ahead.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Thank you, Sir. Good afternoon, sir. I had a question on inventory loss. Did we have any inventory loss for the quarter?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yes. Last quarter there was a loss because, if you recall before that I think the cotton prices were ranging almost in the range of about INR85,000 — INR80,000 to INR85,000 or so, so there is a partial loss, which is already happened, and some losses are likely to happen even in the current quarter also.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

So would it be possible to quantify the amount for Q3?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, you can look at — I mean, I can only suggest you, you can look at the market prices of cotton are available to everyone. Stocks you can make out easily what kind of stocks factories are having. So we do not share that number, but I think it is possible for you to calculate that.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Okay. And sir, how much inventory of cotton would we be carrying end of December?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

I think, not more than a month or so.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Okay. And sir, one more thing, you mentioned about the price of yarn at INR270 a kg. So is this for 30 counts?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

30 count. So all our discussions are always the common count at 30 counts.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Okay. And sir exports, what would be the exports of yarn, let’s say, last month from India and in that, what percentage would be China?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So till December the improvement had not come in. So our — from India, the overall export was about 53 million to 54 million kg in the month of December also. The Chinese — most of the orders have come in the second and third week of December, where I think, January — my expectation is the improvement will happen. Till December, there was no change in what the Chinese were buying. So there was hardly any buying by the China. But all these improvements we have actually started by losing materials somewhere second and third week of December. And I hope the January overall figures from India can be higher — surely, should be higher from 53 million to 54 million kgs, which was constant for two to three months and in fact the lowest figure, I think in the month of September or October. We got only about 35 million kg. So from 35 million kg– on the lowest of 35 Million kg we tried 54 million kg in December and January and February, definitely — it can be, in my personal view, it can be 10 million kg to 15 million kg at least 15 million kg higher than the December figure as well.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Sir in normal times what percentage of our exports would go to China of — from India?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So from India the export to China would be in the range of about 25%.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

25% of yarn exports.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

20% — yeah, 20%, 25%.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

And sir my last question, directionally would you think that Q4 should be better than this quarter?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

I mean — so one is the number, second is the business. I think numbers you guys have to work out how the numbers goes out. I can only say in terms of utilization, its better. I can only say in terms of cotton prices, it is better. I can only say the — lots of losses have already been provided in the system on account of the inventory — it’s an effected door, it is yet to come. So the overall business sentiment perspective seems to be better whether they get converted into the numbers in the fourth quarter or may be a quarter after that, that something you guys have to work on. I do not want to give any indication or any suggestion on the profitability numbers at this stage because the kind of volatility we have seen in the last six months, it’s anyway guess how the — tomorrow will be.

Falguni Dutta — Jet Age Securities Private Limited — Analyst

And sir, if we talk of yarn spreads, the one you mentioned that they are — this is the last question.

Operator

If you have any further questions, we request you to —

Falguni Dutta — Jet Age Securities Private Limited — Analyst

Okay. Fine. No problem. Thank you.

Operator

Thank you. The next question is from the line of Amruta Deherkar from Wealth Managers India Private Limited. Please go ahead, ma’am.

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

Thank you for this opportunity. I have two questions. First is regarding the capacity. So from 11.26 lakhs spindles capacity that we have — so after the commercialized it now 55,000 spindles. So now the company capacity at the end of March will be 11.91 lakh spindles. Am I right?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yeah.

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

Okay. And the second question was regarding the sustainable EBITDA margins for the Yarn and Fabric segment. So what kind of margin do you expect after all these debt settle?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

The margins of Fabric are surely better because the spending is passing-through the stress time as of now. And whenever the yarn prices come down, they — normally, we have always seen whenever the prices of yarn goes up, the fabric price increase doesn’t happen same proportion. And the same is true for the reversal also. So whenever the yarn prices are coming down because they have booked — the Fabric is always booked some orders and run, which are at a higher pace. Also the price doesn’t come down in the same proportion. So surely, the margins as on today on the Fabric division is better than spinning.

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

So what could be the like it’s spacing for on a sustainable basis, the Fabric division could earn?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Sorry.

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

On substantial basis, what kind of margins from the Fabric division were?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Sorry, normally we don’t share the numbers of the division-wise margins.

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

Then just one last question. So for our fabric business, the entire yarn that we used is from our yarn division, right? Or do we acquire any yarn outside also?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. The 97%, 98% percent is in-house, maybe sometimes 1% or 2% some specific yarners comes which we don’t produce segment, that means they buy, but 99% they buy from us only internally.

Amruta Deherkar — Wealth Managers India Private Limited — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Rushabh from RBSA Investment Managers. Please go ahead.

Rushabh — RBSA Investment Managers — Analyst

Yeah. Hi, sir. Just from the industry perspective, we have been talking about increased sourcing of big retailers from India. So in that perspective, is it that they’re asking that we are — the India has to scale up the MMF capacity as we currently have a strong quarter ecosystem, but MMF is not so good. So please — can you please share some insights, sir, on the sourcing, well, I would say, cotton versus MMF?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Sorry. Can you repeat the question please?

Rushabh — RBSA Investment Managers — Analyst

I’m just asking the current scenario. We are seeing a lot of industry players, they’re saying that the bigger retailers from European and US countries, they are saying that we will only — increase the sourcing from India only if you increase the MMF capacity, man-made fibre capacity, as opposed to the current cotton-based capacity that we have.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, no. It’s not like this. I think there is product basket every brand has. So wherever they get the — better pricing or a better product for any segment, they’ll keep buying. So it’s not that they want to put in this condition that if you increase then only we’ll buy from you. But yes, as a matter of fact, it’s a known fact that the cotton consumption out of all fibre consumption is only about 30% worldwide, 70% is man-made. So it’s not that brand is putting pressure. But of course, slowly, I think as the share of man-made is increasing, India also is looking at and we are also increasing our man-made or blended capacities to that extent.

Rushabh — RBSA Investment Managers — Analyst

Suppose, if I have to look at in the business dynamics and I suppose a person who is into 100% retail versus blended, how do they — say margins profile are there in the business sense — makes sense [Foreign Speech] which is better opportunity for a person who is doing both?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Historically, cotton spinners are made — have made more money in India. But there — this has been a period where either we are making cotton, we are making polyester, we are making viscose, we are making any blend everyone was using actually. But historically, since our cotton is placed at the right prices, historically, the Indian spinner makes more money on the basis of 100% cotton products.

Rushabh — RBSA Investment Managers — Analyst

Okay. Okay. Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Surya Narayan from Sunidhi Securities. Please go ahead.

Surya Narayan — Sunidhi Securities — Analyst

Hello. Thank you, sir, for giving me the opportunity. Sir, just to understand, from the current revenue stream, how much is — has come from the regular customers and how much is out of term customer, new customers?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. There’s hardly any new customer in this kind of period. So most of the business was with the existing customers only.

Surya Narayan — Sunidhi Securities — Analyst

Okay. Second is that you have said that the denim capacity industry-wise has risen to 70% — 20% and woven to around nearly close to 100% or 85% to 90% and needs by around 10%. So what is it and, side by side, you’re also saying that the demand has not seen poking off in the US market and because of the — the retailers there destock — and why — what has led in such kind of surge in the capacity utilization?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

I’ve never said my dear, I’ve never said things have not improved. I have said, whichever brand they are exhausting the stocks they’re started buying. Two, the improvement has happened because of China, as they’re expecting a big opening up after the COVID issue is over. So they have started that. So these are the two reasons where the capacity utilization started improving.

Surya Narayan — Sunidhi Securities — Analyst

Okay. And have you — what is your sense that of the — whether the US and the Europe — the retailers — they have seamlessly destocking — our team destocking here, is that work in progress?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. So, there are both kind of brands. There are some of them, where which have decided or which are not buying at all. Lots of them, which have started buying in. So for example, H&M, C&A, so the business has started happening, which was not happening earlier at all. Silk brand maybe the [Indecipherable] the Gildan, which are not buying until now. But I’m sure as the team starts — because everyone is exhausting the stock, and it’s a matter of time when they start seeing around.

Surya Narayan — Sunidhi Securities — Analyst

Yeah. And with regarding the arrival of the crop, you’re saying around 65 plus — we are going to falling short year-on-year. So I mean, I understand that the cotton holding is being taken place by the farmers. So do you — dialogue — do you have any dialogue with the Government of India to work out any mechanism to reduce the import duty, so that will be Indian cotton —

Neeraj Jain — Joint Managing Director & Head of Yarn Business

The industry has been talking to the government to remove it. But we are not very sure whether the government will be willing to take any decision or not. So they don’t commit. They don’t deny. So I’m not very sure how the things will happen. We are waiting for the government maybe they do talk to analytics. Industry continuously is in dialogue with the government to move the anomaly because without this, I think — unless we resolve this issue, there is going to be a long-term concern on this.

Surya Narayan — Sunidhi Securities — Analyst

One of the industry players has said that we will not be competitive to international cotton. Then India could be losing heavily to — in the denim market, in particular. So is your presentation to the industry, the government — sorry, to the government is not being heard hopefully or government has only the farmer in mind and not the industry?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

We can only give our viewpoint, which we have given them adequately. Now government has in their own judgment will take a view, what is right for the country they feel. And accordingly, they’ll do that. So we can’t argue with them. We can give our part of the story, which we have given to them. Rest is up to them to take a view in their judgment, whatever they think is correct for the industry.

Surya Narayan — Sunidhi Securities — Analyst

Okay. Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Awanish Chandra from SMIFS. Please go ahead, sir.

Awanish Chandra — SMIFS — Analyst

Thank you very much for taking my questions. Sir, first thing, you have talked about we have one month of quote on inventory. What would be the average price of that inventory?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

With one ruling prices only. So I think we look at — we’ve been consuming cotton almost 80,000, 85,000, 90,000 also every month. We buy one month based upon the market prices and every month that average will keep happening. So our prices will still be higher than the current prices. But it’s a simple calculation starting from the market prices. We have one month of stock every month and we keep adding and reducing it from the conjunctions. So that is surely — surely it will be happen in the current market prices.

Awanish Chandra — SMIFS — Analyst

Okay. And sir, second question, you have talked about many a times in several calls why you are not deciding on the CapEx part. But purely from the long-term perspective, if you want to participate in growth history, don’t you think it is time to take that decision because it still takes 12, 15 months from implementation from the decision making?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yes. From a business perspective, I think it’s — what you are saying is right that once the capacity utilization, whether we are making money or not, but till the time the utilization is started improving, it’s a matter of time when the business will also improve. So there’s no issue and concern on that. And you are also right. It may take 12, 15 months for implementation of projects from that perspective also. It will make sense to add the capacity. But the larger or the bigger question is that in case the — India always has a custom duty on import of cotton and any area of cotton gets spilled. So what kind of situation will be contributing. So I think we — I mean, we still want to take a little pause for a while and want to look at how the situation goes, how the government views on the same. And I think that — we said only last couple of weeks that the utilization is improving. And coming from a big cutback, we want to wait or pause for a — for some more time before we take a view on a very large expansion base.

Awanish Chandra — SMIFS — Analyst

Okay. And sir, last one question. Not putting any number, but do you really think that we will come back to double-digit margin because the single-digit margin was very surprising. And we all understand that it is a very difficult situation to be in. But still next quarter — in fourth quarter, we will come back to double-digit number?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. So as I mentioned earlier also, I don’t want to put in any guidance on the numbers. So I’ve given you the business scenario. And again, today, all customers buy only for next four weeks. So you do not know the situation every day, whether the price goes up or down. So it’s very, very difficult for us to predict as of now. Two, it’s also very difficult for us to predict what kind of cotton prices are going to be there as normalize the inventory more than three weeks or four weeks. So any judgment call on — or any number suggestion, I think it’ll be too risky and not be desirable at this stage from our perspective.

Awanish Chandra — SMIFS — Analyst

Okay, sir. Thank you very much, sir. All the best.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Thanks.

Operator

Thank you. The next question is from the line of Nikhil Agrawal from VT Capital. Please go ahead.

Nikhil Agrawal — VT Capital — Analyst

Good evening, sir, and thank you for the opportunity. Sir, I wanted to know like regarding these Chinese exports, what has been the trend historically? Like have there been importing cotton and fabric from India previously around three, four years ago as well? Or has it increased because of the US plan on Chinese cotton?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So there are a couple of reasons. One, our prices of yarn is competitive. So that’s why they are buying from us. Two, of course, there is a big pressure on Indian cotton from USA or Western world because of it, it is easy for them to get the yarn from India. And so the exports made — export of the garment made out of this yarn tern. One of the — another reasons is Pakistan is a very big exporter to China. And Pakistan situation of spinning is in a very, very bad condition is, I think, one of the worst in the world today. Their cotton crop got failed. They are getting the imported cotton, which is at the very, very high cost. And as a result of that, their exports to China has come down in a big way. So if Chinese have to buy, so I think India is replacing that because we are still reasonably placed compared to Pakistan. So that advantage has come to India. Last year, our prices of cotton are highest. The advantage was taken by the Vietnamese, where they could — they kept exporting — they kept importing the cotton and they kept exporting the yarn. This year, the situation, if I look at the entire world, the worst situation would be there for Pakistan. And since their cotton cost is very high, they’ll be losing high money, so their capacity utilization will be lesser. Someone else will take advantage of that. So to that extent, I think the other countries, including India, will be more competitive and we started exporting the yarn to China.

Nikhil Agrawal — VT Capital — Analyst

Okay. Got it, sir. And sir, the 25% of yarn exports to China, this is currently like India is basically — of the total export from India, 25% is going to China currently, you said?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, whatever is the export we do, out of that 20%. So our, let’s say, whatever yarn we produce, about 30% gets exported. And out of that 20% would be the Chinese.

Nikhil Agrawal — VT Capital — Analyst

Okay. This — you are speaking on the company level or the industry level?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Industry level, I’m talking. That’s not —

Nikhil Agrawal — VT Capital — Analyst

Okay. Okay. Got it. Thank you so much. That’s it from me.

Operator

Thank you. [Operator Instructions] The next question is from the line of Nirav Savai from Abakkus Asset Management Company. Please go ahead.

Nirav Savai — Abakkus Asset Management Company — Analyst

Sir, my question is — extent to which, as you said, in Pakistan, the situation is very bad. It’s primarily started with plats and now geopolitical problems and all. So what could be the extent of loss, if we see the cotton crop damage this cotton season, where India would have an advantage with better production?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So it looks like their crop has come down to about 50% of their consumption. And to that extent, partially there’ll be losing capacity, partially they’ll be importing from America or the other parts of the world. And their next crop will start coming in only in the month of August or so, July end or August. So in the next couple of months, I think they are likely to be more and more in difficult situations.

Nirav Savai — Abakkus Asset Management Company — Analyst

Right. So this would not only benefit spinning, but also move on Denim [Indecipherable] where Pakistan competes India?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

It should. It should.

Nirav Savai — Abakkus Asset Management Company — Analyst

And next crop you’re saying will come July, August onwards. So maybe for next quarters also, India would have in it over competition from them?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Correct.

Nirav Savai — Abakkus Asset Management Company — Analyst

Right. Right. And sir, another thing was on the import duty of cotton, as you said, that has been a long-standing issue with the industry. So to what extent it has impacted the cotton imports? Maybe if we can say prior to the import duty and post duty was early in [Indecipherable].

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, no, no. No. I think, import duty should not be looked at from the perspective of hampering the imports only. We import only about 10 lakh to 15 lakh bales of cotton in India. And that is not a big issue. The bigger issue is, once we know that the cotton, which has to come from outside will be expensive by 10%, where local prices have gone up. It’s not a question of we have 33 million bales, total crop size. It’s not a question of 1 million bales import expenses. The question is all 33 million, the prices have gone up because everyone knows you can’t import. And this is the only supply available to the Indian spinners today. So if more concern is on the domestic prices and these prices have increased because you can’t import. That’s all.

Nirav Savai — Abakkus Asset Management Company — Analyst

All right. Got it, sir. That’s it from me. Thank you.

Operator

Thank you. We have the next question from Monish Ghodke from HDFC Asset Management Company. Please go ahead, sir.

Monish Ghodke — HDFC Asset Management Company — Analyst

Sir, just one bookkeeping question. You said that average cotton price was INR63,000 per candy, in December. And currently, they are hovering at INR62,000 to INR63,000 per candy. And you said that even in this quarter, there will be an inventory loss. So how is it happening, like could you explain?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

INR62,000, INR63,000 have given you the market price. I’m not saying this is about the month cost.

Monish Ghodke — HDFC Asset Management Company — Analyst

Yes, sir. Our costs will be mark-to-market as on 31st December, right?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. No. No. The mark-to-market of cotton will never happen.

Monish Ghodke — HDFC Asset Management Company — Analyst

Okay. So closing inventory will be valued at cost only, you are saying?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yes.

Monish Ghodke — HDFC Asset Management Company — Analyst

Okay. Okay. Got it.

Operator

Thank you. The next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, I wanted to understand that you are saying that the cotton industry cannot import cotton, but I understand that government had made cotton import duty-free. And — so till when is that duty-free?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

It was only till 31st of October last year duty-free.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay, sir. Sir, so basically, sir, to the extent that we are exporting cotton yarn and cotton yarn fabric. To that extent, we can still import duty-free cotton under the advanced authorization scheme?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

We can do that. But in that scenario, we moved the RoDTEP and we also lose the duty drawback. So that disadvantage is huge compared to — because we got the cotton, but whatever is the conversion cost where the duty refunds are happening because — in form of RoDTEP, those are not available to us today. So we have gone back to the government with this suggestion also that even if you don’t want to reduce the duty, why don’t you give RoDTEP on the advanced authorization also. In any case, has been a committed thing by the government, so the government is working on that. But when do they take it is then, I can’t comment on that.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, and also, in last quarter, you mentioned that some Chinese yarn imports were coming into India from China. And now you are saying that China has started importing yarn from India. So I’m assuming that that trend has reversed and now no more Chinese imports are coming to India instead India is exporting to China. So sir, is my understanding correct?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Sorry.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, last quarter, you’ve mentioned that some Chinese cotton yarn is coming to India since Indian cotton —

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. That’s not happening now. That’s not happening now.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay, sir.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Okay.

Keshav Garg — Counter Cyclical PMS — Analyst

Okay, sir. Sir, that was all from my side. Best of luck and thank you very much.

Operator

Thank you. We have the next question from Resham Jain from DSP Investment Managers. Please go ahead.

Resham Jain — DSP Investment Managers — Analyst

Yeah. Hi, sir. Sir, on the fabric business, would it be possible to share the kind of mix you have between bottom weight, yarn dyed, the mix of business? And within that, what do you classify internally as, let’s say, a value-added mix within the fabric business?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Mukesh?

Mukesh Bansal — Senior Vice President, Fabric Business

Hello.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Mukesh?

Operator

Excuse me. This is the operator. The line for Mr. Mukesh Bansal has disconnected. Please stay on the line, we will reconnect with Mr. Mukesh Bansal.

Resham Jain — DSP Investment Managers — Analyst

Sir, in the meantime, I’ll ask the next one, which is more of a bookkeeping with respect to the gross debt at the consolidated level and the cash at the consolidated level, if you can help with these two numbers, as on December end.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Can you repeat the question please?

Resham Jain — DSP Investment Managers — Analyst

Sir, the gross consolidated debt and the gross cash.

Rajeev Thapar — Chief Financial Officer

That is around INR1,500 crores, including long-term and short-term, and cash investment is close to INR2,400 crores of rupees.

Resham Jain — DSP Investment Managers — Analyst

This is both consolidated, right sir.

Rajeev Thapar — Chief Financial Officer

Our consolidation actually is being consolidated Vardhman Acrylics and retail investment only. So it’s consolidated regard tenure.

Resham Jain — DSP Investment Managers — Analyst

Okay. Right. So sir, the related question on this is that, if I look at the cash balance over the last few years, it has been consistently going up. And on the other side, obviously, the CapEx also is linked to how the industry situation is. So — and I did ask this question a few quarters back also. But, I do understand that during COVID, there were uncertainties and all. But what is — because this cash is not earning a meaningful return, so how are you thinking about the cash allocation going forward?

Rajeev Thapar — Chief Financial Officer

The cash INR2,400 crores, which we are talking as of now because the cotton season like Mr. Neeraj explained that cotton purchase is not being taken place at the pace at which we used to have in early years. So the relevant figure could be as of the end of the year when the cotton season is completed and cotton buying is completed. So at that point of time, the balance does not remain at that level. So it get refused and borrowings also take place. So that is the matter I just want to bring to your notice.

Resham Jain — DSP Investment Managers — Analyst

Okay. Understood. If Mr. Mukesh is there, should I ask the question again?

Operator

Yes. We have the line from Mr. Mukesh Bansal reconnected. So, you can go ahead.

Resham Jain — DSP Investment Managers — Analyst

Yeah. Shall I repeat my question?

Operator

Yes. Yes, sir. Please repeat your question.

Resham Jain — DSP Investment Managers — Analyst

Okay. Okay. Okay. So sir, my question was on the Fabric business. If you can explain the mix within the Fabric business, how much is coming from bottom weight, how much is coming from yarn dyed from the other woven businesses? And how much of the overall Fabric business in a way you classify as value-added kind of products?

Mukesh Bansal — Senior Vice President, Fabric Business

So on the Fabric side, top-to-bottom ratio in the average size 50 to 55 percentage bottoms and about 45 percentage is shorts and women tops. So within that, if you look at this solid dyed is almost like around 70%. And 30% to 35% in yarn dyed and prints. So another slice of that would be, so we call it value-added or like that. So, about 20%, 25% will be value-added and rest of the items are very uniquely 30%, 35% basic — basic will be 30%, 35% and 60% to 65% will be value-added, which will be further — 40% will be low value-added, 20%, 25% will be high value-added.

Resham Jain — DSP Investment Managers — Analyst

Okay. And has this ratio changed over the last four, five years?

Mukesh Bansal — Senior Vice President, Fabric Business

Yes. There is lot of change because — in ’18-’19 and ’19-’20, when we expanded our capacity, we expanded more on the top-wear side and on the yarn dyed and print side, they’re on the solid side. So four, five years ago, our ratio was most due to a solid and toward bottom end, which is now quite balanced. So when we grew our business — so we didn’t grow in the same category, we expanded our product categories also.

Resham Jain — DSP Investment Managers — Analyst

Okay. And the last question, sir, related to this change, which you explained. Four, five years back when you did Analyst Meet, you mentioned that the margin of Fabric business was around 20%, 22%. So with this change in value-added mix and all, has this structurally changed? Obviously, quarter-to-quarter, it might differ depending on demand. But structurally, are you seeing your margin profile changing?

Mukesh Bansal — Senior Vice President, Fabric Business

It depends whether we are able to maintain the same EBITDA margin or not. But structurally, rather we have not seen any change happening as far as EBITDA margin is concerned. But depending on the margin situation that keys are changing, the commodity space is changing or more repetitive coming over the next couple of years. So otherwise, we are trying to maintain the same [Indecipherable] — competitive situation or the market situation there.

Resham Jain — DSP Investment Managers — Analyst

Okay. All the best sir. Thank you.

Operator

Thank you.

Mukesh Bansal — Senior Vice President, Fabric Business

Thank you.

Operator

We have the next question from Bharat Chhoda from ICICI Securities Limited. Please go ahead.

Bharat Chhoda — ICICI Securities Limited — Analyst

Yeah. Thanks for the opportunity sir. Sir, I just required the CapEx number for FY ’23 and FY ’24 and the breakup for the same like how we’ll be spending that?

Rajeev Thapar — Chief Financial Officer

For FY ’20-’23, total CapEx could be in the range of INR600 crores to INR650 crores. And next year, of course, that will be normal CapEx only maybe in the range of INR200 crores or so.

Bharat Chhoda — ICICI Securities Limited — Analyst

Okay. So this INR200 crores would be majorly maintenance CapEx?

Rajeev Thapar — Chief Financial Officer

These are normal CapEx we call it. So, yes.

Bharat Chhoda — ICICI Securities Limited — Analyst

Okay. Okay. And this INR600 crores and INR650 crores has will be spent on the FY’23 number sir?

Rajeev Thapar — Chief Financial Officer

Sorry.

Bharat Chhoda — ICICI Securities Limited — Analyst

The FY ’23 CapEx has been spent on what?

Rajeev Thapar — Chief Financial Officer

That was some loan had been raised, which was eligible for some state subsidy. So remaining amount is being met through own accruals.

Bharat Chhoda — ICICI Securities Limited — Analyst

No, no. Sir, I was saying the breakup for this like INR600 crores to INR650 crores that you are talking on.

Rajeev Thapar — Chief Financial Officer

This is only on — majorly on the spinning side only.

Bharat Chhoda — ICICI Securities Limited — Analyst

Spinning. Yeah.

Rajeev Thapar — Chief Financial Officer

Because that expansion has taken place one lakh spindles. And apart there from some normal CapEx could be there, which could be in the range of INR100 crores, INR125 crores of rupees for this financial year also.

Bharat Chhoda — ICICI Securities Limited — Analyst

Okay. That’s it from my side. Thanks so much.

Operator

Thank you. We have the next question from Nikhil Agarwal from VT Capital. Please go ahead.

Nikhil Agrawal — VT Capital — Analyst

Yeah. Thank you for the follow up sir. Sir, this was — this is regarding the Chinese demand, so again. So they are importing cotton yarn from India mostly for the export markets or for their local consumption?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No. I think they’re doing it for both domestic as well as export. But primarily, they try for — it’s for the exports only.

Nikhil Agrawal — VT Capital — Analyst

Okay. Okay. Got it. And sir, the yarn prices. I mean if you look at the quarter-on-quarter numbers, your volumes have increased — improved quarter-on-quarter. But your topline, it has been — it is because of the drop in yarn prices and all, and cotton prices. So could you quantify? I mean, could you like quantify how much drop was seen in quarter three versus quarter two prices?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yarn prices?

Nikhil Agrawal — VT Capital — Analyst

Yes, sir. Yarn and Fabric as well, both.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So the yarn prices on the higher side had — had gone through almost $4.60, $4.70 kind of a pricing, which now is close to about $3.30.

Nikhil Agrawal — VT Capital — Analyst

Okay. Okay. But — and Fabric?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Mukesh, can you share your permitted, what is the kind of — as a benchmark of products? What is the price earlier versus now? The highest versus now.

Mukesh Bansal — Senior Vice President, Fabric Business

That is difficult to say, sir.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

I think one of the products you can get them within.

Mukesh Bansal — Senior Vice President, Fabric Business

So if you look at what is popling — what is popling is the largest commodity item. So last quarter, the average price was in the range of about 95 to 97. This quarter — the previous quarter was — currently, I think, say 2020 in the range of about 77, 79, so 2020 is more than this while the beginning of quarter three.

Nikhil Agrawal — VT Capital — Analyst

Okay. Got it, sir. And sir, just a last question like how beneficial is the Australian FTA that hasn’t been signed with the government? How beneficial is it?

Mukesh Bansal — Senior Vice President, Fabric Business

The Australian FTA, if you — sorry, sir. You will answer that?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, no. Carry on.

Mukesh Bansal — Senior Vice President, Fabric Business

Yeah. So Australian FTA, if we look at our neighboring competitors like Bangladesh or the others, so they already had that duty advantage. So India was leveled. India had that duty disadvantage between 5% to 8% on the cotton garments. Slovakia — to an extend India will level-three field now. But we, India — [Indecipherable] is not a very shoot market there in — we will set — cannot recall game changing advantage. But yes, we are at level three — some exports will start happening from India as well.

Nikhil Agrawal — VT Capital — Analyst

Okay. Got it, sir. Thank you so much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Sandeep Baid from — I’m sorry. He is an Individual Investor. Please go ahead, sir.

Sandeep Baid — — Analyst

Good evening, sir, and thanks for the opportunity. I didn’t understand the inventory loss for the Jan to March quarter. Because you said that, December average prices were INR63,000, current prices are also around INR62,000, INR63,000. And you said that you are carrying only one month inventory. So that is — the one month inventory that you would be carrying would have been purchased, say towards in November end or in December? So how — so how heavy your inventory loss in the current quarter as well?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

INR63,000 rupees or INR62,000 is the market price.

Sandeep Baid — — Analyst

Yes.

Rajeev Thapar — Chief Financial Officer

My cost of inventory surely higher because we were using the cotton worth INR85,000, INR90,000 in the month of September-October, every month we are buying one month at the cotton — current prices. So our average price is higher than the market price.

Sandeep Baid — — Analyst

Yeah. But you’re carrying only — as of December 31st, you’re carrying one month inventory and that —

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, no, no. My dear — the loss or the written-down value doesn’t happen on cotton. It happens on whatever inventory you have finished goods, WIP, it happens on that. The cotton or the raw material doesn’t get devalue to that extent. So suppose I have one month of stock available to me, which could be the yarn or my work in process, that gets the value-based upon my average consumption rate for that month.

Sandeep Baid — — Analyst

No, no. I still — I’m sorry, I still didn’t understand. So, as of December 31st, you’re saying — you’re saying that you don’t revalue or devalue — cotton devalue yarn or the work in process, is that what you’re saying?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yeah.

Sandeep Baid — — Analyst

Okay. So cotton, you don’t devalue, but cotton you’re carrying only for a month and cotton was purchased in the month of December, when the prices were INR63,000. So there won’t be any —

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Let me give you. Suppose, in the month of September my cotton is INR90,000 rupees, and I’m holding one month of stock. The — in the month of October, the price is INR80,000, so which means my average becomes INR90,000 plus INR80,000 divide by two, it’s INR85,000. So my opening becomes INR85,000, next month, my opening one month is INR85,000, again by one month of stock, let’s say at INR75,000, so the average of that. So my inventory cost will always be higher. Till the time — yeah.

Sandeep Baid — — Analyst

On the accounting wise, you’re not falling fee. You’re falling weighted-average.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

People always go to that. Correct.

Sandeep Baid — — Analyst

You’re not falling [Indecipherable]

Neeraj Jain — Joint Managing Director & Head of Yarn Business

No, no, no. As always weighted-average.

Sandeep Baid — — Analyst

Okay. Understood. Okay. Thank you.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yeah.

Operator

Thank you. We have the next question from Abhineet Anand from Emkay Global Financial Services. Please go ahead.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Yeah. Thanks for the opportunity again. So I think you indicated on the spread in current fee. For 3Q, Rajeev sir, can you provide us the spread or maybe cotton and yarn separately — average for 3Q?

Rajeev Thapar — Chief Financial Officer

Average for?

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Average cotton and yarn prices for 3Q or spread, whichever is available.

Rajeev Thapar — Chief Financial Officer

So it will be close to about $0.60. $0.60.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Okay. And lastly one — I just wanted to have a slightly more — not numerical number, but something like, I just want to understand Indian spinners, typically — I understand lot of players who manufacture spindle and provide, has been stating that India has been one of the countries where the spindle capacity has been increasing versus China, it used to do earlier, is not doing much. So as an Indian spinner, say, few years back and today, are we in a better situation worldwide? Or how — if you can give some qualitative stuff on that?

Rajeev Thapar — Chief Financial Officer

No. I said, we are always competitive till the time our material prices, New York future plus $0.04, $0.05. So in this period, it was almost $0.15 to $0.20 higher than that. And a couple of months, it was as high as $0.35, $0.40 also over the near-future. So we are not competitive against that. As on today, we have come down to New York future plus $0.10. So we are better-off. But our normal margin starts happening whenever it is in the range of $0.03 to $0.04.

Abhineet Anand — Emkay Global Financial Services Ltd — Analyst

Okay. Okay. Thanks sir. Thanks for the explanation.

Operator

Thank you. The next question is from the line of Deepak Varma, an Individual Investor. Please go ahead.

Deepak Varma — Individual Investor — Analyst

Hello. Yeah, so my question is a bit hypothetical. Let us review — and this is on cotton prices, whether you assume government does not take any action. And how long do you think it will take for, in your experience so far. I’m sure this is not the first time although no situation presents a sell price. But in your assessment, what would happen and how long would it take for the prices to actually come down because there’s — probably next crop as well and so on.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

So in our review it should have come by this time. It’s the first time in the history of India there the farmer is holding in-expectation of a better price. It is never happened in the history of India till now. I mean, three days, four days, five days talking, holding, here and there will keep a price where always happen. But on large scale holding by the farmer, where they want the prices to match to the last year prices where the international prices have come down — come under $0.40 to $0.85 is uncomfortable for anyone, but I think they’re still holding on to that. So, this situation has come for the first time. And we require to look at how the things goes in next one month or so. So in my view, the correction has happened in last one month to half month to quite an extent and it may take another couple of weeks before this becomes normalized.

Deepak Varma — Individual Investor — Analyst

Couple of weeks, sir?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Sorry, couple of weeks.

Deepak Varma — Individual Investor — Analyst

Thank you so much. All the best.

Operator

Thank you. We have the next question from the line of Abhishek Jhunjhunwala from KAM Capital Services. Please go ahead.

Abhishek Jhunjhunwala — KAM Capital Services — Analyst

Good evening, sir. I hope you are able to hear me.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Yeah, yeah.

Abhishek Jhunjhunwala — KAM Capital Services — Analyst

Sir, I mean, I have been observing the trends I had been following the quarterly call. So I have an observation. Your cotton hedging policy I feel or maybe the Board to look into it. It may require reflection as I have observed that as you end up with lower number of cotton hedging contracts as prices of cotton keeps rising and your cotton inventory volumes goes down so in your process inventory of cotton or the material process is not protected once you have exhausted your hedging contracts so you are left in a scenario with a high price of cotton or the inventory in process but you have exhausted your hedging contracts so ultimately you are left with a high price inventory and no hedging contracts to look after the fall in inventory cost?

Neeraj Jain — Joint Managing Director & Head of Yarn Business

There are two ways of hedging the cotton. One is it is a natural way where you can sell the yarn so that is one way but that can happen only for a month or two because the yarn you can sell only for a month or two whereas the cotton you have to buy much larger quantities. In India there is no hedging tool available so the only tool available in India is NCS where the volume is minuscule so you cannot hedge it over here. The third way is to go and hedge at New York Future either when you are physically buying you can sell it on a New York Future so that if the prices goes up you have the advantage of physical cotton that you are losing on the New York Future or vice versa if the prices goes down at least you start losing on a physical but at the same time you start getting on whatever you have sold as a future over there.

Our thought process is only whenever you are buying and we feel the prices are too high at that stage we try to hedge it by way of selling the New York Future so that whatever situation happens you take advantage of that, but at the same time whenever the cotton is exhausting we have to liquidate the stocks at those levels because in the month of September-October you come to a bare minimum level where the new season will start happening soon and you cannot have the hedging provision RBI does not allow you to have the hedging position unless you have the physical stock availability.

Abhishek Jhunjhunwala — KAM Capital Services — Analyst

Okay. Thank you, sir for the clarification.

Operator

Thank you. Ladies and gentlemen that was the last question for today. I would now like to hand the conference over to the Managing Director, Mr. Neeraj Jain for the closing comments. Over to you, sir.

Neeraj Jain — Joint Managing Director & Head of Yarn Business

Thank you very much and as we have been sharing our thought processes the market has been very, very volatile, the changes are happening very fast so we always tried that whatever in our view if the situation today we have tried to explain to our investors so the two factors one the market is changing both in cotton and yarn, the demand supply, the Ukraine war, the gas prices which is beyond our control and we have to work and operate within that so whatever is our best segment call we are trying to do within. Second is internal operations where you have to look at whatever in terms of selling, buying, producing whatever you can do and I can assure to that extent I think the management is really, really working hard and trying to look at that whatever is controllable or within our hands at least we try to do best over there.

So I am sure the things will start improving. It is already started it will continue to improve and we might look at better times in the next one or two quarters, but let us wait and watch for the same. So thank you very much for your confidence into our management and we will keep trying our best and I am sure we will look at a better future soon. So thank you very much for being with us for attending this call and anyone has any questions separately they can talk to our investor cell and to that extent we can reply if there is anything there. Thank you guys. Thank you.

Operator

[Operator Closing Remarks]