Vardhman Textiles Ltd (NSE: VTL) Q4 2025 Earnings Call dated May. 05, 2025
Corporate Participants:
Unidentified Speaker
Neeraj Jain — Joint Managing Director & Head
Sagrika Jain — Executive Director
Analysts:
Unidentified Participant
Roshan Nair — Analyst
Awanish Chandra — Analyst
Prerna Jhunjhunwala — Analyst
Resham Jain — Analyst
Lakshmi Narayan — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Q4 and FY25 post results earnings conference call of Vadiman Textile Limited hosted by Batliwala and Karani 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 phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Roshan Nairobi. Thank you. And over to you sir.
Roshan Nair — Analyst
Thank you. Good evening everyone and welcome to POQ FY25 One East Conference Call of Vardaman Textiles Limited. On behalf of BNK Securities I welcome all participants and the management of Vardaman Textiles Limited to the call. We have with us today Mr. Neeraj Jain, Joint Managing Director Ms. Sagarika Jain, Executive Director. Mr. Sushil Ja, Director Raw Materials. 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 and Mr. Agarika Jain for their opening remarks post which we can have Q and A session.
Thank you and over to you.
Neeraj Jain — Joint Managing Director & Head
Good afternoon everyone. We have declared the results so it’s a little better compared to the third quarter and the corresponding quarter. At the same time I think the challenges continue both for the world market textile market as well as in mid textile markets. Considering the earlier concerns were only because of the Blue War but now considering the Terry Bar which is started by usa there’s definitely a more uncertainty as of now for next couple of weeks or couple of quarters till the time there is a negotiation or there is an understanding on the tariff to be put on the various countries.
On the business front, definitely this has been a very very challenging period for the funding business because our cotton in India continue to be on a very very high basis almost in the range of about 81, 82 US cents. Whereas because of the minimum support price over here and not possibility to get the cotton imported duty free in India with the most of this period cotton in the range about 66,67 US cents per pound on a New York future which means the landed cost according to Vietnam or to Indonesia would be in the range of about 7879 US cents.
Compared to that the Indian cotton in this period continued to be almost at 80 to 83 US cents which means putting us at a disadvantage of 3 to 4 US cents. In addition to the quality variation differentiation because of the contamination and so on, so on. So the industry in India continues to struggle. The second aspect of the change is the quality control standard put in by the government where the import of synthetic fiber import of any kind, where the any material to be, any ground material to be sold in India or any fiber to be sold in India, nanite fiber has to be approved by.
This basically has prevented the import of synthetic polyester or viscous in India. And our raw material, both polyester and viscous are almost as of now expensive by about 18 to 20% compared to the mill which is getting north Iran, Thailand or China. So as a result of that Indian Spain industry is a little incomparable as of now on the non mesh fibers as well. These are the two big concern points. Of course on the silver lining side, definitely the brands are coming to India. That business is available whichever can give them the delivery. And potentially if they require resource and manage their lead times as well as the peaking requirements with the new products development innovation, that business should be there, which is green only.
So that’s the direction the company has taken where we are trying to look at more of these products where you can enhance your margin. And to that extent we are monitoring our machine part also so that it is the shop there is more robust, working wholeheartedly on demanding on new products so that we could capture to these kind of businesses where the competition is relatively low and the loyalty of the customer is surely better. So that’s what is happening. The Indian crop almost. It was estimated to be almost 13 minutes and almost 90%. But considering the minimum support price this year Cotton Corporation of India precluded almost 10 million days.
Now we have started selling it, of course the prices in India again are higher because virtually now as of now the entire quantity is available only and we have to buy day to day but at a much, much expensive basis. The next year swing is about to start. The US intentions are already there which is lower by about between 10 to 14% considering the weather and the lower remunerated crop over there. That’s going to be one concern where the overall shortage would be there. But at the same time if USA puts in any kind of duty, that means there could be a possibility of some reduction in the consumption also with there.
So to that extent there could be a possibility of the consumption also being lower in USA which is one of the biggest consumer countries in the entire world. So as of now the ethno sale has become very, very challenging, very very uncertain. Most of the shipments which have happened in last 3, 4 months the customer expectation is or the brand expectation is whatever is the 10% duty that has to be absorbed by the supply chain including the brand. Whereas because of a very low margin it’s not in a position to take that money is being negotiated between the brand and the government error as of now most cases.
2 I think since this facility of 10% is only available for 90 days so there’s more uncertainty how the things will happen in next because any order which comes in today will be delivered three months down the line only. So those are all uncertain periods times as of now which are posing a big concern to most of the not only the textile but I think other non textile products as well. Another piece of information that there has been some issue between India and Bangladesh where they are not allowing now the shipments by road to Bangladesh which used to happen to Benapul border area.
So which means the cost may not increase but at the same time the lead times surely will increase from about 10 days to 3D which is again a concern for the as industries moving more and more on the value added side. So this is definitely a most or a very uncertain period. But I’m sure it looks like this seems to be some silver lining also because you have to put in all kind of duty. As of now India would have the newest in duty as per the previous understanding it was 24% whereas most other comparative countries were between 45 to 50% which includes Vietnam.
Bangladesh was also higher. China was much higher. So there could be a possibility even in the uncertain times there could be a possibility of India getting some advantage by the relatively low duty so that we could announce our exports to usa. That’s my starting comment on the yarn side. I request Sagrita to give her opening remarks on the fabric side as well.
Sagrika Jain — Executive Director
Thank you sir. As for fabric, there was good demand from the markets all around. There was good retail sales during the festive season of Christmas and New Year. As a result import numbers in Jan and February quite good for us, UK and EU markets. So we had a very good quarter four in fact this has been one of the best quarters that we have ever had. We ran on full capacity and we also had a good financial year. Adding to what Mr. Neer again had said on US tariffs. Some of our US based customers are referring to this situation as short term pain for long term gains and we share the same optimism.
So as a response we are actively engaging with customers to understand what their evolving needs are and we are positioning ourselves as a strategic and reliable partner. Our proactive approach, combined with India’s tariff advantage, subsequent tariff advantage places us in a strong position to not only navigate the current disruption but also to achieve sustainable growth over the next quarters. As far as capacity expansion goes, by the end of our current calendar year 2025, our production capacity will increase by 38%. So this expansion will enable us to shift to other products including synthetics, so increase our product basket and also reduce the sale of gray fabrics.
So we will be converting our gray fabric proportion to dyed processed fabric. We have seen strong demand from both existing and new customers, which is encouraging. While the fear of US market slowdown could potentially impact short term demand. But we’re committed to utilizing this expanded capacity immediately. Our aim is to fully absorb this capacity enhancement and optimize our production by fiscal year 2028. We are confident that with strategic planning, agility and the right customer engagement, we will maximize this capacity expansion and drive growth. Hello Prashant.
Neeraj Jain — Joint Managing Director & Head
Can we open the line for Q and A?
Questions and Answers:
operator
Yes sir, sure. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you have pressed star and two participants are requested to use answers while asking a question. Ladies and gentlemen, we. We will wait for a moment while the question queue assembles. The first question is from the line of Rajesh Jain from rtk. Please proceed.
Unidentified Participant
Hello sir. Good afternoon. Can you tell me like why is there a sharp jump in other income and other expenses in this quarter?
Neeraj Jain
The other income increased sale of some land at one of our plants which is about 25, 26 crore today at that time. I think the short term. Sorry, other than that, Other than that is all normal. And the remaining is we do mark to market on the dollar rupee also. So whatever is the foreign exchange game that’s also gets captured into other income technical. As for the accounting standard.
Unidentified Participant
Okay. And why is there a sharp jump in the other expenses? What does that comprise of?
Neeraj Jain
No, that’s generally because we have huge amount of modernization going on in all the factories. So that’s. That’s all related with the repair, maintenance and the service building expense.
Unidentified Participant
Okay. So going forward, I mean this will be the trajectory of the other expenses going forward also in the next few quarters.
Neeraj Jain
No, it will come down for sure. I think most of the modernization are getting completed in first quarter itself. After that it was normalized.
Unidentified Participant
Okay sir. And so apart from so which are the countries to which you export? Can you Give a country wise bifurcation in terms of percentage of your revenue.
Neeraj Jain
Country wise that keep changing. But most of our. I can just give you an idea. I think as a country, whatever yan we export, 50% goes to Bangladesh and the naming goes to all most of the Asian countries or the Central America. Maybe some part of this goes to Mexico and so on and so on. And this is the trend for the country. Our trend is almost in line with the country exports. That is true even for the fabric also.
Unidentified Participant
Okay, so is the Bangladesh exports seeing any continued impact because of the, the. The stand that Bangladesh has taken?
Neeraj Jain
No, as of now, no. But it’s only the permissibility will be a little too hard because we’ll have to ship it through. Ship it through the water route only. So maybe the number of days to reach the product will increase somewhat. In Kawadi products for VAZMAN, let’s say 70% of products were already going by the ship. So I think 20, 30% will have some impact on the serviceability. So cost wise it may not have an impact.
Unidentified Participant
Okay, sir. And sir, just can you provide any update on your foray into technical fibers? How is the capacity expansion going on that front?
Sagrika Jain
Yes. So the progress is as planned, as anticipated and we should be operational in quarter three.
Unidentified Participant
Okay. Okay, thank you.
operator
Thank you. The next question is from the line of Avinash Chandra from smifs. Please proceed.
Awanish Chandra
Thank you for taking my question and congratulations management on good bad performance. Sir, first thing in the historical. If I look at the number of EBITA margin and textile EBIT which you report most of the time, rather all the time textile EBIT was lower than the overall ebit kind of 1 1/2 2% difference. But this is the first time our ebit margin is 11.4 whereas textile EBIT is 12.5. So and I understand this is due to unallocated cost and all. So could you describe what are the huge unallocated cost which is there in the number which is not related to textile business?
Neeraj Jain
All our business is textiles only. There is hardly anything other than that.
Awanish Chandra
Then in that sense EBITDA margin should be higher than the EBIT margin. Correct. If you look at your number, your textile ebit margin is 12.5% which is reported and reported EBITDA margin is 11.4. And historically the whole trend was 1 and a half 2% higher EBITDA margin than the textile debit. This is the first time it is a reverse.
Neeraj Jain
Sorry, I’ll come back to your question in a little while. Let me Just look at. In the meantime, can you move from. Sure.
Awanish Chandra
Sir. The second question you have already talked about in detail the problem the sector is facing the rather than uncertainty and everything. In a few of the other calls also many management highlighted that due to this lower international cotton prices even for some of the spinners business is not viable. So did we lead to that situation even in India that lot of small players are not able to manage any EBITDA margin.
Sagrika Jain
Can you repeat your question so that.
Awanish Chandra
I mean in the start sir already talked about that international cotton prices is lower and that is making an issue as far as our competitiveness against other countries. So I mean has it started impacting our EBITDA margin already compared to the historical? Because our ETA margin is far lower than the historical. That’s where my question is.
Neeraj Jain
There are two issues definitely as of now, since our commitment expenses are higher, our EBITDA margins surely slower and it is impacting all the investors. Two historic margins on EBITDA margins have always been in the range of about 17, 18, 19%. But if you look at the change of base from dividend in last 3, 4 years, the in this quarter used to be about 34, 35,000 rupees a candy four years back. Today the base has become 55,000. So the raw material cost has increased by 70% in this period. Whatever is the raw material cost to that extent yarn sizes have increased.
But if you look at percentage of EBITDA to be sales that’s not grown by 70% 60%. So whatever increase in the raw material prices have happened, our EBITDA per share may be same. But definitely in terms of percentage will never be comparable unless the margins improve significantly.
Awanish Chandra
Sure. I mean a lot of a few companies have shown some expansion in EBITDA quarter and quarter year. That’s what. But when you answer the first question, maybe that will give more clarity. The last question.
Neeraj Jain
Yeah. On the other business I just put that there is acrylic fiber business also which is. Which is added into the consolidated numbers. Yeah.
Awanish Chandra
So I done this math also. But athletic is just 2, 3 crore. So that’s a very small contribution. So that will not change my number from 12.5 to 11.4. It’s a kind of difference of 100 crores to match the whole number.
Neeraj Jain
Let me just put it. Okay.
Awanish Chandra
The last question while you do that math and you can come back during the call on that answer the last question. I mean on the tariff you explained everything so I’m not repeating anything. Let’s say the tariff remains as it is 10% and then some more tariff comes. And if US retailer keep pushing to Indian supplier to give discount, do you think it will also some bit of negative repercussion come on the peanuts as well. Textile manufacturer, garment manufacturer will ask us also to take some cost.
Neeraj Jain
There could be a possibility. Whenever anyone in the supply chain is being asked to share the cost. We can definitely try to come back to the spinner also. But somehow since the spinner margin is so poor as of now the spinner may not be in a position to help at all. Because there is hardly any margin available. So to me that doesn’t look like that the spinner will have to be at this cost. But yes, up to fabric phase for us it can come to some extent. It can though we are existing. But at the same time I think it’s a temporary period of one or two months.
Let’s see how this works. Because if this continues we they will have to increase the price at the retail side. But since it is as of uncertainty and people are not sure how much timely duty has to be so brand little time. And by the time once the duties are finalized, we’ll take a final call. How do we want to go on that?
Awanish Chandra
Okay. Okay sir. Okay. So I will wait for that bit and everything. Okay, thank you.
operator
Participants who wish to ask question may press star and 1. The next question is from the line of Anil Kumar Sharma, an individual investor. Please proceed.
Unidentified Participant
Thanks sir for a good set of numbers. Congratulations for that. Madam Sagir, you have mentioned that our capacity is running at the full capacity. Regarding garmenting. But in the quarters for the sales side you have merchant 5 lakh 15 thousand. You have sold in this quarter. Visa means it is 5 lakh 54,000. It has come down by almost 76%. So can you explain that?
Sagrika Jain
Hi. So are you talking about garment or textiles?
Unidentified Participant
Garment sales figure it is less than the Y quarter in volume.
Sagrika Jain
Sorry, what are you talking about?
Unidentified Participant
Hello. Hello.
Sagrika Jain
Hello.
Unidentified Participant
No, not fabric number. Gray fabric number particularly it has come down volume. You have given day before yesterday. It has come down from 554 to 1511 meters.
Sagrika Jain
Okay, so it could be. It could be quarter to quarter difference. But what I was saying is in this now in FY26 we are expanding our capacity. So the gray fabric will be converted into processed fabric.
Unidentified Participant
Okay, but that is okay. But my question is actually overall also gray. If you combine both even then this quarter is volume wise is less than the last quarter. Why you buy quarter? Is it so it should not be because earlier we were running at 90%. Now we are running at 100% capacity. So volume wise it should not be less. Less than that.
Sagrika Jain
It may not be the case. There’s also other factors like change in the product milk. So like if the product mix changes then the price will be different. So the revenue also is different.
operator
Hello sir, Sorry to interrupt. We may request you to return to the question queue for the follow up questions as there are several participants waiting for that one.
Unidentified Participant
Okay.
operator
Thank you. The next question. Thank you. The next question is from Prerna Jandranwala from Ilara Capital. Please proceed.
Prerna Jhunjhunwala
Thank you. And congratulations on good set of numbers on improvement on margin sequentially. So just wanted to understand the cotton yarns red position today. And how do you foresee for the coming period? Though I understand that uncertainties continue. But do you think there is some strength in the yarn business now given that our margins have been improving every quarter.
Neeraj Jain
If you go by the international quarter, it’s almost in the range about 85 to 90 US cents. It is still reasonably okay. But if you go by the Indian thread, it is almost a little lower than 17 years rent in this period also. So of course there’s some improvement happen. But at the same time it’s not enough. And if you look at the capacity utilization country as a whole, there seems definitely almost to 18% of SPF stock in this period last two years because of the lower margins. So of course there has been some despite in this period.
Because when the cotton season started at that stage we were buying cotton at about 7879 U.S. rent in India. But it slowly has increased to now 81, 82 US dense. And the New York future has been coming down steadily. 67, 68 only. So Indian spread is not more than 70 times as of now.
Prerna Jhunjhunwala
Okay, so what is leading to margin improvement for us? Is it improvement in fabric? Fabric margin or.
Neeraj Jain
Major improvement is coming from the fabric margin. Good. The improvement will be done also in this quarter. But I think substantial increases on account of the samples.
Prerna Jhunjhunwala
Okay, and do we see that there is further potential of improvement in margins given the uncertainty and the challenges at the global economic level or given the uncertainty? We would stay away from giving any comment on that.
Neeraj Jain
No, I think it’s good very difficult or if anyone guess what will happen. But as I mentioned earlier, also considering even if the duties are put in, India surely looks like would be one of the countries with the lowest duties on it. So Khan or two months uncertainty could be there. But if we are at the lower end of the beauty amongst other competitive countries, this will be an opportunity for the Indian market. Be it spinning, be it fabric, be it car. Mental. Okay.
Prerna Jhunjhunwala
And and to the second question is on Bangladesh exposed to Bangladesh, given that land route is now closed by Bangladesh, could you help us understand the impact of it in terms of the cost increase that we’ll have to incur to supply there?
Neeraj Jain
So as I mentioned earlier, also in terms of cost, there’s not much of a difference. Material goes through the road or it goes through the ship. So cost is not really very expensive. But more impact is on the serviceability because it takes almost three weeks to be sent in a bigger ship. Whereas by road it takes only about 10 days. So there is a gap of 10 days, 12 days on the delivery side. But other than that, direct cost really is not good. Big difference as of now through the ship as one date.
Prerna Jhunjhunwala
Okay. Okay. So cost wise there’s no material difference.
Neeraj Jain
Yeah.
Prerna Jhunjhunwala
Okay. And sir, just wanted to ask you on other expenses this quarter, other expenses have seen as huge jump. Any line item that you would like to highlight?
Neeraj Jain
No, not really. So as I mentioned, there were basically two things happening. One, in this period there has been increase in the ocean sales because of the various uncertainties and export also destination wise. So that’s one increase. Two, there are lots of repair maintenance going on in all the factories where we are trying to monitor. So since lots of work has happened in the last six months, it can increase on account of that. Other than that, I think it’s all normal.
Prerna Jhunjhunwala
Okay. Okay. And so the last question is on the timeline of capacity that come, that comes in the next one year, could you help us understand which quarter we can expect some capacities coming in?
Neeraj Jain
So on the skinning side there is only one expansion which was announced on open end. So we are yet to start this project. Still waiting for the government to give the approvals. And also we are evaluating the overall business circumstances. All modernization of spinning is going on as per the plan. And I expect most of the modernization will be completed by September. So it will will be helping us both in terms of reduction of cost as well as some increase in the production on the existing setup. Only the fabric expansion is already given the schedule.
If you want again, just repeat when the fabric expansions are coming in.
Sagrika Jain
Yes, sure. So our fabric capacity expansion should be operational by quarter three. So we would be able to see an impact then.
Prerna Jhunjhunwala
Okay, but you had two capacities. One is existing product and one was synthetic fabric.
Sagrika Jain
Yes, coming in. So both. So this answer is for both.
Prerna Jhunjhunwala
Okay, for both it Will be coming in third quarter. Okay?
Neeraj Jain
Yes.
Prerna Jhunjhunwala
And it will be coming in full or in phases.
Sagrika Jain
So the one from the expansion of the existing capacity would come in full. And as for synthetics, so we have two phases. So phase one is 16 lakh meters per month. That would be coming now and then basis how quickly we are able to establish our products and our brand name in this, in the segment we will expand according to that.
Prerna Jhunjhunwala
Understood. Thank you Sadrika and thank you sir. Welcome back to the question.
operator
Thank you. The next question is from the line of Resham Jain from DSP Asset managers. Please proceed.
Resham Jain
Yeah. Hi, good evening. So I have two questions and clarification as well. So last time you mentioned you are currently incurring almost capex plus opex because modernization is also there close to 3000 odd crores. And if I’m not wrong, the yarn and fabric modernization and the yarn modernization is almost like 900 crore and 330 crores. Is that number correct? Almost 1200 crores of modernization related capex.
Neeraj Jain
Yeah, yeah, that’s true.
Resham Jain
And almost all of this 1200 odd crores will be rooted through PNL. Because you mentioned some while back that some of this repairing, maintenance and modernization related work is a part of other expenses.
Neeraj Jain
So whatever is repair maintenance which is required as a building repair and those things that goes at the P and L expense, all new machine expenditure in this would be the machinery. So all that machine. Okay. Whereas the earlier machine will be written up or will be sold and whatever is the difference depends in the net present in the depreciated value of those machine or sale price that can that can come to be the end in form of a profit or loss. So all new machinery will be.
Resham Jain
So this 1200 crore is the capitalization related number. The PNL related number separate.
Neeraj Jain
No, no. The P not only 30, 40, 50 crores, not more than that.
Resham Jain
Understood. Okay. Clear. Yes. So for the full year FY25, the incremental repair and maintenance. So if I look at your trend of repair and maintenance as a percentage of sales, this number would have gone up by what number on an average this year FY25 as a whole. Will. It be 100 crores on a full year basis?
Neeraj Jain
No, the over and above the normal repair maintenance, it won’t be more than half a percent.
Resham Jain
Okay. Okay. 50 odd crores. Got it. And the second question is with all these measures like you will have renewable energy coming in, modernization happening. Some of the new machineries will also. Whatever new capex you are doing are all automated machines. So I presume this all will lead to slightly better margins than our historical trends. And these are all internal measures which we have taken. So how much on an aggregate basis, how much improvement do you expect because of all the internal improvement measures you have undertaken over the next one or two years?
Neeraj Jain
If you look at the nature of these expenditures, one is couple of things are done to ensure the proper quantity of the products which may or may not give you any direct advantages. Two, some of the machines we are replacing because scaling in the electricity cost or scaling in the number of people over there, there would be an advantage for sure on account of the same. So third is creating more flexibility in the system so that we can produce the differentiated products which sometimes on the existing subsection may not be done depending upon how much those products we are in a position to sell or that kind of business is fighting to the India where our buyers the advantage would come in.
But in any case, whatever expenditure we do, our expectation is always on the capex. At least 15% margin should be retail should come at least 15% should come over and above the existing costs.
Resham Jain
Understood? Okay. The second question is with respect to the technical textile business. So obviously our project will get completed in third quarter as I understood. But from the business development perspective, how are, where are we and what kind of inquiries and what kind of customers we are seeing in the technical textile business?
Sagrika Jain
Yes, I can answer that. So currently we receive good response want from our existing customers. So our existing customers in their portfolio also have these synthetic products. For example, they’ll have a jacket which will be a wing sheet or which will protect against the rain. So we’ve gathered quite a few samples and we are building our know how and other things to how to develop products. So from existing customers the demand is decent and we are also going to be touching. We’ve already reached out to some new customers who we have we weren’t catering to.
For example there would be mainly sports, sports brands. So it will be a mix of both existing and new customers. That’s been the problem.
Resham Jain
Okay, and just one clarification here because in the initial comments sir mentioned that there has been like import duties on polyester as well as viscose and several other synthetic fibers. So because these are all export led drugs, the import duty will not have a bearing on our competitiveness. Is that a correct understanding?
Neeraj Jain
No, no, no, no, no. So these are not the intro duties. This is basically a quality control order which has been issued where any fiber which is sold in India has to be approved by the business of bis. So all the companies which are sitting outside, if they have to sell their fiber in India, they have to get it registered with the government for that which most of the companies sitting outside Chinese Taiwan is, they are not doing it if they are not getting vested registered to the Indian authority. In that scenario, that import cannot be done in India.
So practically the import of all fibers, they were banished to India. And as a result of that, the local players, they increase the pricing and our brown deal have become expensive. It’s not the import duty, it is the system.
Resham Jain
But will it impact our technical textile business? Because I presume that a lot of this material will be imported only to begin with.
Sagrika Jain
Polyester. We will still, I think majority we will be relying on the domestic market as it is available and quality is also okay. Nylon we will have to import. Now of course our first reference would be to go to those suppliers who have bis. Okay. Product to bought product.
Resham Jain
Okay, got it. Okay, thanks. I’ll come back with more questions. I have few more. Thanks. All the best.
operator
Thank you. Before we take the next question, I would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Shivaji Mehta and the individual investor. You may proceed. As there’s no response from the current participant, we will move to the next participant. The next participant is. The next question is from the line of Falguni Dutta from Mansurova Financial. You may proceed.
Unidentified Participant
Yeah. Good evening, sir. So how are the cotton Yarn spreads now versus Q4?
Neeraj Jain
So Q4 was for the Indian mills, about 68, 70 US cents. And it continues to be the same.
Unidentified Participant
Answer at these spreads. Are we main, Are we making something at the pat level for yarn on the basic products?
Neeraj Jain
Probably. No.
Unidentified Participant
I missed you sir. On the. You said on the basic products. No. Okay. And sir, I just missed your comment on the tariff. If it’s not a problem, can you just repeat that part? Meaning what is the situation as regards the US tariff? And it’s on. It is on fabric. Right.
Neeraj Jain
But including yarn, we don’t export yarn to that country. And even the fabric will go to the different countries depending upon where the governmenting happens. So tariff is all across all products and it looks like they’re going by their earlier list. India had one of the lowest tariffs. So indirectly there could be an advantage of exporting to government from this country. So even if our feeling is even if the tariffs are on and if India gets the lowest, there could be some indirect advantage to India that we will be More combative.
Unidentified Participant
And sir, currently it is 10%, right?
Neeraj Jain
It is 10% as of now.
Unidentified Participant
Okay. And sir, as of now how is it like who is is it being passed on to the customers there or how is it many? It’s being absorbed by the suppliers.
Neeraj Jain
Yeah, as of now it is being taken by the brand itself. But though they have started requesting a part of that to be borne by the fabric producer or the spinners. But spinner as of now it’s clearly said not possible. So they are requesting the fabric business also. So we haven’t agreed as a pound and goo. But yes there.
Unidentified Participant
Okay, so answer one final question. How do you see the spread for the directionally for this year?
Neeraj Jain
It all depends upon because the government, the industries already reflected the government to get the import duty on cotton. So I think if they are in a position to do that, our margin of strength would improve. But in case they don’t do that in that scenario CPI will continue to be the sole supplier of cotton. And if cotton is on almost 1500 to 1600 bases on then I don’t think it’s improving for spinning industry even next year also. So unless we have a raw material aligned to the international markets, it looks again visible that margins would improve on the spinning side.
Definitely the kind of customer base we have, the cost reduction buyers taken by the business and all the expansions are coming in the overall capacity announcement there would definitely be an advantage. As a company we may have advantage but purely on the spinning side. That advantage may not be available during the time our boundaries are extended.
Unidentified Participant
Okay sir, thank you so much. That’s all from my side.
operator
Thank you. Before we take the next question, we would like to remind participants, you may press star and one to ask a question. The next question is from the line of Mesham Jain from DSP Asset Manager. You may proceed.
Resham Jain
Thanks for taking my question again. So two questions. First is on the cotton. Given that one third of the cotton is with CCI and probable import duty cuts may also come in. Which means that in both cases possibly the cotton prices may actually come down. I don’t know. This is my hypothesis. But when I look at the balance sheet it seems that we maintain our cotton procurement policy this year as well. So is there any other view which you are carrying given that so much of inventory is already with CCI and in the history we have seen that typically those inventory then land up in the market at a slightly lower prices.
Neeraj Jain
So there are two considerations for us when we buy cotton. One is the commercial, which is the pricing. Second is the quality. So things are most of our customer base of the product based on high quality products. For these sport markets we never compromise on the quality of cotton. So in the season we definitely try to buy the good quality cotton because that’s available practically in about three years, three and a half months time. Irrespective we don’t want our customers to get suffered for longer period of time. So that’s one way we will have to buy the cotton.
Proof your observation can be correct that in case the import duty is cut then definitely have to reduce the price and the prices of cotton currency can come down. So okay, I think this year is much less than what we normally have.
Resham Jain
Okay. So typically you have till September, October, so possibly one or two months lower than. Is that a right way to understand?
Neeraj Jain
Yeah, that’s true. Because beyond that it’s difficult for a company like Vermont because we don’t get quality at the Milton state, then the customer definitely will start having bigger issues. So we generally don’t take that call. Maybe one, two, three months we can take here and there. We don’t keep ourselves open to the not so good quality of parts.
Resham Jain
Understood, Clear. The second question sir is with respect to the overall capex which you have undertaken and assuming all this capex get consummated, what will be the peak revenue at the current price which you’re looking at?
Neeraj Jain
So on the spinning side, as I mentioned, it’s only modernization and about 3.5% of production increase may happen because of the modernization. So that’s not likely to give any top line increase of 15.
Sagrika Jain
On public side keeping the price is constant, we can expect a revenue increase in FY26 by 10% and the year after that we can expect about 50%.
Resham Jain
Okay, what is that absolute number, ma’am?
Neeraj Jain
So absolute number on the fabric side it’s about 4000 crore turnover they had so 10%, that means about 500 crores for the year and the year after that maybe about 1000 crores or so.
Resham Jain
A total 1500 odd crores of top line increase. Okay. In two years time. Yeah, yeah, thank you.
Neeraj Jain
Thank you.
operator
Thank you. The next question is from the line of Manish Kotke from HDFC Mutual funds. You may proceed.
Unidentified Participant
Yeah, thank you for the opportunity. So the kind of tariffs which US. Has put on China and Vietnam and. Given the fact that India might be entering into an FTA with us as. Well as EU by year end, I mean have we given any thought to. Enter into garmenting space?
Neeraj Jain
So again there are two ways of looking at it. Whether the advantages come on only the garmenters or if India starts exporting garments to these countries then whatever section we are producing that will be supplied to the Indian garment. So our major business as of now is the textile material. And we want to be remain to continue to be our strongest player in that. So we have a small shopping division which we are expanding also. But I think there is still no clear decision to assign the government division. If the India becomes competitive, ultimately that advantage would come to extra suppliers.
You want to do governmenting or you want to really give it to 10, 10 times. That’s not a big. Okay. And sir, another question.
Unidentified Participant
You said that MMF fabric in India, MMF raw material in India is approximately 20% expensive than China. So the MMA fabric which we will be making, are we catering to domestic demand, I mean end domestic user demand or is it to the export demand?
Sagrika Jain
It will be a mix of both. So initially we will, we could start with more domestic markets and then as we establish our product then we will move to both domestic and export. And it will be difficult right now to commit that how much percentage will be domestic and how much will be export. I think we can say that once we actually start the production and.
Unidentified Participant
Okay, thank you.
operator
Thank you. The next question is from the line of Rajesh Jain from AGI Capital. You may proceed.
Unidentified Participant
You mentioned that your more than 50% of revenue comes from Bangladesh. And the tariffs on Bangladesh are on the higher side compared to India. But you mentioned that India tends to gain because of comparatively lower tariffs. But in particular how will Vardaman gain Because Verdman supplies mainly to Bangladesh. Are you seeing any negative impact on demand from Bangladesh buyers Or how do you see the situation unfolding?
Neeraj Jain
You know, going by today’s consideration, China will be the most expensive in terms of its rupees etc. China has a huge export to usa. In case China is not competitive, that business will go to all other countries which will include Vietnam, which will include Bangladeshan or India. So to that extent till the time all other countries have this five, they’ll be getting a share from China. Every country may have some advantage. And in any case, wherever you are exporting to these countries other than China, I think that advantage can be shared between the various suppliers.
Because of the DT advantage, it’s only whatever business which will be derived or which will be shifted from China going to any country, that country is going to get advantage only including.
Unidentified Participant
But I’m still not able to get one part of it. So you are supplying yarn to Bangladesh, right? And And Bangladesh is going to be impacted. Right. So just help me understand that how we do stand to gain in this scenario.
Neeraj Jain
Because once China is out of the system, they ultimately declared business coming to Bangladesh. They will be in a position to announce their prices of government because they will be replacing China. So even if whatever we are supplying to them, we should also be in a position to announce ourselves.
Unidentified Participant
Okay. Okay sir, on the fabric side you mentioned that we we can expect 10% revenue increase in FY26 to around 4500cr and. And to around 5500cr in FY27, right?
Neeraj Jain
Yeah.
Unidentified Participant
So and on this increased revenue with the, with the new capacity, how much margin expansion do you anticipate? How many dips or percentage?
Sagrika Jain
Sorry, I’ll just correct you. So currently about 30, 35% of our revenue is fabric. So from that there will be an increase of 10% and in this financial year. And as for margins, I think again it one it would be. It would depend on how the US tariff war plays out. So very difficult to say. I think we should wait for the dust to settle down, where we will find the relative advantage and disadvantage and what different brand strategies will be and then we can let you know what the margin we can expect.
Unidentified Participant
But on a very ballpark number, can we expect 1, 2 percentage point gains on the fabric side or even that is tough.
Sagrika Jain
I think again it depends on the strategies that brands take.
operator
Ladies and gentlemen, before we take the next question, I would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Lakshmi Narayan from Tunga Investments. You may proceed.
Lakshmi Narayan
Yeah, I have one question. If you look at the entire continuum of cotton producers, yarn producers, fabric makers and garmenters, right. So current situation benefits who in a relative sense. And can you repeat your question? So my question is that if you look at the entire continuance from the cotton producers to the yarn producers to the fabric makers and garmenters on a basis, who will benefit the most in this challenges challenging space? And who will actually be will actually benefit the most and who will actually suffer the best
Neeraj Jain
all uncertainty. As of now, it is very difficult to comment what duties will be there on us, what duties will be there on the other countries.
My only belief is if the country as a whole begin, then the entire supply chain will get advantage of that. How much who is going to get will depend upon your own legacies and other things. But if as a country we have the advantage of a lower dp, that advantage comes to the Governmental part of that will be going to the public region. Part of that may go to be Gandhi then also. So this will be shared at the later stage provided that when comes to us who is going to get work. It’s very difficult in this scenario.
We don’t know how much DD branches will have, how the capacity development is going to position to take advantage of that. Theoretically we try to make a model that this is a BTG advantage and who is going to get caught. Not possible to put it in any numbers as of now.
Lakshmi Narayan
Thank you.
operator
In the interest of time, that was the last question. I would now like to hand the conference over to the management for closing comments. Thank you and over to the management.
Neeraj Jain
So thank you very much for your participation and being invested into the company. We have been sharing the challenges continuous last two years has been a very very difficult time. But at the same time considering whatever is controllable by the management in terms of modernization, product mix, new product cost or the other efficiencies, we are really working very hard and whatever results we are seeing a part of that is into the same though these are all the issues and difficulties at this point of time. But as a serious player of sector we still believe good future for this industry and that’s the reason we are investing heavily both on the spinning and on the fabric side.
Our idea is that sooner or later these policies will get corrected. That’s what we believe. So at least we should be prepared and ready to take full advantage of it. Looks like there is some consolidation happening in the industry. There are lots of smaller players. Unfortunately they’re going out of the system because they’re not in a position to sustain the business. So indirectly there is some consolidation happening and eventually as the brand business is moving to India from China, more and more brands are coming and looking at the companies which are more diversified in terms of portfolio, portfolio which are financially strong and which have the technical capabilities and the machine part.
So Varnam gets fit into all these strategies very very well. And also the quality of management where we score quite good in the eyes of the various brands, et cetera, the overall textile team with a good size, good technical know how, good management, good financials and a recently good machine part and a good portfolio product portfolio. We feel definitely that even in these odd circumstances we will do better which we have shown also in the last couple of years and whenever there’s a small business happen in the government policies, definitely that advantage will come up.
So in this period because it’s a tough time, we are looking at all cost advantages or cost, and whatever could be done internally. And thank you very much for your participation, your patience, and I’m sure we will thank you back soon.
Sagrika Jain
Just adding to that, I think we remain vigilant in tracking global development, especially around Paris and the demand cycles. So so our focus will continue to be on building resilience and driving long term value for our stakeholders and ensure that with our strong fundamentals, customer alignment and operational agility, we are well positioned to navigate the near term challenges and deliver sustainable growth. Thank you for joining us and we look forward to the next call.
operator
Thank you. On behalf of Vadaman Textile limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.