Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Vardhman Textiles Ltd (NSE: VTL) Q4 2026 Earnings Call dated May. 08, 2026
Corporate Participants:
Neeraj Jain — Joint Managing Director
Analysts:
Aradhana Jain — Analyst
Cheragh Sidhwa — Analyst
Falguni Dutta — Analyst
Unidentified Participant
Unidentified Participant
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to The Weatherman Textiles Limited 4Q FY26 earnings conference call hosted by 361 Capital. 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 touchtone phone. I now hand the conference over to Ms. Aradna Jain from 361 Capital. Thank you.
And over to you, ma’. Am.
Aradhana Jain — Analyst
Thank you. Shailendra. Good evening everyone. On behalf of 361 Capital, I welcome all participants and the management of Vardaman Textiles to the 4Q FY26 Concord. From the management we have Mr. Neeraj Jain, Joint Managing Director. Mr. Sushil Jham, Director Raw Materials. Mr. Rajiv Thapar, CFO Mr. Mukesh Bansal, Head of Fabric Marketing and Mr. Varun Malhotra, Head of Finance. Without further ado, I would like to hand over the call to the management for their opening remarks post which we can open the floor for the Q and A session.
Thank you. And over to you, sir.
Neeraj Jain — Joint Managing Director
Good evening everyone. Thank you for joining the fourth quarter call. The results are available to you. This period last six months have been. There are some good and some bad news. The good news is one, the US tariffs were over. As a result of that India became more competitive. So the kind of desperation which was there for our garment exporters of the home textiles, that’s over. And things have started moving back to the right direction. Also this was a period where we started looking at a new geopolitical concerns.
Starting with the Iran and US war which created some of the disadvantages of some of the disruptions in the system, be it logistics, be it crude, which has impact on the various businesses including the textile business which I will come to a little later. Also this was a period where the cotton prices started going up internationally in New York Future from 616263 cents went to as high as 8283 cents. And as a consequence of that the Indian pocket also moved from 52, 53,000 rupees a candy to about 68, 67, 67, 68,000 rupees a candy.
So which means the cost of raw material increased in a big way in this period. There has also been improvement in the yarn prices both on account of the raw material push as well as the better demand also which I come again a little later. And in between the dollar rupee Also moved so which was also beneficial as most of the textile is based upon the exporting community. So some advantage came because of that also. So these have been the macro level events. Now we can look at it one by one. Clearly the US tariff has given an advantage.
I understand the utilization of exporters who were directly exporting to USA from India, be it home textile or be it the garment exporter had come down to about 50 to 60% in this period. Also they were giving heavy discounts to the US brands to the extent achieved to compensate 25% as the beauty was 50%. So as a result of that their margins were effective and many products they were losing money as a result of that they were shy of taking those orders. And as a result of again that there has been major issues and concerns for those exporting community since we are the extent producer and we provide the material to them and they were not doing good.
So there was a pressure on the back process also. So all the people who were supplying either yarn or fabric to the garment exporters they were also under a difficult situation either on account of a lower. Both on account of the lower realization as well as the lower utilizations. As soon as the US tariffs were away, slowly the business started coming back. And I understand as of now both home textiles and the garment exporter to the USA they’re running almost 90%, 100% capacity utilization. And as a result of that from the country the overall export is better.
And also since their utilization is better, the overall demand of the yarn is also better. So there’s been a favorable factor in this period. To start with, the second major event was the prices of raw material. Now look at the last two years. The New York future was continuously coming down and came down to one of the historic lower levels of 62, 63 cents. And I think this was a level where the farmers are not actually earning a lot internationally. So there was a fear whether the cotton crop will come down or will increase.
So it was all the concerns and issues which were there in our mind. In between there was a weather bad weather condition which was announced by USA. In the Texas areas where it is as of now it is predicted that 91% drought conditions are there and it is likely the overall crop size in USA will come down. Also the Australian crop size got reduced from 55 million bales. It was expected to be about 41 million bales. The Indian crop also came down against the last year figure of about 31, 31 and a half million bales.
This year it is Projected to be about 39 million bales only. And the Brazilian also was not increasing. There was a possibility either the same or small reduction in that also. As a result of that, the overall cotton stocks which we saw increase in the closing stocks of cotton worldwide last two, three years that got balanced, or rather it was predicted that the world will be reducing the closing stock of cotton maybe to the extent of half million tons to 1 million ton. And the moment it was realized, this was one of the factors where the prices of cotton started going up in the international market.
Two, as the tension started in Iran and usa, the crude prices started increasing, which has a direct impact on man made fibers, especially polyester. And the polyester price increased in this way, in a big way. And as the cost increased because of the crude, all these synthetic fiber prices started increasing. We look at acrylic fiber, the prices increased almost by about 80, 85 rupees a kg. In this period for install fiber prices increased by 25, 30 rupees a kg. And all other stylistic also started increasing.
So somewhere, somewhere it looks like the cotton fiber also got a sympathetic increase on account of that. Also since the synthetic prices were increasing somewhere, I think that was a support given which was which the cotton fiber got. And the prices were also standard to that extent. Third, the demand in this period started improving. So there are two factors how the demand started improving pre war. I’m talking of starting in the month of October or so. The two factors on the spinning side, which had happened in last some time.
One, since the industry was not doing well. So we understand, as per the industrial data estimate, that total of about 11, 11 and a half million spindles have stopped permanently into the system. I shared earlier also our repeat capacity in India was 53 million spindles. Normally we add about 2, 2.5 million spindles every year. And if you go by the normal years, our capacity this year should have been about 59, 60 million spindles. Against that last three years, there was hardly any expansion happening.
But Contrary to that, 1112 million spindles got permanently stocked into the system. So practically the working capacity today in India will not be more than 41,42 million spindles as per the industry estimate. There’s no government data available, but this is the industry estimate, which means there was some balancing of the spinning availability or the yarn availability came into the system where the overall production came down. This was one factor where the surplus capacity got vanished. Two, we saw geopolitical tensions issues concerned in Bangladesh six months before.
So because of that, I think some of the brands or some of the orders got transferred to China also. So there was local Chinese demand, there was export Chinese demand. There were some orders shifting from Bangladesh to China and China. If you look at the Chinese cotton total, they have about 80% of their consumption. They have their internal cotton and 20% they import from outside. And out of the 80% which is their internal production, 80% of that comes from Xinjiang area which is banned by the USA as of now.
So it looks like either the brand suggestion or the local Chinese manufacturer they decided rather than buying the local yarn, they started importing cotton yarn from India, from different countries, including India. The prices were low, so they started buying big quantities of yarn from India. And suddenly starting October, November, we found the yarn demand to be very good in the export market. And the prices started going up for the yarn. Also India, we normally export about 100 million kg of jarn every month.
It is the average for last two, three, four years. And out of that China used to be about 7 or 8 million kgs. Only if you look at the last 4, 5 months data, China is consistently buying about 30 million kg. So practically another 20 million kg demand came to India and Indian exports started reaching or touching almost about 120 million kg plus. So this became yet another factor where the yarn prices started improving in a far better way, not only to compensate the cotton prices, but definitely beyond that.
And suddenly spinning margins started improving into the system. So this demand of China continues even today also. And I think most of the spinners, they’re sold for about two to three months in forward as of now, as far as the export is concerned. And to that extent they try to cover the cotton also. Two, since on the Indian side, the Indian crop size is not likely to be more than 29 million bales. And going by this increased activity of yam, it is expected the our full year consumption can be in the range of about 33 million or 34 million bales.
Now suddenly there was a realization that the cotton is not available in India. And there was the various industries or the various industries Association. They started going to the government to allow the duty to import of cotton so that by the time we finish our existing cotton, there should not be a shortage of cotton into country. The Ministry of Textile could understand and they took a total view with the industry and they wrote it to the Finance Ministry and the Agriculture Ministry that there’s likely to be a shortage of cotton going by the better activity and the better profitability of the spinning sector.
So the cotton should be allowed beautifully coming To India so that there’s no shortage of cotton in the month of August, September, October or so in so on. This information also spread it into the system that India is likely to open the cotton full time or maybe six months. I do not know what government design would be. Whether they’ll take a decision or not, we are not sure. But definitely the market perceived the Indians will buy to buy more cotton internationally. So which also gave some strengthening to the league of future in this period.
The third factor was as the cotton started going up, I understand the hedge money or the speculative money also started coming to this trade. And today, the last two, three years, where the speculators, as per the data which is available in the system, they were negative or they were short on the New York future. They started going long on the New York future. So which means the cotton the 80, 82 cents level got stabilized in this period. Now this has a big advantage if New York Future remains at 80, 82 cents for the Indian market.
India had a peculiar situation where our cotton prices were very high because of the minimum support price. Though CTI was acquiring cotton because they were buying cotton, they were selling in the market. But at the same time there was a loss which was coming to the CJ in this period. As soon as the cotton started going to about 80, 82 cents near your future, the Indian cotton prices became aligned to the bird market. And as of now, even going by our msp, our cotton is not expensive compared to the bird market.
Rather it is aligned to the long term average which we used to look at it always in last 15, 20 years that we are New York future plus 5 to 8 cents cotton which is prevailing as of now. So suddenly all the spinners which were losing money on account of a very high cotton prices. That factor also was that also got aligned into the system last couple of months. And as a result of that, the spinning margins were normal, which earlier was not sufficient or was not normal because we were very, very expensive on the cotton.
The New York future, whether it’s a pain or not, I’m not very sure. But definitely if you look at the other countries. So India today our Cotton prices are 87, 88 cents. New York futures with 82, 83, 84 cents. The Brazilian cotton is available at 94.95 cents which is aligned to it. The Pakistani cotton, which is inferior to Indian cotton is again aligned to 85,86 cents. So which is in line with the normal relativity. And also the Chinese cotton today are in the range of about 103104 cent which normally they are always higher to India by about 15 cents or so, which is also today as of now aligning to that also.
So today there’s hardly any disruption as far as the long term in the cotton prices have been in this relative to future cut. So in this period, since the cotton to Indian spinner was available at a right price, yarn demand was okay. The prices started improving. Just to give you an idea, the lowest prices of yarn in the month of November December were ranging about $2.65 to $2.70 for Khattis Komb. Today the same price is in a ranging between $3.30 to $3.35. Same way. Another advantage which came to India that with the rupee moving from 90 to about 94.95, our cotton cost in terms of US cents came down.
And also the conversion was better available to the Indian textile producers, not only spinner to the everyone who is exporting. So the operation to some extent was viable as far as the spinning is concerned, which we saw after two, three years going forward with the next upstream products. The fabric margins were very good before the increase in the yarn prices. And I think now slowly because the overall demand is good even for the fabric also the demand is not bad. So everyone is trying to increase the prices.
There’s always a resistance whenever the prices go up to increase on the upstream products and vice versa of that. Whenever the yarn prices goes down, the garment or the fabric prices doesn’t go down in the same fashion. So the fabric also they have increased the prices. So but there’s always a lag of two to three months. And I hope going by our position today or most of the other fabric producers either knitting or the woven, it looks like that we are trying to push this system and we would be in a position to get that increase hopefully in the times to come.
Same is situation with the garmenter where they are now trying to increase the prices. So one they got an advantage because of the Turner rupees. Also we’re trying to push with the brands to increase the prices. And it’s always a part of negotiation we have to see. But definitely going by the total increase it looks like the brands have started talking to increase the prices. New brands have started giving small increases. But I think it’s a time where we have to look at maybe next one, two months more clarity comes on this issue.
So second on our capacities in between we have taken Ordoman has taken a very big capex plan on the spinning side. It was more of a modernization. I’m happy to share almost 90% of the modernization got completed in this period and whatever is left, I think this current financial year, next six, eight months will complete. And as a result of that we’re much more strong on the shop floor both in terms of flexibility, quality and also the cost factors. And I’m sure that advantage would come to us in the future times both in terms of the cost as well as because of flexibility, better products which we can produce and give it to the various customers.
The fabric side, there were two major expansions we have taken. One was the performance fabric which plant was commissioned during the last financial year. So I think normally it takes about six to nine months time for the orders to come in as it’s a new well care for us. So I hope next six to nine months we should be in a position to utilize it fully or better utilization will happen. And we hope that this will be a new line for us where the lots of expansion or the major expansion can come in as there are hardly any players for 100% synthetic in India.
The second metal was the fourth line which was of cotton and normal fabric production which was also commissioned during the year. But as far as soon as we commissioned that line there was this issue of US tariffs. So practically we couldn’t utilize that capacity. But slowly we started building on that. Also in terms of our volumes we would be doing one of the highest days. But still we have unutilized capacity which I expect maybe next six to nine months time we should be in a position to complete that.
In addition to that, there was a huge expenditure we wanted to be doing on green power, be it biomass boilers, etc. Etc. All those projects are likely to be commissioned in next one to two months and after that I think June or July onwards we should start getting advantage of that also both in terms of green power as well as some cost reduction possibility going by these differentiators as of now. So these are. This is what is in this year, the major changes which have happened. So now I think remaining parts we can cover in the QA session.
Thank you.
Questions and Answers:
Operator
Thank you sir. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the test on telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Saran Gupta from Swan Investment. Please go ahead.
Cheragh Sidhwa
Hello sir. Am I audible?
Operator
Yes, you are.
Cheragh Sidhwa
Hi. Thank you for the opportunity sir. And congratulations on a decent set of product. So I just had few queries regarding industry and the business. So firstly as you said that the prices earlier our cotton by Indian cotton prices used to trade at a premium to US cotton. But right now it is trading at par. So how has this impacted the demand for yarn? I know you mentioned that the demand in the yarn is better though it is also visible in the realization that if we see the realization for yarn but we are able to rock it on to the customers.
Neeraj Jain
So the yarn prices are determined by the international cotton whatever. Even if our cotton is expensive, we can’t pass it on. Because that’s an Indian phenomena only. So one, the in any case the yarn prices whatever is the cotton internationally that is determined by the international market. And even if buy cotton is expensive, that has to be bond buyers. That’s first point. Two, since the overall demand was better. So both on account of the demand as well as increasing cotton prices that could be passed on comfortably to the customer as of now.
Cheragh Sidhwa
Okay. Okay. Understood sir. And on the demand side, sir, like how is the demand shaping up with us has opened up, right? And demand is
Neeraj Jain
As of now the demand of Jan is very good. You look at most of the US brands, the first quarter numbers, there’s an increase of the retail size increased from 4% to 10% of the various brands. The demand from us is really good. And as a result of that I think the overall textile demand as of now seems to be pretty good.
Cheragh Sidhwa
Understood sir. If we move on to the public segment like how is the industry panning up right now? Like you said that there was a. There is a price have increased but there is a lag. So how is the customer conversation catching up?
Neeraj Jain
The customer is very clear. They don’t want to give any increase. But I think since the raw material price we are increasing the intermediary products, they don’t have a choice. But they’ll not. Nobody would like to keep it to take the losses. So everyone is trying to push the prices and some increases are happening selectively. It’s not that the increase are not happening. But as I mentioned since there’s always a lag and whenever you want to do a new business there’ll always be a resistance. But with the every week, every month, every order there’s some price increase which we are pushing to the customers.
Cheragh Sidhwa
And on the spread side have the threads also improved from post status on. On the segment,
Neeraj Jain
Yes, definitely has improved as I mentioned because our spread was lost, was less because our cotton was very expensive. So since our cotton is line to the international market, our spreads are definitely improving.
Cheragh Sidhwa
Like if you can quantify that in some numbers.
Neeraj Jain
If you, if you look at the Indian crisis today, the cost of Indian crisis is about 87, 88 cents. So if I convert 87 cents it comes to about $2.35 38 cents or so. And with the price of $3.30 today with this kind of a rupee, I think 90, 95 cents spread is available with four months back was only about 60, 65 years.
Cheragh Sidhwa
Okay, so there is a 50% jump in this spread that we can see
Neeraj Jain
From the worst to the best. Because this happens slowly. The impact will come in the times to come. But yes, 40, 50% spread improvement is there as of now. Sir, is this a signal like can we go ahead with this number or will there be some correction the prices of yarn? So as I mentioned, there are two issues beyond our control. One, New York future will come down or not, I’m not very sure. But if New York levels practically the Indian MSP issue or the art quadrant price is going broad point, that issue can be taken care of.
But New York feature will go up or not. Something I can’t really predict. On the demand side, as I mentioned since the demand from China has been good in this period because they are full of orders from the various brands. So I think to that extent it looks like it can be sustained for some period of time.
Operator
Request you to join me back in the case. Right. The next question is from Chirag sidwa. From Bajaj McClure. Please go ahead.
Cheragh Sidhwa
Sure. For the opportunity. My first question pertains to the industry dynamics, sir. As you indicated, close to around 11 and a half million spindles are off the market. So sir, as per your experience, let’s assume that these LV spreads sustained for a longer period of time. How much period would it take for these capacities to come back into the market? Or is it more structural in nature? People are right now not investing and it might take couple of years to again come back to that 50, 53 million spindle capacity.
Neeraj Jain
You know there are two things which have changed in this time. One, as per the industry estimates only the total number of spindles in India was 53 million. At the same time the number of miss were close to about 3000. We understand the 11 million spindles which are oste system, almost 1000 factories have gone shut down. So which means the Overall, indirectly, some consolidation of the industry happened. So all this small spinning capacity, 4,000, 6,000, 8,000 swindles, which in many cases was very, very difficult to manage in today’s time.
I think that’s one segment which is going off to the system. The industry has passed through a very, very difficult time last two, three years. So nobody is looking at a very big expansion to start immigration. I think everyone is looking at more clarity on the board policy of government and what happens. And my feeling is in case these margins or this kind of prices ustain for next three to six months, then people will start looking at more projects to come in into the system. You go to the machinery manufacturers which are one of the best.
What is happening on the industry side, especially on the expansion side, Their utilizations have improved, but more from the modernization orders rather than the expansion orders as of now. So people have started talking on the expansion side. As of now there are not really very big projects which have started working on it. And I feel maybe next six months, nine months time people will wait before they can start up or they start taking of the new projects. Two industry definition will be more consolidated.
So those 4,000, 6,000, 8,000 plus will never come back into the system. And if it better organize comes back to the system which are more concerned sustainable in terms of the profitability extract the overall structure. My personal view is will keep improving on the comp here onwards.
Operator
Okay, we will take the next question. The next question is from Pal Dutta from Mansouror Financials. Please go ahead.
Falguni Dutta
Yeah, good evening, sir. Sir, I have two questions. The first one are operating profits are not look as good as maybe people like Nitin Spinners or GSPL textile. Is it because the fabric price increase will happen with a lag and hence Q1 numbers would show more of it?
Cheragh Sidhwa
Yeah, that’s. That’s likely to happen.
Falguni Dutta
Okay, and. And what we. What were the. What was the export percentage for the quarter? Export as a percentage of revenue for this quarter versus Y same time last year.
Neeraj Jain
Direct company as a whole has always been the range of about 44, 45% plus minus 1, 2%.
Falguni Dutta
Okay, so this is as a percentage of revenue, right?
Neeraj Jain
Yes,
Falguni Dutta
So this has been maintained. I mean there has been no issue on. Okay, so sir, then then is it fair to say that we would do like since exports have not been impacted. So with the fabric doing better, we will do much better in Q1. Can we say that? Meaning what? I mean to say in short, our performance in Q4 was it not as much as it could have been just because of the fabric part which takes a lag effect.
Neeraj Jain
I mean going by the spread improvements which is looking like as of now, I think most of the. Most of the textile companies should do far better in the first quarter.
Falguni Dutta
Okay. And suppose including. Including our
Neeraj Jain
Company, including
Falguni Dutta
Sir. And what. What with these higher cotton costs which have come in even then it should be okay. As you said, the current. The current cost and current yarn prices, the spreads are okay. So one can assume even Q2 assuming the current status remains. Even Q2 3 could be better assuming the current spread remains.
Neeraj Jain
And that’s true. So assuming the current prices of yam, current dollar rupee and the current prices of cotton, it will be better compared to the last year. And anyone or if they have cotton available to them which is at a cheaper price, that advantage would be should be additional available to them.
Falguni Dutta
Okay. Okay. And sir, year end this time we are having what three months inventory or bit more for cotton
Neeraj Jain
Normally numbers. But our normal coverage year end.
Falguni Dutta
Okay. Six to eight months cotton you have at year end.
Neeraj Jain
I’m normally the same year numbers. I. I’m trying to explain you. The cotton in India comes in the month of October. Most of this gets vanished by March. So most of the company on March numbers will have six to seven months in most of the country.
Falguni Dutta
Okay sir.
Operator
Thank you sir. Thank you. Thank you. The next question is from Prashant Rishi from Cascade Capital. Please go ahead.
Cheragh Sidhwa
Good evening sir. I just wanted to expand on the last point that you made. Since bulk of our procurement has happened by the financial year end types. So what would be the average cost of cotton that you procured? Because that will be be the base for the cotton for the rest of the financial year, you know. So
Neeraj Jain
I will not be. I will not like to give the numbers at what cost of what. But I can give you how the market has behaved in this period. If you look at today’s price of CCI selling it is sixty seven thousand rupees a candy. And they increased this price almost by 5000 rupees in last one week only. So practically the CCI price one month before was to. So eventually anyone who has a. Who has an inventory available in the system will be definitely much lower than the today’s price which includes us. Understood.
And sir, any very speculative question but any viewpoint on how U.S.
Cheragh Sidhwa
New York future would do considering the north situation in the US will it. Will it sustain 283 historically, I mean
Neeraj Jain
As I mentioned the drought is not the only reason I mentioned earlier. Also drought is One of the reason
Cheragh Sidhwa
Also
Neeraj Jain
Also the crop in India and Australia was also lower. So the demand supply got reassessed for the first time. After three years there will be a reduction in the clothing stock of cotton. So all these factors and then the synthetic other price is increasing giving the possibility of some consumption change or replacement from polyester to the cotton. All those factors have played it into this role. So it’s not only the broad condition of USA but the many factors could have played a role where suddenly people are more optimized or optimism more optimism is there on the New York future.
Okay, understood. That’s all my questions. Thank you. Thank you.
Operator
Thank you. Sir, the next question is from Avnish Chandra from Snips. Please go ahead.
Cheragh Sidhwa
Congratulations management team on decent performance with gross margin expansion. My first question is related to this only if look at the number where gross margin was higher quarter on quarter 300 basis point. But due to other expenses margin expansion was not reflective at EBITDA level. So sir, could you just give a good highlight on what led to a great increase in other extension and when it will get normalized if there is something one off.
Neeraj Jain
Okay, so you know there has been one item which has been charged to the revenue in this period and the other expenses whatever is the corporate modern exchange position we have taken that gets mark to market on every month end. So in this period the rupee had moved very sharply. So whatever we have been selling because our policies were whenever we book these short orders most of the time we like to cover the rupee at the same day rupee moved suddenly to 94 rupees 80 paisa or so on the 31st of March.
So whatever we had sold that was required to be making to be nominalized on mark to market basis. And we provided a loss of about 5,758 crore rupees in this quarter on that. But that advantage will come to us in the next quarter. Now all our exports will be moving at 94 rupees 80 pesos or. Or whatever the market rate going. So that onetime hit it is definitely impacted our margin in the fourth quarter.
Cheragh Sidhwa
Okay, so it was roughly the number was. The hit was exact number
Neeraj Jain
57, 58 crore is provided. Okay,
Cheragh Sidhwa
So that will not be there going forward or there will be some reversal of that
Neeraj Jain
Depending upon it what the dollar finishes I can’t say tomorrow it goes to 97. We might have to provide it goes to 90 then that advantage comes in. So I can’t speculate on that. But yes, whatever. About 31st March we are provided for that.
Cheragh Sidhwa
Okay, sir, the second question. You have already highlighted that at March end everybody inventory is six to eight months. As a strategy, what would be the number at the September and general number?
Neeraj Jain
No, I’m one. I’m not saying everyone had an inventory of six to eight months. I said most of the good textile mills, since it’s a seasonal product, they try to cover their cotton normally six to eight months time. But the company to company it could be very, very different. Our cotton, new cotton will start somewhere in October only. So by September we have to exhaust most of our stock and we have to start preparing for the buying once the. Once the new arrival comes in because we can’t as a new arrival will come somewhere in the month of October.
And if we have a six to eight months, any factory has an inventory of six to eight months, then they’ll be. They’ll be finishing in this period and then eventually they’ll have to buy these new cotton starting September. October, November.
Cheragh Sidhwa
Okay, fair enough. Answer one quick question. On the capex side, you talked about increasing your garment capacity, which is still a very small part of our overall business. So are we thinking seriously to have major expansion in garment segment and broaden our product profile the way you have mentioned in your testimony?
Neeraj Jain
So earlier we were not very sure we really want to expand the garment capacity or not. But definitely the businesses, whatever small capacity we have done, we have, we are doing good. So. But our costs are very high because. So the first step is let’s make it a little viable unit. And in case we can make money on the expanded capacity also then we look at it differently. As of now, the only idea it’s a good business where we are dealing with some of the brands, we are supplying the material to them or we are giving them the final product.
So just to serve to that we have decided to expand this capacity so that we are more viable. Whether we’ll do it in a full fledged basis in the future or not. There’s no difference as of now on that. So it’s the first step where we are looking at whether we can make the business viable. If yes, a fresh view has to be taken by the management. As of now, there’s no difference that we’ll be looking at it in a very, very big way. Not neither yes nor so we’ll look at it or we’ll evaluate it later.
Cheragh Sidhwa
Sure. And sir, what is our average realization per shirt?
Neeraj Jain
$5.
Cheragh Sidhwa
Okay. Okay sir, thank you very much for answering my question all the way.
Neeraj Jain
Sorry.
Cheragh Sidhwa
Seven and half Dollars.
Neeraj Jain
Yeah.
Cheragh Sidhwa
Okay, sir. Thank you. All the best.
Operator
Thank you sir. The next question is from. Yes, as retail investor, please go ahead.
Unidentified Participant
Oh, thank you for the opportunity. Sir, can you tell tell me what was the average spread earned by us in FY26?
Neeraj Jain
I can’t say what was but the industry spread for the year average will not be more than 65 cents.
Unidentified Participant
65 cents. And the current market conditions you were saying that the spread has increased to about 1995. Okay. And my second question is that when the in the last two years when cotton globally was cheaper than cotton in India because of which and our important yarn realization is linked to cotton globally. I’m sure the industry must have made representations to the ministries regarding this disadvantage that Indian spinners had. So what? What? Like anything structural that has happened to address this gap that this disadvantage that Indian spinners had.
Neeraj Jain
So India are most of the industry. We have been going to the government and we have only one request made to them. That zoo allow the duty free import of cotton in India. That will have a balancing effect automatically. But if CCA buys all the cotton or majority the cotton then whatever is there. So there are two ways of looking at it. One, the CCA cell phase at a normal basis so that there is no disadvantage to the Indian spinner that could be one. Two, to have a price right price discoveries. You allowed duty free cotton to happen in India.
So that automatically will happen in the times to come. So the industry issue is only and only. We are not talking of msb. We are not talking of increasing or we are not talking of not supporting departments. The industry viewpoint is simple that the cotton should be allowed in India duty so that the price discovery happens on automatically. And Texas minister is totally aligned to that. They have already written couple of times to the agriculture and to the to the finance. No design has happened.
But I’m sure at least the our ministry is aligned to our thoughts.
Unidentified Participant
Okay. And my final question is on the all the FTA that have been signed with the us, with uk, with eu. Let’s say that the demand from for this, for all the all the textile industry from India it improves. But because of this cost disadvantage will we be able to compete in case cotton again like there is duty free access, duty free import is not allowed of cotton. And then again you’ll fall back into that same problem of high cotton prices.
Neeraj Jain
You know there are two things we are talking to the government. One, as the demand would increase on account of the fta definitely we will be requiring more raw material be it synthetic based Cotton. So whatever cotton we have it may not be sufficient for us to supply it in case the government exports or the home textile exports increase a big way from India. So both the logic we have been giving. One is on the cost prices that we should be competitive. Second on the availability of raw material.
Because any any industry they put in Capex, the raw material should be available at the institution international competitive price. So these are the both the issues can take care of if they allow the duties recorded to India. So let’s see what happens.
Unidentified Participant
Got it. All right.
Neeraj Jain
One, one good thing in between what has happened is that the CCI pricing policy this year has been good and they’ve been selling the cotton based upon whatever has been the long term alignment of Indian cotton with the New York future. So to that extent there was no disadvantage for most period last six months to nine months. That’s why the industry is in a better condition. I should give that credit to CK for that.
Unidentified Participant
Okay, Understood. Understood. Thank you. Those are my questions.
Operator
Thank you sir. The next question is from the line of Resham Jan from BBD Asset managers. Please go ahead.
Cheragh Sidhwa
Hi. Hi Neeraji. Good afternoon and thanks for giving us a very detailed update. So I have one question mainly with respect to the announcement which government has made yesterday mission for cotton productivity. But what I could see in that is that it is not talking about the introduction of the new variety of seeds but it is largely talking about all the farm improvement practices and stuff like that. High density planting and all. Do you think that if India has to move from 450 kg per acre to let’s say even to US level of 700 to 800 levels, will this be suffice or what is your thoughts around this.
Neeraj Jain
Different than whatever we are thinking? So one is we look at the overall lesser crop in India. One is the seed quality, second is the practices and third is the land holding. Because our land holdings are also very small in India and any kind of optimization may not be possible there. Also look at the total crop in India. It’s 30 million grades and almost 6 million farms. Farmers are producing that. So that means average per farmer we are only to going whereas you go to the US or to Brazil or to Australia.
The number is in thousands of ways, not less than that or maybe lakhs of weight. So eventually even if so we are looking at feed, we are looking at productivity, we are looking at processes. But the holding is also playing an important role in terms of the overall optimization. So going to a US level of 700 or the Brazilian level of 2000, I don’t know but definitely we can improve upon it from where we are. But again going to, I mean today Brazil is at 2000 and they’re still optimizing, they’re still looking at more experimentation, they’re still looking at what more can be done and our cost will definitely be expensive going by our land holdings also having said that, we have to start from there.
It’s a good initiative which the government has taken and I’m sure if we can take this 450 to even 550 we can increase our productivity by 20% which will give us leap to the overall cost as the MSP is dependent is dependent upon the cost to the farmers plus 50% accumulation. So if the cost come down, definitely it will have an impact in the better realization and a better cost for the industry as well.
Cheragh Sidhwa
Understood, sir. So the second question is given that now the expectation for next year overall for the industry is looking quite positive and we have already done modernization capex largely in the last two, three years which will bode well for us. But beyond this are you looking for because you need to plan from now to utilize that incremental cash generation. So from a capex perspective, are you planning anything?
Neeraj Jain
So two things, I think you’re right. And not only us, most of the industries waiting because the situation is a little better after a long time. So everyone is trying to look at whether it is sustainable or not. But in between one, we have taken a one open end project which was. Hold on. So we are likely to restart that. Also we have taken a new piece of land in PM Nitra park in Madhya Pradesh. That land is likely to be given to us as per the government copies as of now by December or January this year.
So once the land is available to us, we start working. We are already on design boards, they are putting up some ideas and maybe next two, three months we’ll finalize those ideas also and by that time we look at the sustainability of the system also. And not only these, the many players we are looking at because this FTA demand will start happening somewhere 15 months down the line and India we have to prepare within next two to four months. We’ll have to start looking at what all is required in countries and all the good players have to prepare themselves so that those capacities could be put in.
They’re also gearing up ourselves and I’m sure next two, three months we finalize our plans as well. On the spinning side, on the fabric side, we in any case has a surplus Capacity So we like to utilize in next six months and by the time we utilize it definitely there are some ideas in our mind what to do next in the next financial year also.
Cheragh Sidhwa
Okay, but in the existing set of verticals only like yarn fabric you ventured into.
Neeraj Jain
Yeah. As of now we are restricting ourselves to this. Only as of now.
Cheragh Sidhwa
Okay sir, thank you. All the best.
Operator
Thank you. The next question is from Rudraksh Gupta from Navneet Investment Trust. Please go ahead.
Unidentified Participant
Hi, very good afternoon and thanks again for the detailed explanation. So I have two questions. One related to what you explained that India should have had a spinning capacity of 58,59 million versus operational today at 41 42. Given the environment where spreads are expanding, the cotton prices have actually aligned of India and international which actually solves a big problem. A potential FTA with Europe and UK which is an incremental positive to play out like you’re suggesting over 12 to 18 months and an incremental development in terms of, you know, if the import prices or the import duties are actually dealt with correctly by the government.
This is the most promising commentary if I may say so that I’ve heard in a long time. Along with a very wide gap of required capacity versus available capacity at play. Would this really mean that a very large expansion of capacities can come through over the next three, four years if the cycle sustains, the import duties are taken out and the FDA’s actually start to bring in benefits. And I will bring in my second question after once I hear on this. Okay,
Neeraj Jain
So I’d like to make one correction. Your all the data and facts you have given is correct except one. When I said the capacity should have been 60 million, it should have been going by the tradition or the conventional increase which happens everywhere. Whether we require 60 or not is a separate question. So we were at 53. Normally we were adding two and a half million spindles every year. So we should at least 5,960 against year at 41 the Indian spinning capacity, lots of spinning capacity was very, very unviable, inefficient, which is going out of the system.
So if you look at the total demand in India today, 41, 42 million spindles are sufficient as of now for the country. And that’s why our margins have become better now going forward as the expansion will happen by way of more FTs and the demand coming in, we definitely require more spinning capacity. Whether it is 60 million or 45 or 50. That’s depend. That will depend upon how much new business we can Generate with these fta. But definitely there is a scope for this India for the country. If with all these FDA’s coming in, the demand on the garmenting and home textile increases.
Definitely on the spinning side, we will be requiring a much bigger capacity as a country. And the good part is all the smaller, all these smaller players have gone out of the system. So now the new expansion hopefully will come more in the organization hand, which means there will be a better competition compared to the very, very unorganized. Competition
Unidentified Participant
Sustains profitability for the industry and helps capex building as well. So the second question is more related to this situation where geopolitics is what you refer to, where you know, some countries who are also manufacturers and exporters have been having issues and those issues in my understanding have worsened in the current West Asia war, if I may say so. Is that correct as an understanding? And is there a further weakening of other Asian competitors which will give a sustained advantage to India?
Is that a fair assumption or an understanding or that is something where we can see a comeback from them very quickly?
Neeraj Jain
You know, if you look at the spinning sector, the four countries are or five countries are taking 90% share in the spinning. China, India, Pakistan, Bangladesh for captive Vietnam, These are the five countries which are taking care of almost 80, 85% of the world’s spinning capacity. Let’s look at it one by one. China, they started reducing their spinning capacity almost 15 years back from a peak of 112 million spindles. They are today down to 84 million spindles only though they have announced some capex in the Xinjiang area where there are lots of cotton.
At the same time, the government of China this year has officially announced that we want to reduce the cotton in the Xinjiang area and we want to move on on the food articles as the country will be requiring more more food grains for their consumption. So which means the cotton grid come there also. And if you look at last 10, 15 years, as I mentioned, their peak capacity from 112 million splinters have come down to 84. So which means they will not be expanding, which means we can. The difference could be that they will not be expanding in a big second country will be Pakistan.
Now Pakistan again if you look at their own issues and concerns, be it political, be it power availability, be it or any other factor, I think there is a limitation. So they will also not be expanding their business in a big way to cater to the international demand. Third is the Vietnam. Vietnam already is a very small country, small population and they have done fantastic job in the taxpayer starting from spinning to the garmenting
Unidentified Participant
As
Neeraj Jain
The per capita income has started moving up, there is more interest on the people to go in for the electronics and the service industry there also. So with a small population we don’t feel that Vietnam will be increasing further on this. On the spinning side rather whatever is there they can at best utilize that not not likely that they’ll be expanding the spinning business to that extent. Fourth is the Bangladesh is very strong on the garmenting after China. They are number two players. Almost 55, 54, 55 billion dollars of work of export they are doing.
On the commenting side, the spinning capacity today is about 14 to 15 million and the utilization is not more than 55, 60% even as of now since they are very strong at the garmenting, some groups have gone back to back that they’ve put enough spinning capacity but spinning is a very very large capex required and they don’t have cotton, they’ll have to import everything. So eventually it looks like the major spinning expansion may not happen in Bangladesh also. And but on the garment inside they may continue to grow As a result of that they’ll be requiring good quality yarn as well as the fabric they may require.
So to that extent they’ll have to depend upon someone else. And the last out of these five is the India which is today the best phase was we are number two spinning capacity in the world. Even with the 4142 million spindles we are second largest in the world today in terms of technology, in terms of cotton availability and in terms of the overall. The overall clusters in the geopolitical I think they’re definitely better placed. I can only hope that India should be in a position to take full advantage of this situation.
The only caveat I have in mind is that the raw material availability at an international competitive price which we have been talking to the government and we are hopeful that the government looking at the overall potential will definitely understand and look at something like this.
Unidentified Participant
Thank you sir, that’s very, very helpful once again,
Operator
Thank you. The next question is from Sudhir Kedia from Valuewise. Please go ahead.
Neeraj Jain
Yes, good evening sir and thanks for the opportunity. You have outlined lots of reasons for the tailwinds for the industry. My question from the next season, do you think that next season quarter also get impacted because of the weather?
Cheragh Sidhwa
There
Neeraj Jain
Are two factors. One is the physical cotton, second is the future cotton. So whatever is the weather conditions announced today, it’s already captured in the future prices. And going by the situation, if things go worsen, it can Increase if things become better or the more rain happen, it can soften also. But cotton is one product where based upon the future events which are likely to happen, it’s already capturing into the market very very well. So. So from cotton prices perspective you think that the is already captured in the cotton prices from international perspective, right?
As of now, yes. But definitely there are. So one is the more news coming in based upon that what whatever condition can happen. Again, there’s the possibility for the hedge fund or the speculative fund which is beyond control of any one of us.
Cheragh Sidhwa
The second question is that while since the spreads have increased almost by 40, 50% from their lows, what has been the spreads at the peak in the past? And do you think that the spreads can rise further from the current levels as you move ahead to the next season?
Neeraj Jain
Most of the times if you look at last 20 years, except the years which could be very good or very good, that the $1 spread is always considered to be good for the spinning industry.
Cheragh Sidhwa
So with rupee depreciation that will add extra to the earnings of the spinners for the industry.
Neeraj Jain
It should normally because our cotton is about 50, 55% of the total finished product. So whatever with the rupee change is happening, the cotton will align to endure sense very cotton gets aligned to us very fast. Because anyone who’s buying here will always look at New York future and the landed cost in India based upon the US hand. But whatever is the value addition, that advantage comes in with the. With the weaker rupees.
Cheragh Sidhwa
And my next question is, do you up to what time do you expect this spreads to sustain? Meaning do you think this to sustain sustained from 12 quarter perspective or. Or maybe 45 quarter perspective. How should we look at that?
Neeraj Jain
Today things are good. It’s really, really difficult for me to say whether these people will remain at these prices or what will happen to the China or the world. So it’s very difficult. But I can say as of now things are looking nice and there doesn’t seems to be any big concern. Rest is very difficult for me to predict whether it can be for 5/4 or 1/4 or 2/4. But as of now, and I can tell you most of the spinners from India in export market are sold for three months as of now.
Cheragh Sidhwa
My reason, the reason of my question was because some of these reasons which you highlighted like on the spinning capacity line, these are structural reasons and they do. They are not seasonal. So from that perspective, from that
Neeraj Jain
Perspective definitely seems to be a better place. From that perspective, it’s A better place. But then the cotton prices or the demand structure or anything happening on the bar side. There are so many factors today that anything can pay anything. But yet in Indian context, with the closure down of part of the capacity, it can be better days. And also we have a better situation going forward because of the FTA and next 12, 15 months. Definitely things are likely to be better only for India, Indian governmenters and the home testing.
So to that extent we are optimized or we have optimism to that extent as well.
Operator
Thank you sir. Due to time constant, we will take this as a last question. I now hand the conference over to management for the closing comments.
Neeraj Jain
So I think we’ve tried to get based upon our judgment and our thought process, we have tried to give whatever best knowledge we have. Rest the events occurring across border so far so many that impossible for anyone to understand and know the impact of that on the overall industry. But definitely as I mentioned, after two, three years there seems to be some respite to the industry again for the reason as I mentioned that our raw material became more competitive and with the better demand and lesser capacity, we are definitely better balanced as of now.
I hope the next year should be better year for most of the textile companies including Vardaman. And in the meantime most of the industries have optimism based upon all the activities which the government has done which could be a major growth engine for our government. And we being the textile producer or textile material supplier to them, if they do well, definitely our company can also do well. So thank you very much for your confidence and your support. Always. Let’s hope things will be better in the next times to come.
Operator
Thank you sir. On behalf of 361 Capital. That concludes this conference. Thank you for joining us and you may now disconnect your ends. Thank you.