Arvind Limited (ARVIND) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Arvind Limited Q4FI 26 Earnings Conference Call. As a reminder, all participant lines will be in the listener mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchstone pole. Please note that this conference is being recorded. I now hand the conference over to Mr. Saptiprakash Mishra. Thank you and over to you, sir.

Good morning, everyone, and a very warm welcome to the Arvind Limited earnings call for the quarter and fully are ended March 2026. The financial results for the quarter and related presentations were uploaded to our website. Hope you had enough time to go through it. Before we begin the call, let me introduce the leadership team that I have with me. We have Mr. Puneet Lalbhai, the Vice Chairman, Mr. Jaish Shah, Whole Time Director and Group CFO, Mr. Nigam Shah, Executive Director and CFO of Farwind Limited, Mr. Gurpreet Singh Bhatia, CEO and President of AMD Business. I am very happy to inform you that the journey of Arvind Limited has taken a defining turn to become a truly global organization. We intend to continue this in the foreseeable future and expand our horizons beyond the boundaries of India, while being deeply rooted in our place of origin. We remain optimistic and upbeat about India's long-term growth story and are fully aligned to capture the opportunities in the world's largest population center. Over the long term, Our well-diversified business model, with an equal contribution between exports and domestic markets, positions us strongly and helps us insulate the company from macroeconomic volatility. Walking all of you back down the memory lane, let me remind you all that we have started the financial year 2526 with a severe disruption in trade due to imposition of tariff by USA. However, Arvind has started the fiscal year 2025-26 on a stable footing. Proactively absorbing tariff-related pressures and realigning its businesses to navigate the challenging macro environment. A disciplined approach led the foundation for a strong second half, highlighting the agility of our operating platform. Despite multi-front disruptions, we remain focused on execution excellence, cost optimization, and deepening customer engagements, enabling us to deliver consistent growth. Coming to the operational performance during the quarter and the full year, we witnessed strong volume growth across all core segments during the quarter, in line with our guidance. Denim volume grew by 19% to 17 million meters, with full year volume at 60 million meters, up 15%. Oven fabric grew by 5% to 35 million meters, taking full year volume to an all-time high of 136 million meters. The garmenting business continued its strong trajectory, crossing 10 million mark for the third consecutive quarter in a row. For the full year, the volume reached 42 million pieces, which is up 12%. Advanced materials delivered a robust performance with growth in line with our guidance of 18 to 20% growth in this year. This was supported by a favorable product mix. Operating leverage and reversal of earlier expense provisions made during the year to take care of tariff. EBITDA margins improved by 200 basis points in quarter four. On a full year basis, the business continues to maintain a sustainable margin profile of 15%. Coming to the financial performance, for quarter four, consolidated revenue and EBITDA stood at 2,553 crores and 327 crores. Reflecting a growth of 15% and 19% respectively. For the full year, revenue grew by 12% to 9,303 crores with an EBITDA of 1,061 crore and a margin of 11.4%. Important in this to note that the EBITDA for the first time has crossed 1,000 crore mark. The textile segment reported revenue was at 6,897 crore for the year, up 12%, with EBITDA margin of 10.3%. The garmenting segment delivered strong growth of 21%, with revenue crossing 2,000 crore mark. Advanced Materials Division reported a record performance during the quarter and year, with a revenue of 1,839 crores, up 21%, and EBITDA margin of 15.1%. Full-year profit after tax grew by 21% to 444 crores, with return on capital employed improving by 120 basis points to an all-time high of 14%. The number is 15.7% if we remove capital work-in-progress from the calculations. Negative during the similar period, reduced by 112 crores to reach 1,172 crores, supported by a strong pre-cash generation. In terms of capital allocation and balance sheet, we continue to maintain a disciplined approach to capital allocation. During the year, we invested approximately 486 crores in growth capex. Our balance sheet has strengthened meaningfully over the past few years, driven by a prudent capital structure, rationalized debt profile, and consistent free cash generation. In line with our dividend policy, the board has recommended a dividend of 4.5 rupees per share, translating into a payout of 28.5% of profit after tax reported. This is subject to shareholders approval. During the quarter burn by, during the previous month, we have announced the acquisition of 61% stake in US-based Dalko GFT through our wholly owned subsidiary of Arvin Advanced Materials Limited, marking our journey, marking our entry into world's largest technical textile market. This is a strategically important step. Strengthening our presence in specialized non-open segment and expanding our global footprint. The acquisition is expected to be margin and EPS executive from the first year. In subsequent years, it is expected to unlock meaningful synergies over time. Looking ahead, the global environment remains uncertain with ongoing disruptions, including evolving situations in the Middle East, impacting input costs, supply chains, and currency movements. While the near-term risk persists, demand across textile and advanced materials remains resilient, and key sourcing destination continues to be stable for now. We are entering a 527. With a healthy order book position and a strong inquiry pipeline, we expect to maintain the growth momentum to grow at a double digit with high double digit growth in advanced material and routine growth in garments. However, there may be disruptions in demand, especially in second half due to increase in inflation and other global uncertainties impacting discretionary consumption. Input costs. Across product lines have risen sharply, which may exert margin pressure in first half of FY27. While the margin recovery is expected in second half, this is subject to easing of geopolitical tensions. We will continue to invest in growth with planned capex of 450 to 500 crores in FY27. This will be funded through internal accrual. At the same time, we remain focused on aligning stakeholders' interests and enhancing long-term returns. Please note that the outlook that I have given earlier does not include the financial impact of acquisition of Dalko and its consolidation into Arvind's books. We will provide a detailed update on that in coming quarter. Let me close by reiterating that the company is well positioned to navigate the current environment and deliver sustained profitable growth. Our diversified portfolio, disciplined execution, and capital allocation underpin the margin improvement and stronger return ratios and superior cash generation capability while managing near-term uncertainties with agility. We remain firmly focused on long-term value creation through targeted investments, portfolio premiumization, and balance sheet strengthening. Thank you. We can now open the floor for questions.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touch phone 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. Before we proceed, Ladies and gentlemen, in order to ensure that the management will be able to address all the questions from the participants in the question queue, we request you to kindly limit your questions to two per participant.

If you have a follow-up question, please please join the queue again.

We will now wait for a moment while the question queue is ended. We have the first question from the line of Aratna Jain from 361, Captain. Please go ahead.

Hi, thank you for the opportunity and congratulations on the good set of numbers. A couple of questions. First on the garmenting business, if you could just help us understand what are the growth levers in the garmenting business which gives us the confidence that we'll be able to achieve the mid-team kind of growth, like is it on the back of the recent capacity expansion that we've done, the new client additions that we are getting, better utilization, realization, and how should one look at the realization going ahead? Because if we see the last two, three years, the realizations were not growing. But this year, there's been an increase in the realization. I think that this is kind of realization growth. So what would be the growth levers in the governmenting business which gives us this confidence? And a second part to this question is if we could also highlight what is the current margins that we are making in the governmenting division. And if there's any cost or operational efficiency that we are able to bring in in the governmenting side of business which can help improve the margin. Yeah, that's my first question.

Sure. Thank you for the question. So, the growth in garmenting is, you know, almost automatic. The demand to buy from India is very high with pretty much every global buyer needing to de-risk Bangladesh and Vietnam particularly. So, India will always be a preferred destination. To source garments. The challenge is India is a supply constraint geography. So, you know, people, our garment industry is not growing because we don't have capacities. So, the moment we create capacities, growth will come. So, we don't have to really work very hard to fill order books as far as garments is concerned. If you are a good garmenter with... You know, integrated capabilities, diversified product portfolio like us. The order book should not be the hard part. So, the. From the capacities we've already created. The capacity is from high 40 million. You know, be somewhere in that. It is, of course, product mix linked. And we have shirts. It depends on... As far as margin is concerned, because we are still in investment mode, there are certain factories that are at lower margins, there are certain factories that are, you know, higher margins. Margin is in the high single digits, EBITDA. of time we will want. That is still going to take. We need to further expand into garments.

And, sir, is there any labor issue that we would be facing because of the, you know, inflation and the West Asia war-related issues at our garmenting facility right now, or do we foresee that in the near top?

See, garmenting business is people management, mostly. So, you know, it is always about managing people. Our strategy is to automate so that we... Can have the highest productivity per person. And we are constantly innovating and automating to ensure that happens. Meanwhile, we have to have very people-friendly HR practices that lead to higher retention of skilled manpower. So these are all day-to-day sort of activities as a garment manufacturer. And I don't see anything specific to the West Asia conflict that is going to impact the garmenting industry. I mean, you know, if inflation goes up, people will be in more need of stickiness of jobs. So I don't see that as a negative. But overall, labor management is the...

So, my second question is on the AMD division. What are the...

I mean, the Advanced Materials Limited. So, now it's no longer a division, it's a company. Sorry to...

You know, side of things, like from order book perspective, should we be looking at order book visibility that should give us confidence in that particular segment of yours? And how long, as a tenure, do we have the order book visibility for? Like, is it for three months, six months that we are sure that you have an order book visibility? Or is it for a longer period? And how many new client additions would we be doing on a year-to-year basis? And if you could also give some guidance on the EBITDA side of things. Now that the Dalco division will be integrated into us, how should we look at the EBITDA margins? Because this quarter itself, we've seen a 200-bit improvement. Can we expect that to be on a steady-state basis? Again, I understand that it is because of the product mix, you know, driven by that. But going forward, what should be a steady-state EBITDA margin for the A&T division?

See, this is a rather complex question. Arvind, Advanced Materials is a complex business, so the answer varies from product category to product category. The way to think about it is that, you know, we have the visibility to grow at... Margin is likely to be around... I'm getting quarter in, quarter out, some quarters there could be, you know, higher, some quarters there could be lower, just as a result of. 15% to 20% growth and 15% EBITDA margin with hopefully a ROC that will, you know, And with Dalco, Dalco is a margin accretive acquisition. It is also in the high teens in terms of EBITDA margin, so it doesn't dilute our margin profile, but it increases our... So that's how you should look at the business.

Understood. Thank you. I joined by the Q4 products.

Thank you. We will take the next question from the line of Ronak Shah from Equary Securities. Please go ahead.

Yeah, thanks for the opportunity. Sir, my first question is broader on macro terms. So, considering the current geopolitical tension and volatile environment, how the industry is realigning and if you can call out certain specific measures which the industry as a whole are taking to mitigate such risks?

So, that's a good question. I think this is the question on all of our minds as well. So, it seems like to deliver a good performance, we are having to work harder and harder. And in that context, I would like to place on record the fantastic job the team has done in navigating what already was a very challenging environment in Q4. As far as the... The year that we have just entered is concerned. It's a tale of two halves, if you ask me. The first half is, you know, very deeply characterized by both strong demand, but very, very erratically and fast increasing input costs. So, you know, cotton has gone up, yarn has also gone up disproportionately. We are having, when we have already lost. So, we are able to manage, but there is going to be margin pressure in the first half. And the second half, the worry is, will this robust demand, you know, environment actually hold? If the oil stays at between $100 and $120 a barrel, it is conceivable that... The mind that we are seeing. But I think what we have shown is that, you know, our business model is quite resilient. You know, we've seen shock after shock, you know. Or then we have seen... We found a way. So, you know, I believe in our team that they will, you know, continue to find a way. And yes, there might be some quarters where, you know, some of these pressures lead to slightly muted performance. There may be some quarters where, you know, we will soldier through and deliver a very good set of numbers. I think overall, medium term, our thesis around our growth model. Pushing garments, pushing advanced materials, driving efficiency, automation, digitization, globalizing our manufacturing. A lot of these challenges that are uncertain by the very nature. We don't have enough information to predict the future, and it's challenging to manage day-to-day.

Sir, just a small follow-up to this. So, when we see the first half of FY26 vis-a-vis second half, we have relative lower base on annualized base. So, when the management is seeing some margin pressure into the first half, it is more to do with the annualized comparison or you are sensing pressure compared to the first half of FY26?

No, so I think I'm just seeing pressure now compared to FY26. I think we should still be okay, you know. I mean, we shouldn't be worse than 26. That's at least my feeling sitting early in 27. But there will be some margin pressure. And my margin pressure, my observations are always indexed to what could have been or what was, you know, in the very recent past. So, I think compared to Q4, we are facing more margin pressure, and maybe Q2 will face even more margin pressure, but compared to last year, maybe, you know, there will be other factors that will, you know, sort of allow us to do not worse than last year, at least.

Understood. And just last to follow up on the bookkeeping question. Sir, can you elaborate the current installed capacity into each sub-segment and how you are looking to expand it over next two to three audios?

I'm sorry, can you repeat that?

So, can you just highlight what are the current installed capacity into each sub-segment, be it your denim, woven, or garmenting, and how you are trying to expand over the next two to three odd years, considering the capex plan which we are having?

So, fabric will expand marginally. I mean, maybe 5-7% expansion in capacity is coming. After a very long time, we have gone ahead and we've done some expansion in our knitting capacity because our verticalization percentage is quite high in knits. And if we want to grow, we also will need to grow the fabric. So, we are putting in fabrics this year. We are growing denim in an asset-like model a little bit because the demand environment is very good. And the last bit of capacity that we had added in wovens maybe two years ago is now almost reaching 100%. So there could be some volume growth there as well. So on the fabric side, it is sort of very strategic volume growth. In garments, we will grow capacity by about 20% this year, and advanced materials also we are... Thank you.

Understood, understood. That's it from my side. Thanks a lot.

Thank you. We will take the next question from the line of Prerna Junjunwala from Ilara Securities. Please go ahead.

Thank you for the opportunity and congratulations on strong set of numbers. Just wanted to understand, it's been a fantastic year amid headwinds for you. Could you help us understand what went right for us, any strategic level initiatives that are sustainable, that could cushion us from the coming headwinds of input cost inflation that is coming in? There's some, you know, strategic-level initiatives that could. Highlight the strength of a standing business model. That's my first question.

I think, you know, I would see this performance as a validation of our strategy. We've always believed we can perform well. So I think it's just following through on that belief and delivering what we can. And of course, you know, the results could have been significantly better had it not been for some of those headwinds. So... You know, the headwinds do have an impact, but one must have a business model that is resilient to these impacts. I think the growth of advanced materials... Manufacturing footprint that takes advantage of pockets of opportunity and relative competitive advantage from a geopolitical perspective. So, products starting to go from Egypt is one such example. Diversified business. It was very strong. Advanced materials business. So when something is hit disproportionately, something else, you know, hopefully is... Diversified portfolio and the focus on efficiency, responsiveness, and productivity, I think have had. Certainties that we are seeing.

Questions on inflation, input cost inflation that you've been highlighting that second, first half could have input cost inflation because, and could impact margins. Just like to understand how big that it could be. At this point in time, it can change with time, I understand, but how governments, advanced materials, fabrics are getting impacted and what should we...

Thank you. It's difficult to give a very definite number, but as of now, I can see easily 1.5% of EBITDA coming off because of input costs in H1. Volume growth will be very strong. If demand environment stays strong, we might have an opportunity to make up. There is a chance that demand might not be very strong. So I think it's just too much uncertainty to give a very definitive answer. But rest assured, the team is equipped to sort of see these.

Follow-up on this, how is rupee depreciation, how can it help us?

It definitely helps. It will partially offset many of these. If it wasn't there, then...

And are we getting price hikes from customers on existing contracts?

The price hike is always, you know, it's always difficult and it always takes time because, you know, what you've just finalized, you can't go back and revise. You'll have to wait for the next order to get the price hike. So there's always a lag effect and the price hike is never... There is always, you know, somebody more desperate than you. We are getting price hikes. depreciation will all be And mitigate the... We have levers to pull. It's just a question of timing. Demand needs to be. In the second half.

One more question, if I'm increasing, on that.

Jayash, do you have anything to add on input cost?

Yeah, so I think more than the input cost, there was this discussion around whether you will do better or worse than what you did in the last year, first half. So, I think the contextually, as you rightly said, Guneet, we are seeing what we could have done, and we are seeing a 1, 1, 1.5% going down from there in terms of margin. It may not be at percentage back when you compare it with H1 of the last year.

Well taken, sir. So, yeah, that I understand, sir. This last question on debt, given the acquisition, the debt has almost doubled on a consolidated basis. How do you plan to reduce it going forward and any timelines that you would like to give?

Yes, so Prana, as we had spoken during the call a week ago on the acquisition. We are clear that we would like to bring down the debt back to where we were and at a comfortable level. Just that the opportunity was so compelling that we had to finance immediately with the debt. We are working on a plan that our philosophy, as you know, and we have been... We are consistently following that. We would bring down the debt over a few years. It may be maybe one or maybe two years. And we are working on various levers to try and bring it down. It's a bit too early to say what we will do, but maybe when we meet again in the first quarter results, hopefully we will have a very clear idea as to how we are going to do.

Also, the 50 million debt which is on the Delco parent is completely non-recourse to India. The risk on the India balance sheet is...

Thank you, sir, and best wishes for this upcoming challenging year again.

Thank you.

Thank you. We will take the next question from the line of Vishal Mehta from IFL Capital. Please go ahead.

Yeah, good morning, and congratulations on the continued strong set of numbers that you've been delivering. My first question, sir, would be on advanced material size. So we recorded around 19% to 526. We continue to die for 18% to 20%. If you could give some color sub-segment wise, you know, what's kind of driving this strong growth and, you know, your visibility, what it is enhanced by.

So, as you would know, we've got three key segments in our business, human protection, composites, and industrial, with a very diversified portfolio meeting, several end-use applications and solutions. We are seeing growth across all the three segments. There is not a particular segment which is going faster than the other. When we look at human protection, it's also growing in high teens and a huge opportunity in the coming year to expand and continue the growth through regional expansion into some of the underrepresented geographies. And also, hunting for new customers is a big drive. On the human protection side, and we are moving in that direction over the work done over the last six, eight months. Innovation is also a critical pillar, where we have now developed new products for defense and other critical applications to drive growth on the HP side. In industrial, which is predominantly a filtration business and where this acquisition also comes, We have new investments that we made over the last year for more advanced technologies for high-temperature filtration applications, and also have a significant CapEx expansion plan for growth this year to, again, drive an 18% to 22% kind of growth in industrial. Composites is, again, diverse from mobility to building and construction to renewables. We are seeing good demand on the renewable side, which is the wind energy sector. Building and construction, again, is seeing very robust demand from Europe and the U.S. market. And in mobility, where our presence with Indian railways is, we've got now reasonably outlook for the next 18, 24 months, an order book from our Indian railway customers. So, overall, pretty secular in nature across all the segments, and your question on margins, we did see a margin expansion in quarter four by about 200 basis point, but as Puneet said, anywhere from 15 to 16 percent is what. We retain as an aspiration for the business. Overall, driving an 18-20% revenue growth with an equitable, profitable EBITDA growth is clearly the objective.

Just a follow-up here, on HP, you said that you are increasing presence on underrepresented geographies. Would it mean that we are also increasing our domestic defense, you know, kind of share here?

Yes, so defense is, and it's a clear direction that we have to... Support the India growth story and make it more self-reliant in all the sectors that we operate in, whether it's infrastructure build or filtration solutions for emissions in the Indian market, and also our defense services. That's a critical segment, and we have now not only expanded our footprint with the Indian Army, but also expanded to the other forces and paramilitary forces. We are now going up the ladder to reduce and help the Indian forces to reduce import dependence of certain high-value and high-solution products. To enable indigenization, working with some of the core agencies in the Indian ecosystem and conclusively coming to solutions for the Indian forces. So defense clearly is a critical growth sector for us. And as I said, Europe on a geography point of view is a critical geographic expansion where over the last couple of months, we've focused on the GTM, the business development activity, and have a very good pipeline getting established to build a business in Europe over the next two years. And, of course, as you would know, the UK, EU, FTAs are key enablers to support our investments and strategic focus in these geographies.

Thanks, thanks. Just on this, Puneetbhai, I just wanted to get your sense on where we are in terms of implementation and implementation of these FTAs.

We are pretty, pretty advanced, so, you know, hopefully... It should happen any moment and we are expecting that, sorry, UK should happen any moment and should be towards the end of the year is what the current consensus is. And of course, you know, this is a complex bureaucratic process. There is no doubt on whether it is only when.

And how are you seeing your responses from EU clients, especially EU UK clients currently on the textile side of things?

The challenge there is our garment capacity. Way more from us than we have capacity to offer. So, in fact, we have started... In London. we are sort of tying up with a lot of partner facilities. We have plenty of fabric capacity. We have a capacity-constrained environment in garmenting because our existing customers also want to grow with us in garmenting, so they get first preference, and then when We have to offer capacities to new clients in these FTA geographies. Virtual vertical supply chains, and that will be fueled by this new system.

Just lastly, you know, we have, on the fabric side, been operating at more than the rated capacity, which we kind of disclosed. How are we managing to grow there, and what's your growth outlook on the fabric side of business, and how will we fulfill that, you know, given that we are operating at close?

We have significant capacity, almost 60% more than what we are having right now. In Denim, we are doing an asset-like model. A lot of de-bottlenecking capexes have been happening and are happening. So machine speeds go up. We add some finishing technology. We can buy undifferentiated product from third parties and then value add on it. So all those opportunities are there.

We will take the next question from the line of Surya Narayan Nayak from Sunidi Securities. Please go ahead. Mr. Surya, please proceed with the question. Due to no response, we will take the next participant. We have the next question from the line of Harsh Dubey from LFC Securities. Please go ahead.

Hi, good morning, sir, and congratulations for a good set of numbers. I just have questions on the government. As you say, as you have rightly pointed out, that the capacity is a constraint in India, and we are having the EU and the UK FTAs, and a lot of clients are looking towards the sourcing and de-risking from Bangladesh, right? What I wanted to understand is when you talk about the partnership factory, what's the timeline that you're expecting in this? And just wanted to also understand the timeline for our internal capacity and the garment shipping numbers going forward.

So, garment shipping numbers will go from, you know, low 40 million to above 50 million. So, we should add more than 10 million, you know, full garments this year. We should also grow significantly in our essentials business, you know, which is, that will also grow by 20% this year, which is another 35 million, of course, it's undergarments. So, Thank you. So, capacity addition in our own governmenting is very, very strong, which is an ongoing process. Every year, we've been investing behind. And then, partner facilities, we already partner with quite a few, you know, strategic vendors, some of which we've been working for decades. So, we will dial up our engagement with these people and maybe add one or two more relationships like that.

Perfect. On this, sir, as you have rightly said, that right now we are also partnering with other players. So, I just wanted to understand, this is specifically only in India. And when we talk about the diversification, are we also looking at geographical diversification, might be partnering up with partnership factories in Bangladesh, Vietnam, or something like that?

So, we already have strong partnerships in both. Sri Lanka and Bangladesh, these are historic. Bangladesh. Fashion textiles, particularly denim, some partnership factories.

Sir, on this, when we say that as we are an integrated player, and I rightly understand that we are also having partnership factories in Bangladesh, just on this, when we talk about garments, specifically, do we think that we are going to have our own facilities as well in Bangladesh going in the future? After this FTA is done, I think so, still the cost-effectiveness of Bangladesh because of operating costs, still Indian textile will be 5% to 7% higher FOB. So, what do you think about that? Are we thinking of adding new facilities in Bangladesh, like internally, not with partnerships?

So, we want to go with an asset light approach, investment light approach.

Before you interrupt in between, sir, Harsh, I would request you to kindly self-utilize and management of answer. Thank you. Sure.

Yeah, so the, we are, we are trying to go in with an asset light or investment light model where we invest, but invest in very strategically bottlenecking assets or capability enhancement or quality control equipment. We invest, we are investing in people. So that's the form of our investment, and should... Should that succeed, then we can think of, you know, dialing up investment as we go forward. If it works well with an investment-light approach, we can just do more of it, right? So I think, in a sense, the next 18 months will teach us a lot as to, you know, what final mode or form should this. Partnership approach take, and we will evolve as we keep learning, but we are quite excited by the opportunities. We are finding, you know, good meeting of the minds with many people whom we can come together with and grow our business. You know, managing risk.

Just a question on this. So, when we say that our capacity is good, so just a clarification on capacity of government and the shipping number. So, we are saying that by end of FY27, we should have approximately 60 million, the capacity, and 50 million of shipping is what you're saying?

No, no. So, end of 27, our capacities, we should be in the mid-50 million range in terms of our... By the end of the year, the capacity should reach 60 million.

Okay, so if you are saying that it's going to be 55 to 60, and then we are going to have the shipping number that's going to be above 50. Okay, but thank you so much, sir, and all the best for your future endeavors. You're doing great. Thank you.

Thank you. We will take the next question from the line of Harsh Mittal from MK Global Financial Services. Please go ahead.

Thank you for the opportunity. So just continuing with the previous participant's question, do we see any upside risk in the human protection segment in growth numbers, given that vegetation crisis is there, countries are ramping up their defense budget, and we have the EU and the UK FTA in place? So this kind of balance is out if there are any downside risk, downside growth risk in the governments or the textile divisions. This is my first question.

So I think the demand environment in human protection is good. There is also a capacity ramp up that is there ongoing. So you can't, you know, really do much more beyond capacity. So I think we will be at full capacity. The efficiency unlock piece also, there is... So whatever opportunity we get to dial up, you know, our capacity utilization, we will ensure that we take it. Sales are not as discretionary as... Thank you. Thank you. It's going up in the world. Europe needs to indigenize its defense. The Middle East is procuring more. Thank you.

Revenue in human protection takes So while we may see an upsurge of global demand on defense, for us to realize that would take a couple of months.

So my second question is around the margin. We alluded to that. In the first half, there may be some 100 to 150 budgets in the first half. Thank you. Some efficiency measures, it kind of negates. So, you alluded to the thing on margins deductions of around 100 basis points in the first half. So, is this a net-off after you taking the efficiencies, cost efficiency measures, which already you're working on, or there are some efficiencies measures which kind of buffers this or negates this 100 basis points cost inflation? from what it could have been.

And from last year.

Question is on the CAPEX. The 500 crore CAPEX mentioned earlier in the call, does it include the DALCO CAPEX as well, or is it...

In the non-Dalco part of the business, Dalco is over and above that.

So that, we believe, should be around 50 crores in Dalco, which makes a total of 550 crores.

A little more depending on the environment and opportunity set.

Sure. Thank you. These were my questions. Thank you.

Thank you. We will take the next question from the line of Bimal Sampath, an individual investor. Please go ahead.

Yeah, good morning. Two questions. One is in advanced material, we also had a tie-up with a Japanese company for carbon fiber. Can you throw some more light on that? And second one is on our sustainable measures like renewable energy, we have shifted, we are shifting to that, and recycling of garments, which I think has a very bright future. Coming, I mean, in the coming years, can you...

Japanese joint venture is not in carbon fiber. It is in this needle punch non-woven space for filtration materials. We make the roll-good filtration for... Recycling is a big theme. We are participating in that theme. We already have a...

And this renewable energy, you know, we had tied up for some briquettes and then one solar venture was there.

Yes, so there is one wind-solar hybrid. It should come at the end of Q2. Okay.

And this briquettes, we are doing something on briquettes.

That also should come towards the end of Q2. It's a new experimental technology, so fingers crossed that it will work. If it will work, then it will dramatically speed up our decarbonization. 80% renewable electricity with this. We'll come in hopefully end of Q2.

Thank you. We will take the next question from the line of Surya Narayan Nayak from Sunidhi Securities. Please go ahead.

Yeah, am I already going? Yeah, thank you, Puneet, for giving the opportunity and congrats for the good set of numbers in a turbulent period. So, just to understand the current garment botic allergies and we are operating in, considering the expansions in the R&D underway. So, what kind of scope we are carrying for a long-term vision of 2030, because we are not expanding, we are seeing majorly in the carbon of arborics, and we are trying to verticalize more, and that could be increasing our margins. So, what run rate we are currently on, and what is our expectation?

So I think medium term plan is, you know, even with the 60 million, we are 300 million meters of fabric and 60 million garments is still a very small percentage. So there is a lot of opportunity to grow garmenting. And we are not saying we won't grow fabrics. We will grow fabrics slower. And this year is case in point where we've seen the need to grow knits. Because our verticality has crossed 50-55% in needs, so to keep all our customers serviced and then to, you know, sort of prepare for EU and UK business, we have chosen to also expand our fabrics there. So, we will take such decisions when it is strategically right for us to do that, but the percentage of verticalization should keep going up, and hopefully by 2030, we reach 30-35% verticalization, and then, you know, some more virtual verticals as well, so that we are not very dependent on fabric nomination-based business.

Certainly, there is a lot of opportunities coming from the European side. There is a mandate from the European Textile Association to have textile to textile recycling. So, are we doing anything currently in the chemical side of processes or any other processes we are actually indulging in?

We are doing all three. We are doing mechanical, we are doing chemical, and we are doing hybrid also. So, we have a constellation of partners. ...technologies for...

So, currently, are we investing anything? Have you invested anything in the textile-to-textile area, respectively?

We have, you know, we have created one joint venture with... in India for In that also, we work with a lot of... It really, unless there is something that we can value add, we would much rather... People, people.

Mostly, it is the consumer side you are focusing as of now.

We are also looking at post-consumer.

Okay, okay. So, is there any timeline you have set to scale up that joint venture into a bigger scale? Because, you know, globally, some of the companies in the European side, they are actually developing capacity to the tune of nearly 1 million tons. So, the demand is coming from the branch to have more recycled fiber to be investing. So, is it the opportunity we are also seeking or we are watching?

We look to partner with this kind of, you know, ecosystem rather than, it's not our core business to be. So, we will evaluate all options, but my first response is we would like to partner with this ecosystem and be an early adopter for all these technologies.

Okay, and lastly, recently there was some labor unrest happened in the Noida side, and the UP government has set some higher price for the labors. So, are we also revising anything on the Baranasi side of our plant?

No, we will comply with all the labor regulations. So we operate in multiple states. So we comply. You know, we go above and beyond compliance with labor norms and good employment practices, so we don't see any challenge.

So in that case, the wage impressions are to be accounted for the R&D going forward?

So that we do every year in our budgeting. You know, it is a fact in India that... I'm going to be a high-cost inflation country, high-wage inflation country. So that's built into our model.

Okay. Thank you.

Thank you. The next question is from the line of Rajat Baldeva from Kizuna Wealth. Please go ahead.

Yeah, hi sir. Thanks for giving me the opportunity and congratulations and good set of members. My first question is on the output on the export trajectory of the AMD, given that the export currently around 65% of AMD revenue. And in particular, do you expect this proportion to rise? This is my first question.

Yeah, the advanced materials business, which is now called AAML, we are pretty happy with, you know, the current domestic to export. And it will kind of remain constant there because India for us is also growing and India is a very important market where we would like to continue to operate with deep penetration. In fact, the largest right to win for us is our home market. So we don't want to underserve it. So I think 60-65% export for the moment is the right.

Okay, and tell how much she's gone by US.

U.S. would be about between 35 and 40 percent.

The second question on the human protection segment, should you please give a bifurcation like what circumstances of order or the revenue come from defense versus industrial safety, given that India's defense indigenization push?

So, defense currently contributes to about 15% of our human protection business. And as I shared, there are several programs. To diversify through the forces and also paramilitary forces, and I see this anywhere within human protection. But if you look at the total advanced materials business, it will be about 8 to 10 percent.

Okay. And so, just one last question, a bookkeeping question. A recent disclosure indicates a pledge of security with Bajaj women. In addition, the existing promoter pledge is around 7-8%. So, can you please elaborate or provide the rationale behind this incremental pledge and offer clarity on the broader pledge through the tree?

I think there is no... Can I answer?

Yes, sir. Yes, sir.

Yeah, so there is no extra pledge by the promoters that has been done. In fact, place levels over the last two years have been dropped down. So, I'm not sure what data. I can check and talk to you separately, but we are very clear that there has not been any extra place. Maybe it has shifted from one to another, but there is no extra place. Thank the promoter for that.

Okay. Thank you. Thank you.

Thank you very much. Ladies and gentlemen, we will take that as the last question for today. And with that concludes the question and answer session. I now hand the conference over to Mr. Sathya Prakash for closing comments. Thank you and over to you, sir.

Once again, thank you everyone for joining today's call. We trust that the discussion has addressed most of your questions. Should anything remain unanswered or if any queries arise going forward, please do not hesitate to reach out to me and my colleague Himansu. We are just a phone call or an email away. Looking forward to engaging with you in upcoming events of the company. Thank you and wish you a good day ahead.

Thank you, members of the management. On behalf of Erwin Ltd., we conclude this conference. Thank you all for joining us, and you may now disconnect your lives. Thank you.