Himatsingka Seide Limited (HIMATSEIDE) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Himmat Sinka Saide Limited Q4FI26 Earnings Conference Call, hosted by Alara Securities. As a reminder, all participants' lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during this conference, please signal for an operator by pressing start and then zero on your touchtone telephones. Please note that this conference call is being recorded. I now hand the conference over to Ms. Prerna Junjunwala from Ilara Securities. Thank you and over to you, ma'am.

Thank you, Farah. Good afternoon, everyone. On behalf of LARA Securities, India Private Limited, I would like to welcome you all for Q4 and full-year FY26 post-result conference call of Himmatinkar Side Day Limited. Today, we have with us the senior management of the company, including Mr. Srikant Himat Sinka, Executive Vice Chairman and Managing Director, Mr. Sankaran Arayanan M, President Finance and Group CFO, Mr. Bankesh Dhingra, Senior Vice President and CFO Operations, Mr. Bhimal Agarwal, Vice President Corporate Finance, and Mr. Hari Krishnan Balasubramanian, Associate Vice President Finance, Banking and Compliance. I would now like to hand over the call to Mr. Srikant Simmat Sinka for opening remarks, post which we will take this Q&A. Thank you and over to you, sir.

Good evening, everybody, and thanks so much for taking the time this evening to join us for this call. As always, I'd like to start with a quick business update, and presumably you've gone through the numbers, and then I'll be happy to take questions that you might have. On the business update front, you know, despite the continued pressures that we face from the volatile U.S. tariff policies and heightened geopolitical uncertainties that we have seen off late, the company delivered a range-bound performance for the queue. The consolidated total income should have 721 pros. Again, 681 pros during the same period last year, registering a moderate growth of approximately 5.8%. I must say at this point that the fiscal 26 has been a volatile fiscal because of the tariffs that prevailed for most of the year. And then during the fourth quarter of the fiscal, we also started witnessing You know, impacts that arose, you know, from the war in the Middle East. So it wasn't the easiest of financial years for us. We saw volatility on the supply chain front. We saw pricing pressure during the fiscal and things of that nature. So, obviously, we expected our operating performance to be impacted by the various events that occurred during the year. The Q4, other income amounting to just over 100 crores, was primarily driven by foreign exchange movements of approximately 95 crores. This was on account of the depreciation of the rupee. During the same period. The fourth quarter, 26 capacity utilization levels at our manufacturing facilities were mildly impacted on account of some of the reasons I just shared with you, you know, for most of the fiscal. And as a result, Q4 has not been an exception. We witnessed a delay in some outbound shipments to certain jurisdictions during the quarter. We expect the Middle East overhang to continue to impact shipments to certain jurisdictions even during Q1 FY27, as we see it at this point. And the utilization levels during the quarters to that 99, 56, and 63%, respectively, for spinning, sheeting, and terry-tarl division. Over the past year, the evolving tariff situation and the geopolitical uncertainties have continued to impact, you know, growth prospects across key markets, but we remain cautiously optimistic. To effectively navigate the evolving environment and deliver sustainable long-term performance as we transition into a new model with a more diversified revenue mix and category mix. As I touched upon earlier, during my last call and, you know, with stakeholders, you know, Imusinka is in the middle of a transition of sorts. We are transitioning to have a more diversified revenue mix and category mix. Therefore, using our existing infrastructure and capabilities, we will not just be in home textile solutions, but we will also be active in the yarn solutions front. The Fabric Solutions Front, Advanced Fabric Solutions Front, and things of that nature. We are also exploring initiatives on apparel solutions. We believe these initiatives will position us to basically have larger addressable market pools vis-a-vis home textiles. And therefore, pave the way for us to look at, you know, a more diversified revenue-based, client-based, geography-based, category-based, and ultimately, you know, reduce concentration risk across these buckets. So we are in the middle of these transitions, which we started a few months ago, and it should start panning out in a more material. Format safe starting at H2 FY27 is what we estimate. We also believe that these initiatives will position us better vis-a-vis things like revenue risk as well as pricing power, which sometimes is a little challenged in the home textile space. Thank you. So, in addition to our focus on enhancing capacity utilization from our existing product lines, we have added new product verticals, which I just talked to you about, leveraging our current and existing infrastructure. And we will accelerate utilization levels, diversify revenue stream, and tap new opportunities in the wake of emerging new global regulatory frameworks. So, that's really our aim to position. We think of for a new tomorrow vis-a-vis textile and apparel space and not just be a single vertical company. The progress on the India, EU, India, UK, and other FTAs Along with, you know, some normalization of U.S. carriage structures is expected to enhance India's standing as a preferred textile and apparel sourcing destination. And we therefore feel that that should be an impetus, you know, for us to consolidate and strengthen our market share in key regions in the medium term.

So, we do believe that these

policy-level movements will act as tailwinds for not just the industry, but participants in the industry, and will therefore, you know, augur well for us in the medium term. As mentioned to stakeholders earlier, we've taken our... We've taken our presence in the Indian market very seriously, and we're working to enhance our position at home. We currently work on the home textile solutions front. We work with three brands, and we're constantly working to enhance the market penetration and presence of these brands. There's been a reasonably good response. And have shown growth during the year. Just to remind stakeholders, these brands have been, you know, reaching consumers through various channels, including multi-brand outlets, large-format stores, e-commerce channels, quick-commerce channels, and private-label brands, you know, and therefore, we continue to believe India is being important. Market for us, not just now in home textile solutions, but also in some of our emerging verticals like yarn solutions and fabric solutions. In addition to all of these initiatives, the board has also, at its meeting, held on the 27th of May, approved raising up to 850 crores through issuance of senior, secured, redeemable, non-convertible ventures on a private placement basis, and basically these funds will be used to make sure that our debt tenors are balanced, going forward in line. With our internal policies as to where they should be, and we will be net net mutual, largely speaking. And our dividend for the year remains inbound at 25 pesos per equity share with a paid-up value of 5 rupees per equity share for FY26. So these are some of the points that I wanted to share with you all. Thank you for patient listening. I'll be happy to take questions that you might have.

Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star followed by 1 on their touchtone telephones. If you wish to remove yourself from the question queue, you may enter star and 2. Participants are requested to please use only handsets while asking a question. We will wait for a moment while the question queue assembles. If you ask a question, please enter star and run. The first question is from the line of Prerna, Junjunwala, Ilara Securities. Please go ahead, ma'am.

Hi. Thank you for the detailed... I just wanted to understand the new business verticals that you are talking about, yarn solutions, fabric solutions, apparel solutions. What exactly are your plans in terms of capacity, if you are building that, or any business plans that you can mention that you are planning to do over here? Because there is little clarity on what exactly you are planning to do in the new verticals.

It's a fair question. So essentially, as stakeholders might be aware, the group operates four manufacturing facilities located across two campuses. All of our facilities are of global scale in their class of products. But in addition to, you know, being able to make certain kinds of home textile products, we are also equipped to make various other products, which we haven't explored, but will now be entering, and some of which we have entered and some we are entering as we speak. So essentially, we believe that, you know, we wouldn't want to be a company. That's solely, you know, focused on home textiles. It doesn't make strategic sense. For us, after having witnessed some of the headwinds that we have, you know, over the recent times, we feel that the challenges in the home textile space and the pricing power, margin profiles, and things of that nature needs to be. Adequately balanced, you know, by having exposures to other areas as well. And therefore, we, after a lot of deliberation and a lot of learning, you know, with these challenges that these challenges brought along, we've taken a decision to leverage our facilities to be facing several more product verticals slash adjacencies. Leveraging our existing infrastructure. The key word here is existing infrastructure because we are not on capital expenditure mode. The yarn solutions business will entail us entering into the yarn space. A quick reminder that Himithinka operates the world's largest cotton spinning facility under one roof with a capacity of 211,000. Visible. We'll see us leveraging some of our existing. We'll be leveraging those precautions. So we will be a comprehensive place in the Fabric Solutions space. We are very excited about that. We are very excited about the Yarn Solutions prospects. I think home textile solutions will obviously be a major port. And the apparel solution space is, again, of adjacency for us because we already operate infrastructure in the cut and stool space, and we also... We will... So, essentially, we'll have a multi-front portfolio and we'll seek to address larger market pools globally rather than just a little home textile market pool and fight for the same share. We believe we'll be a more balanced growth strategy, and we'll position ourselves for a new tomorrow. And it's not something which I think works best. You know. for one reason or the other. And therefore, we feel that... The definition of that would also mean leveraging our infrastructure for new category adjacency.

Okay. So, which means you will be selling these yarns and fabrics manufactured in your existing infrastructure? There are already 99% utilization in yarns today. So, you will divert some of the capacities to these newer verticals than use them in home textile? Is the right way to think?

Yeah, yeah, and we also have... Some capacities which are not part of our capacity matrix, you know, because it wasn't relevant for investors, but, you know, like, for example, our sheeting capacities and our knitting capacities are not on the table, but we have that as well, and we feel that our yarn solutions will be much better off, you know, serving third-party clients as well than just home textiles. We feel that there could be some, you know, market share pressure or pricing pressure in the home textile space as we go along. And therefore, we'd like to play in areas which are larger and more promising as we see it.

Understood. And so, next question is on India revenues. You had highlighted earlier that you would reach 150 all per oz. In India market, what would be the current number for SY26? And how has it spread this year?

Yeah, it was just over 100 crores, actually. We expect that to improve further this year. You know, we are... Um, uh... We are seeing a lot of optimism in India, but India will not now just be limited to home textile solutions. It will be across our categories that we deal with, and I think we are really looking forward to building India to be a very integral part of our revenue mix going forward. You know, as far as margins are concerned, I don't think... You know, they will be, if I put everything together, I don't think there will be any material movements, but even if it is, it will be range-bound, and I think it should emerge to be a stronger model for us, because our concentration on the U.S. and North America has to undoubtedly come down, and that's what we're working on.

Wonderful. And... On margins this quarter, we saw a sharp decline. We have been able to maintain 15-16% in school 3. And this sharp decline that came in this quarter, excluding other income, I'm talking. How should we see that going forward? And how is the input cost inflation, which is increasing cotton prices, going to impact you going forward?

Yeah, so, I mean, I've always urged investors to look at our numbers, including other income. You know, I do agree that it could distort numbers sometimes depending on the quarter, but it's not all of it is not unrealized gain. A lot of it is realized gains as well. So to that extent, the picture will change. My medium-term view on margin profiles remains. We have seen some of that in Q4. Of course, it was more the tariff overhang and some of the things that we have to share with customers and things of that nature. But, you know, I think maybe short-term movements on the inflationary front could be a little, let's just say, dampening on the margins by a small percentage. But I don't think our medium-term or regular outlook on margins has changed. It will largely remain range-bound. If there are some movements, it will be marginal at this point. We'll take it as it comes.

Understood. I'll come back to the question to you. Thank you.

Thank you. Participants, if you have any questions at this time, you may please enter star followed by one. The next question is from the line of Rajiv Maheshwari from Praj Industries. Please go ahead.

Hi. Good afternoon, everyone. I had a couple of questions. The interest cost has come slightly down if we compare YOY as well as Q&Q. So what's the target which we are looking at going ahead in terms of the reduction in the coming quarters or coming years?

I think directionally, you know, our next bus stop is, we would like to bring our netback down to approximately levels of 2,000 crores. That's where our next bus stop is. It could take us a little bit of time, but we are also working on our next initiatives to be able to deliver further. We do think that our leverage levels need to be corrected a little bit in order to position us optimally for future growth, let's just say, opportunities. So, you know, we had done a QIP of about 404s in FY25, and we... I think that we will continue to take some delivery initiatives to bring our debt down, both in the ordinary cost and through some capital market initiatives at an appropriate time in the near future.

What's the current standing loan right now?

Our net debt is approximately $25.50.

So we plan to reduce it by another 500 crores, and any specific time frame within which we are looking at this?

Yeah, we are looking at it within the next year, within the next month.

The second part of the question is coming to the new verticals of yarn, fabrics, and apparels. In the opening remark, if I heard correctly, the revenue generation would be visible from H2. That's right. So, basically, from Q3 onwards, we'll see the revenue getting added to the current home textile revenue. So, any ballpark figure or expected figure which we are planning to get in the Q3 and Q4 from these new verticals?

Rajivji, I can't give you figures since we don't share guidances, but... You know, our infrastructure should be able to deliver, you know, around 4,000 odd crores in top line and approximately 700 to 800 crores in bottom line and EBITDA, which I've shared with stakeholders earlier if we were to run at optimal capacity utilization levels. And I maintain that outlook. And the initiatives we're taking on adding on new adjacencies should... Basically, position us to be able to tap into these utilization levels faster. My estimate is approximately hitting those runways in approximately 18 to 24 months.

Okay, fair enough. If you can give me the rough idea in terms of what is the ratio we are looking ahead in terms of the planning which we have made, if you just give a ballpark figure on what's the ratio we are looking at in terms of home textiles, yarns, fabrics, and apparels going forward, means if the home textiles would grow accordingly along with it, these two additions would definitely give us a better match.

I think one textiles will become approximately half our portfolio.

Okay. Okay, and the balance 50% would be taken by these two?

I mean, I'm talking about approximately, because we have to right-size it, and we have to make sure that the margin profiles are appropriate. Just garnering revenues is not something that's of interest to us.

Okay. So margin profile-wise, will the yarns, fabrics, and apparels be more profitable compared to the home textiles, or how is it like?

I think it will be compatible. So, therefore, as I was answering, you know, the previous question, our margin, I've always said that our EBITDA margin should be in the region of 18 or 22%, which for the most part it has. And I don't think our model is going to fiddle with that band in any material form or shape. But listen, I must qualify my statement saying that we do live in times of uncertainties and volatility. If there are changes to my band of 18 to 22% on account of externalities and things which are more structural in nature, then of course I'd have to revisit that band. But for the time being, we are comfortable with it.

Okay, fair enough. Good, good. We are looking into these new verticals because it's been a quite long time from the shareholder point of view. And we have been patiently looking for the…

It absolutely has, and thanks shareholders for their patience. It's one of those phases that Imitinka is going through where… For one reason or the other, our performance has been hit, and our operating performance has, let's just say, fallen short of expectation. And, you know, we have had a lot of introspection to do given the challenges over the last couple of years, and we've now come up with, you know, what we believe would be the right direction to pursue in order to deliver sustainable growth for our investors.

Are we incurring any additional capex for these new verticals, or how is it like?

No, Rajivji, actually, it's a good question. I've said that, you know, for the most part, we will be within our maintenance capex budgets. I wouldn't want to take on more capex at this point until I'm delivering reasonably well on the operating performance front for our investors. And I honestly don't need anything more than that of any consequence. We do operate South India's largest textile complex, an integrated textile complex. It's a 400-acre complex. It's very well-equipped. It's very flexible. It's state-of-the-art. And it's capable of delivering on many fronts. So I'll be happy with, you know, sticking to our band of maintenance capex for the here and now. I could be off by a few crores, of course, that I won't be able to predict, but conceptually, that's where we stand.

Okay, right. So, it's a good news that we'll be getting this new revenue without any additional capex. I do have full faith in the organization and wishing you all the best, and let's hope that things take a turn for the good for the coming quarters and years. Thank you.

Thank you so much, Rajiv, for your positivity and for your remarks. Thank you. Thank you.

Thank you. As there are no further questions, I would like to hand the floor over to Mr. Shrikanth Hemat Sinka for closing remarks.

Thank you, Penan. Thank you, everybody, for taking this time today. I do hope I have answered your questions. If you have any other questions, queries, observations, etc., please do reach out to us and we'll be happy to answer them for you. Thank you again. Bye-bye.

Thank you very much, sir. On behalf of Ilaris Securities India Private Limited, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.