Himatsingka Seide Limited (HIMATSEIDE) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Hemaat Singh Asai the Limited Q1 FY27 Result and Business Update. As a reminder, all participant lines will be in listen-only 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Prerna Junjunwala. Thank you. And over to you, ma'am.

Thank you, Atharva. Good afternoon, everyone. On behalf of Ilara Securities India Private Limited, I would like to welcome you all for Q1 FY27 post-result conference call of Himachinkar Saida Limited. Today we have with us the senior management of the company, including Mr. Srikant Himatinka, Executive Vice Chairman and Managing Director, Mr. Shankar Narayanan M, President Finance and Group CFO, Mr. Bankish Dhingra, Senior Vice President and CFO Corporation, Mr. Bimal Agarwal, Vice President Corporate Finance, and Mr. Hari Krishnan Barasubramanian, Associate Vice President Finance, Banking and Compliance. I would now like to hand over the call to Mr. Srikant Himatinka for opening remarks. Thank you and over to you, sir.

Thank you, everybody, for taking the time to join us this afternoon. As always, I'll first go through a business update and shed some light on developments at our end, and then I'll be happy to take questions from you all. So, the consolidated total income for Q1 FY27 stood at 634 crores versus 661 crores, which was a range-bound number. Also... It took some hits on this account from the ongoing issues that we were facing on the geopolitical front in the Middle East. So we had some deferrals of shipments and things of that nature. And it also reflects some movement on capacity utilization in some of our divisions which I will come to in a bit. The consolidated EBITDA came in at 101 crores. The EBITDA margin came here at about 16%. Again, primarily given by slightly lower revenues, some tweaks in product mix, and some inflationary headwinds on the raw material front. The capacity utilizations at our facilities stood at 99%. Our sheeting division came in at 52%, and our terry division stood at 63%, as was the case during the last quarter. The company continues to drive focus on transitioning its business model. So, actually, you know, this call today is really not about our quarterly numbers as much as it is about, you know, sharing some thoughts on the transition that we are undertaking vis-a-vis our model and our businesses. So, as I shared with the stakeholders on our previous call, That in addition to focusing on enhancing capacity utilizations for our existing product lines, we have also added new product verticals by leveraging our current infrastructure. We believe this will accelerate utilization levels and diversify revenue streams, tap new opportunities in the wake of new global regulatory frameworks and geopolitical realities. So, in a sense, we are going to be adding three new product verticals to our portfolio, and in addition to home textile solutions, and the three product verticals will be yarn solutions, fabric solutions, and apparel solutions. So, our efforts are essentially geared to transforming the Himsinka model. And steering away from U.S. concentration, steering away from client concentration. As we've seen in the home textile space, that seems to be a cornerstone of the home textile, let's just say, world. So some of our new verticals, we would like to stay clear from those kinds of issues. And we would like to broaden the number of jurisdictions we serve. We would like to broaden our India presence. We would like to broaden the categories that we operate in because this is what we believe will drive de-risking of our revenue streams and unleash growth potential for us because we... The markets, you know, overall, in terms of yarn solutions or fabric solutions or apparel solutions, are substantially larger markets for us to be a part of vis-a-vis home textiles. So it's a much, much larger universe. It's a universe which is probably 20x the size of home textiles, if not larger. And we therefore will find growth opportunities. You know, for us to be able to tap into as we go along. So, in this regard, the group has already started its Yarn Solutions business, which is being ramped up as we speak and will be ramping up through the rest of this year. Which essentially means that while we do, you know, service some of our internal requirements, our yarn solutions assets, which is our spinning assets, will be focused on driving, you know, independent, it will be an independent business vertical driving volumes by the sale of various kinds of yarns. Do keep in mind that it's the world's largest plant under one roof with the capacity of 211,584 spindles. So the yarn solutions business will chart its own journey, which has largely been only captive all these years, but we believe it's a large market, we believe we have the right technology platform, we have capacities which are of global scale, and we think that it's an interesting space for us to tap into. We will also make progress on the fabric solutions business, you know, as we go through the fiscal, and we will essentially be tapping into our existing capacities to unlock growth potential in the fabric solution space. The products will have applications in lifestyle fabrics. And later, we'll also be tapping into technical and advanced fabric solutions using our current infrastructure. It's a very large space, and we think that we would like to be an important player in that area. Approximately, by the end of the year, should stand at about 90 million meters, and we will be channeling a substantial part of these capacities to service our fabric solutions business. The apparel solutions piece will kick in. Thank you. In textiles vertical, which is our traditional vertical, we'll have to go through a right-sizing exercise. We make sure that we have, you know, limited concentrations in markets like the US, which have other uncertainties associated with it, while we ramp up the other verticals. So, this is a little bit about all the four verticals that I think I'll be transforming into. So, this period for us, you know, be it Q2 or whatever it is, in the short term, for a couple of quarters, our focus is on transition. We will see some volatility numbers while we go through this transition and stabilize. On the new platforms, but we believe that new platforms will drive significant growth and, you know, unleash significant potential for us going forward. You know, in addition to this, we have, you know, our overall leverage, which has remained range bound for the quarter at about 2,550 crores. And, you know, we are all internally focused to drive these measures that I just spoke to you about, keeping the future opportunities in mind, both on the domestic front and on I'll be happy to take questions as you might like. Thank you.

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 1 on their touch room telephone. If you wish to remove yourself from the question queue, you may press star and 2. 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 comes from the line

of Sanjay from Musa Enterprises. Please go ahead.

Good afternoon, sir. Actually, I just want to ask what are the positive and negative in this quarter for the company?

Well, you know, the negatives have been some overhangs which I spoke about on the revenue front and on the, you know, overall off-take front. But I think the positives, I believe, you know, is the fact that we have now started the transition into our new model. As I shared with all of you earlier, this does not involve any expansion or capex. It is transitioning into a new business model using our existing assets and opening up very new and exciting opportunities for us going forward. So I think the positives I'm looking forward to is really transforming our operating model over the next couple of quarters and heading in this new direction. That's really what the positive is. Because there's going to be a lot of opportunities in the textile and apparel world, and we believe that limiting our... Operations to only home textiles is going to be very restrictive going forward. And therefore, we are looking forward to unleashing potential on all these fronts.

Okay. Thank you, sir. Wishing you great success for the future.

Thank you very much.

Thank you very much. Ladies and gentlemen, if you wish to ask a question, please press star and run. The next question comes from the line of Nirav Shah from Mesh Stock Brokers Private Limited. Please go ahead.

Hi, sir. Good afternoon. I wanted to ask why I am raising so much of money. And how do you see quarter two, quarter three, or quarter four? And how are the tariffs affecting your company, U.S. tariffs?

Thank you.

Vis-a-vis U.S. demand as far as Inusinka is concerned. We've also seen some flip-flop on policies and therefore the uncertainty. It's created an inflationary environment as far as our products are concerned, and therefore the demand, let's just say, scenario has been slightly altered. But I think the going forward situation vis-à-vis tariff seems to have stabilized to current levels. On the other side, the FTAs that the country has signed with jurisdictions like the UK and EU will all go well for us in the immediate term. The UK piece will kick in. The EU piece, we're not sure exactly when it's going to kick in, but it should be in the short term. So, I think this is my view on the regulatory and tariff-related funds. In essence, the tariff piece is stabilized and the FTA piece should, you know, offer some opportunities. But as I said, the domestic markets will also open up for us vis-à-vis our new product verticals, and therefore there will be a lot of new opportunities. On the fundraising side, you know, Profiles are balanced, so it's not really additional capital as such.

Thank you.

Thank you. The next question comes from the line of Prezna Junjunwala from Alara Securities. Please go ahead. Perelma ma'am, please unmute your line and proceed with your question.

Hi, sir. You mentioned in your commentary that the fabric solutions would be around 90 million meters of capacity, while your current home solution capacity is around 61 million meters. So, 60 million meters, would you be investing any further? Could you help us understand that?

So, you know, we have a processing, you know, we have a fabric processing and knit processing capacity of 90 million meters because our earlier 61 million meters didn't really include our knitted platforms. So, you know, they put together, they are about 90 million meters, and both our home textile solutions piece, which is our sheeting vertical part, not the terry, the terry is a separate plant, you know, and our fabric solutions verticals will share this capacity. Okay. We will be really allocating capacities, you know, between the two verticals from common infrastructure.

Understood. And have you made any progress in the new businesses, any revenue generation from there, or it is still nascent to?

I think that we have started revenue generation. You know, it will pick up over the next few quarters, obviously. And I estimate that some of our home textile revenue streams will taper down, especially on the sheeting front. On the Terry front, we'll hopefully continue to see growth going forward, but we will have to look at right-aligning our portfolio on the sheeting front, and some of those capacities will be unleashed for other verticals.

And in YAN solution, How much of capacity, of the current capacity that you mentioned, would be actually sold externally? Because that is, in our opinion, faster scalable market as compared to fabric or garmenting.

Yeah, so I believe that over 90% of our capacities will be placed externally. Because even today, we are not able to fulfill our internal requirements just by our captive plant. So, we buy yarn in the ordinary course of business anyhow, but we would like to set free that business and make it capable of charting its own growth journey, and therefore, a substantial part of its capacities will be channeled to external markets.

Okay. And any capex that you would be requiring to do for this conversion?

No, we're keeping our CAPEX limited to just our maintenance and organic CAPEX requirements, which is why I keep saying that all of these things are using our existing campus and infrastructure.

Understood. Thank you, and all the best.

Thank you.

Thank you. The next question comes from the line

of Vineet from Access. Please go ahead.

Hi, hi. I'm Avni from Access AIF. Our one question is that what is the peak debt that you expect by the end of this year? Because, you know, the current 850 crore entities that are being raised, you expected to refinance the entire debt or, you know, you expected to add some additional leverage in the books?

No, our leverage should be range-bound, Avni. It's largely only for debt balancing, as I said earlier. So we don't see a lot of incremental movement at all. It should be range-bound. And in addition to that, we are taking initiatives to strengthen our equity as well. We will be sharing stakeholders at an appropriate time.

Understood. Is there a fundraise plan?

So, therefore, in all in all, we will see a reduction in net debt by the end of the fiscal year.

Understood. That's it from my side.

Thank you.

Thank you. The next question comes from the line of Rajiv Maheshwari from Raj Investment.

Good afternoon, everyone. Thanks for having my question. I have a couple of questions. As you mentioned earlier that we may see some fall in the revenue in the home solutions division. So, do we expect this to be made up from the yarns and fabric sale within this quarter or next quarter, or it will take some more time? Because what I've observed is the sale has been range bound in the 600 to 700 for last few quarters. So, do we expect a drawdown in the total?

That's a good question, Rajiv. So, while we go along, we will try to make sure or we are attempting to make sure that our revenues are range-bound and don't take a knock as such. There might be some small movements on the positive or negative side. Since it's a, you know, it's a transition, you know, with moving into various verticals and so on, and right-sizing our sheeting division's revenue, so home textile solutions will correct a little, but it's primarily driven by sheeting. The terry tile businesses in the home textile solutions will continue to perform. But while we undertake this journey, we will hopefully make sure that, you know, our new revenue streams compensate for any reduction in existing revenue streams.

Okay, so regarding the yarns, what is the rough revenue addition for this quarter, maybe a rough figure in terms of what's the expectations? Because Fabric, I believe you are starting somewhere two quarters down the line. So how's the yarn revenue?

Fabric has also begun, and yarn solutions has also begun. The apparel solutions is what we will be starting in the next phase, couple of quarters down the line. So as we speak, the company now operates in three verticals, the home textile solutions vertical, the yarn solutions vertical, and the fabric solutions vertical. Of which the yarn and fabric solutions vertical are nascent and are being ramped up as we speak. I won't be able to specifically comment on what their revenue contribution was during the quarter in terms of each of the verticals. But what I can tell you is that the overall revenues we are looking at from the yarn solutions vertical and the fabric solutions vertical Are in the region of 1,000 crores each.

So this 1,000 crores…

At full capacities.

Yeah, at 1,000 crores each, right? So that makes a total of 2,000 crores. And the apparel division sounds very exciting in terms of the retail and how the consumer behavior has been developing of late in the Indian context. Look, I just wanted to know a little bit more about how do you plan to target which are the areas it could be primarily kids wear, men's wear, women's wear, or what's the plan like if you can show some more light on the apparel division?

The apparel division will be actually positioned, you know, to serve a broad cross-section of demand, and I'll be happy to share that as we close in on ramping that vertical up. But the fabric solutions and the yarn solutions verticals will also be servicing a broad cross-section of products in that domain. And we are excited to be able to service that. It's refreshing for us to be operating in that space and not be limited to just home textiles. We believe the home textiles space will see pricing challenges going forward, especially on the sheeting front. And we also believe that our new product verticals... We'll offer better pricing power and market opportunities for us going forward. So hopefully Unisinka will be a transformed business model in a year or so, and I'm looking forward to that.

So basically, this has been a thought-out effort from our side to ramp down the sitting division in order to gain more profitability and sales, or this is because of the challenges which we were facing in the U.S. market has worked out around this decision?

Yes, we face market share challenges in the U.S., we face pricing challenges. On account of the tariffs, we believe that we have faced concentration challenges, and these things which we faced during the last fiscal made us introspect and, you know, think about how we'd like to look at the future, and this is what we have come up with in terms of. Our, you know, direction going forward, and this is the areas that Himitsinka 2.0 will operate in.

Okay, just one last question. Have we seen any pickup due to the FT agreements with the UK or EU, or it's still under process or discussion stage?

Still under process. Sentiments have definitely picked up, but I will add here that, you know, in the medium term, India will become the, probably become the largest jurisdiction for the company going forward, if not the largest amongst the top two. So, there's a very large domestic consumption piece which will be tapping into vis-a-vis our new verticals, and that's something that... We will change our jurisdictional profile vis-a-vis revenues.

All right. That's all from my side and wishing you all the best in the coming verticals going ahead.

Thank you, Raj. Thank you very much.

Thank you. We'll take that as the last question, and I would now like to hand the conference over to the management for closing comments. Thank you, and over to you.

Thank you very much, all of you, for your questions. I hope I've answered them to your satisfaction. If you'd like to know anything more, do get in touch with us, and we'll be happy to take you through your queries, and we look forward to chatting soon. Thank you.

Thank you. On behalf of Alara Securities and Hemaat Singhah Sehde Ltd, that concludes this conference. Thank you for joining us and you may now disconnect your lines.