Nitin Spinners Limited (NITINSPIN) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Nitin Steeners Ltd Q1 and FY27 earnings conference call. 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 take one of the services by pressing star then 0 on attached to the phone. Please note that this conference is being recorded. I would now hand the conference over to Mr. Avnish Chandra from Smiths Ltd. Thank you, and over to you.

Thanks a lot, Muskan, and thank you very much, everyone, for joining this call. On behalf of Smiths Ltd., I welcome you all to first quarter financial FY27 earning conference call of Nidin Spinas Ltd. We are pleased to host the top management of the company. Today, we have with us Mr. Dinesh Nolka, Chairman and Managing Director of the company, Mr. Nitin Nolka, Managing Director of the company, and Mr. P. Maheswari, Chief Financial Officer. We will start the call with initial commentary on the results, and then we will open the floor for question and answer. Now, I will hand over the call to Mr. P. Maheswari, CFO of the company. Over to you, Maheswari, sir.

Thank you, Avneji. Good afternoon, and a warm welcome to all the participants to this Q1FI27 earning call of Nathan Spinas Limited. I hope you have had a chance to go through the financial results and investor presentation available on the company's website and stock exchanges. I will start with a brief overview on operational and financial performance for the quarter, post that our CMD, Sri Dineshji, will give you an overview of industry and business scenario. Coming to our financial and operational performance, Q1FI 27. The company has reported another quarter of strong all-round performance with improvement in revenue, EBITDA, and PENT. Revenue for Q1 stood at Rs. 875 crores, which is a growth of 10.3% on year-on-year basis and 1.8% on quarter-on-quarter basis. It is our highest ever quarterly revenue for second time in a row, driven by implementing the annualization and better demand scenario. EBITDA before other income for the quarter stood at Rs. 155.6 crores, which is a growth of 39.85% on year-on-year basis and 19.3% on quarter-on-quarter basis. EBITDA margin for this quarter stood at 17.78% against Q1 FI26 margins of 14.02% that is increase of 376 BPS on year-on-year basis and 261 BPS on quarter-on-quarter basis. That is due to improved realization and cost-saving initiatives. Profit after tax for the quarter stood at rupees. 75.3 crores, that is a growth of 33.63% on year-on-year basis and 31.2% on quarter-on-quarter basis. EPS and case EPS for the quarter is stood at Rs. 13.39 and Rs. 20.08 per share, respectively. In terms of geographical split of revenue, export contributed nearly 65% and domestic 35% of the total revenue during the quarter. In FY27, our spinning tape city was operating at 98% utilization and woven fabric at over 92% utilization. That is all from my side. I now request Siddhineshji to share his insights about the industry and business scenario. Thank you, and over to Siddhineshji.

Thank you, Maheshwariji. Good afternoon, everyone. FIJ 27 has commenced on a positive note for the textile industry. This positive momentum has been supported by an improvement in demand from the last quarter itself. Following the removal of the additional tariffs by the U.S. Cotton prices increased during Q1 by about 8 to 10 percent, primarily driven by overall lower global production, global supply chain and logistic challenges due to West Asia war. Government of India, due to this, has also removed the import duty on cotton, so looking to the higher prices in The domestic as well as international markets. The price parity between international and domestic cotton improved, which was one of the factors for the improvement in the performance of the textile industry. The upstream textile industry also witnessed an improved market scenario, with yarn prices increasing higher than the cotton prices, supported by healthy demand from both the domestic and export markets. The increased demand of cotton yarn. In export market from China was one of the factors for a better demand scenario for the Indian spinners. The recently implemented India-UK FTA is also expected to support India's exports by opening up new sourcing and export opportunities for the Indian textile sector. Other trade agreements like EU FTA will also play an important role in creating a more level playing field for India against other competing textile nations. India's textile sector continues to have good long-term growth potential, supported by its large manufacturing base, raw material availability, increasing focus on value-added products, innovation, and sustainability. For the favorable government initiatives, an increasing global interest in diversified sourcing will contribute to going forward the improved demand. We anticipate that the demand for fabric and yarn will continue to be better, supported by demand coming from growth across the downstream sector and the consolidation of the spinning industry. Coming to the company's performance, we are pleased to announce our highest ever quarterly revenue for the second consecutive quarter. At about Rs.875 growths, given by improved annualizations, a better demand environment, and optimum capacity utilization. The public business witnessed a stable pricing environment compared to the previous quarter. Margin saw the water improved on both a sequential and on year-on-year basis as well. This improvement was finally given by higher realizations across our products and the cost-saving initiatives. Going forward, one of our future growth drivers will be our capacity addition, plant which is going, progressing, especially due, with the expansion of our fabric capacity by around 35 million meters and spinning capacity by at least 74,000 spindles. We anticipate closing financial year 27 on a stronger note compared to financial year 26, supported by the partial contribution from the new capacities in the second half of this financial year. The CAPEX will further support an expansion in our blended margins, as highlighted earlier as well, driven by an increase in the share of value-added products in overall revenue mix. The renewable power expansion plan is also going as per schedule and expected to be operational by the end of Q327. Upon completion of the same, we are expected to reduce our power costs further. The positive external environment, including the trade measures and improved prosperity of cotton, gives us a confidence in faster ramp-up of these capacities once they become operational and help us in sustaining the margins. With this, I would like to open the floor for the question and answer session. I think we can go forward with that.

Thank you very much. We will now begin the question and answer section. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from question queue, you may press star and 2. Falsons are requested to use sensors 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 Madhur Rathi from Counter Cyclical Investments. Please go ahead.

Sir, thank you for the opportunity. Sir, if you could help us understand what were the spreads during Q1 FY27 and what are current spreads right now in Q2?

In the first quarter, I think, in the last quarter of the last financial year, the spreads were in the range of about 110 rupees, and now it is in the range of about 130 rupees.

130.

Yes.

And sir, are we sustaining in Q2 as well?

As far as today's condition is there, we are sustaining the same.

Got it. So what has led to this spread improvement? Is it the difference between the pricing of Indian cotton versus international cotton or the demand is much higher than the supply, if you could help us understand?

In fact, there are a couple of reasons. First is there is an improved demand scenario and also consolidation of the capacities. We have seen some capacities going out of business in the last one and two years. And then there was a very dull period of demand, especially post the announcement of the U.S. tariffs, and the prices went down substantially lower. Now that has corrected itself, and accordingly, there is a stable price regime. Maybe we can say we have come back to the similar levels, what was their pre-U.S. tariff levels. And also, one of the important factors, as you rightly pointed out, was the parity between the Indian cotton and the international cotton. For good one and a half to two years, from 24, end of 23, till the middle of 25, our Indian cotton was outpriced. They were higher, much higher than the international prices. So, now this course correction has happened. So, that is also resulting in trees improvement.

Got it. Sir, can you quantify what is the premium on international cotton versus Indian cotton currently, and historically, where has it, like, you mentioned that we were at a disadvantage like in 23 and 24. So, how is it compared to that right now?

If we have to look at the Cotluck Index, normally Indian cotton, Cotluck Index is basically index of six larger groups of cotton. So if we compare that, normally Indian cotton was minus the Cotluck Index, maybe a couple of, let's say, a couple of percentages points minus the Cotluck Index in view of the quality of the cotton which we produce in India. Okay, so... In 2023-2024, our cotton prices were about 5% to even 7% higher than the Kotluck index. And now it is at this point of time at the similar level, minus 1% or 2% the Kotluck index level. So the overall delta change has been in the range of 7% to 8%.

Got it. Sir, just final few questions from mine. Sir, we are adding the 35 million meters of capacity in our finishing division. So, is it more towards weaving or is it more towards printing? And sir, it seems that the printing, the textile printing, although the volumes are getting much smaller, sir, so are we moving from rotary printing towards digital printing, if you could help us understand?

First of all, printing is a very small part of the business. The capacity which we are adding is both in the weaving as well as finishing. We are adding both weaving capacity as well as finishing capacity. And this new capacity will be for solid dyes, solid dyed fabrics, also the yarn dyed fabrics. As well. So we are not adding any capacity in the printing segment. Already we have printing segment available, where we are already running the thing. So we are not adding any capacity in that particular segment.

Got it. And so, considering this demand improvement that we have seen, but our volume, yarn volume have actually de-grown on a Q on Q and a Y on Y basis. So why was it I think majority came from the realization improvement? So how do we see FI27 in terms of top line and bottom line? And so the volume, should we expect these to move up going forward or customers are delaying their purchases because of higher yarn prices?

There is, I think there is no degrowth as such. The volume has degrown because our fabric divisions have consumed more. If we go into the detail, our fabric divisions have consumed more, and slight, some stocks were left out at the end of the quarter because of logistic challenges. So, there was slight increase in the stocks with us which got dispatched later because of the non-availability of the vessels or other things. Logistics as I highlighted in my earlier comments also. So, because of that, otherwise, there is no reduction in the sales side, up in quantum, I would say. Going forward, as our capacity increase, yes, the quantum will also increase. That is also going to increase, going further. For the, what will be the revenue and other things for the financial aid, I think in the last conference call also, we have highlighted that Thank you. We should be already, with our new expansion, we should add another 200 to 300 crores to our revenues going in this whatever capacity we had. Plus, the existing revenue should be slightly higher than the last year. So, Paul put together so that there will be a reasonable increase in our revenues.

Got it. Sir, thank you so much on all the rest.

Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead.

Thanks for the opportunity and congratulations for good set of numbers. As you have been saying that, you know, the spreads are sustaining in second quarter also. But let's say, if we, you know, if our, for most of the spinners, for most of the yarn companies, the low price inventory should get over by maximum by Q2. So, let's say, how do things look like for our company in Q3 with, you know, with us also procuring higher cost inventory during Q1, Q2? We can talk about. About that.

We are not at all relying on our inventories alone. We are... Trying to pass on the increase in the raw material prices. This has happened in the past also. And going forward also, if the prices, there is no abnormal increase in the raw material prices, I think we should be in a position to pass on the increased quarterly prices also. This quarter itself, in the Q2 itself, we are also seeing the increase in the raw material prices in comparison to last six months, and which is getting passed on.

Okay, okay, okay. And, you know, we have been hearing about China starting to buy, procure cotton yarn, cotton yarn supplies from India and others countries. So, is that one of the major reasons why, you know, such high demand and high yarn prices are sustaining? And what's your view on continuity of the same?

First of all, it is one of the reasons. I would not say it is the only reason. Overall, demand in the domestic market has also been good. If you see there is an incremental increase in the exports, we were, India was exporting in the range of 90 to 100 million kgs during the whole of year 25. In 26, in the calendar year 26, China started to import and we went up to 110 to 115 million. So there is not a very large increase or, let's say, the kind of capacity which they used to buy in 20, earlier years, in 21, 22 kind. But this is also supporting the overall. So, I would say that and we are expecting because of the strategy which China is adopting, there is a lower crop expected in China and they may go in for this kind of continuity of the import of yarn will continue.

Okay. So, given all this, if we expect that the current margins for the quarter, let's say around 17-18 percent, that should sustain going forward at least for next quarter or two?

We are expecting same. In view of the cost-saving initiatives going forward, which is also going to kick in, and also the margins looking reasonable, unless we have seen extraordinary changes in global scenarios or something like that, geopolitical, geopolitical things, we should be able to maintain.

Okay. Maintain and not improve. The margin should stay at around 17-18%.

Improvement, I cannot comment upon at this point of time.

But at least it should not go down from the Q1 levels, or at least not significantly lower than Q1 levels.

No comments on this link. I am just giving you the fact on the figure. The margins will come automatically when it comes.

Sure. Okay. Thank you. Thank you.

Thank you. A reminder to all the participants, you may press star and want to ask questions. The next question is from the line of Narayan Danak. An individual investor, please go ahead.

Sir, thank you very much for the opportunity. I hope I am all in. Yes, you are. Please. Thank you. So, I see that the volumes QOQ down per yarn around 14% and YOY 7%. That is compensated by increasing the volumes for clot, right, by 7%. And that is clear from what you just say. And demand perspective will not increase in terms of volume, right? I think what you pointed out as a demand perspective, can you please put forward the facts in terms of how the demand has increased and the volumes are actually down? That's the first question. And second question, if are these spreads, right, is specifically due to spread increase is due to the cost reduction in terms of inputs. That's how I understand it. So correct me if I'm wrong. And how much is it sustainable given this China scenario which you just explained. These are the two things if you can address this. Thank you.

Coming to your first question, there is, basically, if you see the production capacity, it is running at the similar production capacity. So, we are running at 98% capacity utilization, and accordingly, the increase in volumes is not possible beyond the capacity which we have. So, last year also we were running at this level, and this year also we are running at same level. Now, out of the capacity, the yarn which is produced, it goes for different applications. Sometimes we have our knitting capabilities, we have our weaving capabilities. So, when it goes more into those in-house consumption, then when the utilization increases here, the outside sales slightly reduces. So, that is what you are seeing at this point of time. Some quantity reduction, which is left in our stocks. This is also, which is also reflected in our numbers, is due to the non-dispatches of the materials from our end, because of logistic challenges in the international market. So, that is one of the reasons, and that is later on, already in the month of July, and others, it has already got dispatched as well. So, this is the reason why the volumes you are looking at is changing. So, that is, from our side, there is no major change in the volumes, and it remains as it is. So, all the increase which has happened is due to the increase in the realization, and there is no reduction in the volumes of the yarns which we are producing or which we are selling at the moment. Now, coming to your second question, where you have asked about the cost initiative. In this particular quarter, there is some – our renewable energy portion has kicked in, the new capacity which we have started. So that has contributed partly for the reduction in the costs, but that is not very substantial, I would say. We have also gone in for an effort of saving the energy. So that has also resulted in the lesser energy consumption per unit of the production. So these two things have resulted. Some automations have also been done, which was also a part of our expansion plans. So we have also modernized some of our existing capabilities. So all these three things have resulted in some of our cost savings, which is going to continue. These cost savings are permanent in nature and will continue going forward as well. Right, sir. Thank you.

So, most of the cost saving is coming due to input prices, the way I understand. And part of it is due to what you just explained.

No, no, no. Not input prices. Due to the power, input prices have gone up rather. And accordingly, the finished goods have also gone up. So, input prices have not gone down. So, if you see, so, the increase in the revenue is more than what the input increases there.

Right, right. And that's why spread about 130 rupees that you just mentioned previously, right? And the last question from our side, how does it look when the full capacity expansion comes alive and we are producing more, say, FY28, FY29? Do we see substantial demand to absorb the capacity expansion that we have done?

The new capacity, which is going to come in, will be, in the young capacity, what we are adding, will be more for our, It will go for, out of the new capacity, about 22,000 metric tons we are adding going forward, so out of which nearly 16,000 to 18,000 will go for our yarn production, for our fabric production. Also, we are adding a yarn dyeing capacity, so part of the capacity will also be, so it's a new product for us, so that will be some of the yarns will be going forward. So, in total, we will be adding very small capacity for our gray yarn business, which would be easily absorbed, looking to our presence all around the world and the demand of our products at this moment also. So, there is no issue at all for absorbing the yarn capacity. Now, coming to fabric capacity, this is going to – we are also introducing many new products in our range in the fabric. And also, these new markets which are opening for us, like with the FTAs happening for the UK and also going forward for the EU, we expect that we will have more customers coming from these markets, which we are already in discussion. So, they will – that will further enhance our utilization capacity. But the ramping up of fabric will take some time to happen. So that is going to take six to eight months time going forward.

Got it. Thank you, sir. And the margins from these new products, right? At least you would be matching the margins of yarn, if I'm not mistaken.

Yes, of course.

Of course. Yes, yes. Thank you very much. Yes.

Thank you. The next question is from the line of Abhishek Shah from Fortitude Fund Management. Please go ahead.

Hi, sir. Firstly, congratulations on the set of numbers. I mean, we are very impressed with, you know, how we've been able to foresee the upcycle. So just a couple of questions. I think last quarter on the con call, you said the price rise in fabric was not being passed through the way it was getting passed on in yarn. So just wanted some clarity. Has that pass-through started now? I mean, are we getting higher margins in fabric as well?

Basically, let's say we have been able to pass on... 100% of the raw material increase in the yarn business, or rather, in fact, improve it. Let's say if the increase is 100%, we have been able to pass 120% or 125%. I'm just giving an example. But in the case of fabric business, only whatever raw material increase actually has happened in the cotton, that is only getting passed on. We are not able to improve upon the margins as we are able to improve upon the margins in the yarn business. Got it. Sir, do you expect this to sort of improve in the coming quarters? Yes, definitely. With the settling down of the cotton prices at higher levels, yarns at a level, we expect that definitely with the demand coming from various quarters all around the world, I think we should be able to do that.

Got it. Sir, in terms of the new capacity that comes in, you know, in addition to the previous person who asked you on the capacity ramp-up, sir, of the 1,000 crore is what we were guided incrementally will be the turnover that gets added. How much of that will be yarn and how much of that will be fabric? Is it 505 in it? No. Fabric will be about 600 plus. Okay. Got it. So, in terms of ramp-up, what will be the tentative timeline for yarn and fabric?

I think we should be, you know, as far as yarn is concerned, I think we would have ramped up all our capacities by 31st of March of this financial year. So, that will be there. And fabric 100% ramp-up may take a quarter or two more in FY28.

Okay. Sir, lastly, in terms of the solar capacity, has any of the benefits accrued as yet, or all of it will come in Q3 itself?

I think some of it has come in the Q this quarter also. I think about 1.2 crores or 1.5 crores is the exact number. It has come in this particular quarter. Yes, it is going to come going forward.

So, if I'm not wrong, I think the number is 3035 crores, right, for this savings will start, say, post Q3?

If I think annually, it will be about, it should be at the EBITDA level, it should be around 50 crores. About 50 crores. Okay.

So, at least 50 crores, so maybe 50 divided by 4 will start from Q4. Is that safe to assume? Yes, definitely. Okay. All right. Thank you so much, sir.

The next question is from the line of Kushal Sengupta, an individual investor. Please go ahead.

Hello. Yeah. Congratulations on a great state of numbers. I just wanted to ask, any chance of you looking at a buyback at any point in time?

I think at this point of time, we are in a growth phase. We are deploying our capital for the growth purposes, internal accruals, as well as we are also taking some loans as well. So, it would not be prudent for us to go for buyback at this point of time.

Okay, thanks.

Thank you.

A reminder to all the participants, you may press star and run to ask questions. The next question is from the line of Varun from Fnitz PMS. Please go ahead.

Good afternoon, team. I'm audible. Here, please. Yeah, so most of my questions have been answered, but I would like some clarity on the EBITDA margins that have expanded this quarter. So, we can see there is a 39.8% growth in EBITDA, and the margins have grown from 14% to 17.78%, which is a 376-bit incremental EBITDA. So, can you just help me, like, sort of bridge the YOY EBITDA expansion, like, how much of it is from cotton-yard spread? How much is the realization and how much is from the mix or from the cost efficiency that you've been talking about? So, can you just help me on that?

A lot of, I think a lot of number crunching will have to be, we'll go over there. I'll just give you a brief outline. On saving on the cost of power is, if you see, about 0.5% of our EBITDA, whatever, if you compare with last year to this year, is due to our power because we have done some savings on our existing systems also, as well as the solar capacity has also increased. Some capacity increased last year, some capacity increased this year. So, part of it is going from that side. Also, that is about 1.5% of our EBITDA. Further, there is an improvement in the yarn realization. We have been able to increase the prices more than our raw materials. So, if you see our gross margins, they have substantially improved from 34-35% and 35% levels to now to about 40% levels, 40% plus levels. So, the major increase is due to the increase in the yarn realizations only.

Thank you, and I would like to just have a follow-up on that. So, how much of this is coming through the cotton inventory that's been there, like the valuation gain on that? Is there anything from the cotton inventory?

We do not increase the valuation normally. So that is basically the inventory part because of substantial jump in the cotton prices. Definitely there was some inventory gain. But as a policy of the company, we do not carry extraordinary inventories and our inventories are normally balanced with our sales. If we have inventory, we also have the sales in hand going forward. So, a very small portion would have come in from the inventory gains. Majority of it has increases due to the realization increase only.

Understood. And is there any impact on the working capital cycle over the last quarter versus currently what it is?

There is no major change as such. The cycle has more or less remained similar as compared to the last quarters of the financial year.

Okay. Yeah. Thank you so much. Thank you.

The next question is from the line of Varun Gajaria from Boring AMC. Please go ahead.

Hi, sir. Thank you for taking my question. So I just wanted to understand, when we talk about yarn, capacity ramp-up, and fabric, what portion of the yarn will go towards intern consumption? What will be, like, intern consumption towards fabric?

If you are talking about the overall internal consumption, or are you just talking about that?

I am talking about the 11 of the cross capex that we are doing, right? From that, from yarn, how much portion will go to fabric, and what will be towards, you know, About

60% plus will go for the, our internal consumption, and the balance will be for the safe. 40% will be for the same.

Okay, so on fabric, on fabric front, next year, for the next year, at least we'll be able to do 200 crores from the fabric, right? Considering that it's towards the second half of the year. The facility ramp up is towards the second half of the year.

200 crores of what?

Incremental, incremental revenue. We could be able to do 200 crores of incremental revenue from there.

No, no, it will be much higher. It will be much higher. Our fabric revenue, if you see today, is totally about 700 crores plus for the last financial year. Going forward in FI 28, we are expecting that our revenues will go up to 1,200 crores from this.

Okay, so it will be about 500 nodes will be added.

Yeah, 500 nodes has to come from this.

Got it, got it. And in fabric, the acetone should be around 1.2 times? How much is it usually? Pardon? The acetone? What is the acetone like in fabric?

Asak, I mean, fabric is, if you see individually the fabric, then it is about 1.3, 1.4, but when it seems to be a composite unit, it is less than 1.

Okay. Okay. Thank you so much for taking the question and all the best.

Thank you.

Thank you. The next question is from the line of Narayan Danak, an individual investor. Please go ahead.

Thank you for putting me in the queue once again. Sir, I just wanted to understand the industry outlook. I understand from your saying that we are operating at optimum capacity and we don't have spare capacity, so that we are not able to save more such that the volumes came down. But when people have capacity? What are the avenues? What is the industry as an overall? Having tailwind or it is neutral outlook for next two to three years, you said that some of the capacities came off the market, sometimes closed. So how is it happening overall in terms of industry structure?

As far as industry structure is concerned, I think the outlook is very positive. Going forward with the kind of avenues which is opening for the Indian textile, we see very good opportunities going forward. Important thing is that we should be able to capitalize on them by selling the finished products. We are, at this point of time, in India, a very good producer of yarns and fabrics. Ultimately, most of the European countries as well as the U.S. and Japan, which are the bigger market for textiles in exports, are consuming the garments. So, a lot of our future growth will depend on how the Indian garment industry takes up and also the home textile for the finished fabric takes it up going forward. A lot of capacities in India is going to come up in these sectors to ramp up the overall thing. For them, they will also need a lot of industrial supplies, which is in the form of yarns and fabrics. And we are part of that particular chain. There, the demand and supplies, at this point of time, very finely balanced. In the last two years, we have seen some validation, some weaker players going out of business, some smaller capacities, which were unviable, also stopped. This gave a very good, I would say, a balancing factor, because of which we could see this kind of price increases at this point of time. Going forward, not much capacity is coming up in these segments, and we expect that the major investment which is going to happen will be in the field of garmenting and also in the field of the finished products. So, that is going to be the future for the country as such. Once, if we are able to capitalize on that, then the future looks very bright, not even for two, three years, but even for more. I love that.

Yes, sir. Thank you. Just a last follow-up. The way we expanded and increased the product lines vertically from time to time, are we thinking of going to garments someday?

Definitely. We have to, as I have highlighted here, that the future will be dependent on how our garmenting industry performs. Definitely, we have to look for that particular field as well. We are just waiting for the right opportunity and right conditions. We want to first capitalize on whatever capacities we have, and this is going to be one of the areas which we are looking very seriously.

Maybe what you just pointed out that printing and other segments, other products that you are creating, I think they are downstream to garments. Once they are successful, I think you might venture into garments. Is that fair to assume? Should be.

Once we are successful in ramping up our capacities for the fabric division and all the different kinds of products are available in our basket, we may have a look at that also and I'm sure that that helps.

Sure. Thank you, Dave.

Thank you. Before we take the next question, a reminder to all the participants, you may press the N1 to ask questions. The next question is from the line of Sandeep Gurr, an individual investor. Please go ahead.

Hi, this is Sandeep Gurr. Thank you for the opportunity. My questions are also on the new capacity which is coming up. One, can you give me the timeline for the new spinning capacity as well as weaving and the finished product, finished fabric capacity that is going to come over the next couple of quarters? Second, you know, you had been mentioning about 1,000 crores of turnover from the new capacity, but in the last six months, prices have gone up by about 20-odd percent. So are we looking at higher revenue from this new capacity that is coming up? And lastly, since you have an integrated fabric capacity, and on yarn you make, say, between 15% to 18%, depending on where the prices are, what would be the margin for the integrated fabric unit, if you can throw some light on that?

First of all, on your question, on your timeline, I think we'll start our weaving capacities in a couple of months' time. We should be starting the same. Processing capacities will take then further one, one and a half more month to start, which is around Diwali. And spinning capacity should be on stream by around December. So next four months, we should be most of four to five months time, most of our capacities should be up and running. If the utilization will increase slowly, so utilization levels will ramp up by 31st of March. For fabric, it may take slightly more time, especially the processing side, it may take more time as it is fashion-oriented, so normally it takes longer time to put the capacity at full level. Then, second question regarding the top line increase, you are very right, it can increase, but today, looking for the volatility, we are not factoring it in. Yes, the increase, since there is an 8 to 10% increase in the prices, this can also happen with the finished, with a new turnover also, this may go up also. Thirdly, you have asked about, I think, the third question was, can you repeat? Margin on the integrated circuit. Yes, marginal intake normally we do not calculate in that manner. We are just calculating the overall margin. Yes, I have already highlighted that since we are at this point of time, our top line consists about 20 to 21 percent of our fabric, which you should go up to about 30 percent going forward. And this should add about 100 to 150 bits to our margin. So our overall margins may increase by this level. So that is what, so incrementally that should be the situation.

Okay, that's very helpful. You mentioned that by first or second quarter of next financial year, you should be able to ramp up your new fabric capacity as well. So that's about 12 to 13 months from now. Beyond that, how are you looking at growing the business?

There are various opportunities available for us, so we keep on evaluating the same, and at this point of time, there is no firm business plan. If you go our track, you see in our track record, we have been consistently growing. If you see any block of three to five years, we have consistently had a CAGR of about more than 15%, and we hope to maintain the same. So, we will definitely let you know with our plans going forward what we are planning once they are solved up.

So the reason why I'm asking this question is because the market dynamics are changing. As you mentioned, the market is looking very positive given the FTAs that India has signed and, of course, given the strength that India has in the cotton value chain. Now, any new capacity will take at least 12 to 15 months. And given that and given the market opportunity, I wanted to understand your thought process on expansion.

Definitely the capacities and we can get into some new lines as well, as well as we have the opportunity to expand in our existing capacities also. But since we can horizontally increase, we can vertically increase, both the options are available with us, and we will evaluate and accordingly come up with a firm plan. As of now, for whatever CAPEX we have announced, we are not considering any new CAPEX in the next FI. FI 28, this is all done for FI till to FI 28. So anything which is going to come up, is going to come up only after FI 28. So let us, in the meantime, we are working out what is the best options available with us, and not hurry it up and see the markets which are opening, and then decide.

Thank you, sir. And my last question, sir, I think the new capacity is coming under the Rajasthan scheme, textile scheme, where a lot of incentives have been made available by the government. Given these incentives, what kind of incremental margin can be added to the new business in your opinion?

These incentives are available for our existing business also. It is not the last expansion, the last two expansions which we have undertaken. We also had these incentives available to us. A part of this incentive is capital subsidy, which does not form part of our revenues or other things. It is in the other income. So margin profile does not increase or change because of that particular fact. Yes, and there is interest subsidy. Again, it is a part of the data only. So, margin profiling does not change with this kind of incentives which we have. Yes, of course, net profit increases. So, it is not going to majorly change. We are already having those incentives available on our earlier budget as well.

Understood, sir. Thank you so much for answering my questions. Thank you.

Thank you. The next follow-up question is from the line of Abhishek Shah from Fortitude Font Management. Please go ahead.

Hi, sir. Just a quick follow-up on the previous participant. Just want to understand on the next leg of growth. I understand once we get to this, we'll be at around 45, 4,600 pros of turnover. You did mention that garmenting could be something that we could evaluate. So, just want your thoughts on a couple of things. Are we open to looking at the inorganic opportunities in garmenting, maybe at a later stage? That is one. And second is the garmenting versus home textiles, maybe just your views on each of them.

First of all, definitely, if the opportunity is interesting, we would be interested in organic as well. There's no issues with that. Plus, organic growth is also possible. Both ways we can look at this particular field. But we have to evaluate which areas, which particular segment of the industry we want to get into also in the garment. So that evaluation will take some time and then only can go forward with it. So at this point of time, we have not firmed up anything. It's just an, I would say, idea that this is an area which is growing, which has to grow if the country has to grow. So, that is one of my – you can say it as a rider that I am not saying that we are venturing into governmenting for sure.

So, secondly, as far as –

your second question was regarding –

Sir, home textiles, I mean, what I'm trying to understand is that from 400 crores to 4500 crores, we've made a journey. Now, of course, for us to, you know, keep maintaining a good amount of growth, maybe spinning, we might saturate at some level. So what next is what I was trying to understand? So could it be home textiles or…

Yeah, yeah, yeah. Home textiles versus garmenting, both are the key growth areas for Indian textiles. Home textile had a very rough phase for last one and a half, two years because of these regulatory changes in the U.S. Since we had a lot of dependence on the U.S. market from India. But our home textile, if you see the industry is very, very strong and having all the capabilities. With the Europe opening, a lot of opportunities are also coming in their hair as well. So, it will be a big opportunity in EU where the presence is smaller, could be where the home textile can grow very substantially. So, definitely both of these areas have very good opportunities available and can be evaluated at any given point of time. Both are equally good opportunities, I would say. Got it. Fair enough, sir. That's all for myself. Thank you.

Thank you. The next question is from the line of Pujit Agarwal, an individual investor. Please go ahead.

Hello. Yeah. Hi. Thank you so much for giving me this opportunity. I just wanted to understand what a blended power cost per unit would be. Once our solar capacity comes on stream, would it be possible to share that?

Exactly, I will not be able to share, but I can give you a ballpark number. This should be once we have our complete capacity up and running. We should be constituting about 60% of our overall requirements. Our blended cost would be in the range of about 5.50.

Got it, got it. Thank you so much. And considering the fact that states like Jammu and Kashmir and other states have really lucrative policies for spilling industry, Jammu and Kashmir or let's say MP for that matter as well, are we planning to diversify and increase our exposure in other states?

We keep on evaluating the various policies all around the country, and there are pluses and minuses in all the states as far as policy is concerned, and I don't see any major... The negative factor remaining in Rajasthan that we have, we have only location disadvantage of slightly higher logistic costs. Otherwise, we are able to bring in solar capacity to this level, which is not possible in many states in the country. And the one you are mentioning as well, where the solar capacity cannot come to this level. There are pluses and minuses, both ways. So, this needs to be, so it is not that we have to diversify or go into some other state compulsorily. We may go for other logical reasons, but not only for the incentives.

Got it, got it. Thank you so much. Thank you so much.

Thank you. The next question is from the line of Raina, an individual investor.

Please go ahead. Hello, everybody.

Yes, you are. Please.

Yeah. Yeah. Hi. Thank you for the opportunity. In the last call, if I'm not mistaken, you had mentioned that the margins, the guidance you had given for margins was about 16 to 20 percent. We are somewhere in the midpoint there. And to one of the earlier callers, you mentioned that it would improve from here or like remain steady. I was wondering for the long term, maybe not an FI 27, but 28, 29, do we see this closer to 20%? That's my first question. I have a few more questions. In terms of the value-added products, I wanted to understand the demand of these products. Third is you mentioned entering new markets. Other than UK and EU, the region, are there any other countries or like domestically, any other states that we've recently, you know, ventured into? And lastly, on the cotton inventory, could you tell us how many months of cotton inventory are we currently holding?

Like, your first question was regarding the margins. I have guided or have informed that the kind of product mix which our company has, we should be in the range of 16 to 20%. I still maintain the same, that we should be the kind of product profile as well as the kind of cost matrix we have, we should still remain in this range. It is always the endeavor of the management to go to the upper level of the band, which we have discussed, and that is a continuous effort, but cannot give any guidance from that part at this point of time that we will definitely reach that level. It is our endeavor. We always try to move in that direction. Your second question was regarding value addition. There are various value-added products which we are already having, and this is a continuous process. It is not in textiles. Once a value-added product, after three, four, five years, it becomes a commodity product. So it is not that once you have done a value-addition product, it will remain like this, the margins will remain like this. So, we have to continuously evolve and identify the new product which is going to happen. So, this is a continuous process which keeps on happening. So, we are always working on that direction that keeps our company in the leadership position. So, we continue to do that. Your third question was, I think, regarding the cotton inventory position. I'm sorry, we are not able to disclose about this. We normally do not disclose our inventory position. And as far as new markets and other areas or other states are concerned, it's a continuous process. We do not disclose our marketing strategies on the investor conference calls where we are heading and where we are heading. We can just give you a broad picture where we can tell you that these are the areas which may give us the growth to all the companies as well as ours.

Thank you. This is very helpful. Just one last question. On the knitted fabric production, it's slightly up sequentially, and I remember the last call you had mentioned that there were some headwinds from the U.S., and you were expecting utilization to be around, I think, 65-70%. Could you just give an update on how it is currently?

This is in the range of about 55 to 60% at this point of time. We have not yet reached the 65% level. The usual utilization pre this U.S. tariff regime used to be around 60% to 65%. We have not yet reached that level due to the various uncertainties which is still prevailing in the U.S. market. We have had a major presence of our net fabric business in the U.S., which has impacted because of this, a lot of changes which is happening very often in the tariff rates and others.

I'm Mr. Anderson. Thank you so much.

Thank you. Due to the time constant, we will take one last question. From the line of Uday Kumar from UK Capital, please go ahead.

Hello. Am I audible? Yes, you are. Sir, just one last question on the crop size. How was the crop size as the season is going to end, and the quality issues you have been mentioning in the earlier quarters, and how do you see the crop size and quality shaping for the next upcoming season?

Last year, I think we have closed at about... Three crore, 20 lakh bales. Nearly, we'll close it over. Normal pressing bales I am talking about, which is more or less equal to what we had in the previous year. This is about plus minus one. I think it was 326 or 327 lakh bales in the year 24-25. I think we'll close at around 318 to 320 lakh bales, around that level only. So there is a very minor blip. The coming year, the crop at this point, when the season starts, when the sowing season started, the crop was, the sowing was lagging behind. As of the last data, which I have received last week itself, the acreage is more or less same, about half a percent or about one percent less than what it was in last year, so not a major change. The major factor today would be how the rain span out during the next one month that will decide the size of the crop. But at this point of time, it is expected that it should remain at the similar levels as of last year. As far as the quality is concerned, the last year's cotton quality was not that good, and that was one of the reasons which has prompted most of the... Spinner from India to import the cotton from outside the country. Although the cotton parity international and domestic was more or less same, but still people imported more cotton because the quality of the cotton available was not as good. In this year, at this moment, quality looks good, but for the 26-27, quality looks good, but as I said, the rain in the next four weeks is going to decide how it shapes up.

Thank you, sir. Thank you for answering my question.

Thank you.

Ladies and gentlemen, that was the last question for the day. I want to hand the conference over to Mr. Avnish Chanda for closing comments. Over to you, sir.

Dinesh, sir, before taking your closing comment, just one quick comment on your margin. The first time after long we have hit mid of our given margin range, and since product mix is going to improve, power saving will be there. So can we say that our margin now will be in the guided range of 16 to 20 percent in foreseeable future?

Definitely, that is what... We are working on, and we definitely, with the kind of changes in the margin profile of the company, looking to the power savings, as well as the fabric business, increase in the fabric business, we should remain in this world, definitely.

Sure, sir. Thank you very much, Dinesh, sir, and management team, for giving us the opportunity to host this call. Sir, your closing comment?

Yes, definitely. I would like to thank everyone for taking out time for joining the call. I hope we have been able to address most of the queries. I would also thank Smith's team and Agnesi for hosting the call. For any other information or any other queries which we have not been able to answer, you can contact our finance team or our investor relations advisors. Thank you once again, and I hope to see you all in the next Earning Conference course. Thank you very much.

Thank you. On behalf of Nitin Spinas Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.