Vardhman Textiles Limited (VTL) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Vardaman Textiles Ltd. 4QFY26 Funnings Conference Call hosted by 361 Capital. As a reminder, all participant clients will be in the listen-only board and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your test-tone phone. I now hand the conference over to Ms. Arasna Jaya from 361 Capital. Thank you, and over to you, ma'am.

Thank you, Shailendra. Good evening, everyone. On behalf of 361 Capital, I welcome all participants and the management of Verduman Textiles to the 4Q FY26 Concord. From the management, we have Mr. Neeraj Jain, Joint Managing Director, Mr. Sushir Jham, Director Raw Materials, Mr. Rajiv Thapar, CFO, Mr. Mukesh Bansal, Head of Fabric Marketing, and Mr. Varun Malhotra, Head of Finance. Without further ado, I would like to hand over the call to the management for their opening remarks, post which we can open the floor for the Q&A session. Thank you, and over to you, sir.

Good evening, everyone. Thank you for joining the fourth quarter call. The results are available to you. This period, last six months have been, there are some good and some bad news. The good news is, one, the U.S. tariffs were over. As a result of that, India became more competitive. So, the kind of desperation which was there for our garment exporters of the home textile, that's over, and things have started moving back to the right direction. Also, this was a period where we started looking at new geopolitical concerns, starting with the Iran and US war, which created some of the disadvantages of some of the disruptions in the system, be it logistics, be it crew, which has an impact on the various businesses, including the textile business, which I will come to a little later. Also, this was a period where the cotton prices started going up internationally. In New York, the future from 61, 62, 63 cents went to as high as 82, 83 cents. And as a consequence of that, the Indian cotton also moved from 52, 53,000 rupees a candy to about 67, 68,000 rupees a candy. So, which means the cost of raw material increased in a big way in this period. There has also been improvement in the yarn prices, both on account of the roundtable push as well as the better demand also, which will come again a little later. And in between, the dollar rupee also moved, so which was also beneficial as most of the textile is based upon the exporting community, so some advantage came because of that also. So these have been the macro-level events. Now we can look at it one by one. Clearly, the US tariff has given an advantage. I understand the utilization of exporters who were directly exporting to USA from India, be it home textile or be it garment exporter, has come down to about 50 to 60 percent in this period. Also, they were giving heavy discounts to the US brands. To the expense, at least to compensate 25%, as the duty was 50%. So as a result of that, the margins were affected, and many products were losing money. As a result of that, they were shy of taking those orders, and as a result of, again, that there have been major issues and concerns for those exporting communities. Since we are the textile producer and we provide the material to them, and they were not doing good, so there was a pressure on the bad process also. So all the people who were supplying either yarn or fabric to the garment exporters, they were also under a difficult situation, both on account of the lower realization as well as the lower utilization. As soon as the U.S. tariffs were agreed, Slowly, the business started coming back, and I understand as of now, both home textile and the garment exported to the USA, they're running almost 90%, 100% capacity utilization, and as a result of that, from the country, the overall export is better, and also since their utilization is better, the overall demand of the yarn is also better. So, there's been a favorable factor in this period to start with. The second major event was the prizes of raw material. Now, if you look at the last two years, the New York future was continuously coming down. It came down to one of the historic lower levels of 62-63 cents. And I think this was the level where the farmers are not actually earning a lot internationally, so there was a fear. Whether the cotton crop will come down or will increase. So it was all a concerns and issues which were there in our minds. In between, there was a bad weather condition which was announced by USA in the Texas area where it is, as of now it is projected that 91% drought conditions are there and it is likely the overall crop size in USA will come down. Also, The Australian crop size got reduced from 55 million bales. It was expected to be about 41 million bales. The Indian crop also came down against the last year figure of about 31 and a half million bales. This year it is projected to be about 39 million bales only. And the Brazilian also was not increasing. There was a possibility either the same or small reduction in that also. As a result of that, The overall cotton stocks, which we saw increase in the closing stocks of cotton worldwide last 2-3 years, that got balanced, or rather, it was projected that the world will be reducing the closing stock of cotton, maybe to the extent of half million tons to one million tons, and the moment it was realized, this was one of the factors where the prices of cotton started going up in the international market. Two. As the tensions started in Iran and USA, the group prices started increasing, which has a direct impact on... On man-made fiber, especially polyester. And the polyester prices increased in this way, in a big way. And as the cost increased because of the crude, all the synthetic fiber prices started increasing. We look at acrylic fiber, the prices increased almost by about 80-85 rupees a kt in this period. Polyester fiber, prices increased by 25-30 rupees a kt. And all other cell music also started increasing. So somewhere, somewhere it looks like. The cotton fiber also got a sympathetic increase on account of that also, since the synthetic prices were increasing, somewhere I think that was the support given, which the cotton fiber got, and the prices were also standard to that extent. Since the demand in this period started improving, so there are two factors how the demand started improving. Pre-war, I am talking of starting in the month of October or so. The two factors on the spinning side which had happened in last some time. One, since the industry was now being well, so we understand as per the industry data estimate, the total of about 11.5 million spindles have stopped permanently into the system. As shared earlier also, our rated coverage in India was 53 million spindles. Normally, we add about 2.5 million spindles every year. And if you go by the normal years, our capacity this year should have been about 59-60 million spenders. Against that, last three years, there was hardly any expansion happening. But contrary to that, 11-12 million spenders got permanently stopped into the system. So practically, the working capacity today in India will not be more than 41-42 million spenders as per the industry estimate. There is no government data available, but this is the industry estimate. Which means there was some balancing of the spinning availability or the yarn availability came into the system, where the overall production came down. This was one factor where the surplus capacity got damaged. Two, we saw geopolitical tensions, issues, concerns in Bangladesh six months before. So, because of that, I think some of the brands or some of the orders got transferred to China also. So there was local Chinese demand, there was export Chinese demand, there were some orders shipping from Bangladesh to China. And China, if you look at the Chinese cotton total, they have about 80% of their consumption, they have their internal cotton and 20% they import from outside. And out of the 80%, which is their internal production, 80% of that comes from Xinjiang area. Which is banned by the USA as of now. So it looks like either the brand suggestion or the local Chinese manufacturer, they decided rather than buying the local yarn, they started to hoarding cotton yarn from India, from different countries including India. The prices were low, so they started buying big quantities of yarn from India, and suddenly Starting October, November, we found the yawn demand to be very good in the export market, and the prices started going up for the yawn also. India, we normally export about 100 million kg of yawn every month. It is the average for last 2, 3, 4 years, and out of that, China used to be about 7 or 8 million kg only. When we look at the last 4-5 months data, China is consistently buying about 30 million kg. So practically another 20 million kg demand came to India and Indian exports started reaching or touching almost about 120 million kg plus. So this became the yet another factor where the yarn prices started improving in a far better way, not only to compensate the cotton prices but definitely beyond that and suddenly swing margins started improving into the system. So, this demand of China continues even today also, and I think most of the spinners, they are sold for about two to three months in forward as of now, as far as the sport is concerned, and to that extent, they try to cover the cotton also. Two, since on the Indian side, the Indian crop size is not likely to be more than 29 million whales. And going by this increased activity of jobs, it is expected that our full year consumption can be in the range of about 33 million or 34 million bays. Suddenly, there was a realization that cotton is not available in India, and various industries started going to the government to allow the duty-free import of cotton, so that by the time we finished our existing cotton, there should not be a shortage of cotton into country. The Ministry of Textiles could understand and they took a total view of the dusting and they wrote it to the finance ministry and the agriculture ministry that there is likely to be a shortage of cotton going by the better activity and the better profitability of the spinning sector. So the cotton should be allowed beautifully coming to India so that there is no shortage of cotton in the month of August, September, October or so and so on. Information also spread it into the system that India's likely to open the cotton, whether full-time or maybe six months. I do not know what government design would be, whether they take a design or not, we are not sure, but definitely the market received, the Indians will buy to buy more cotton internationally, which also gave some strengthening to the Europe future in this period. The third factor was as the cotton started going up, I understand the hedge money or the speculative money also started coming to this trade. And today, the last two, three years where the speculators as per the data which is available in the system, they were negative or they were short on the view of future. They started going wrong on the view of future. So which means cotton, the 80-82 cents level got stabilized in this period. Now, this has a big advantage if New York future remains at 80.82 cents for the Indian market. India has a peculiar situation where our cotton prices were very high because of the minimum support price. Though CCI was acquiring cotton, because they were buying cotton, they were selling in the market. But at the same time, there was a loss which was coming to the CCI in this period. As soon as the cotton started going to about 80.82 cents New York future, the Indian cotton prices became aligned to the world market and as of now, even going by our industry, our cotton is not expensive compared to the world market, rather it is aligned to the long-term average which we used to look at it always in last 15-20 years, that we are New York future plus 5 to 8 cents cotton which is prevailing as of now. So, suddenly, all the spinners which were losing money on account of very high cotton prices, that factor also got aligned into the system last couple of months, and as a result of that, the spinning margins were normal, which earlier was not sufficient or not normal, because we were very, very expensive on the cotton. The New York future, whether it is sustained or not, I am not very sure, but definitely if you look at the other countries. So, India today, our cotton prices are 87, 88 cents, New York, Egypt with a 82, 83, 84 cents. The Brazilian cotton is available at 94, 95 cents, which is aligned to it. The Pakistani cotton, which is inferior to Indian cotton, is again aligned to 85-86 cents, so which is in line with the normal relativity. And also, the Chinese cotton today are in the range of about 100-304 cents, which normally they are always higher to India by about 15 cents or so, which is also today, as of now, aligning to that also. So today, there is hardly any disruption as far as the long term in the quarter prices have been in this relative to each occur. So, in this period, since the cotton to Indian spinner was available at a right price, yarn demand was okay, the prices started improving. Just to give you an idea, the lowest prices of yarn in the month of November-December were ranging about $2.65 to $2.70 for 30s combed. Today, the same price is ranging between $3.30 to $3.35. Same way, another advantage which came to India, that with the rupee moving from 90 to about 94, 95, the cotton cost in terms of US cents came down, and also the conversion was better available to the Indian textile producers, not only spinner, to everyone who is exporting. So the operation to some extent was viable as far as the spinning is concerned, which we saw after 2-3 years. Going forward with the next upstream products, The fabric margins were very good before the increase in the yarn prices, and I think now slowly, because the overall demand is good, even for the fabric also, the demand is not bad. So everyone is trying to increase the prices. There's always a resistance whenever the prices goes up to increase of the upstream products, and vice versa of that, whenever the yarn prices goes down, the garment or the fabric prices doesn't go down in the same fashion. So, the fabric also, they have increased the prices. So, but there's always a lack of two to three months, and I hope going by our position today, or most of the other fabric producers, both either knitting or the women, it looks like that we are trying to push this system, and we will be in a position to get that increase, hopefully, in the times to come. Same is the situation with the government where they are now trying to increase the prices. So one, they have got an advantage because of the dollar rupee. Also, they are trying to push with the brands to increase the prices, and it's always a part of negotiation we have to see, but definitely going by the total increase, it looks like the brands have started talking to increase the prices, few brands have started giving small increases, but I think it's a time where we have to look at maybe next one, two months, even more clarity comes on this season. So, second, on our capacities, in between, we have taken, Urdman has taken a very big capex plan. On the spinning side, it was more of a modernization. I am happy to share, almost 90% of the modernization got completed in this period, and whatever is left, I think this current financial year, next 6-8 months will complete, and as a result of that, we are much more strong on the... Software, both in terms of flexibility, quality, and also the cost factors, and I'm sure that advantage would come to us in the future times, both in terms of the cost as well as because of flexibility, the better products which we can produce and give it to the various customers. The fabric side, there were two major expansions we have taken. One was the performance fabric, which plant was commissioned during the last financial year. So I think normally it takes about six to nine months time for the orders to come in as it's a new venture for us. So I hope next six to nine months we should be in a position to utilize it fully or better utilization will happen. And we hope. That this will be a new line for us where the loss of expansion or the major expansion can come in as there are hardly any players for 100% synthetic into India. The second factor was the fourth line, which was of cotton and normal fabric production, which was also commissioned during the year. But as soon as we commissioned that line, there was this issue of U.S. storage. So practically, we couldn't utilize that capacity, but slowly we started building on that also. In terms of our volumes, we would be doing one of the highest today, but still we have unutilized capacity, which I expect maybe next six to nine months time, we should be in a position to complete that. In addition to that, there was a huge expenditure we wanted to, or we are doing it on, on green power, these biomass boilers, etc, etc. All those projects are likely to be commissioned in next one to two months, and after that, I think, June or July onwards, we should start getting advantage of that also, both in terms of green power, as well as some cost reduction possibility going by these raw material differentiators as of now. So these are... This is what is in this year the major changes which have happened. So now I think the remaining parts we can cover in the QA session. Thank you.

Thank you, sir. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the test on telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Redesign center map, we will wait for a moment while the question queue assembles. The first question is from the line of Saran Shrupta from Swan Investment. Please go ahead. Hello, sir. Am I already? Yes, you are.

Hi, thank you for the presentation and congratulations on your decent set of products. So I just had two queries regarding the industry and the business. So firstly, as you said earlier, Indian cotton prices used to trade at a premium to U.S. cotton, but right now it's trading at par. So how has this impacted the demand for yarn? I know you mentioned that the demand for the yarn is better, though it is also visible in the realization that if we see the realization for the yarn, are we able to pass it on to the customers?

So, the yarn traces are determined by the international cotton. Whatever, even if our cotton is expensive, we can't pass it on, because that's an Indian phenomenon only. So, one, in any case, the yarn price is whatever is a cotton internationally, that is determined by the international market, and even if our cotton is expensive, that has to be bond buyers, that's first point. Two, since the overall demand was better, so both on account of the demand as well as the increase in cotton prices, that could be passed on comfortably to the customer as of now.

Okay, okay, understood, sir. And on the demand side, sir, like, how is the demand shaping up with the U.S. has opened up, right, both Alex and...

Demand is, as of now, the demand of Jan is very good. If you look at most of the U.S. brands, the first quarter number, there's an increase of, the retail size increase from 4% to 10% of the various brands. The demand from viewers is really good, and as a result of that, I think the overall textile demand as of now seems to be pretty good.

Understood. Sir, if you move on to the public segment, like how is the industry car situation running up right now? Like, you said that there is a lag, but there is a lag, so how is the customer conversation shaping up?

Now, the customer is very clear they don't want to keep any increase, but I think since the normative price, they are increasing the intermediary product, they don't have a choice, but nobody would like to keep it, to take the losses. So, everyone is trying to push the prices, and some increases are happening selectively, it's not that the increases are not happening. But as I mentioned, there's always a lag, and whenever you want to do a new business, there's always a resistance, but within every week, every month, every order, there's some price increase which we are pushing to the customers.

Okay, sir. And on the spread side, sir, like, has the spread also improved from post-target and pre-target on the yarn segment?

The spread also improved.

Yes, spread definitely has improved, as I mentioned, because our spread was less because our cotton was very expensive. So since our cotton is going to be international market, our spread is definitely improving. So, if you look at the Indian prices today, the cost of Indian prices is about 87-88 cents. So, if I convert 87 cents. It comes to about $2.35, $0.38 or so. And with a price of $3.30 today, with this kind of a rupee, a $0.995 spread is available, which four months back was only about $0.60-$0.65.

Okay, so there is a 50% jump in this spread that we can see.

From the worst to the best, because this happens slowly, the impact will come, the times to come, but yes, 40-50% spread improvement is there as of now. Sir, is this sustainable?

Like, can we go ahead with this number or will there be some correction if the prices of the yarn comes down?

So, as I mentioned, there are two issues before beyond our control. One, New York future will come down or not, I'm not very sure. But if New York future remains at these levels, practically the Indian MSP issue or the art cotton price is going beyond a point, that issue can be taken here. But will your future go up or not? It's something I can't really really predict. On the demand side, as I mentioned, since the demand from China has been good in this period because they are full of orders from the various brands. Okay, so I think to that extent, it looks like it can be sustained for some period of time.

Mr. Sharan Shoptar, we request you to join you back in the case, sir. The next question is from Chirag Seedwa from Bajaj AMC. Please go ahead.

Sure, for the opportunity. My first question pertains to the industry dynamics. Sir, as you indicated, close to around 11.5 million spindles are off the market. So, sir, as per your experience, let's assume that these healthy spreads are sustained for a longer period of time. How much period would it take for these capacities to come back into the market? Or is it more structural in nature? People are right now not investing and it might take a couple of years to again come back to that 50-53 million spindle capacity.

You know, there are two things which have changed at this time. One, as per the industry estimates only, the total number of spindles in India was 53 million. At the same time, the number of hills were close to about 3,000. We understand the 11 million spindles which are off the system, almost 1,000 factories have gone shut down. So, which means the overall indirectly with some consolidation of the industry happened. So, all these small spinning capacity, 4,000, 6,000, 8,000 spenders, which in many cases was very, very difficult to manage in today's time. I think that's one segment which is going off to the system. Two. The industry has passed through a very, very difficult time, last two, three years. So, nobody is looking at a very big expansion to start immediately. I think everyone is looking at more clarity on the board policy of government and what happens, and my feeling is, in case these margins for this kind of current projects will change for next three to six months, then people will start looking at more projects to come into the system. We go over to the machinery manufacturers, which are one of the best. We have to measure what is happening on the industry side, especially on the expansion side, their utilizations have improved, but more from the modernization orders rather than the expansion order as of now. So people have started talking on the expansion side. As of now, there are not really very big projects which have started working on it, and I feel maybe next six months, six, nine months time, people will wait before they can start up or they start taking up the new projects too. Industry definition will be more consolidated. So those 4,000, 6,000, 8,000 plants will never come back to the system, and if it's better that the ordinance there comes back to the system, which are more constrained, sustainable in terms of their profitability extract, the overall structure, my personal view is, will keep improving only from here also.

Mr. Jack?

Okay, we will take the next question. The next question is from Pargoni Dutta from Mansurora Finances. Please go ahead.

Yeah, good evening, sir. I have two questions. The first one, are operating profits are not look as good as maybe people like Nitin's pillars or GSTL textiles? Is it because the fabric price increase will happen with a lag and hence Q1 numbers would show more of it?

Yeah, that's likely to happen.

Okay, and sir, and what was the export percentage for the quarter, export as a percentage of revenue for this quarter versus YOY same time last year?

Direct export company as a whole, there's always been the range of about 44-45% plus minus 1-2%.

Okay, so this is as a percentage of revenue, right? So this has been maintained? I mean, there has been no issue on... Okay. So, sir, then is it fair to say that we would do, like, since exports have not been impacted, so with the fabric doing better, we will do much better in Q1? Can we say that? Meaning, what I mean to say, in short, our performance in Q4, was it not as much as it could have been just because of the fabric part, which takes the lag effect?

I mean, going by the spread improvements, which is looking like as of now, I think most of the textiles will make you do far better in the first quarter.

Okay. And suppose, sir, and what with these higher cotton costs which have come in, even then it should be okay. As you said, the current cost and current yarn prices, the spreads are okay. So one can assume even Q2,3, assuming the current status remains, even Q2,3 could be better, assuming the current spreads remain. And that's true.

So, assuming the current prices of Yam, current dollar-rupee, and the current prices of cotton, it will be better compared to the last year. And anyone or if they have cotton available to them, it is at a cheaper price that the advantage would be, should be additional available to them. Okay.

And, sir, year-end, this time we are having a three-month inventory or a bit more for cotton?

We normally share our numbers, but our normal coverage, we keep 6-6-7 months at the year-end.

Okay, 6-8 months cotton you have at year-end.

We normally keep, year-to-year numbers are disclosed, but our general signal is due to October and March.

I was wondering if we have six months of cotton in March is going

to be in the month of October, most of this gets vanished by March, so most of the companies on March numbers will have six to seven months inventory, most of the companies.

Okay, I understand. Thank you.

The next question is from Prashant Rishi from Cascade Capital. Please go ahead.

Good evening, sir. I just wanted to expand on the last point that you made. Since bulk of our procurement has happened by the financial year end types, so what would be the average cost of cotton that you procured? Because that will be the base for the cotton for the rest of the financial year, you know, so I will not be I will not like to get the number that what costs are bought, but I can give you how the market has behaved in this period. If you look at today's price of CCI selling, it is 67,000 rupees a candy. And they increased this price almost by 5,000 rupees in last one week only. So practically the CCI price one month before was 57, 58,000 rupees. So eventually anyone who has a inventory available in the system will be definitely much lower than the today's price. Thank you very much. And sir, any, I have a very speculative question, but any viewpoint on how U.S. knew of future patterns would be considering the drought situation in the U.S.? Will it, will it sustain 3283 historically? So, as I mentioned, the drought is not the only reason. I mentioned earlier also, drought is one of the reasons. Also, Also, the crop in India and Australia was also lower. So, the demand supply got re-adjusted. For the first time after three years, there will be a reduction in the closing stock of cotton. So, all these factors. And then, the synthetic other prices increasing during the possibility of some consumption change or depletement from polyester to the cotton. All those factors have played into the store. So, it's not only the broad condition of USA, but the manufacturers could have played a role where suddenly people are more optimized or optimism, more optimism is there on the need of future. Okay. Understood. That's all my questions. Thank you.

Thank you. Thank you, sir. The next question is from Avnish Chandra from SNIPS. Please go ahead.

Congratulations management team on decent performance with gross margin expansion. My first question is related to this one day. If you look at the number where gross margin was higher quarter on quarter 300 basis points, but due to other expenses, the margin expansion was not reflective at a beta level. So, sir, could you just give a good highlight on what led to a great increase in other expenses and when it will get normalized if there is something one-off?

Okay. So, you know, there has been one item which has been charged to the revenue in this period and the other expenses. Whatever is the foreign exchange position we have taken, that gets mark to market on every month end. So, in this period, the rupee has moved very sharply. So whatever we have been selling, because our policy is whenever we book the export orders, most of the time we like to cover the rupee at the same day. Rupee moved suddenly to 94 rupees 80 pesos or so on 31st March. So whatever we have sold that was required to be normalized on the mark-to-market basis, and we provided a loss of about 57, 58 crore rupees in this quarter on that. But that advantage will come to us in the next quarter. Now, all our exports will be moving at 94 rupees a.p. or whatever the market rate going forward. So, that one-time hit, it has definitely impacted our market in the fourth quarter.

Okay, so it was roughly, the number was, the hit was exact number.

57-58 crores is provided as mark-to-market on the dollar.

Okay, so that will not be there going forward or there will be some reversal of that.

Depending upon what the dollar will be finished, I can't say tomorrow it goes to 97, we might have to provide it goes to 90, then that advantage comes in. So I can't speculate on that, but yes, whatever amount of reverse mark, we have provided for that.

Okay, sir. Sir, second question, you have already highlighted that at March end, everybody inventory is six to eight months. As a strategy, what would be the number at the September end, general number?

No, as one, I'm not saying everyone had an inventory of six to eight months. I said most of the good textile mills, since it's a seasonal product, they try to cover their cotton normally, six to eight months time, but the company to company, it could be very, very different. Two. Our new cotton will start somewhere in October only. So by September, we have to exhaust most of our stock and we have to start preparing for the buying once the new arrival comes in. Because we can't, the new arrival will come somewhere in the month of October. And if we have a 6 to 8 month, any factory has an inventory of 6 to 8 month, then they'll be finishing in this period. And then eventually they'll have to buy new cotton starting September, October, November.

Okay, fair enough. And sir, one quick question on the KPIC side. You talked about increasing your government capacity, which is still a very small part of our overall business. So are we thinking seriously to have major expansion in government segment and broaden our product profile the way you have mentioned in your case, really?

So, earlier we were not very sure if we really want to expand the garbage capacity or not, but definitely the businesses, whatever small capacity we have done, we have, we have done good. So, but our costs are very high because the cost is very high. So, the first step is, let's make it a little viable unit and in case we can make money on the expanded capacity also. Then we look at it differently. As of now, the only idea is it's a good business. We are dealing with some of the brands. We are supplying the material to them or we are giving them the final product. So just to serve to that, we have decided to expand this capacity so that we are more viable. Whether we'll do it in a full-fledged basis in the future or not, there's no decision as of now on that. So it's the first step, if we're looking at whether we can make the business viable picture, a fresh view has to be taken by the management. As of now, there's no decision that we'll be looking at it in a very, very big way, neither yes nor no. So we'll look at it or we'll evaluate it later.

Sure, sir. And, sir, what is our average realization per shirt, ballpark number? Okay, sir. Okay, sir. Thank you very much for answering my question. All the way, sir.

Sorry, sorry, sorry, sorry. It's seven and a half dollars.

Seven and a half dollars. Yeah. Okay, sir. Thank you. All the way.

Thank you, sir. The next question is from Yash Junjunwala as retail investor. Please go ahead.

Thank you for the opportunity. Sir, can you tell me what was the average spread earned by us in FY26?

I can't say what was the average spread, but the industry spread for the year average will not be more than $0.65.

$0.65. And the current market conditions, you were saying that the spread has increased to about $0.90.95. Correct. Okay, and my second question is that in the last two years, when cotton globally was cheaper than cotton in India, because of which, and our cotton yarn realization is linked to cotton globally, I'm sure the industry must have made representations to the ministries regarding this disadvantage that Indian spinners had. So, anything structural that has happened to address this gap, this disadvantage that Indian spinners had?

So, India are, most of the industry, they have been going to the government, and we have only one request made to them, that you allow the duty-free import of cotton in India. That will have a balancing effect automatically. But if CCA buys all the cotton or majority the cotton, then whatever is there, so there are two ways of looking at it. One, the CCA sells it at a normal basis so that there is no disadvantage to the industrialists. That could be one. Two, to have a right price discovery, you allow duty-free cotton to happen in India. So that automatically will happen in the times to come. So the industry issue is only and only. We are not talking of MSC. We are not talking of increasing or we are not talking of not supporting departments. The industry viewpoint is simple that the cotton should be allowed in India duty-free so that the price discovery happens automatically. And Textile Minister is totally aligned to them. They have already written a couple of times to the agriculture and to the finance. No reason has happened, but I am sure at least our ministry is aligned to our thoughts.

Okay, and my final question is on all the FTAs that have been signed with the U.S., with U.K., with EU. Let's say that the demand for all the textile industry from India improves, but because of this cost disadvantage, will we be able to compete in case cotton, again, like there is duty-free access, duty-free import is not allowed of cotton, And then again, you'll fall back into that same problem of high cotton prices.

You know, there are two things we are talking to the government. One, as the demand would increase on account of the FDA, definitely we will be requiring more technology. Be synthetic, be Scott. So, whatever cotton we have, it may not be sufficient for us to supply it in case the government exports or the home textile exports increase a big way from India. So, both the logic we have been giving, one is on the cost prices, that are these should be competitive. Second, on the availability of raw material, because any industry, if they are put in the capets, the raw material should be available at the international competitive price. So, these are the issues taken care of if they allow the duty-free cordon to India. So, let's see what happens.

Got it.

But one good thing in between what has happened is that the CCA pricing policy this year has been good, and they have been selling the cotton based upon whatever has been the long-term alignment of Indian cotton with the New York future. So to that extent, there was no disadvantage for most people in the last six months to nine months. That's why the industry is in a better condition. I should give that credit to CTI for that.

Okay. Understood. Understood. Thank you. Those are my questions.

Thank you, sir. The next question is from the line of Rishim Jan from VBD Asset Managers. Please go ahead.

Hi. Hi, Neeraji. Good afternoon. And thanks for giving us a very detailed update. So I have one question, mainly with respect to the announcement which government has made yesterday, mission for cotton productivity. But what I could see in that is that it is not talking about the introduction of the new variety of seeds. But it is largely talking about all the farm improvement practices and stuff like that, high density planting and all. Do you think that if India has to move from 450 kg per acre to, let's say, even to US level of 700 to 800 levels, will this be suffice or what is your thoughts around this?

Okay, aap mere personal views thode se different ho sakte hain than whatever we are thinking. So one is the, look at the overall lesser crop in India, one is the seed quality, second is the practices, and third is the land holding, because our land holdings are also very small in India, and any kind of automation may not be possible there also. Looking at the total crop in India, it's 15 million bears, and almost 6 million farms, farmers are producing that, so that means average per farmer, we have only 5 bears, whereas if you go to the U.S. or to Brazil or to Australia, the number is in thousands of bears, not less than that, or maybe in lakhs of bears. So, eventually, even if so, we are looking at seed, we are looking at productivity, we are looking at processes, but the holding is also playing an important role in terms of the overall optimization. So, going to a US level of 700 or the Brazilian level of 2000, I don't know, but definitely we can improve upon it from where we are, but again going to, I mean, today Brazil is at 2000. And they're still optimizing, they're still looking at more experimentation, they're still looking at what more can be done. And our cost will definitely be expensive going by our land holdings also. Having said that, we have to start somewhere. It's a good initiative which the government has taken. And I'm sure if we can take this 450 to even 550, we can increase our productivity by 20 percent, which will give early to the overall cost. As the MSP is dependent upon, the cost to the farmers plus 50% remuneration. So, if the cost comes down, definitely it will have an impact in the better realization and a better cost for the industry as well.

Understood, sir. Sir, the second question is given that now the expectation for next year overall for the industry is looking quite positive. And we have already done modernization CapEx largely in the last two, three years, which will bode well for us. But beyond this, are you looking for, because you need to plan from now to utilize that incremental cash generation. So from a CapEx perspective, are you planning anything?

So, two things. I think you're right, and not only us, most of the industry is waiting because the situation is a little better after a long time, so everyone is trying to look at whether it's sustainable or not. But in between, we have taken one open-end project. This was hold on, so we are likely to restart that. Also, we have taken a new piece of land in PM Mitra Park in Madhya Pradesh. That land is likely to be given to us as per the government office as of now by December or January this year. So once the land is available to us, we start working, we are already on the ground boards, we are putting up some ideas, and maybe next 2-3 months we will finalise those ideas also, and by that time we will look at the sustainability of the system also. And not only we, the military we are looking at, because this APA demand will start happening somewhere 15 months down the line. And India, if we have to prepare, within the next two to four months, we will have to start looking at what all is required in the country, and all the good players have to prepare themselves so that those capacities could be prepared. We are also waiting up ourselves, and I am sure next two-three months we will finalise our plans as well. On the spinning side, on the fabric side, in any case, it has a surplus capacity, so we'll like to utilize it next six months, and by the time we utilize it, we'll definitely, there are some ideas in our mind what to do next, in the next financial year or so.

Okay, but in the existing set of vertical zone, you like yarn, fabric, you have entered into a little bit of silver.

Yeah, as of now, we are restricting ourselves to this only, as of now. Okay, sir. Thank you. All the best.

Thank you. The next question is from Rudraksh Gupta from Naunith Investment Trust. Please go ahead.

Hi, very good afternoon and thanks again for the detailed explanation. So I have two questions. One related to what you explained that India should have had a spinning capacity of 58, 59 million versus operational today at 41, 42. Given the environment where spreads are expanding, the cotton prices have actually aligned of India and international, which actually solves a big problem. A potential FTA with Europe and UK, which is an incremental positive to play out, like you're suggesting, over 12 to 18 months. And incremental development in terms of, you know, if the import prices or the import duties are actually dealt with correctly by the government. This is the most promising commentary, if I may say so, that I've heard in a long time, along with a very wide gap of required capacity versus available capacity at play. Would this really mean that a very large expansion of capacities can come through over the next three, four years if the cycle sustains, the import duties are taken out, and the STAs actually start to bring in benefits? And I will bring in my second question after once I hear from you.

Okay, so I'd like to make one correction where all the data and facts you have given is correct except one. When I said the capacity should have been 60 million, it should have been going by the tradition or the conventional increase which happens every year. Whether we require 60 or not is a separate question. So, we were at 53. Normally, we were adding 2.5 million spenders every year. So, we should have reached 59, 60. Again, we are at 40 months. Two. The Indian spinning capacity, lots of spinning capacity was very, very unviable, inefficient, which is going out of the system. So if we look at the total demand in India today, 41, 42 million spenders are sufficient as of now for the country, and that's why our margins have become better. Now, going forward, as the expansion will happen by way of more FTAs and the demand coming in, we definitely require more spinning capacity. Whether it is 60 million or 45 or 50, that will depend upon how much new business we can generate with these FTAs. But definitely, there is a scope for this India, for the country. If with all these FTS coming in, the demand from the garmenting and home textile increases, definitely on the spinning side, we will be requiring a much bigger capacity as a country. And the good part is, all the smaller players have gone out of the system, so now the new expansion, hopefully, will come more into organized hands, which means there will be a better competition compared to the very, very unorganized competition.

That sustains profitability for the industry and helps Capex building as well. So the second question is more related to this situation where geopolitics is what you referred to where, you know, some countries who are also manufacturers and exporters have been having issues, and those issues, in my understanding, have worsened in the current West Asia war, if I may say so. Is that correct as an understanding, and is there a further weakening of other Asian competitors, which will give a sustained advantage to India? Is that a fair assumption or an understanding, or that is something where we can see a comeback from them very quickly?

You know, if we look at the spinning factor, the four countries are, or five countries are taking 90% share in the spinning. China, India, Pakistan, Bangladesh are captive from Vietnam. These are the five countries which are taking care of almost 80-85% of the herd spinning capacity. Let's look at it one by one. China, they started reducing their spinning capacity almost 15 years back. From a peak of 112 million spindles, they are today down to 84 million spindles only. So, they have announced some attacks in the Xinjiang area where there are lots of cotton. At the same time, the government of China this year has officially announced that we want to reduce the cotton in the Xinjiang area and we want to move more on the food articles as the country will be requiring more food grains for their consumption. So, which means the cotton will come there also. And if you look at last 15 years, as I mentioned, their peak capacity from 112 million spindles have come down to 84, which means they will not be expanding. Which means, we can, the interest could be that they will not be expanding in a big time. Second country is the Pakistan. Now, Pakistan, again, if you look at their own issues and concerns, be it, be it political, be it power availability, be it, or any other factor, I think there is a limitation, so they will also not be expanding their business in a big way to cater to the international demand. Third is the Vietnam. Vietnam already is a very small country, small population, and they have done fantastic job in the textile, starting from spinning to the garment team. As their per capita income has started moving up, there is more interest of the people going for the electronics and the service industry there also. So, with the small population, we don't feel that Vietnam will be increasing further on the spinning side. Rather, whatever is there, they can at best utilize that. Not likely that they will be expanding the spinning with us to that extent. Fourth is the Banya region. Bangladesh is very strong on the government team. After China, their number two players, almost 55 to 54, 55 billion dollars worth of exports they are doing on the government side. The spinning capacity today is about 14 to 15 million spindles, and the utilization is not more than 55, 60 percent, even as of now. Because they are very strong at the garmenting, some groups have gone back to back where they have put in a spinning capacity, but spinning is a very, very large step that is required, and they don't have cotton, they will have to import everything. So, eventually, it looks like the major spinning expansion may not happen in Bangladesh also. But on the garmenting side, they may continue to grow. As a result of that, they will be requiring good quality yarn as well as the fabric. They may require, so to that extent they will have to depend upon someone else, and the last Out of the V560 India, which is today the best place because we are number two spinning capacity in the world. Even with the 41-42 million spindles, we are the second largest in the world today in terms of technology, in terms of cotton availability, and in terms of the overall clusters in the geopolitical, I think they are definitely better placed. I can only hope that India should be in a position to take full advantage of this situation. The only caveat I have in mind is that the raw material availability at an international competitive project, which we have been talking to the government, and we are hopeful that the government, looking at the overall potential, will definitely understand and look at something like this.

Thank you, sir. That's very, very helpful once again.

Thank you. The next question is from Sudhir Kedia from ValueWise. Please go ahead.

Yes, sir. What do you think, sir? And thanks for the opportunity. Sir, you have outlined lots of reasons for the tailwinds for the industry. My question is from the next season perspective. Do you think that next season, quarter, also get impacted because of... So, the cotton, yeah, there are two factors. One is the physical cotton, second is the future cotton. So, whatever is the weather condition announced today, it's already captured in the future crisis. And going by the situation, if things go worse, it can increase. If things become better or the more rain happens, it can soften also. But cotton is one product where based upon the future events which are likely to happen, it's already capturing into the market very, very well. So, so from cotton prices perspective, you think that the

The question is already captured in the Horton prices from international perspective, right?

As of now, yes, but definitely there are, so one is the more news coming in, based upon that whatever solution can happen, second is the possibility for the hedge fund or the speculative fund, which is beyond control of any one of them.

Bye.

The second question is that while the spreads have increased almost by 40-50% from their lows, what has been the spread at the peak in the past, and do you think that the spreads can rise further from the current levels as you move ahead to the next season? Most of the times, if we look at last 20 years, except the year which could be very good or very good, that the $1 spread is always considered to be good for the spinning industry. So, with rupee depreciation, that will add extra to the earnings of the spinners for the industry. It should normally because our cotton is about 50-55% of the total finished product. So whatever with the rupee change is happening, the cotton gets aligned to U.S. cents very fast because anyone who is buying here will always look at the future and the landed cost in India based upon U.S. cents. But whatever is the value addition debt advantage comes in with the weaker rupee. And sir, my next question is, up to what time do you expect this spreads to sustain? Meaning, do you think this to sustain from one-two-quarter perspective or maybe four-five-quarter perspective? How should we look at that? Today, things are good. It's really, really difficult for me to say. I can tell you, most of the spinners from India in the export market have sold for 3 months as of now. No, my reason, the reason of my question was because some of these reasons which you highlighted, like on the spinning capacity, these are structural reasons and they are not seasonal. So from that perspective, from that perspective, definitely seems to be a better place. Yeah, from that perspective, it's a better place. But then the cotton prices or the demand structures or anything happening on the wall side, there are so many factors today that anything can pay anything. But yes, in Indian context, with the closure down of part of the capacity, it can be a better place. And also, we have a better situation going forward because of the FTS, and next month, 15 months, definitely, things are likely to be better only for India, Indian government, and the home tax system. So, to that extent, we are optimized, or we have an optimism to that extent as well.

Thank you, sir. Due to time constant, we will take this as a last question. I now hand the conference over to management for the closing comments.

So, I think we've tried to give, based upon our judgment and our thought process, we've tried to give whatever best knowledge we have, rest the events occurring across words are so fast, so many, that it's impossible for anyone to understand and know the impact of that on the overall industry. But definitely, as I mentioned, after 2-3 years, there seems to be some spike in the industry. Again, for the reason as I mentioned that our raw material became more competitive and with better demand and lesser capacity, we are definitely better balanced as of now. I hope the next year should be a better year for most of the textile companies, including Workman. And in the meantime, most of the industries have very optimism based upon all the FTAs which the government has done, which could be a major growth engine for our government and the home textile. And we bring the textile producer, textile material supplier to them. If they do well, definitely our company can also do well. So thank you very much for your confidence and your support all day. Let's hope things will be better in the next times to come.

Thank you, sir. On behalf of 361 Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your hands. Thank you.