Arvind Limited (ARVIND) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Arvind Limited Q1 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Satya Prakash Mishra. Thank you, and over to you, sir.

Good morning, everyone. A very warm welcome to Arvind Limited Earnings Call for the quarter ended June 2026. The financial results and investor presentations have been uploaded to our website, and I hope you have had enough time and opportunity to review them. Before we begin, let me introduce the leadership team. Joining me today, Mr. Puneet Lalbhai, the Vice Chairman, Mr. Jayesh Shah, Whole Time Director and Group CFO, Mr. Nigam Shah, Executive Director and CFO of Arvin Limited, Mr. Guthrie Singh Bhatia, CEO and President of Advanced Material Business, Mr. Karan Oja, CEO of Ogun's Business. The first quarter of the year was an action-packed one for the company. We began FY27 with encouraging momentum supported by robust demand across our key businesses. During the quarter, the business environment was influenced by evolving geo-economy developments, realignment of global trade flows, and elevated input cost across several raw material categories in our businesses. Notwithstanding these external headwinds, demand across all our core businesses remains very healthy, reflecting strong customer partnerships and sustained market engagement. Coming to the operational performance during the quarter, the quarter witnessed healthy volume momentum across our core textile businesses, supported by robust demand conditions, higher vertical integration, and higher investment in product innovation. Denim fabric volume reached 17.5 million meters, the highest level in 16 quarters, registering a growth of 34%. Oven fabric volume stood at 31.2 million meters, up 7% despite the seasonally weaker water, while the garmenting volume crossed 11 million pieces for the first time, recording a growth of 13%, supported by a healthy demand and higher verticalization. On the strategic front, we have strengthened our global footprint by establishing a physical presence in the UK through a design gallery-cum-marketing office in London, supported by a dedicated on-ground representative to enable deeper and more consistent customer engagement throughout the year. We have also partnered with a garmenting manufacturing unit in Bangladesh and Egypt to diversify our manufacturing base and enhance supply chain resilience. Together, these initiatives will deepen customer proximity, broaden our global capability, and further strengthen our international presence. Advanced materials business also delivered a strong quarter, with India business reporting a robust growth of 40%, supported by a broad-based growth across key segments. The human protective gear segment benefited from normalization in defense procurement activity in India and easing up of tariff-related pressure in U.S. to help increase demand from that geography, resulting in a strong growth during the quarter. The composite business continued its positive momentum, supported by increased demand from renewable energy and mobility and mass transport applications. The mobility segment in particular witnessed a strong traction driven by new customer additions. The industrial segment experienced relatively low growth during the quarter due to a higher capacity utilization. Higher capacity utilization is on account of some of our incoming CAPEX programs has not come on line yet. This is expected to go better in coming quarters. The underlying demand environment though remains very healthy and we continue to see encouraging opportunities across the segment. Overall, the advanced material business maintained a healthy growth trajectory supported by operating leverage and improved business mix and broad-based demand across key markets. Now, coming to the financial performance for the quarter. Consolidated revenue stood at 2,501 crore with EBITDA of 258 crore, representing a growth of 25% and 39% respectively. Excluding the contribution from Dalko GFT, revenue and EBITDA stood at 2,344 crore and 234 crore respectively, reflecting a very healthy growth of 17% and 26%. EBITDA margin during this quarter improved by 104 basis points to reach 10.3%, supported by operating leverage, an improved business mix, and continued execution discipline. At the segment level, the textile division reported a revenue of 1,735 crore, with a growth of 13%, with an EBITDA of 139 crore. The Garmenting Division reported a revenue of 497 crores supported by 13% volume growth and revenue growth was moderated by higher contribution from value segment products during the quarter. The Advanced Material Business reported its highest ever quarterly revenue and EBITDA of 650 crores and 97 crores respectively, maintaining an EBITDA margin of 15%. The India business delivered revenue of 493 crores and EBITDA of 74 crores, reflecting robust growth across key segments. With respect to Dalko GST, the business contributed revenue of 157 crores and EBITDA of 24 crores during the quarter, representing approximately 1.8 months of operation post-acquisition. EBITDA margin stood at 15.1%, impacted by elevated raw material costs during the period. Full quarter, Talco GST delivered a revenue of 244 crores and EBITDA of 40 crores, translating into an EBITDA margin of 16.3%. Profit after tax for the company stood at 80 crores, registering growth of 47% during In terms of capital allocation and balance sheet, we continue to maintain a disciplined and prudent approach over the past several years. The company has materially transcended balance sheets through focused capital allocation, a rationalized debt profile, and efficient capital structure, and consistency cash flow generation. During the quarter, we have invested roughly about 98 crores across various growth-oriented capital expenditure programs, in line with our long-term strategic priorities and future growth plans. Very happy to inform you all that we have successfully completed our median QIP of 500 crore, which witnessed strong investor interest and was oversubscribed multiple times. The issue saw participation from several marketing institutional investors, further strengthening company's shareholder base, and reflecting confidence in our long-term strategy and value creation potential. The proceeds from the QIP are being primarily utilized towards debt reduction and balance sheet strengthening, which will further enhance financial flexibility and support future growth initiatives. Looking ahead, the implementation of UK FTA and the gradual improvement in domestic demand are expected to create incremental growth opportunities for the textile sector. Demand remains resilient across both textile as well as advanced materials supported by healthy order book and sustained customer engagement despite the prevailing uncertainties in the operating environment. Within advanced material, the defense allied segments continue to gain traction and we maintain focus on expanding our presence in high-value customer programs and differentiated applications. At the same time, elevated raw material cost and supply-side challenges continue to exert pressure on profitability. We are actively pursuing mitigation initiatives including strategic sourcing and customer-led pricing intervention to maintain margin resilience. To conclude, we are pleased with a strong start to FY27, marked by broad-based growth across our businesses, Continued momentum in advanced material and successful acquisition of Dalko GFT, which further strengthens our technical textile platform. While the operating environment remains very dynamic, our diversified portfolio, strong customer relationship, and disciplined execution positions are well to capitalize on growth opportunities and create long-term value for stakeholders. I'll now hand over the call to Mr. Kunit Lalbhai to give his opening remarks.

So, good morning, everyone. It's a pleasure to be here and interact with all of you. Satya has mentioned all the events that happened in quarter one in great detail, so I won't dwell on the same. But I'd like to say that this quarter from a qualitative lens was extremely challenging and action-packed at the same time. And I think the team has done fantastically well to deliver, you know, the kind of volumes that we have delivered, both on the fabric side and the advanced material side, we have historic high levels of production, which took some very, very strong execution. Only for that reason are we in such a great position, because if you look at the war impact this time, it has been quite significant, and almost 100 crores worth of inflation in input cost happened in a very short period of time. So, about 100 crores in H1 would be the overall impact in just cotton and yarn. And on top of that, there would be impact of, you know, all the petrochemical related chemical costs. Therefore, it was essential to do a high VAP volume to keep our absolute EBITDAs very close to our budgeted range. So, I think the teams have done a fantastic job. Of course, we are extremely excited with Dalco GFT becoming a part of the advanced materials business. And the more we learn about that business, the more we are excited about its future. It's a lot stronger with that U.S. base now within the business. Now for the general commentary as of now, I'd like to throw questions.

We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Aradna Jain with 361 capital. Please go ahead.

Hi, thank you for the opportunity and congratulations on the good set of members. First, I wanted to understand on the textile side, the textile revenue grew 21%, but we saw margins declining to around 7.5%. Could you help us understand the margin bridge, why there was a decline in the margins, and quantify how much was due to the higher raw material costs versus the product mix or, say, other factors? And more importantly, how should we think about the textile margin over the next two to three quarters as the raw material pass-through catches up? That's my first question.

So, I think the first thing to understand is Q1 is always a lower margin quarter. So, compared to Q4, the margin will always look. So, last year, we were at an 8.4% EBITDA margin. This year, it's an 8% EBITDA margin across the textile vertical. It could have been close to double digits, but for the sort of, you know, escalations that happened within a short period of time. You see, our order books fill up 3-4 months in advance of the business, and, you know, the pricing gets fixed. It is then very difficult to sort of change that, and we wouldn't want to let market share go down, especially when we are on the growth trajectory. So, we traded growth for margin, you could say. And I think this is a temporary phenomenon. As the year progresses, we have passed on and are in the process of passing on some of the price escalations. That said, of course, it is an uncertain environment and there is still, you know, the world is still not conflict-free and, you know, till that happens, you know, absolute certainty on the future is very difficult to predict. But all else being equal, as we progress towards the future, we should be able to improve these margins as, you know, the market catches up to the raw material escalation, our product prices catch up to the escalation, and things, you know, normalize. So I would say we are We are about one, one and a half basis points off because of the overall war impact. And there is nothing more than that. The order book is extremely healthy. The demand scenario is holding up quite well. The teams have executed excellently. So I wouldn't read too much negativity into, you know, the set of textile margins that you see.

And, sir, in the garmenting side, our margins have been in the high single digits and we are aspiring to move towards low double digits. By when can we expect that margins to move towards the low double digits number?

I think that will still be a journey of say 18 to 24 months because we are constantly adding capacity at the same time. So while the older plants are scaling nicely and some of the plants are already at double digit margins, whereas there are more plants moving from low single digit to high single digits, there will be plants that are coming in that will be at negative margins also. So, because we are expanding rapidly, the margins will take, say, 18 to 24 months to...

Understood. My second question is on the denim side. Your denim volumes have significantly increased this quarter. How much of this reflects an improvement in the underlying industry demand versus how much could be because of, say, the market share gains or verticalization that we are doing? And can we expect this current run rate to sustain over the next couple of quarters? And where exactly is our capacity utilization in Denim?

So in Denim, we are also, you know, sort of creating some new capacity through an asset-like model where we are tying up with, you know, sort of non-functional assets that are available in the market and running them ourselves. So, in fact, demand we see robust going forward. I think the current trajectory looks quite positive. At the end of the year, we don't see any pressure on volumes. So, the opportunity is to utilize, so our asset base is already at 100%, and we are also, you know, working on increasing our sort of leased assets, where we will take over management of a few assets and run them as if they are our own assets. So, currently, not much of that has happened, but in the future, we are also exploring those options as well. So, it's a good demand cycle, and we are trying our best to take advantage of it. And so far, we are proving to be reasonably successful.

Understood. Just last question from my side. On the AML India business, two things that, you know, catch my eye was one was your human protection growth, and the second was composite growth. If you could just help us understand what, you know, led to that kind of growth, while I understand that there was some defense orders that normalized and easing of U.S. tariff pressures also helped us to get to that 39% kind of growth that we delivered in human protection. But if you could help us understand how is the order book pipeline looking like and what sort of growth should we expect for the rest of the year? And similarly for composites also, how much of the 76% growth came in because of the 4Q shipment spillover that happened? And how much is, you know, a sustainable rate that we can expect in the composite side as well? Yeah, that's it.

So, hi. Good morning, Mrs. Gurpreet. So, the way to look at it is, last year, our quarter one, amidst all the tariff uncertainty, was the softest quarter in the last five quarters. If you normalize that softness, we are in the ballpark 25-30% kind of a growth. Coming to your specific question on the accelerated higher growth on human protection and composites, last year, for six months, we had very high softness because of the external environment on defense in India, which started to normalize in quarter three onwards. We started investing efforts to broad base our customer base in defense and paramilitary during that period last year, and we are seeing that benefit accruing to us as commercial and business benefit in this quarter. So our customer base across all defense services and paramilitary services has expanded, and we are on that path. Some of the investments we made on defense to upgrade our portfolio to superior products are also going to see commercial realization in the coming quarters. Third area on defense as a focus area is global defense. We started to look at that business quite seriously, and that would be another development over the next 12-18 months. Composites again had a very soft last year, quarter one. Due to the uncertainty in Middle East, because Middle East is one of our focus markets for infrastructure development, we had delayed execution of some quarter four orders. I would say that number is about 10% of the revenue for the quarter, which got implemented in quarter one. We still have some pending orders to execute, which we are hoping to execute in Overall, normalized, I would say, on revenue, high teens to 20 percent, thereabouts, for the full full year is what we will look like. However, on margins, beta margins, we will deliver a growth higher than the 18-20 percent on revenue because of all the operational efficiency programs that we've implemented over the last three, four quarters.

So, in summary, growth rate is a result of hard work. It is, you know, sort of very high in quarter one because the comparative quarter last year was lower than normal. And I think the way we should think about this performance is that things are going in the right direction. And we are on track to achieving that 18 to 20% medium term sort of growth target that we've been constantly guiding towards. So we can say that, you know, our efforts are being dividend in that direction.

Understood. Just one last bookkeeping question, if I may. Your net debt has increased this quarter to around 2100 crores following the acquisition. After applying the 500 crores of QIP proceeds towards your, a part of it towards your debt reduction, where should we expect the net debt to settle for the full year? Yeah, if you could just highlight on that.

So it will settle exactly 500 crores below where it is today. But the way to think about it is that, you know, the 450 odd crores that we've taken in the US will get serviced by the US entity. The India business will come very close to, you know, the debt levels before the answers out the additional debt that we've taken on the India entity to finance

I'll join back the queue for follow-ups. Thank you so much.

Participants in the interest of time and fairness to others, please restrict yourselves to two questions. For any more questions, you may rejoin the queue. The next question comes from the line of Soham Samanta with Motilal Oswald Financial Services. Please go ahead.

Yeah, thanks for the opportunity. Sir, just wanted to check our garmenting target because we are expecting 15% growth in FI27, but obviously this quarter we couldn't do that. So I just wanted to check on a full year numbered how we are looking the garmenting growth for FI27.

We should come close to that. If not 15, it will be in the, was a quarter of look at the early journey. So you are asking the right question and we should be close to the number that where we want to be.

One follow-up in this garmenting, so when we are talking this 7.5% margin this quarter, so assuming the raw material is where is it right now, so if we take the raw material right now and if we take next three quarters, so is it fair to assume that high single digit or maybe low double digit margin will exit by Q4?

I think it will take one more year to So, I think that's the heavy lifting that needs to be done in governmenting, and I'm happy to report that, you know, the trend line is positive. We are doing better than last year in terms of margin as well, max, slightly, but it is better than last year. And our plans are going according to how we have budgeted internally.

And the last question on AMD business, so when you're expecting 18 to 20% kind of growth, so this is the India business, I'm assuming. So what is the Dalgo number we're looking, and overall margin, if I compare AMD plus Dalgo, what are the margin we're looking in the range of 15 to 17? That is the number we're looking for ever 27?

We will have our business to integrate the business.

And, sir, combined margin for this AMD plus Calco?

It will come down slightly because of the petrochemical linked raw material, similar problem as our textile business. So, it should come back to that 16 plus percent, you know, as the hard pricing to our customers catch up to, you know, the levels required. But right now, you know, we had rapid raw material increase and, you know, already fixed pricing. So that normally takes a couple of quarters to catch up once the escalation is through and the new cycle of orders come in at the higher price.

Okay. Thank you. Thank you so much.

The next question comes from the line of Surya Nayak with Sunidi Securities. Please go ahead.

Yeah, thank you for your opportunity and congrats for the best group numbers. So, Puritvay, just a couple of questions. One is that, as we discussed last time, there were some lines to be added in the balko site. So, if you can give some status as to what set of lines we are currently operating and what set of categories lined up in the balko site this year.

Sorry to interrupt, Surya. Your voice is not audible. Are you using a hands-free device? A little better.

Go ahead. Thank you. Thank you, thank you. So, my question was, you know, we discussed last time that we are actually about to increase the lines in the DALCO, and if you can quantify the kind of, you know, we are actually going to implement in the DALCO side, and secondly, what is the utilization level there at the moment, and what level, because my understanding is, you know, with the current running rate, We will be increasing the person to what level going forward. You just indicated that now we have increasing the line from below.

I would request you to change your location.

The question is that, you know, what is the capacity at Daleko and we were planning to increase that capacity and how that capacity increase is going to happen. We are already functioning at high levels. There might be some capacity that can come on stream through good work Work on efficiency improvement, which the team is doing. But there are two things that are happening. We have already invested in the upgradation of two of our seven lines. So those capexes should come on stream within the next three to four months. That will give us a little bit of capacity starting towards quarter four. And then the bigger decision The decision is under evaluation right now, and we are positively viewing it, but that decision will be taken in the next month or two. That will add significant capacity. So, that will increase the capacity by almost 7-8%.

Overall, what kind of peak revenue we can expect from a size 20 thing?

You know, about between 100 and 110 million somewhere we should land.

Oh, good. Okay. And regarding the date repayment, because we can pay within three years, three to four years, as last time said, so are we on track to reduce the date of the bulk over there, or is we doing?

We will repay the debt in five years, and there is enough cash flow to, you know, service interest, repay debt in five years, and do the capacities that we want to do.

The next question comes from the line of Prerna Junjunwala from LRA Securities. Please go ahead.

Thank you for the opportunity, and congratulations on strong EMD performance. So, I had a question on this partnership model that you are pursuing in the commenting business. How should we look at it in terms of capacity addition, balance sheet investment, and revenue and margin opportunity that it would unfold for us?

So, it will require some investment, but it will require only a fraction of what it would require for a whole plant, because we will be taking, you know, we will be making only strategic investments to improve the, you know, functioning of those plants. Right now, it is quite early days. So, you can say that, you know, it is an exciting opportunity, but But I think this year we will sort of go conservative to ensure that we are able to execute before we try and sort of scale it up to a very large level. It is important to establish it well. And I think the important thing is that our first efforts have been quite successful. So, I am, you know, optimistic about this becoming, you know, a model that we will use, and sometimes we may also strategically invest something in these factories. But it will be a fraction of the overall balance sheet impact that, you know, a new plant would have. This gives us capacity from multiple regions of the world, which is globally optimized. Each country has its strengths and we would like to leverage that. Plus, our customers appreciate that we don't have all our eggs in one basket. So, this ticks many boxes. However, the important thing is to do it right so that we don't make mistakes and all the benefits that we think we will get through this actually accrue and are not spoiled by execution-related failures. So, we are going in a conservative yet optimistic way on this model, and I think more and more clarity will emerge on exactly what it will be, but it can easily, in my mind, be 20% of the overall business in the medium term. I don't want to give a fixed timeline by when it will reach But, you know, that's the kind of scale we are thinking, maybe 30 if we are very successful, update on how we are doing here.

Actually, I was not looking at what kind of scale you will be achieving through this model. I just wanted to understand how should we look at it against the investment that you are doing in your own capacity. So, what kind of return ratios you can make, and what kind of margin should we look at it, because it will not be similar to what you make in your own factory, because it is shared.

Our factories, but our factories, it is coming at marginal fixed costs, right? So, there is much smaller fixed costs associated. So, the return metrics will be very high on this. So, it will be high, maybe margin will be 2-3 percentage points lower because two people's margins have to be re-risking and as I mentioned, its own product signature which we can also benefit from. So, overall return metrics, it will actually improve from a return on capital employed perspective. EBITDA margin will be slightly lower.

Question on denim, you are already at 17.5 million meters, and you mentioned you are running at almost full utilization, so is it ideal to assume that you are running at 70, your capacity is improved to meters currently from 60 million earlier, or is there some

deep bottlenecking, you want to give a market and, you know, demand scenario and, and orders being now and in the medium term.

Let me talk a little bit about the denim business first. As we all see, the denim business is at its all-time high in last so many quarters. The main reason for that is, first of all, geographical expansion that we have done. Verticalization that has played in into the denim space, that has been extremely important. Third is we going into multiple geographies through differential routes, giving customers the country of origin that they want. So we are going more closer to the customers. That gives them flexibility. That gives us flexibility of offering different kind of products from different geographies. Third is we are able to capitalize on the scale of the region. Fourth is that we have started to open up design hubs globally, which connects us better to the customer, and in real time, we are able to service the customers and close our development process, which is extremely important. So these design hubs coming up in multiple geographies, we are strengthening our design hub in the US, we have added in UK. We are also looking at one or two locations in the Europe, looking at the EU FTA coming in place. So, you put all of these together, your verticalization happening, your product developments happening. We have gotten Japanese consultants and designers on board, so the product has become a little premium with our design hubs coming in, verticalization strengthening. I think all of this gives us very positive momentum for the next couple of quarters, I would say, till the year-end. We have very good visibility on our denim business. Likewise, in the moments business also, this has been, this is typically a lower quarter, quarter 1. But if you see, we have clocked the highest ever numbers in quarter 1, which are typically seen in H2. So the volume has been extremely good. We have been taken a little bit on the lower side because of the sudden spike in raw materials, but that also is pretty much the strategy in place, how we'll be back to our numbers in the medium term, but it will take some long-term time to get back to where we were. But yes, we see a very strong order pipeline, so that gives us sufficient, enough confidence.

This is helpful. Just to follow up on this, I wanted to understand what is the role of Bangladesh over here, because Bangladesh is also facing issues with respect to power and other issues. Is that also helping our denim business procurement as their capacities run below normal utilization level? And what is our export share to Bangladesh currently?

In denim, it is quite high. So maybe 50% of our denim goes to Bangladesh. So, and Bangladesh is doing quite well, and, you know, we've entered a reasonably stable period, and, you know, our virtual sort of partnerships are also, one of them is in Bangladesh, and the advantage that Bangladesh has is the governmenting capacity and the ability to scale that up a lot faster because of readily available labor. So, that is the strength of Bangladesh, and we have been able to use that to our advantage. So, Bangladesh will be important now and in the future. We want to de-risk Bangladesh because their sourcing footprint is very high in Bangladesh. But because we will be multi-country, brands are willing to, you know, give us a higher ranking in terms of priority of what business they want to do. through Bangladesh because we give them Bangladesh plus India plus maybe Egypt. So having that three-country kind of go-to-market is, you know, it puts you out of the quota system in a way because it helps the customer reduce risk.

Thank you. I'll come back to the question queue for follow-up. Thanks so much for the detailed answer.

The next question comes from the line of Rajat Badeva with Kizuna Wealth. Please go ahead.

Yeah, hi sir. Thanks for the opportunity. The first question on the demand side of the AML business in India versus in Dalco, and what are the management thought profits regarding to increase the market share of the Dalco, even that currently it's 4%. So, how are our thought profits going on the Dalco side, and what's the demand outlook in the US in mobility and in the filtration business?

The line wasn't very clear, but if I paraphrase your question, you are asking about demand in India and US, especially on Dalco, which is, you know, the answer to the Dalco question first. Our plan is to increase our, to maintain our leadership in automotive. You know, the new capacity that is coming is, needs to come through, you know, the geotextile business, where, you know, there is a lot of potential growth that will happen in the U.S. market because the infrastructure bill has been signed and there is good amount of development happening on, you know, roads and products. We have to maintain leadership in auto, and we have to start the process of taking our filtration business, which is India-centric today, and use the Dalco base to sort of increase that business in the US. So these would be the strategic priorities. And India demand As Iran remains robust for advanced materials, India continues to develop as a strong. Every quarter, you know, the legislation is getting stronger, the government procurement is increasing, and there will come a time when India will be a very large market for these products. You know, we are well positioned to take advantage of that because we already have a strong base across two continents.

And for the second question, is that what was our export mix from the Europe?

Sports to Europe is quite small today. It will be at that 8 to 10 percent margin across the group, both in textile. In garmenting, it is slightly higher, but our fabric would be about 8, 9 percent, and advanced materials also, we are at that 8, 9, 10 percent range, Which the FCA will help a lot, I think, going forward, but it will take maybe 18 to 20 months to actually convert the initial promising conversations to any significant business. But as you mentioned, Karan say we are investing, we started the UK studio on the textile business side. We have started, we are looking at one or two other locations in Europe to open design We have a larger sales and marketing presence. For our human protection business in advanced materials, we have, you know, sort of done some hiring to have a local presence in the UK, and we are currently looking at Europe there also. So, we are strengthening our ways in Europe so that it can become a larger percentage of our business.

So, sir, it is bad to assume that our realization in the garment business, so it will be in a moderate range, because in Europe, the realization is quite lower as compared to the U.S.

No, I don't think that is true. I think it depends more on customers and regions. So, I don't think there will be any change in realization. And the way to think about our garmenting business is that, you know, it will be a medium-teens growth and we have to get to double-digit EBITDA. Whether it's coming from the US or Europe, there will not be much difference in realization and margin. But we want Europe to be an overall larger percentage of our portfolio because it is an important region into which we are currently underpenetrated.

Okay, sir. Great. Thank you very much, sir. And best wishes for the portfolio.

The next question comes from the line of Vishal Mehta with IIFL Capital. Please go ahead.

Thank you for the opportunity and congratulations on a strong set. My questions are more on the AMD side of business. You know, if you could give, so while we get from the presentation that the end-use applications of defense and renewables in composites and, you know, mobility have done well. But if you could give more color on what sort of products, you know, are we in each of these segments and, you know, what sort of products are having such high demand that we are serving? And second part to this question would be, you know, out of the three sub-segments, you know, probably industrial seem to be one where, you know, we probably don't have exposure to these, you know, high-growing end-use applications as such. So, would it be fair to assume that industrials probably would grow at a stable growth rate of 8% to 10% and, you know, the other two sub-segments, HP and composites, which have the tailwinds of defense, mobility, and renewables, continue the higher growth trajectory? Yeah.

Thanks for the question. I wouldn't agree with that statement. The lower growth in industrial is purely a function of, you know, challenges on getting the capex off the ground in quarter one. We had shipping delays, we had execution delays, we had, you know, even flooding. So, you know, we are one quarter late in our capacity expansion in industrial. And, We have not invested in the last year significantly in industrial. The investments are going in this year. So this year you may be right that the growth will be slightly lower compared to HP and composites. But I don't see any challenge to the medium-term growth and why industrial cannot grow at 20%. As I have consistently mentioned that we are in an execution constrained environment rather than a market constrained environment. So, there are enough opportunities to grow in industrial and in the medium term it will catch up as our capexes are catching up. So, referring to your question around composite business and which are the, you know, segments to which our products go, you kind of answered it yourself. You know, the mobility, renewable energy, infrastructure, those would be the three big areas. We have our bultrusion business that makes profiles for building and construction industry and infrastructure industry. We have our role-good reinforcement business which mainly goes to where renewable energy is a big end-user market, among other industrial uses as well. And then we have the molding business for mobility. Those would be the current volume drivers. The future, of course, is aerospace defense and a carbon-led future, which, of course, is in its very nascent stages and it may take some years before it becomes a large part of the business, but we are putting in efforts to scale that business up. So, that's where we are in terms of products and where our composite products go. As far as industrial is concerned, it's a filtration business mainly and that is a very large market and a very profitable market. So, on a run rate basis, our growth will be okay in the medium term and we have ample opportunity and we are investing significantly. So, this year, there is a disproportionate allocation of interest, investment towards industrial. Also, one other thing happened, there is, you know, some common infrastructure between industrial and human protection, especially our yarn creation capacities. A lot of them were diverted towards the human protection business because there was a sudden spike in orders there. So, to that extent, you know, we couldn't support the industrial business So, many reasons why the industrial growth is not there, but none of them are market-driven. It is more our internal capacity-driven reason, and we are correcting that quickly, so growth rate will catch up.

And if I may just add on the industrial, with the stringening of emission norms, we are well We are well prepared with the portfolio to lead and deliver solutions for high-temperature solutions and reduce emissions for the next three, four years. That's the portfolio we've been working on over the last 12 months, which will get our portfolio from mid-tier to top-tier products. India strengthening its norms is another great opportunity that the team has been working on to expand. And the last is the verticalization from felt to bags. We are enhancing our end-user complete solution for installation, especially in the end-end context. So, very bullish on both profitability and growth once the CapEx comes on stream in this quarter. And we should see mid-teens to high-teens growth in Q4 onwards when the utilization of new CapEx scales are. Thanks.

Thanks for that. Just a follow-up on this, you know, if you can also help with some color on what product types and defense, especially on the Indian defense side that we are catering to. And another one on, you know, on the composites, I was probably reading somewhere that there seems to be some application of, you know, glass-based composite material in semiconductors and wafers. So is that an opportunity that we are participating in, or do we have the capability of?

So let me answer the defense question first. Our whole philosophy is around co-creating solutions for our customers. And when we look at the defense segment, there are three set of bodies that we work on. One is the product development, which are the agencies like D-PAS, DRDOs, and the research agencies. Second is the users themselves, which is the forces and the paramilitary, the Indian Navy, Air Force, and the MHA services. And third is us as a partner for us. We start our development journey right at the basic requirements stage that our forces need. We have been doing that work now for offering solutions from innovative fabrics and designs for uniforms, FR or fire-resistant coveralls and products for the Indian Air Force and Indian Navy. Moving upwards to extreme cold weather clothing and NBC suits type of clothing. So it's virtually everything that we do is built on this platform of working quite closely for the requirements of our troops. The second philosophy we work on is offering solutions which can be substituting for imports for our defense services. So, that's the broad-based portfolio that we are working on, and we are continuously looking to enhance these solutions that we provide to the forces.

On the glass fabric side,

on the composite side, our focus is on solutions for renewables, building and construction, and mobility. I don't think we have anything to offer on the semiconductors.

You've read right that semiconductors do use composites, but currently in our Indian context, the customer base is quite limited there and the technology platforms required for that are very different from the ones we have currently invested in. So, electronics and composites is a good space to look at, and I think if we have to enter The first place we will enter it is in the reinforcement side, where currently we do a lot of roving-based reinforcement fabrics that go into, say, wind energy. There are yarn-based, which could be, you know, the first place where we, as of now, it's not a very large segment. Three, four segments that...

Very detailed and helpful. Just last question from my side on the garmenting piece. You know, the capacities that we currently have and what sort of expansions, you know, are we planning outside of the partnership model that, you know, we are seeking? Yeah, that would be my last question.

I don't want to give a very detailed answer on the partnership model until I'm fully confident that we are on firm ground. So, I think I'll wait a couple of quarters before finalizing that medium-term view on the partnership model. So, as far as our own capacities are concerned, we are getting, you know, we bottlenecking two or three of our brownfield factories, our objective to grow. This is an all, it didn't grow up much. It's not either.

Fair enough. Thanks.

The next question comes from the line of Mithun Ashwar with EVA advisors. Please go ahead.

I just wanted to understand on the Advanced Materials Division, now you've made this acquisition as well, and the business is heating up quite well. Would there be some point where you would want to, you know, de-merge this business and grow it individually? Or do you remain as a division of the business because there are some benefits also that you have to do because of being one entity? Just wanted your thoughts on that.

So we've housed the advanced materials business in a certain way. Some sort of capital action in the future. What nature that is, is not yet decided upon. Now think about that at the right time.

The next question comes from the line of Shirish Pardesi with Motila Oswal Financial Services. Please go ahead.

Hi, team. Good afternoon. Thanks for the opportunity and really impressive performance. Congratulations for that. I am reading slide 15 where we have given the capital employed in AMD business. So, AMD India is 853, Talco is 326. Thanks. I'm a little curious, sir, if the business growth is executed well, how this number should look like for next one year?

I think, you know, both businesses are at very high return on capital employed business, and yes, there is always some headroom to improve, so, you know, it can go up by a few percentage points in terms of ROC. If we are very efficient, we can maybe squeeze out 30, 40 crores of capital employed. But right now, we are doing actually the opposite because of the uncertain raw material environment and price fluctuations happening. We are actually going longer than normal on raw material just so that we can protect our customer commitments. Availability and price both become an issue in such a geopolitically uncertain and shipping So, to be able to service the business well, we have actually, you know, sacrificed some working capital efficiency and focused on, you know, having high reliability and performance for our customers' expectations.

That's helpful. I just wanted to re-tablish sure. Is it this optimum level or this can be, this can go up more substantially?

I see between 90 and 100 days of working capital in slightly less, Delco would be around 60 days. I think we will be, Delco is more like closer to 50 than 60. We will focus on that efficiency. Right now, the time is to focus on, you know, from six turns to seven is not the focus.

Question on the same slide. There is a goodwill and intangible setting of 853. How is this number we should think about for next 15-18 months, 2 years?

Our idea is that we don't have to pay tax because of it.

Okay.

The next question comes from the line of Bimal Sampat, an individual investor. Please go ahead.

Yeah, good afternoon. So now, just a broad question. Seeing this, we are turning more and more into a product company, having, you know, tie-ups like asset light, raw material sourcing, and asset light manufacturing. So, going down four or five years down the line, I mean, we will be like a multinational and more of products rather than fabrics. Is my judgment correct? We will be more of a product company than a…

Right now, our sort of asset-like model is tiny. We are still primarily a manufacturer and I think manufacturing-free. Yes, we are, you know, in the process of all those kinds of considerations to sort of think about and also limited pool of capital needing to go as far as it can go. We are exploring more and more asset-like models going forward. So asset-like as a strategy will go up as a part of the portfolio, but we will still remain a manufacturing heavy, you know, company. The nature of our manufacturing is also different and evolving as we go forward. So, we are focusing on digital transformation. We are adding a lot of automation. We are bringing in more and more innovations in terms of technology. We are bringing in, you know, a more multi-product go-to-market where we are adding, you know, MMF capabilities. We are adding newer lines of business in advanced materials. So our material diversity is going to increase. Our manufacturing platforms are going to be more diversified. Our footprint is going to be more global, and asset light is going to become a higher proportion of the overall business. But we are still going to be predominantly a manufacturing company.

And our size, I think, will be in about five years at least double of what we are now in terms of turnover.

So you can think of, you know, on a 10,000 crore base, if advanced material grows at close to 20, if garments are single digits. The company will grow, you know, in the teams. Plus, there might be one not credit sitting at this point in time. So, I would say, you know, you're not very far off from, you know, our desired trajectory.

Thank you, sir. The next question comes from the line of Roshan with Antic Stock Broking. Please go ahead.

Yeah, thanks for the opportunity. So, you emphasized on the fact that you have been focusing on verticalization to improve economics across the segments. So, now going forward, how should we look at it? The next phase of growth will be dependent more on capacity addition or extracting value from the existing integrated model. Your comments would be helpful on that part.

Can you repeat the question? I'm not sure I understood it clearly. Sorry.

I'm saying you have been emphasizing on verticalization across these segments. So how should we look at the next phase of growth would be more capacity addition driven or extracting value from the existing integrated model? So your comments would be helpful.

No, so, for the model to get integrated, to increase the capacity. So, the two are linked, right? You cannot integrate if you don't have the garmenting, you know, capacity. Hence, we are adding factories, we are adding automation, we are doing this kind of partnership model. All of that is there to be able to verticalize our very large, you know, we make more than 300 million meters of fabric and, you know, With our current garment capacities, only 15 to maximum 20% of it can be vertical with the existing capacity. So, capacity has to go up to be more vertical. So, it will be both. We will try and leverage more value through verticalization, but to do that, we will have to add capacity. So, both will happen.

I understood. That's helpful. And next, you alluded to the fact that the textile EBITDA margin has improved despite a 19 crore impact on higher raw material cost. So, how much of this pressure can realistically be kind of recovered through pricing, product mix, and sourcing? And how much could remain structural?

I would like to correct you. The margin hasn't improved. It has gone down quarter 1 to quarter 1. It has gone down significantly from quarter 4 to quarter 1, but that is reflective of quarter 1, quarter 4 regular dynamics. So, normally, quarter 4 is a higher margin quarter than quarter 1. So, if you compare quarter 1 to quarter 1, we have reduced by half percentage points on the overall textile margin. That, you know, should be gradually recovered as, you know, see, imports are still high as we speak because they started going down, then the whole Middle East thing flared up again. So, again, there is, you know, there is still a reasonably high level of, you know, stress on raw material prices. And so, it's a constant effort to pass on as much as we can to customers and, you know, do our best there. So, it's going to be a gradual process to creep back to the old margins. And the timeline cannot be predicted because the conflict is still, you know, ongoing.

Understood. That's helpful. And wish you all the best for the coming quarters.

Thank you. Thank you very much.

Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Satya Prakash Mishra for the closing remarks.

Once again, thank you everyone for joining today's call. We trust that the discussion addressed most of your questions. Should anything remain unanswered or if any questions arise going forward, please do not hesitate to reach out to us. We are just a phone call or an email away, and we will be happy to assist. We look forward to engaging with you at an upcoming conference. Thank you, and wish you a good day ahead.

Thank you, sir. Ladies and gentlemen, on behalf of Arvind Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.