Gokaldas Exports Limited (GOKEX) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Gokal Das Exports Limited Q4 and full-year FY26 earnings conference call hosted by EY. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on a touchtone phone. I now hand the conference over to Ms. Kasuri Sharma from EY. Thank you, and over to Ms. Sharma.

Thank you so much, Michelle. Good morning to all of you on the call. Before we proceed, let me quickly remind you that the discussions here may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future results, performance, Please note that we have mailed the results and earnings collaterals, and the same are also available on the company's website. In case you have not received these, you can write to us, and we will be happy to send them over to you. To take us to the results and answer your questions today, we have the management of Gokuldaas Express Limited, Represented by Mr. Shiva Ramakrishnan Ganapati, Vice Chairman and Managing Director, and Mr. Satyamurthy, Chief Financial Officer. We will begin this call with a brief overview of the quarter and highlights for the year, followed by the Q&A session. With that said, I'll now hand over the call to Mr. Shiva. Over to you, sir.

Thank you, Mr. Tudi. Good morning, everyone. Happy to have you at our earnings call for the financial year of 2026. FY26 marks a year of spectacular disruptions, with the year beginning with the imposition of reciprocal tariff, which went through multiple iterations throughout the year. For a significant part of the year, the reciprocal tariff, which is in addition to the already high MFN tariff imposed by the U.S. on apparel imports, remained at a staggering 50% that was way higher than most countries, including China. The later part of the year also saw a war in the Middle East, which imposed an upward pressure on cost of raw materials. The war in Ukraine continued to keep pressure on EU markets. In Q4 FY26, India business operations for Kokuldas exports grew by 2%, despite the prevalence of steep tariff, and the Africa business, supported by an extension of Agoa, expanded by 17% YOY. During this period, Indian apparel exports declined by 10%. In FY26, India operations grew by 10% YOY despite U.S. tariff-related uncertainties, while Indian apparel exports witnessed a decline of 1.4%. The company offered a net discount of over 90 crores for the year to its customers to offset the tariff burden. This is tariff discount passed on to customers, net of discounts imposed on the supply chain of ours. Africa business declined by 19%, primarily impacted in the period up to Q3 due to Agoa uncertainties, leading to a reduced order book for that period, resulting in a revenue drop of about 180 crores. Despite these headwinds, the company delivered a total income of 4,065, 4,065 crores, a 4% growth over the previous year. Indian apparel exports witnessed a decline during this period. The EBITDA margin was sustained at previous year's level, absorbing a severe financial setback in terms of tariff burden share. The company had booked most of H1 FY27 orders during the prevalence of penal tariff regime. The company had offered discounts on U.S. shipments to offset the penal tariff. After normalization of the penal tariff, there has been a reset of pricing to its customers, leading to margin improvement. Africa business witnessed a healthy growth and will continue its growth momentum in FI27 post the renewal of AGOA. The company continued the committed capital expenditure in creating newer capacities and upgrading its existing machinery and equipment to support future growth. During the year, the company spent about 170 crores towards new capacity creation, which will pay out in the years ahead. Net debt has increased by 395 crores, primarily driven by CapEx investments for incremental capacity expansion, additional investments in BTPL, and increased working capital on account of hauling increase. The withdrawal of penal 25% tariff in February and the subsequent U.S. Supreme Court ruling against the tariffs led to a 10% tariff being imposed until July 24, 2026. AGOA got restored until December 2026. With the competitiveness of these main production centers of the company restored, the revenue and margin outlook for FY27 has improved. Tariff has shown the resilience of the company as its entire operations were severely impacted on account of surge in tariff for both India and Africa. The company used this opportunity to strengthen its leadership team, build durable processes, and expand its customer outreach to secure the company from future shocks. It looks like the worst is behind us. Even if tariff is reimposed under Section 301, there is a strong likelihood that it will be somewhat similar to most competing nations from Asia. Africa is not under Section 301 investigation, giving further comfort. The company signed up two new premium customers in FI26 for its India operations, one American and one European, that will begin yielding revenue from FI27. There is a good momentum from existing customers as well. Growth of revenue from European customers continues to be strong. Similarly, for its Africa operations as well, the company has onboarded two new customers, one American and one European, that will begin operations in FI27. On demand front, U.S. and U.K. retail sales witnessed a strong growth of 8% and 6% respectively for CY25. U.S. sales continue to remain strong in early 2026 as well, while U.K. is showing signs of paining. Despite such strong sales, retailers and U.S. have started paring down their imports from second half of calendar 2025, The U.S.-Iran war has impacted textile value chain with increased cost of raw materials like fuel, packaging, polyester, and trims. Cotton prices have also risen due to combination of higher yarn exports to China and substitution from MMF to natural fibers, weather-related disruptions, etc. Shipping costs have increased as well. Inflation across economies on account of higher fuel prices could impact consumer spending. Most U.S. retailers and many EU retailers continue to diversify away from China-based suppliers. This helps growth of other regions. India remains a strong long-term prospect for sourcing. The trend of consolidating in favor of stronger suppliers also continues. FTAs with European region could help in strengthening the prospects of the industry. The company is expected to continue its growth trajectory in FY27, delivering strong performance across its business. The company has initiated merger of BTPL, subject to NCLT approval. Well, this is expected to conclude in the third quarter of FY27. There has been steady progress of operational improvement there. It is expected to turn in operating profits in the second half of the financial year. The capacity utilization at BTPL is approaching nearly 50 lakh meters per month, and the mill has currently a capacity of 70 lakh meters a month and can be raised to 100 lakh meters Thank you for listening, and I would be happy to address any questions that you may have.

Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Kostup Pavaskar from ICICI Direct. Please go ahead.

Yeah. Good morning, sir. Thanks for giving me the opportunity and congrats for the resilient performance. So, my first question is on the profitability. We have seen in this quarter, stand-alone business EBITDA margins, operating EBITDA margins, improved to 12%. And if we just minus, console minus stand-alone, which is largely subsidiaries, there the EBITDA margin stood at around 5.9%. So we have seen substantial improvement in the stand-alone margins, which is largely related to India business margins, while subsidiaries margins are yet to improve. So, considering your outlook in the initial comment and the way we look at the cotton prices and, you know, the other prices have also gone up because of the, other commodity prices have also gone up because of the India, sorry, Iran-based war. So, in that context, should we expect, you know, this 12% kind of range for India business to sustain and what is your outlook on the Africa business margins because that is currently lower. But considering the fact that the business will improve in that, you know, region, should we expect margins over there also to improve in the quarters ahead? So this is my question.

Okay. Thank you, Bhaskar. You know, you're right. The Africa business, you know, has had – but we are anticipating that in the – the business flow is strong, and we should have a continuous improvement of EBITDA margin in Africa. I anticipate that in the second half of FY27, Africa business would have an EBITDA margin of somewhere between 8% and 10%, and we are working towards that. The order flow is also moving in the direction where our operating leverage will also kick in, allowing us to improve our EBITDA margin substantially. The other Indian subsidiaries, which is non-Gokuldas exports, which are, you know, Matrix and others, have also had some minor setbacks in the fourth quarter, particularly because the tariff continued to be high in Q3 and Q4 at about 50%. And some of the customers there, instead of asking for discounts, just pivoted to other regions for business. This also is reversing back in FY27 because the tariffs have normalized. So there is an upsurge that we will see in India, you know, thanks to tariff blowing away, The 50% penal tariff blowing away somewhere in the middle of February 2026. And going forward, India business margins will improve as well as Africa business margins will also improve.

So my second question is on the working capital. So this year, our working capital days have gone up, and we can understand because of the days have gone up. But now, since the tariff issues are, you know, receding, and if things, you know, are good going ahead, so should we expect working capital to improve from here? And on the other hand, the working capital loan also, you know, will get reduced maybe in FY27, 28. So, your outlook on the scene?

So, you know, I'll give you a high level. We are, of course, working towards reducing working capital in the apparel business. The working capital deployed in the business has slightly increased in Africa because of the customer mix that we had in Q4. There was also a year-end factor where certain receivables took time to mature, and hence working capital ballooned towards the end of the year. We also had some fabric-related working capital increases in our business. But overall, I feel that in FY27, the working capital should taper down. There will be an increase in working capital as and when BTPL merges into Gokuldas because that entity's working capital will also come in. But obviously, it will also come in with its own revenue stream, etc. But I feel that the year ahead, Gopuldas' working capital should moderate down or temper down a bit. Satya, you want to add more color to this?

Yes. So there was also, you know, additionally to the points, whatever Mr. Shiva has mentioned, we also, you know, we had to advance the material import to take care of the Q1 execution. So because of that, the Chinese holidays, we have, and with the import content involved, we have to additionally invest close to about 50 to 60 crores. That has happened in Gokulda. These things, you know, we'll get, you know, we are working towards how do I improvise. So, one is the inventory build-up, which has incrementally happened to take care of the volume in Gokuldar, apart from the incremental volume, which is happening in Atrako. So, these are the two major additions which has happened on the inventory. Other one is on the customer mix, what he has talked about, that is on the receivables, that we are working towards to work with the customer to really work on the early payment program and other initiatives. So, at least, you know, our intention is that, though there is an overall increase of almost 200 crores, our intention is to really work, to bring down the working capital, whatever incremental volume which has happened, by at least about 75 to 100 crores in this financial year in Gokuldak operations. That is Gokuldas and Atrako operation. Obviously, the incremental working capital will happen when BTPL gets merged with Gokuldas. But at least Gokuldas operation on this basis, our intention is to really bring down our working capital at least to the extent of 75 crores during this year from where we are at this point of time.

And one last, if I can, in our outlook for FY27, have we considered the incremental benefit what we will be getting from UK, India, FTA? So, are we considering that in terms of incremental revenues from the customers what we already had in the UK or is any new customer what we will be adding in the quarters of it?

No, so we are not considering. We do not consider until and unless the FTA actually fructifies. So, an impending FTA with UK sometime this year and probably an EU FTA sometime next year could help further fuel the momentum on the business. However, we have not factored in any of these. The UK FTA itself has been delayed. It was supposed to come by April, May, but now it's further delayed, and we are awaiting the date when it will get implemented. So, we don't factor in till some of these things actually materialize.

So, excluding that, should we expect around 10-12% rate of revenue growth, considering the things that have improved, will be improving in Africa, and, you know, there is a stable environment in the standalone business?

I would probably reckon it will be much more than that.

Okay.

Thank you. Thanks for that.

A reminder to all the participants that you may please press star and want to ask questions. The next question is from the line of Jatmohan Singh from Master Portfolio Services Limited.

Please go ahead. Mr. Singh, I have unmuted your line. Please proceed.

As there is no response, we will move on to the next question from the line of Gunjan Kabra from Neveshai. Please go ahead.

Hi, Seva. Thank you so much for the opportunity.

First is, right now, our currency has depreciated a lot with respect to the other countries where U.S. exports the most as well, like Bangladesh or any other currency as well. Plus, you know, demand traction, like you said. So, if we can understand that, you know, how is the demand shaping up considering in the U.S.? Because for one and a half year or two years, U.S. will be the dominant market for us. But with respect to, you know, now the raw material, logistic cost, everything has also increased. So how is right now the demand traction in the U.S. or whether we are becoming much more competitive with respect to currency as well? And is it like the most exciting times right now for us? Thank you, Gurjan.

Yeah, thank you, Gunjan. You know, hedging policy where we hedge the, you know, receivables for the quarters ahead, and for two quarters ahead, we hedge almost 80% of the revenues, and the subsequent two quarters, that is third and the fourth quarter, we hedge to the extent of 50%. So, our hedging principle means that almost for 80% of the revenue for up to Q2, we have hedged at prices ranging from 87 rupees to a dollar to about 91 rupees to a dollar. So, you know, we're not really seeing the advantage of a weaker rupee because of the hedges that we have. You will appreciate that the rupee weakened so fast in the last few months that, you know, hedges have proven to be counterproductive for us, but that's the policy that we have. We don't speculate on the rupee. It's movement in either directions. So that means that the rupee depreciation advantage is not baked into our numbers and will probably only flow in H2. Having said this, your question was mainly from a demand perspective. And once the U.S. tariff or the penal tariff went down from 50% to 25% initially, and then immediately after the Supreme Court order went down to 10%, we got a level playing field with the rest of the world. You will see that our revenues never dipped even during 50% tariff regime. We maintained our revenue even though we gave discounts, et cetera. We maintained our revenue. In fact, we slightly grew our revenue even after giving discounts. That shows how strong Gokuldas' relationship with its customers are that with a substantial American customer base, we still managed to grow the business. So, our feeling is that now that the tariff has leveled off, there is a global equal tariff across the board, and the prognosis is that even if Section 301 tariff is imposed going forward from end of July, it should bring India nearly at par with the rest of Asia in that 20% odd range. And again, this is speculative. We have to see where we land at that point in time. We will still have a level playing field, which really means that our competitive advantage is sustained. A weaker rupee will obviously add to the competitive advantage, which we have not yet seen, but we will see going forward in the future. So overall, I don't see any problem from a demand standpoint. And, you know, U.S. retail, you know, retail sales is also going strong. We are watching how U.S. retail sales will pan out in the second half of calendar 26 and early 27. At the moment, we are booking orders for spring 27, and while the order flow is good, there may be some apprehensions, you know, with respect to inflation in the U.S., higher gas prices, et cetera, et cetera. So we'll let us see how it actually pans out. While the customers are being conservative in placing orders and will come closer to date with additional orders, we seem to find that our order book is relatively very robust and strong. So, we're confident that, you know, India's competitive advantage is restored. We're confident that our customer relations and our, you know, business model will be able to attract fairly strong business flow in the quarters ahead.

And what's the inquiries in terms of new customers coming to Gokulda for me reaching out to them? How is that order flow, inquiry order flow right now?

Oh, that's good. So, we are being selective. We just don't want to go, you know, add several new customers as the overhead of managing multiple new customers actually brings down the profit in the initial period. So we are selective. We have added two customers which will materialize in FY27. Both are premium customers, and we may choose to add one or two more with whom discussions, and again, these are all top-class customers, customers who are doing exceedingly well in the market and whose brand names are also pretty strong. And performance is strong. So we are very selective in adding customers. We will also be selective in growing with them. We want to make sure that our execution is perfect before we start ramping up. So the contribution from these new customers in the first year will be of the order of single-digit percentage of total revenue, maybe more like 5%. The idea is that they will scale up in the years ahead pretty smartly. We have enough order flow from our existing customers to absorb additional capacity. So, there's no dearth of business that, you know, we feel confident that we can continue to sustain our growth momentum.

Thank you, small question, but is there any incremental tactical demand that can come in the U.S. because of the adoption of GLP-1 just as well?

Can you repeat that question?

This might be a little smaller proportion, but since the inventory there is low, so can there be an incremental tactical demand for the apparels because of the GLP-1 adoption as the size reduces, so the demand for apparels might increase? Are we seeing some short-term apparel demand increasing because of that?

I am not seeing any short-term apparel increase. See, all this will have to pan out to see. We are seeing a growth, and because of inventory-related issues, I have not seen any short-term practical advantage. We'll have to wait and see.

And are we planning any new CAPEX as well that we have kept on hold?

We will do some CAPEX selectively. We will also watch and see how the markets react, you know, to how the tariff regime unfolds in July. But, you know, to sustain our at least 15% kind of growth, we will definitely work on the CAPEX that is required to manage that and to deliver that growth.

Got it. And so what was the major reason for India's export, yarn exports to China in the cotton segment increasing a lot, and how sustainable does this look like?

I mean, at the end of the day, you know, China is buying a lot of Indian yarn because, you know, they tend to, you know, they tend to operate with a herd mentality. Their own market is also very large. And if they want to export, then they may have to also tap into Indian markets. So, you know, these are all trade movements. It could sustain, it could slow down going forward. I think cotton prices, you know, depending on cotton yields, may probably ease off starting October, November this year. But, you know, at the end of the day, from a pure apparel standpoint, cotton and raw material prices eventually will become a pass-through for us. So, you know, if the cotton prices go up and hence fabric prices go up, we will tend to factor that in the pricing of the goods that we produce.

Got it. And, sir, Goa also, it will get expired, the agreement will get expired in December 26th. So, probability of renewal, and how will that take time on, how will that take?

So, if you recall, you know, in the Congress, the AGOA, you know, the House of Representatives approved a three-year AGOA renewal. Usually, AGOA gets renewed for every 10 years. U.S. wants Africa on account of its, you know, mineral presence, etc. But, you know, the current U.S. administration also thinks that they want to enter into country-by-country deals rather than a Pan-Africa deal. When the Congress approved, when the House of Representatives approved a three-year AGOA deal, the administration, you know, brought it down to one year. The belief is that AGOA may get further extended towards the end of this year by another one year or, you know, two years. Which will allow U.S. to enter into agreements with individual countries. There's an FTA on the anvil with Kenya, which is where bulk of our operations are. I'm not confident that it will happen by end of this year. I feel more, you know, I get a feeling that a Goa may get extended and that may continue to provide relief. The other topic is that, you know, come Section 301 tariffs from July, where tariffs may go up to 20% for the rest of the world, Kenya will continue to remain at 10% because there is no, you know, Section 301 investigations for African countries. So their tariff will continue to remain at 10%, which it was even earlier. So, the tariff advantage for Kenya will continue to remain, which will probably give that region, you know, a sustainable advantage going forward, AGOA or no AGOA. If AGOA comes through or AGOA extension comes through, then the story for that region becomes even more compelling. When I look at our order book, it seems to be pretty strong. You know, at this moment, we are working on third quarter and fourth quarter orders there. And the initial impression that I get is that there is a fairly strong amount of traction for continued business there.

Thank you so much, and good luck all day. Great talk.

Thanks, Vijay.

Thank you. A request to all the participants to kindly mute their lines when the management is answering for optimum audio quality in the conference. We'll take the next questions from the line of Vishal Mehta from IIFL Capital. Please go ahead.

Hi. Thanks for the opportunity and congratulations on a resilient set. My first question, just continuing on the AGOA expiry topic, Like, you know, if, you know, the AGOA, you know, renewal announcement is delayed, like in the case it was done last year, last time, and, you know, just hypothetically assuming that 301 tariff stays at 10% globally, you know, what prevents, you know, a situation, same like last time, to happen as in, you know, the customers again start delaying their orders. or probably, you know, expecting that there's probably a renewal of Agoa in the Anvil, et cetera. So just wanted that.

Sure. So when Agoa was in Agoa in 2025, some of the customers came and asked us for, you know, sharing of the burden, et cetera, And we flatly refused because we did not believe that, you know, our Africa business was resilient at that time for us to share any business discounts or anything to, you know, go and give an artificial support to offset a co-op. And at that point in time, there was a, you know, in anticipation of all of this, there was a business drop, which we let it let happen and try to curtail our margins, our costs, rather than simply go, you know, book business without a go-up. So, this time around, I feel that Section 301 tariff is more real, and, you know, it's quite likely that post-July 24th, there is going to be a reset of tariff back to, you know, 20-odd percent for the rest of the world, barring Africa, which may remain at 10 percent, because that's not covered under that. The administration is quite intent in achieving that, and all signs are pointing in that direction. A Goa renewal is still, you know, to be decided, and my sixth sense says that it may come towards the end of the year. You know, it may get extended by a year, you know, and it may get extended by increments of one year going forward until individual FTAs are worked on. But assuming that none of this materializes what is our confidence, we have expanded our customer base so that we have now many more customers in Africa. We have had multiple conversations with customers in, you know, with whom we are working in Africa to ensure that come agoa or no agoa, we should see business flows. We are now open a little bit if we have to address a Goa-related tariff. We have the size, scale, and the volumes to address some Goa-related issues if we need to. So I feel confident that the revenue for this time may not be happening, given the diversity of customer base, given the discussions that we have had, And some of the external indicators that I'm seeing, which may not be as direst as the scenario we just discussed.

Thanks. Thanks for answering that. My second question was, you know, I just wanted to check on the timelines for capacity commissioning on India and Africa. Africa, you know, is the expansion, is the new capacity commissioned already, and what kind of revenue capacity are we, you know, currently at there, and what will it be after the expansion? And similarly, in India, you know, over 1Q and 2Q, what sort of revenue capacity additions are we expecting? So, just timelines on these.

So, capacity expansion in Africa has already happened last year, and we anticipate that in FY27, we should at least target approximately $115, $120 million in revenue, regardless of what the adverse status is. I feel, you know, $115 is the worst case. You know, we could even do $120 million in top line in FY27. This is, in comparison, in FI26, we did about 80 odd million or in that region. So there is a huge growth, which we will see in Africa, and that growth will also bring with it some margin improvement. The operations and, you know, the factories are completely aligned. If there is an additional tailwind, we do have the prospects of opening up second shift operations. So we don't want to add a lot of further physical capex. We can probably see some incremental growth by operating two shifts. We've already started two shift operations in one of the factories in Africa, and we have about 20-25% of that factory's capacity running on two shifts, and it's working successfully. So there is – and the workers are available. Unlike India, it's much more easier to recruit second shift operations in Africa, given the need for jobs. So, there is a further opportunity for us to increase capacity without putting too much of capital here, which is an advantage. As far as India is concerned, from a capacity growth standpoint, we do have capacity in our existing facilities. For example, the facility in Karnataka in Kohler Goldfields, where we still have half a factory yet to ramp up, which is on the ramp as we speak. So it will ramp up in Q1 and Q2, and we will take it to full capacity utilization. The second shed in Madhya Pradesh is getting commissioned, and we have started expanding the lines as we speak, and it will reach full capacity utilization by third quarter of FY27. So, from September, October onwards, that thousand machines will operate at full capacity, which is, which at the end of the March, those thousand machines were non-operational. Now, you know, two, three lines have started getting operational, and it will continue to expand. In addition, we have an option to commission two new factories, the call for which we will take in the next quarter or so, depending on how the tariff, if there is any new tariff or geopolitical situation that we need to deal with. But, you know, most likely, given how the customer tractions are and business tractions are, we may have to press that button and go ahead and add those incremental capacities for sustaining growth towards the latter half of FI27, but more particularly in FI28.

So, the Karnataka and Bhopal additionally adds around 400, 500 crores to the revenue capacity?

For FY27, you mean?

At full capacity.

At full capacity, about, you know, the additional 1,000 machines in Bhopal will add about 300 crores. 175 crores, sir.

175 crores. Bhopal will add up 175 crores and another 125 crores in a steady state.

Yeah, so that's what I do. And the two capacities that we are talking about, that can always bring in incremental revenue. That also, at steady state, will bring in another 300 or crores of revenue. But that will take a little longer because those are just in planning at the moment.

Okay. Actually, your voice was breaking when you were answering. So 400 is a reasonable...

Let me see. Just the Karnataka and Bhopal units will add at steady state 300 crores of top line, and then we have two other units which is in the planning stage. Those two units at its steady state, which will not be in FI27, but which will probably be in FI28 or even later, can add another 300 crores. This is apart from whatever debottlenecking capacities that we will continue to do in all our existing facilities.

Sure. Thanks. Just last question on margins. You know, given the input cost inflation that we've already seen, you know, are we, you know, kind of when we are now probably finalizing our orders for probably, say, second half, are we probably seeing customer accepting, you know, that pass through of increased input inflation? As in, are we increasing our pricing?

The second half orders are yet to be closed. Obviously, we are eating up some of those margins in the first half. You know, orders were booked long back, and those first half orders were booked even when the tariff was 50%. You know, it was booked pre-February. And obviously, there were a lot of price pressures and order pressures, et cetera, et cetera. But, you know, in the second half, our endeavor is to try to push back as much of these price increases back to the customer. There is obviously a resistance back from the customers as well because they are also anticipating inflation-led demand challenges from the US. Everything depends on the Iran war and the continuance of it. If the hiatus that has been obtained there continues and if the oil prices cool off, I think both demand and price pressures will ease off, but that time will tell. At the moment, our endeavor is to push back on that price increase. We may succeed in partially passing it on, not passing everything on in full, primarily because I'm also seeing Southeast Asian players and Chinese players quite happy to absorb some of these cost increases as a strategic move, because many of them are sitting on undercapacity utilization. So, you know, there is going to be all those global geopolitical capacity demand fights that will happen. But nevertheless, in the long run, I guess all of this will get pushed back. In the short run, particularly in second half, we may recover portion of it. I also feel that some of the pricing pressure may also ease off. We'll have to wait and watch.

Okay. Just a follow-up on this one. You said that you negotiated first-up orders when the tariffs were still there. So does that mean that we'll still see some tariff rebate-related pressures in 1H?

No. Our tariff rebate was clear. As long as the penal tariff was there, the rebate was an add-on. So, as long as the penal tariff was there, there was this rebate. When the penal tariff went, the rebate also went out. So the impact that we took in Q3 and partly in Q4 would not be there going forward. Having said that, apart from the rebate, there were sharper prices that we gave in Q1 and Q2 because we wanted to maintain the business in-country as opposed to allow it to drift out of India, keeping longer-term business interest in mind. So to that extent, the, you know, small, sharper prices that we gave for Q1, you know, excluding the rebate, I'm saying, is something that we may have to absorb in Q1 and Q2. Those sharper prices are also being taken off in Q3 and Q4. So when we are pricing Q3 orders, we are not even, you know, giving the sharp pricing that we gave in Q3 and Q4. But certainly, there is no rebate on top of it at all for the year. Does that clarify?

Yeah. Thanks. Thanks a lot for patiently asking.

You know, rebates were to the order of up to 15%. Part of it which we clouded back by, you know, asking rebates from our supply chain. The sharper pricing was to the extent of 3%, which continues in H1. But in H2, that also goes away. The rebate of 15, I mean, the tariff burden share of 15% went away from mid-February onwards. Does that give you a better color now?

Yes, yes, yes. Thanks. Thanks a lot for patiently answering and much appreciate it. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit yourself to two per participant. Should you have a follow-up question, please rejoin the queue. We'll take the next question from the line of Amit Sheda from Banyan Capital. Please go ahead.

Yeah. Hi. I just had two questions. You spoke about the two new capacities that you are planning. Although it's too soon, but what would be an approximate CAPEX for these two factors?

The CAPEX should be, for both of them put together, should be of the order of 80 to 100 crores. Probably it will, you know, it will get spread over two years.

Okay, so it's over two years. But if I'm not wrong, you said that FI28, you will start seeing revenues.

That is correct. So as we keep putting the lines, we will have to, you know, we'll incur additional capex in FI28. You know, it will come towards the end of, you know, second half of FI27 if we decide to bring it on board. And, you know, some portion of it may fructify in the early part of FI28.

Okay, understood. And if you can just share the revenue of BTPL for Q4.

Q4 of FY2026?

Yes.

Q4, FY26, our revenue was above the revenue of that entity or that company was 190 crores.

Sorry, 190 crores?

Yes.

Okay, and what were the margins?

At an EBITDA level, I think the company, you know, company lost about, you know, about 4-5%.

Okay. And what is the revenue that we expected?

Sir, I am sorry to interrupt you, Mr. Cheda. I would request you to kindly rejoin the queue for follow-ups, please.

Thank you.

Just asking the current question and then please join, if you can.

Sir, Arshad, sir, give me a moment.

Mr. Sheda, I have unmuted your line. Please, Rasheed.

Hello, can you hear me?

Yes, I can. Please go ahead.

Yeah, what is the revenue that we are expecting in FY27 with the ramp up in BRFL?

So, you know, I mean, the revenue for the year should be in excess of top of the course.

Sorry, I didn't get you. Your voice was breaking.

The revenue for FY27 for that company should be in excess of 1,000 crores based on the momentum that it is going. Thank you so much.

Thank you. A request to all the participants to kindly mute your lines when the managements are answering the questions. We'll take the next question from the line of Siddhanth Mantri from Invesque. Please go ahead.

Yeah. Hi, sir. Thanks for the opportunity.

So, most of my questions have been answered. I would like to know, given our recent acquisitions, how are we looking at those ramp-ups, and are these up to our internal targets or expectations, if you could give us some color on those, on that side?

So, and short answer, no, they are not up to our targets. And the reason for that is we went through an extraordinary level of disruption in terms of tariffs. All the businesses, you know, locations that we are, whether it is India or Africa, both suffered extreme tariff situation. AGOA went away in Africa, taking away, you know, MFN tariff anywhere between 20% to 32%. If you look at the underlying apparel tariff, that ranges from 14% to 32%, and most of Africa was doing synthetics, where the duty differential is the highest, which was between 25% and 32%. So, you know, to that extent, the tariff bumped up, which then again went back when Agoa was reinstated. And India's tariff went up to 50%, a 30% tariff delta vis-a-vis rest of Asia. So we did have huge disruption, which impacted business. Different customers reacted differently. Some asked for discounts. Some took the business away to other regions, or some toned down the business. Some pivoted their U.S. sourcing from India to European sourcing from India if they had operations elsewhere. But all of this meant that the business volumes partly shrunk or the margins took a hit last year. Having said that, overall, we actually delivered higher revenue despite all these challenges because, you know, we made sure that all our capacities got fully utilized and our teams went and sold the capacity in its entirety and more. So now, going forward in the year FY27, the expectation is that all these acquired entities will perform as per plan in that year.

Okay, okay. And, sir, also on the margin

side, so we've seen a lot of volatility given tariffs, given government incentives, and as well as integration of these acquisitions.

So, could you guide us on the margin side, what is the view for the current year?

When you say current year, you mean FI27?

Yes, sir, FI27.

So, the margin should improve, of course, from FI26. FI26 was probably plus, and hopefully that's behind what kind of tariff disruptions we will see going forward. So, you know, everything gets subject to that. So, you know, come July, there could be a Section 301 direct which may get imposed. But, otherwise, I feel that there will be a couple of percentage point improvement in margin YOY on account of, you know, on account of the disruptions being behind us. Our endeavor will be to try to do better than that. You know, what we don't know is what kind of disruptions will be unleashed in the year ahead. So, everything is subject to that.

Thanks, sir. That's helpful. Thank you, sir. All the best.

Thank you.

Thank you. We'll take the next question from the line of Chiraas Jain from Catamaran. Please go ahead.

Thank you for the opportunity. Congratulations, sir, on a very resilient performance during a very challenging year. So just one question on the Q4 numbers, specifically in the standalone. I'm not sure if you addressed it earlier. I missed the starting point. The margins expanded QOQ and YOY by around 200 to 400 basis points, right? So just wanted to understand what led to that. Was it just that tariff reversal which happened, or there was one ruling which said that it's in the US Supreme Court ruling that the US has to refund the tariff. So was any of those bookings also incorporated into this? Just want to understand where did that gross margin benefit came from in specifically Q4 quarter in the standalone operations.

Okay. So largely it is because of the sheer volume, the revenue growth that we had. So the operating leverage helped. There has been no tariff reversals being factored in anywhere. The tariff reversal portal has opened in the US. Many brands have started applying for tariff refunds, but it's unknown whether some of those tariff refunds will be passed back. to the supply chain. There have been instances where customers of those brands have also sought, you know, tariff refunds to the customers. Nike has seen a class action law, I think that, you know, they, you know, all the tariff increases were passed on to the customers, and hence the tariff reversals which accrue to the company should be, which is in this case the retailer, should be passed back to the customer. So this opens the Pandora's box of how it will all be dealt with. There is enough confusion out there. So we don't know whether the supply chain will receive any benefit out of tariff reversals. That's yet to be seen out there in the future, and we're not even counting on it. But going forward, you know, the tariff burden that we shared with the customers are no longer going to be there. So that margin inflation will certainly happen. As far as Q4 standalone performance is concerned, the half of the quarter was impacted with the penal tariff, 50%. You know, it got withdrawn mid-February. So, post that shipments, we have not factored in the tariff discounts that we offered until middle of February. So, that also helped us in some margin improvement.

So basically, as you mentioned, only half of the quarter was impacted by tariffs. So if I assume the number which you mentioned in your notes that around 18 crore's tariff impact was taken this quarter, technically if I add that back, that should be the normalized margins running forward given this scale of revenue?

For the standard load, yes.

For the standard load, yes. So, sir, then when you mentioned 200 business points of margin expansion for the full year, it should be much higher, right, given the Q4's performance, especially in the standard-owned business. And then you are mentioning that Africa will go by almost 50%, so obviously that will also see a big margin bump up. But I understand input cost is one...

Yeah, that's my point. The input cost point, the fact that our H1 is at a little sharper pricing because, you know, we were booking H1 business when the tariff was insanely high on India, and we wanted to keep the revenue rather than let it go out because at some point when the tariff reverses, we didn't want to see business vaporize from the region. So there's been a look at an underlying level, which will get reversed in Q3 and Q4. So there is a little bit of that. And I'm factoring in some levels of unknowns, which who knows what will be unleashed during this year. You know, we all know that we are living in an extraordinarily volatile time. So I'm factoring in all of that when I say 2%.

Got it. Wonderful, sir. Thank you so much. And again, congratulations, sir, on a very good performance during this challenging year.

Thank you.

Thank you. The next question is from the line of Akash Deep Singh from Master Capital Services Limited. Please go ahead.

Thanks for providing the opportunity.

Sir, could you please share where the capacity stands today in terms of million pieces, both in Indian and Africa, and what capacity does management desire to reach in India and Africa in coming years? And, sir, what return margins we could expect for acquisition BDVL in FY27?

Thank you, Akashdeep. I'll let Satya answer this question.

The capacity numbers in terms of number of pieces, it will be misleading, but however, I'll give the number. As far as India operations is concerned, it is 52 million, and Africa operations is 40 million. This you have to look at it in context with what is the realization what we get in each of the regions. When we say 40 million pieces in Atrako, that was at the rate of 200 dollars was the average realization. When the realization goes up, the number of pieces what you may achieve will slightly change because we handle a multi-product. That's why we prefer to really give the numbers on the overall value what we can derive from each of the capacity. Okay, and in terms of the new addition of the capacity during the year, and whatever, which is likely in the pipeline, in India, we added another 9 million pieces, we have added the capacity, and Africa is about, sorry, in India, it is about 7 and a half million, and Africa is about 4 and a half million. So, in total, with the new capacities coming on board, our capacity in terms of the capacity in terms of pieces will remain at 104 million, but it comes with a caveat for India when you take, you should take at the rate of 500 rupees realization on average, and in case of Africa, you please take at the 200 dollars average. Okay?

Yeah, thank you, sir. Answer for the second question, what margin we should expect for BTBL in FY27?

In FY27, the company is aiming at at least, you know, EBITDA break-even in H1, and they intend to really get EBITDA positive in H2. So we should really expect about EBITDA level around 6% to 7% in H2.

Okay, sir. Thank you very much, sir. Thank you.

Thank you. The next question is from the line of Sagar Makwana from MAG Securities. Please go ahead.

Mr. Makwana, I have unmuted your line. Please proceed.

As there is no response, we will move on to the next question from the line of Neeraj Mansinka from White Pine Investment Management. Please go ahead.

Thank you. I have two questions. One, can you clarify that the standalone EBITDA margin for the Q4 was between 14% and 15%?

Because the numbers look high to me.

Satya, I want to add.

Relatively, the performance, I mean, the EBITDA numbers look relatively higher. At least you need to really factor in one to one and a half percent on account of that. But for that, the rest of things flows through on account of operations, what Mr. Shiva has explained, because of the volume and the scale benefits, whatever you see.

Sir, if you remove the impact of reversals, it can go to 15.5 percent. And this happened because of operating leverage in the Q4.

Right.

But next year, you're talking of higher volumes. So, should we expect the EBITDA from the year to go up by another 200 BIPs on an average because of the operating levels? Is it right, sir?

In terms of, you know, that's where Mr. Shiva in the earlier question, he has addressed the responses. There is a possibility, I mean, there are other challenges which you may see as far as QIM and H1 is concerned because already the sharper pricing has been given. That's the point which he has highlighted. Apart from, you know, if there is any unknown contingencies, that's why he has indicated that you cannot travel it the same way as you see. Maybe for Q4 on Q4, probably there could be, you can really compare it, but on a full year basis, whatever Mr. Shiva has given the guidance, that will hold good.

So, this, no, no, okay. The question to Shiva, if you look at in the same like-to-like condition, what margin would you expect on a stable state in FI28? If you remove all the one-offs here, because that would explain us where your margins are heading on long-term.

You're talking of FI-28, right?

Yes, yes, yes.

My, you know, this is an estimation because, you know, this has to be caveated with any geopolitical events or any disruptions. We don't know what all can get, but let's assume that a somewhat of a steady state here, let's say, right, except for the fact that there will be some new capacities which are always coming on board, which may have some negative EBITDA contribution, because every new capacity in the initial two years tend to depress the earnings from that capacity. So if we look at it from that standpoint, and there's no externalities or external disruptions of a significant nature, then I think the India EBITDA margin should be of the order of 13, 13.5%, whereas the Africa EBITDA margin should be about 10, 10.5% for that year. And the ratio between India and Africa from a revenue standpoint should be about 75-25 or, you know, anywhere between 75-25 to 80-20.

And you're not talking of the Bombay Rayon including in that?

Bombay Rayon and FI28 also should be contributing an EBITDA margin of anywhere. I would say in the first, you know, FI28, perhaps more closer to 12%. But if I take an FY29 view, it should also be of the order of 14%.

Got it, got it. Last question, on Bangladesh, can you tell us how the customers are looking at Bangladesh versus India? And some anecdotal evidence will be useful.

Sure, sure. So, Bangladesh, you know, during its peak disruption, you know, when there was a regime change from Avami League to an interim government and all the problems, there were a lot of concerns and people wanted to diversify out. European customers still consider that they have over invested in Bangladesh, and thanks to good, solid commercial reason, because Bangladesh was duty-free to Europe, and once FTA comes, they are very, very clear that they want to diversify out of Bangladesh to an extent, because now they'll get a level playing field as far as Tarik is concerned between India and Europe. As far as American customers are concerned, you know, the general impression is that Bangladesh is now somewhat, you know, stable with the new government in place from BNP. The impression is that Bangladesh continues to be a low-cost region, so the importance of Bangladesh will continue in the global apparel manufacturing space. The only concern is that with high oil prices, et cetera, many retailers also, when they look at Bangladesh, feel that their ability to withstand oil shocks, et cetera, because, you know, they're very import-dependent countries, and all of these smaller countries will have low, you know, BOPs, balance of payment surpluses or dollar surpluses. That there is a risk that some of these countries may find local inflation galloping as energy costs go up and, you know, all the imported goods costs go up. So there is a fear that, you know, we be a better off diversifying. So net-net, if we synthesize all of this, the impression is that, yeah, but cost-effective location. It has got now a stable government. But let's not put all eggs in Bangladesh basket. Let's diversify. And when they look at diversifying, India stands out as a very big priority for them to diversify.

Okay. Thank you very much.

Thank you. We'll take the next question from the line of Janvi Jain from Axia, India. Please go ahead.

Hello. So, I just have a bookkeeping question. If you could just study volume for Hooker as a standalone unit.

It is there in the presentation, but sorry, you are talking about Gokuda's standalone?

Yes.

For India operations, I will give the number. For India operations, it is 10.19 million for the quarter at the rate of 742 rupees.

No, for the full year, just for the standalone Gokuda's entity, X of Matrix?

For standalone, it is 33.627 million. And at the rate of 765 rupees.

All right. All right. Thank you so much.

Thank you. The next question is from the line of Heath Pora from Guardian Capital Partners. Please go ahead.

Thank you for the opportunity and congratulations on a very strong sequential recovery. So, just picking you up from the previous comments that you made on Bangladesh. So, one thing that at least, you know, we've been reading is that there are a lot of power cuts happening in Bangladesh. Most of the times, Bangladesh textile companies, they run on generators which run on diesel. But in current situation, even that is difficult because diesel availability is an issue. So are you seeing any orders, maybe now, or any additional inquiries moving from Bangladesh to maybe India, given the current situation?

So, Srinath, at the end of the day, from a customer standpoint, they will look at what is the net cost. And, you know, sans any disruption. So, most Bangladeshi operators somehow manage to ensure deliveries do happen regardless of all the energy disruptions. That's why I indicated that customers are wary of putting more business there simply because of, you know, volatility disruptions on account of, you know, energy and various other reasons. But from a political stability standpoint, Bangladesh seems to have become better. It all depends on, you know, what is the cost economics. And cost economics, at least for now, from a European standpoint, Bangladesh scores very well. From an American standpoint as well, their costs are lower because their labor costs are lower. But as I said, again, nobody is going to expand aggressively there. They will continue to expand modestly there.

And just one more addition on this is that I think that LDC status is also about to end. And I mean, there's no clarity whether it gets extended. So in an event that does not happen, do you see any advantage for India? I mean, in US, I think everyone goes at the similar rate, but maybe X of US, do you foresee a sizable windfall for maybe India from that standpoint? Or do you think they'll maybe agree on an FTA before that?

So, their LDP status was extended from 2026 to 2029. So, it's highly likely that post-2029, their LDP status will get removed. Would Bangladesh enter into an FTA with Europe? There is a likelihood. Is Europe going to perceive Bangladesh as a big enough market to enter into an FTA with Bangladesh? That is something which is a big question. Because FTAs are always reciprocal. And if you hope the Bangladeshi market being large enough, then only an FTA may happen. So it's probably unlikely or probably challenging, we got to see. Would that result in a windfall opportunity? Bangladeshi labor costs continues to remain low. However, it is also increasing as we speak. So I feel that it is definitely an opportunity for India. And if India secures an FTA, it is a massive windfall for India.

And just the last question was actually on Africa bit, sir. So we are quite confident on our operations improving there. Do you see any sort of impact on your operations largely on account of the current riots that, you know, we're hearing about largely on account of this entire petroleum sort of price hike happening there? And is there any issue on power availability in the African operations? I mean, just want me to understand that.

Answer is no disruptions whatsoever. We are in Mombasa, but there are absolutely no problems. We are right at the port. We've had no issues either from power, labor, disruption, civil disruptions, nothing whatsoever.

Got it. Thank you so much for the answer.

Thank you. The next question is from the line of Abhishek Shankar from ICICI Direct. Please go ahead.

Yeah, thanks for taking my question. I'm going to congrats on a good set of results. So, I just wanted to know that you mentioned in the PPT that, you know, the tax expense, the rise in tax expense is mainly belonging to a standalone entity. So, what is the reason for the tax expense in the standalone entity?

You know, at a consolidated, I mean, when you look at the consolidated profits, it is basically the tax expenses incurred on various entities, and you consolidate. Generally, because of the underperformance, what we mentioned, from overseas entities, because at RACO, whatever the reasons what Ms. Shiva has explained, we couldn't really do, we couldn't achieve the profitability of what we originally anticipated. That doesn't carry any tax credit, right, for the losses. So, and similarly, for some of the new investments, whatever you made in fabric business, those businesses, though at a better level, they have been breaking even in the quarter, but there have been some carry forward interest and depreciation expenses. They could not recover it in the current year. So, to that extent, the losses, whatever is incurred by these subsidiaries overseas and Indian subsidiaries, you are not getting any set up. So, the total tax incurred by the tax-paying entities in India, when it is consolidated, it looks, you know, at a net level, it looks relatively higher as a percentage. Otherwise, at the individual entity level, when you look at it, the tax percentage is normal at the rate of 25.17%.

Thank you. Just another question. You mentioned the volumes for GE standalone, Google standalone, that is 10.19 million for Q4, right?

10.19 million is for the India operation. If you want for the quarter for only Jets, it is 8.6 million at 773 rupees.

Okay, and what are the volumes for Matrix and Atrako?

Atrako is 5.63 million for quarter four at 405 rupees. And similarly for the full year, it is 16.27 million for 420 rupees. Matter is, you can derive it. I have given the Indian operations number, so you can derive that.

Thank you.

The next question is from the line of Vijal Shah from RTL Investments. Please go ahead.

Yeah, thanks a lot for the opportunity and congratulations on very good numbers. So, I have two questions. Number one on Africa. When you say Africa, you will go to $1.60 million to $1.20 million. Should we see that coming from Q1 itself, what that is also going to be back-ended?

Sorry.

So I think from a Q1, Q2 standpoint, we should be at a revenue run rate of about $24,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000.

Got it. So, I mean, the remaining, the next two quarters should be like $35 million kind of a number.

So, it will be about $33, $32, $33 million.

Okay, got it. So, secondly, can you give us what is the interest and depreciation as BTPL? And I'm talking about interest excluding what they are paying on the investment which you have made.

The depreciation is around 54 crores on realized basis, and the interest is 50 crores, 50 to 54 crores, and interest on the debt component is around 25 crores annually.

So that is excluding what you have invested, right? That is excluding, yeah. Okay, sir, thank you very much, and all the best.

Thank you.

Thank you. The next question is from the line of Ravi Dutta Mishra from the Indian Express. Please go ahead. Mr. Mishra, please proceed. As there is no response, we will move on to the next question from Avinash Nahata from Parami Financial Services. Please go ahead.

Yeah, hi, thanks for the opportunity. My question pertains to the FTA, UK, and EU. So, what is the legislative or executive action which is pending from both the sides? If you can just explain. Thank you.

So, to start with FTA Europe, there has been an announcement that an FTA will be entered into between India and Europe. This is between the European Administration and Government of India. They're working on it, and what they said was that they will work out on all the legalese and the documentation by middle of calendar 2026. So, June, July 26, they They should come to some sort of an agreement on all the nitty-gritty issues of the FTA, and then it will require ratification by the individual 27 countries in Europe, which itself can be a long-winded process, and it will require ratification from all the countries. So, European administration in Brussels will have to get that done with individual countries. It's a long-winded process. We anticipate it to happen in 2027. The whole process has been gone through by Indonesia as well, which is way ahead in this, and they have, I think, gotten an FTA with Europe. So India should also, provided we have a meeting of the minds on all the various points that may arise from FTA. As far as UK is concerned, all of that is done, and it requires ratification by UK Parliament. In India, there is no Parliament ratification required. It's an executive order. You know, the UK Parliament ratification has not yet happened. I think it is probably due to political events happening in UK, which is probably delaying it. There are a few other issues which have since then cropped up on steel, etc., which is going back and forth between India. Directionally, while there is an understanding that an FTA should come in soon, I think we are seeing some delays on account of political issues as far as UK FTA is concerned. Most of the documentation, or rather all of the documentation for UK has been done. Does that clarify?

Yeah, just a follow-up on this. As far as 27 countries of EU is concerned, for them also, is it they have to go through the parliamentary process or it's an executive decision for them?

I think it's a parliamentary process in those countries.

Okay. And just if you can briefly talk about the labor availability and labor inflation in our country. That's all from my side.

Labor availability is different in different parts of India. So we have operations, for example, in central India and Madhya Pradesh. We have operations in Ranchi. Labor availability is strong. In these regions, in the south and in and around NCR, labor availability is a challenge. We also depend on migrant labors in these regions, and all the time we tend to, you know, encourage migrant labors to come in and settle and work with us. So incremental expansion, we are going into rural areas, hinterland, et cetera, So that we can tap into labor availability. Even in the south, when we go into deep rural regions, we may, you know, from, we may be able to tap into certain labor pockets there. As far as labor costs are concerned, which is a very important point, there is labor cost inflation happening. For example, recently in NCR, particularly in Haryana, the state government announced a 35% wage increase from April 1. So that was in response to labor unrest, high cost of fuels, et cetera, for migrant labor force in Gurgaon, Manisaray, Belt. UP responded with a 25% increase because, you know, what happened in Gurgaon, Faridabad spilled over to Noida, and UP increased. And so these kind of moves can happen in multiple parts of the country, and there could be some labor cost pressures. We will have to deal with these as they come by. An offsetting factor here could be India's rupee depreciation. We will have to continue to explore ways to improve our labor efficiencies or productivities, et cetera. Some amount of labor cost inflation does bring stability in labor force because, you know, we will see less amount of attrition and absenteeism, which may also help drive productivity. But these are challenges that we will grapple with over the next one or two years in India. This is a challenge which will happen across the world, you know, as well, even if it is in Bangladesh, we have seen labor cost pressures continue to mount. If I look at Vietnam, China, etc., their labor costs are of the order of $300 plus. India is still at about $210. So there is still some headroom for us as far as labor cost is concerned. It has to be offset with labor productivity, which is always a challenge, but that's what we let to ensure that we get.

And across the three states, you mentioned Central India, MP, Bihar, and Karnataka. Is there any possibility of operating a second shift?

So, in some region, in Ranchi, we are operating two shifts. In Madhya Pradesh, there is a possibility of operating two shifts, but it's not the entire factory we are operating two shifts in part of the factory. So, we are experimenting with it. In Indian labor force, particularly women labor, do not, They're very family-oriented, et cetera, are not very supportive of working in the second shift. We have been far more successful in Nanshi because the labor force there, you know, are far more amenable to work in the second shift. They're far more open. We're not finding that level of flexibility in the rest of India, but definitely not possible in the south. We do have some success in central India.

So, thanks a lot, and all the very best.

Thank you. The next question is from the line of Bhavika Singhvi from Niveshai. Please go ahead.

Thank you for the opportunity. So, basically, I want to understand from the Vietnam point of view, like, as we see, the region is doing good in the textile segment, and the imports in the U.S. have increased from Vietnam. So, can you make us understand what's the reason behind it, how Vietnam is gaining share from other nations?

Okay. What China is losing, Vietnam is gaining. It's clearly a shift from China to Vietnam. Many Vietnamese players are basically China-based, who are moving their factories or setting up incremental factories in Vietnam, leveraging Chinese supply chain. So, you know, the way the world works is that it's a competitive supply chain, not just between apparel companies. So, China has very large-scale fiber and yarn and fabric ecosystems, which gives very competitively priced raw materials to their apparel manufacturing units. That's why despite their labor cost being high, but apparently labor cost intensive, labor intensive, they are offset with a lower cost of raw materials, fabric, even lower utility costs, et cetera, et cetera. Now, what happens is when the units are set up in Vietnam, due to proximity, the raw materials flow easily between China and Vietnam and then get shipped out of Vietnam. So that partly explains why Vietnam is growing. Having said all of this, Vietnam is also growing in electronics exports, automobile exports, and so on and so forth. So they're a country with limited population, and the labor costs are increasing in the Ho Chi Minh region or Hanoi region. And that will continue to exert pressure on apparel industry. Apparel industry has not been really able to leverage Cambodia, Laos, et cetera, because of political challenges in those regions. Unlike Vietnam, those countries are not that productive from a China standpoint. So, there is a limit or a ceiling up to which Vietnam can grow, but until then, Vietnam will continue to be cost-effective thanks to the value chain that Vietnam has. The labor costs in Vietnam in and around large cities are growing or galloping. You know, around the big cities, it's moving closer to $400, but, you know, lower – the hinterland has lower costs of about $250 to $300 plus. That's more expensive than India, but the value chain benefit continues to provide them that benefit. And lastly, you have to keep in mind that when you look at global trade in apparel, almost two-thirds are synthetic-based, which is polyester and nylon. And in polyester and nylon, China has global quality and global capacities, which India doesn't have. So, for synthetic garments, which are usually preferred in the fall-winter times, you know, these countries do tend to dominate because of their quality of fabric that they have access to.

And so, like, maybe the synthetic demand is going to Vietnam, but what about cotton? Like, is it maybe coming to India, if you can say that?

So, cotton, you know, of course, India, Bangladesh, all these regions have cotton. It's not like Vietnam does not do cotton, but they will have to rely on imported cotton fabrics from China, of course. So, yeah, from a cotton standpoint, from a cotton perspective, India does have its strength. Fabrics-based garments are often used in spring, summer. That's why in the second half of the year, we tend to have seasonality-favoring Indian apparel manufacturers.

Okay, so as of now, just to summarize, we can say that the production that is decreasing in China is maybe shifting to Vietnam, but in the medium term, we can see that the shift can happen to India from Vietnam as well, just to summarize.

And, you know, if you look at Vardaman, right, they have set up a synthetic fabric mill. If you look at India's synthetic garment production is also increasing. Gokulda's leads in synthetic manufacturing in India, and we are doing a lot of synthetic fabrics, synthetic garment production, mainly in outerwear, etc., which is growing leaps and bounds for us. And the fabric for those are still dependent on China, Vietnam, Taiwan, Korea, and all these places. So, increasingly, with domestic fabric coming in, with the likes of Vardaman setting up their units, we will see some additional traction coming for synthetic garments out here, too.

Will it be tough for us to compete in terms of price for synthetic? More competitive in terms of price, right, in synthetic?

Right, because, you know, China is far more competitive in terms of innovation, price, quality, etc.

Yes. Okay, so that will be all. Thank you, sir.

Thank you. The next question is from the line of Sagar Makwana from MAG Securities. Please go ahead. Sir, please use your handset, sir.

Hello.

I would request you to kindly use your handset, Mr. Makwana.

Sorry, sorry, excuse me, sorry. Sir, thank you so much for giving me this opportunity. So, my first question is from current 50,000 meters per month of capacity of BTPL. Sir, what's the captive fabric consumption that Google asks?

I think the captive fabric consumption will be to the extent of about 30-35% of BTPL.

Okay, sir. And so, my second question is, sir, is there any difference in margins for European customers? Like, as you mentioned in your last phone call, that your largest customer is in sportswear segment in EU, and margins are generally higher in sportswear segment.

See, on an average, American customers give better margins than Europeans simply because of volumes being larger, et cetera, and American retailers are larger. This particular European customer is a large European customer, so we do get our run sizes and volumes. But in general, American margins are better as long as there is a level playing between your tariff. When India was on 50% tariff, we lost a lot of margins with America. But, you know, as long as the tariff is normalized, we find American customers better from a simple standpoint that the order sizes are bigger. American retailers are much larger. Europe has a more fragmented retail base. So, to get the same revenue as an American customer, I may need two or three European customers. Europe is also more fashion-oriented, which really means that the run sizes are smaller. So, there are those factors which impact cost margin equations.

Okay, sir.

And, sir, what is the difference between current war and the Russia-Ukraine war from Guphalda's exports perspective?

I think the only current war has really resulted in oil prices being up, which means polyester, polybags, all of those. You know, things have gone up. LPG shortages meant that some of the ovens which we use, which are run on LPG, had utilization challenges. We had to switch to electric components, which took time to, you know, make it effective. So the disruptions on account of the Middle Eastern war has been much more than Russia-Ukraine war, which really impacted European demand, but did not impact supply chains. Here, some supply chain has been impacted. That's the difference.

Okay, okay. Thank you so much. That's all from my side.

Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now have the conference over to the Gokaldas Exports Limited Management for closing comments. Thank you, and over to you, sir.

Thank you so much. I think we continue to take every global shock seriously. We continue to work diligently with our customers. We continue to work to strengthen our leadership team and strengthen our operational performance at every step in order to be resilient to external shocks. We believe that the worst is behind us, and that has tested us and proved to us that we are capable of handling anything that comes our way. Most of our operations were severely disrupted because we had bulk of our manufacturing in India or in Africa, and both regions got the worst end of tariffs, 50% penal tariff in India, AGOA abolishing or AGOA being taken out in Africa, which also changed the tariff by almost 20%, 25% or 30%. So, some of these are behind us, and we feel that we are resilient. It proves that, you know, a strong team can handle any situation. We believe that the years ahead will, you know, benefit from the learnings that we have had and from the operational improvements that we affected in our business now. And we should reap that benefit in the years ahead. I see demand not to be a challenge, you know, except for occasional blips here and there based on geopolitics. And if that is the case, then we should be able to capitalize on the productivity improvements and automations that we have done for delivering continued growth in both revenue and margins. Thank you so much.

Thank you, members of the management. On behalf of Gokuldas Experts Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your line. Thank you.