Gokaldas Exports Limited (GOKEX) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Google Glass Exports Limited Q2FY27 Earnings Conference Call, hosted by EY. As a reminder, all participants' line 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 and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Kasturi Sharma from EY. Thank you and over to you, ma'am.

Thank you so much, Ikra. Good afternoon to all of you, and thank you for joining us. Before we proceed, let me quickly remind you that the discussion on the call today may contain certain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It is important that these be viewed in conjunction with our business risks that could cause future results, performance, or achievements to differ significantly from what is expressed or implied by these statements. Please note that the results and earnings collaterals have been emailed and the same are also available on the company's website. If for any reason you have not received these, please write to us and we will be happy to send them over to you. To walk us through the performance and answer your questions today, we have the management of Gokulda's Exports Limited, represented by Mr. Shiva Ramakrishnan Ganapati, Vice Chairman and Managing Director, and Mr. Satya Murthy, the Chief Financial Officer. We will begin the call today with an overview and highlights of Q2 and the half year, followed by the Q&A session. With that said, I'll let Mr. Shiva take over. Over to you, sir.

Thank you very much. Good morning, everyone. Happy to have you at the earnings call for the second quarter of FY27. The business kept up its growth momentum in the second quarter of FY27. Our India business grew a robust 10% YOY in a seasonally weak quarter, supported by a strong and improved execution. This is particularly notable because overall Indian apparel exports drew only by 1.2% year-on-year over the same period. It reflects continued market share gains through focused execution. Our Africa business delivered a 32% YOY growth on the back of higher volumes and improved realizations. At the consolidated level, income grew a healthy 13% year-on-year and EBITDA rose 48% year-on-year, and improved product mix and productivity gains supported this performance. It was also aided by a lower base in the same quarter last year when U.S. tariffs weighed on both our India and Africa businesses. Wage increases and higher factor costs arising from oil prices limited some of these gains. On the balance sheet front, we continue to work on maintaining a tight working capital cycle. The net debt declined to 429 crores as of September 26, compared to 553 crores as of March 26. Sourcing activity has lagged consumption in key markets. Apparel imports declined across our key markets, including US, EU, and UK, in the year-to-date period, ending August 26. In our assessment, two factors explain this. First, last year's base is high because brands bought shipments forward ahead of expected tariff increases. Second, retailers kept inventory tight through much of this year while tariff picture remained unsettled. Importantly, early signs of recovery appeared in August. Imports into the US and EU returned to positive growth. Looking ahead, the year-end holiday season in the U.S. is expected to remain healthy. The National Retail Federation projects retail sales growth of 4.2% year-on-year. That said, the consumer environment is also becoming more uneven. Elevated inflation, rising fuel price, and pressure on household budgets are expected to affect spending differently across income groups, with lower-income households likely to feel most strained. We expect this to show up as more value-seeking behavior and continued inventory discipline from retailers. That means a preference for shorter lead times, more frequent replenishment, and fewer, more reliable supplier partners. We believe that we are well positioned for this environment. Our customers span value, mainstream, and premium segments, which give us resilience across income groups. Our scale, speed, and execution record makes us a natural partner as customers consolidate their supplier base. End demand is holding up, inventories have been managed tightly, and tax policy is now clear. Together, these point to a gradual recovery in sourcing volumes over the coming quarters. The past few months have brought much-needed clarity on trade policy. In the U.S., the final Section 301 tariff rates took effect on 24 July 2026. They placed India on an equal footing with several competing sourcing countries, including Bangladesh, Cambodia, Indonesia, Sri Lanka, etc. India also has kept a clear advantage over China and Basin, both of which face about 12.5% tariffs. This is a significant turnaround from a year ago when Indian apparel faced additional duties up to 50%. For our Africa business, Agoa has been extended through December 28, including the third country fabric provision. This gives us visibility for several years on preferential access. UK comprehensive economic and trade agreement has been enforced since 15 July 26. It gives India duty parity with Bangladesh and Vietnam and a meaningful 12% duty advantage over China. In Europe, the India-EU FTA is expected to be signed soon, which will further strengthen India's competitive position in this region. Thank you. Thank you very much.

We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone 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'll wait for a moment while the question queue assembles. The first question is from the line of Harshit Gulecha from Flare Investments. Please go ahead.

Hello. Yes, sir. Yes, sir. Am I audible? Yeah, good afternoon, sir. Sir, I'd just like to understand the demand is great in the market right now, but are we also finding the skill, proper skill for suing because we are listening everywhere. There is lack of labor or the creativity is lacking a lot.

No, I don't think we are facing that. I mean, wherever we are facing shortfalls, we are using migrant labors, particularly in the south. And our incremental expansions are all happening in central India, eastern India, where we don't seem to have any concerns as far as labor availability is concerned. So we're not seeing a significant labor challenge. We have found ways to manage. In addition, we run training camps in most of Central and Eastern India, all the way to Northeast, including Arunachal Pradesh. So we are conducting training camps there and then sourcing our employees or prospective workers from some of our own run training programs in those regions. So we have a manpower pipeline process put in place, and this is serving us adequately.

Okay. So, are we also seeing any help from government also, sir, in creating the skills in India?

So, there is a DDUKGY program, the Nupadhyay training program. So, we are utilizing that, but largely the effort is done by the company in, you know, training and securing the workforce. Okay.

So, sir, manufacturing capacity and execution capability with FTAs, opening up opportunities in markets such as Europe and UK, Indian government manufacturers could potentially receive significant large orders, sir, and the industry currently has significant manufacturing capacity to execute these. Do we have enough orders, sir, like enough manufacturing facility?

We will have to continue to expand our manufacturing facilities. You know, we are doing that. So, for example, our bulk of the growth in capacities will happen in Bhopal and Ranchi, where we have facilities running, and we are working towards it. For example, we are setting up a thousand machine factory in Rajji, we are expanding our capacities in Bhopal, all of those, in addition to expansion in other regions, but these are principal areas where we are expanding. And we continue to expand because we have visibility of growth in business. There's a lot of European growth which we are anticipating post-FTA, and that will also aid our continued growth in the quarters and years ahead. So we do anticipate that, and we are in turn creating capacities aligned to it.

Okay, so like there is no problem with manufacturing issues. I am talking general market access, sir. Okay. So the next one, sir, the suing machinery import restrictions have come a lot, sir. Finally, there have been some reports regarding restrictions on the import of suing machines. Could you clarify whether there are restrictions applied to household suing machines or only the industrial government manufacturing machines?

Here, we don't face any sewing machine import restrictions. I'm not sure about households, but as far as industrial imports are concerned, especially for export-oriented manufacturers, we don't have any such restrictions in place, and we have not seen any problems on that count.

Okay, given that the advanced industrial sewing machines involve sophisticated technology, and India still depends significantly on imports for such equipment, could these restrictions adversely affect the industry's ability to expand capacity?

Sir, we have not faced any restrictions so far, and we don't seem to have any problems in securing any technology for our purposes.

Shaman, last question, sir.

Sorry to interrupt you, Harshit.

Okay, just one last question. Ultimately, do you believe India is currently equipped to capture the incremental government orders arising from FTAs, or will it take another two, three years to build a required manufacturing capacity, skilled workforce, and supporting infrastructure, sir?

No, no, it's always a ramp up, and we do have the ability to ramp up and grab the... All these businesses will come, you know, in flows. So as and when an FTA happens, for example, India-UK FTA happened in the middle of 2023. The real impact will be seen in FI-28 because most of the orders for this current financial year was done by then. So, you know, these growths do tend to come with a phase lag and it will get built up. The buyers or the brands will also have to take time to move orders from other regions. Indian manufacturers will also take time to build the capacity and ramp it up and settle down. So all that, this is a trajectory. If you look at when Bangladesh got LDC status many years ago, probably a decade ago, their growth started ramping up or rather galloping, and they were growing at about 11% or 10% year on year. Many companies grew much faster. So, growth happens, you know, in waves and phases, and it will be sustained over the next several years.

Harshad, please rejoin for our follow-up question. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, Please limit your question to two per participant. If you have a follow-up question, please rejoin the queue. The next question is from the line of Jignesh Kamani from Nippon Mutual Fund. Please go ahead.

Yeah, I see your answer, yeah. Just from the Atraco segment, I think we started taking the phrase order at the revised price from last, I think, third and fourth quarter of last year. So, despite that, we have seen the deepened margin at least sequentially. So, what explained that and what is current outlook based on the order book and the increase in the order, what kind of margin Atraco can do currently?

So, you know, second quarter is a seasonally weak quarter for a traco, and that is what it reflects. So, when you have a large capacity and seasonally, there is a weakness in terms of order book, which happens in the second quarter, there will be a little bit in margin because of the fixed cost impacting it. In fact, if you look at the order book for the quarters ahead, it is fairly robust. And if I look at FY28, we seem to have a strong surge in demand from some newer customers as well as existing customers who want to diversify into Kenya, in particular to take advantage of the duty differential. So, a lot of customer discussions are going on. We've actually secured two new customers in Africa, which will start from April onwards, one American and one European. So, there is a fair amount of demand. One of the things that we are, you know, looking at in the quarters ahead is also rebalancing our portfolio with respect to the right set of customers. So, you know, there could be a movement from one customer to another just so that we have a strong, profitable and suite of customers and product types that we work with. So, going forward, I think the margins will improve and, you know, the order books as well as the pricing is aligned towards it.

So, maybe six months down the line, can we hit to around 10% kind of margin or still journeys a little bit far ahead?

Six months down the line, I am confident that we should be at the 10% EBITDA margin.

Understood. And how is the efficiency improvement and the margin improvement at BTPL? And if you want to say merge right now, chapter one quarter, can you give me some profile about what kind of data and the R&BTPL is having right now?

So, BTPL, you know, currently, if I look at Q2 revenue, it is of the order of about 170 odd crores, with Q3 revenue going to about 225 odd crores revenue in Q3. In Q3, we are expecting BTPL to be EBITDA break-even. In Q2, the EBITDA was slightly negative. And in Q4, we are expecting the revenue to go to the region of about 250 crores or thereabouts. And we are expecting, or we are working towards the PBT level break-even. So, we are working towards that.

And on the working- Does that answer your question on BTPL? Yeah, on the working capital cycle and the debt level, or the BTPL.

Okay. On debt level, currently BTPL is at about 300 crores. We are trying to manage the working capital tightly. So, as and when we go towards Q4, when the revenue will be 260 odd crores, we will still try to manage it at about 300 crores of working capital level in BTPL.

Understood. So, once we merge, 300 crore debt will be added to our books, right? Roughly.

Yes, correct. Dignesh, as of September, we are at 423 crores net debt level. At the year end, when we close this financial year end, including BTPL, we are targeting to end at around 650 to 700 crores. Remember, this is after taking, we started with 550 crores at the beginning of this financial year, so after taking it upon this 300 crores, we are targeting around 650 to 700 crores. We'll be also, you know, we have also accounted 80 to 100 crores settlement to BTPL shareholders in cash component, and all the capex and working capital, whatever we incur here in this financial year will be funded out of, all those has been built in, and accordingly, the number we should end up with around 650 to 700.

Understood. Thanks. Thanks a lot.

Thank you. The next question is from the line of Rohan Samantha from Motilal Uswal Financial Services Limited. Please go ahead.

Yeah, thank you for the opportunity. My first question is where, I mean, when we can see a double digit volume growth in India, like most of our peers are growing minimum 19% of volume and we're growing hardly 5%. So can you please put a light on India business? And another point is that the realization if you look this quarter, I mean, not for us, for every, most of the textile company having a huge realization growth, but with this realization growth is sustainable for H2 or maybe FI28?

Double-digit volume growth, we should start seeing from FI28, and we are, you know, seeing a fair amount of growth, even starting from Q3 onwards. In fact, revenue growth will be at strong levels. We are very margin conscious also, so we make sure that we're not simply chasing volumes, but I'm confident that next year there will be double-digit volume growth. In Q3, definitely revenue growth will be very strong, and the volume growth will also be pretty reasonably strong.

So other is that a realization of momentum, is it sustainable? Because if in this quarter, half-year-old, we see the realization of growth was much higher compared to volume growth. So this pricing for prices is sustainable or not?

It is sustainable, and it depends on product mix. Usually, in Q1 and Q2, we have a higher realization simply because we tend to do a lot of outerwear, which are higher ASP garments. We have certain customers who are more oriented towards autumn-winter wear. In fact, we are seeing a very strong traction in that space. So, when I look at autumn, winter, you know, Q1 and Q2 of FY27, which will be actually production in Q1 and Q2 of FY28. We are seeing a strong growth in those product types, including volumes. So, not only are the ASPs high, but we are seeing a pretty strong volume growth also for Q1 and Q2 next year, based on the early projection discussions that we are having with customer. So, yeah, I mean, you know, that's usually Q1, Q2, we will have a higher ASP product growth. Q3, Q4, it's spring summer, but on an average, we tend to work with higher ASP products. And then that will be maintained or improved.

And so in the follow-up in the India business, the capacity in last year, we had a 52 million including metrics. How we're looking the total capacity for by 29, another 15, 16 million, we can add this Raji and your Kandataka field and the Bhopal one.

Just a second, now.

What kind of topics then we're looking in that case for next three years?

I think our capex, you know, for instance, this year we are planning about 150 crores, we might ratchet it up to 75 crores based on the volume growth. The projections which I am getting from certain customers in the years ahead would necessitate us to work a capex in excess of 200 crores in the... Three years, every year, because there is a fair amount of, you know, business traction that we are seeing from some of our customers going forward. You know, forward-looking projects are very strong.

So the combined capex for next year would be in the range of 450 to 500 crore.

I mean, there's a lot of disturbance in the line. Can you say that again?

So basically, the combined capex from FI 26 to 29, it would be in the range of 450 to 500 crore?

From FI 26 to FI 20? 29. Yeah, it would be about, say, 150 to 175 this year, and say at least 200 in the years ahead. So yeah, that's correct.

What could be the tax rate going forward? Because we have some BTPL losses and all.

So on a half year, tax rate going forward will be low because once the BTPL asset merges with us, we will have accumulated losses coming into the company. BTPL carries an accumulated loss in excess of what, 600 crores or thereabouts. And hence, there will be a... Tax Shield, which will come from there. Some of the subsidiary entities in India will continue to be taxed as the tax will apply to the parent entity or the standalone entity. So our tax rates will probably stay low for some time to come, very low. It will be, it will approach near, it will be near zero or maybe.

So, for the full year, BTPL, can we add the four months, can we add 130 to 140 crore in our top line?

You know, there's so much of disturbance in the line. Can you repeat the question?

So, I was asking for the four months, BTPL, can we add 130 to 140 crore in our top line in FY27, BTPL?

In FY27? Yeah, I think so. So, if the fourth quarter revenue is about 250 crores. I think we should be able to add about two-thirds of that.

Okay, thank you so much.

Thank you. The next question is from the line of Sunny Vishay from Prabhuda's Leela Dal Capuchin. Please go ahead.

Yeah, thanks for taking the question. It's more of a follow-up from earlier two questions. So, in Africa, you said the quarter is seasonally weak, but even on year-on-year growth, the growth in first quarter was somewhere around 44%. That has now dropped to 32%, I think. So, the utilization has again dropped to close to 40%. So, do we expect the utilization to remain so low in the next two quarters? Because the two new customers, you said, will be starting to contribute from April onwards. So, for the next two quarters, what are the expectations in terms of the utilization?

The African business for Q3 and Q4, we have a fairly strong order book, and I think we should see growth from Q2. In that sense, Q2 is the plateau or it is the trap, and from which growth will be robust. And there will be a robust growth in FI28 also. In FI28, I would see at least a 20-plus percent growth, if not more, in FI28. And due to three onwards, there will be a robust growth.

Okay. Okay. And another follow-up on the earlier question. So, realizations, you said, again, realizations also have seasonality effect. So, those may drop season, right? Hello.

So, seasonality effect. What happens is when the seasonality effect hits, in that particular quarter, there is a drop in revenue, and fixed costs then tend to, you know, as a percentage of revenue increases, which is why margins tend to drop in Q2. But then it bounces back in the subsequent quarters.

So, does that mean the average selling price that we have achieved in India and Africa, this is sustainable in absolute terms for the next two quarters?

Average selling price is a function of product type. Usually, it will be higher in Q1 and Q2 and lower in Q3 and Q4 because in Q3 and Q4, we make a lot of... Spring, summer dresses, tops, and shirts, etc., which are lower ASP garments relative to the outerwear that we tend to make in Q1 and Q2, which are autumn, winter wear. So, when we look at it at a per garment basis, the realization per garment will be always higher in Q1, Q2, vis-a-vis Q3, Q4. Naturally, in Q3, Q4, the volume or the unit quantity will go up to occupy the manufacturing volumes that we have.

Right, but on year-on-year basis, there will be a realization group. So on comparable quarter, it will be better. And finally, a couple of bookkeeping questions. One is, any orders you see that have it pre-booked? Because I think there has been a buzz that given the longer freight time, some of the holiday orders some companies are delivering have delivered in September itself. So, do you think that some of the Q3 volumes have already been recorded in Q2?

We have not seen too much of it. We do tend to work on shorter late-time orders, usually, and we have not seen any pre-book and Q3 getting advanced into Q2 compared to the previous years.

Finally, would you be willing to share the volumes and...

We have actually merged Matrix and Gokuldas because you know a lot of our current orders in Gokuldas is now being manufactured in Matrix factories etc. So literally that old division between the two has become infructuous as all India businesses are being run as one business with one set of management team with factories becoming fungible. So, purely carving out the erstwhile matrix business may not be the right way to look at it also.

Okay, understood, sir. Thank you. Thanks a lot.

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

Yeah, thanks for taking my question in Congress and a good set of results, sir. Sir, I just have two questions, mostly on the industry part. So, recently, we've been hearing news that in Bangladesh, the government facilities are getting shut. There are some protests and all these things are happening there. So, very early to say, but do you see in the future, in the medium term, some demand shifting to India and any incremental orders coming from India?

This happens in Bangladesh from time to time, where there is a clamor for higher and higher wages in Bangladesh, because obviously the wages in Bangladesh are insanely low. So clearly, you know, an inflationary environment with oil prices being high, etc., is creating a situation where Bangladeshi workers tend to push for higher wages. If you recall, three years ago, there was a substantial increase in wages in Bangladesh. At that time, it was almost a 50% increase in Takata. And now again, they are demanding from 12,500 going to almost 30,000. But it may settle down. There is a baseboard. You know, an opportunity in terms of European business. You know, seeing FTA benefits or, you know, by delivering out of India. So, it's clearly an opportunity for India going forward. So, that is happening. But I wouldn't bank too much on Bangladeshi disruption to last long. So, while, you know, from a risk mitigation standpoint, many customers are actively seeking capacities in India from all of us, the Bangladeshi business is not going anywhere. Their economic argument for delivering out of Bangladesh remains robust as long as the wage costs there remain low. And because a lot of political interests are tied into the government industry there, you know, they will, at least historically, they have tended to manage to keep the wage costs or wage increases fairly low. In the past, increase in wages were offset by depreciation of Taka. We have not seen Taka, too much of Taka depreciation in the last one and half two years. So we got to see how the currency plays out. But having said that, you know, the bigger factor as far as Bangladesh is concerned would be how is the LDC tending. So, you know, there is a least developed country status which gives them zero-duty access to Europe. And that is expiring in November 26 with a three-year grace, which will technically expire in November 29. So, if that is not getting extended, then, you know, India, which will in the future have zero-duty FTA with Europe, and Bangladesh, which may lose the duty-free status, that may have a much bigger play on movement from Bangladesh to India. Uncertainty, but it may not significantly move the business.

Fair point, sir. Just one more question. So, I just wanted to know what is currently your regional mix, and why I'm asking that is because this EU FTA opens up a lot of opportunities for India, right? So, if I'm right, please correct me if I'm wrong. If I'm right, the... The EU realizations, any order from EU, client realizations from EU would be higher than what it is in US, right? So I'm just trying to understand if over a period of time your EU and UK salience moves up, so your realization should improve further. So that's what I basically wanted to understand.

So, our current European business, which includes UK, would be about 15%, and we intend to take that up pretty significantly. In fact, our growth of European business is very, very strong, and based on certain projections from our European customers, we anticipate that to remain fairly robust. You know, some of those customers are growing at some 60-70% YOY. So, that tempo of growth will be sustained. My sense is that it may also, over a period of 4-5 years, grow to about 25% of total revenue. Having said that, we have not seen too much of difference in profitability between European and American customers, simply because the customers that we choose to work with and the products we choose to work with, we make sure that we have the minimum threshold margins. Normally, I find U.S. margins better than European margins, simply because we get good amount of run sizes. It's a more homogenous market. Also, it is a market where, barring Africa, which gets reduced duty access to U.S., you know, from all other countries, the duty structures are similar. So, you know, unlike Europe, where currently at least, you know, Bangladesh enjoys the duty-free access, until that gets balanced in India, you know, balanced to India's favor, you know, European customers do tend to expect us to serve at or at least match the Bangladesh landed duty paid price. So, margins in Europe are not lower than US. Having said that, the business that we do, we tend to expect and get equivalent margins from both regions.

Okay. Thank you so much.

And once the duty free access is restored, probably a margin for Europe will also improve. Because that gives the additional play of duty saved.

Okay, sir. Thank you and happy D-Bali.

Thank you.

Thank you. The next question is from the line of Vishal Mehta from IISL Capital. Please go ahead.

Yeah, hi. Thank you for the opportunity. Shiva, my first question, can you hear me well? Yeah, yeah. Yeah. So, my first question was on Africa. So, in OneEdge in Africa, we've done like $45 million kind of revenue. Earlier, I read that, you know, with the expansion coming in, we should probably target this year in Africa to reach around $110 million to $120 million kind of revenue rate. So, any change in that guidance or we stick to that $110 million, $120 million for this year in Africa?

So, we do have, you know, a visibility to go to that level. You know, we do have visibility to, you know... 60 million kind of revenue in Q3 plus Q4. Having said that, we are actively kind of slowing down on one of our customers there, where, you know, we are anticipating that customer's financial strength to be a bit weak. So, we want to be careful before we really commit to that volume. So, that is the only concern I am having. So, you know, at this moment, we are not anticipating any credit loss kind of situation. Having said that, Lamping up to the fullest extent. So, there is a little bit of that, else we could have easily ramped up to 60 million. In H2, I'm sorry. Probably will be. Abundant choice of customers to ramp up without fear of any customer-related challenges.

How big is that customer as a percentage of African revenue?

It is about 20-25% revenue, but at the moment, yes. And they are usually a little H2-heavy customer, spring-summer customer.

Okay. So, we'll completely ramp them down this year.

We want to ramp them down rather than keep them in place as a measure of de-risking rather than go all out. So, that's a call we are still in the process of taking. We may take the call and end up doing.

Shiva's second question was on margins. So, obviously, you know, there have been sharp input price rise in 1H. We've also seen sequential dip in margins in 2Q. For 2H now, is the price pass-through, you know, achieved, both in India and Africa? And how are you looking at margins at India and Africa in 2H?

Okay, good question. So, there are multiple factors at play in 2H, right? One is, you know, some of those input costs are being passed through back to the customer going forward. Second, there is an exchange rate benefit that we will get. So, in Q2, for instance, our exchange rate, because we hedge our foreign exchange receivables, our exchange rate was at about 91 rupees. In Q3, we are holding an average hedge at about 93, and in Q4, we are holding it closer to 94.50 or 95. So, there is a 2 rupees gain that we will get in exchange rate in Q3 and another, you know, 4 rupees gain in Q4. And itself is about 1.3-1.4% in EBITDA margin. So, that's an additional gain that will come purely out of exchange rate. Then, you know, until... Q2, there were some discounts that we had passed on to our customers. Effectively, that was about of the order of 0.5% of total revenue, gross revenue of the company. So that is no longer in effect from Q3. So that is an added margin gain that we will see from Q3 onwards. And some of these input factor costs, we are now pushing it back into our pricing as well. So those will yield a little margin upside in H2.

Sure. And my last question on capacity, you know, are the, you know, Bhopal phase two and the brownfields done last year in Karnataka, Jarkun settled and ramped up now? And you'd also guided for, you know, two, three thousand incremental machine additions in addition to the brownfield done last year in Karnataka and Jarkun. So how are we placed there and any new large greenfield on cards or will still continue with small brownfields here and there?

So, all those expansions are done, and, you know, Bhopal phase 2 is on a ramp up as we speak. So, by this financial year end, that phase 2 will be fully ramped up. Ranchi, we have started work on a new factory, which is a thousand machine factory, which you run in two shifts. So, effectively, two thousand machine factory. Two thousand machine factory effectively will contribute 400 crores in top line. And that we anticipate to be ready for wrap-up. So, around third quarter, middle of third quarter, ramp-up will start, so the revenue contribution for that largely will come from FI 29 onwards. And we are looking at... Two more factories, based on projections that we have from our customers, a minimum of two more factories of 1,000,000 machines each, which effectively will contribute to another 400 crore top line. Brownfield demottlenecking is a continuing activity. At least across the board, we will realize 4 to 5% extra revenue from demottlenecking in all the factories. So that's an ongoing... Let's see how the bottlenecking effectively happens. That we run those projects everywhere.

Just follow up here. If you can give revenue capacity right now, you know, considering Bhopal phase 2 fully ramped up, and what will be the revenue capacity after, you know, you have this ranchy 2000 machine factory coming in?

So Bhopal will be about a period of million in India. Bhopal 2 will be 3.5 million minutes.

3.5 million. Revenue will be about 200 crores, and ranchi will be 400 crores, so it's about 600 crores, and then, you know, additional factories will come in the multiple of 200 crores, which we are working on, and deep octetecting itself can yield about 4 to 5 percent across the board in India. So, on a revenue base of about... We will have a...

Okay, so $3,000 goes to $4,000 probably by end of next year in revenue capacity.

Yeah, that's right. Capacity-wise.

Yeah. Okay. Thanks. That's all. Thank you so much. All the best.

Thank you. The next question is from the line of Saurabh Srivastava from Arista Consulting. Please go ahead.

Hello.

Yes, sir. Audible.

Good morning, sir. Sir, my first question is regarding Agoa. It has been signed retrospectively. So, are we expecting any sort of refund from the clients? First question. Second thing, are you also targeting some loss-making units which can be later on merged with the Gokuldas so that that tax benefit can improve going forward when the current one is exhausted, sir? And third is, sir, what is utilization going as of now? These are the installed capacity, sir.

Okay. So, AGOA, there is no refund expected because we sell FOB, and when we sell FOB, the duty incidence is picked up by the customer, and hence the refund also goes back to the customer. So, we don't tend to either pay the tariff or receive tariff refund. So, there is no refund expected. As far as, you know. Tax benefits are concerned. I think, you know, our Africa business will continue to remain tax-free primarily because of the structure there and tax holidays that that enjoys and the fact that the revenue is booked largely UAE, which is a tax-free zone. As far as India is concerned, we will... Have a tech shield going forward. And, you know, are we actively seeking out loss-making entities? We are not. We don't look at the business from that perspective at the moment.

And third, sir, capacity utilization of the installed capacity in percentage terms. How much are we utilizing enough now?

I think in India, we are, you know, we are, I would say we are utilizing, in Q3, we would be utilizing close to about 90 to 93% or, you know, thereabouts, and in Africa, we will be utilizing at about 80, 85%, and that also will be climbing up.

Thank you.

Thank you. A reminder to all the participants, you are requested to restrict your question to two per participant. The next question is from the line of Ashish Upganavar from InvestQ PMS. Please go ahead.

Yes, sir. I have a broader question. Basically, if we look at the turnover of the company that has doubled in the past four years, but our profitability or the profits have remained the same. So, a few reasons for that, one, margins are a bad bit lower, interest costs have gone up and depreciation has gone up with the capacity and expense and the acquisition that we have done. So, all in all, I mean, all the expansions plus the problems that we had with the tariffs and stuff, everything seems to be getting over and in the balance sheet. So, what do you expect to deliver maybe a year and maybe a couple of years now? Because the base seems to have set in. If you could guide us on that, that will be helpful.

In my opinion, Q2 is, you know, I think, you know, from a financial standpoint, right, I mean, of course, the base has settled, and there will be growth in revenue across all the business units of ours, and in fact, you know, a large amount of investment, big investment, heavy hauling, would also get completed by Q3 when BTPL acquisition-related monies will go in. From Q3 onwards, I can see that there will be stronger revenue growth and margin growth. As I mentioned, some of the currency-related benefits and tariff discount-related benefits will kick in. I just alluded to that answering the question before. So, margins will go up. Our top line will grow. So I think growth will start from age 2. We will see a pretty significant growth happening from FY28 onwards also, based on some of the discussions that we are having with our customers and the volumes that we are anticipating from...

Okay. So, do we see deleveraging also taking place because interest cost has been hitting the P&L? That is one thing, and we have that incentive from the state government on the rebate that remains lingering from India perspective. So, all in all put together, do you see maybe from 150-odd crores of profit that we delivered for the last four years average, this can be maybe around 250-odd crores plus? Is it possible?

In my mind, it will be much above the numbers that you indicated in the F from FI28 onwards itself, right? I mean, you mentioned about 250, right? I think it should be far higher than that based on how we are looking at the numbers. So, you know, simply because, you know, there will be A, growth in top line, and B, margin yield itself, right? So, for instance, Every 1% improvement in margin will actually yield, on a quarterly basis, I'm saying, on a 1200 crore, roughly, top line, we are talking of additional 12 crores, right? So, you know, we are talking of exchange rate benefits tariff, plus our pricing has improved, you know, all of those, those will kick in, you know, operating leverage will kick in. So, you know, there will be those additional... from FI28 onwards itself.

But the rebate, sir, what is the status of that?

The export, the R-O-S-C-T-L. So that is work in progress. You know, there are a lot of discussions happening with the government of India. Subject to that, you know, I really don't want to jump the gun and say anything. But there are, you know, there are discussions to continue this in the interest of... You know, protecting labor intensive business. This rebate is not technically a rebate. It is actually refund of embedded taxes. There are a lot of diesel plus electricity duties plus money taxes. All these are actually embedded, which are not vettable or, you know, GSTable, which is what comes in as refund. So, there is an expectation that it will continue in some form fashion, even if it... The worst case will be it will get reduced by some extent. So, ROSCTL, for instance, for us, is approximately 3.5%. Even if that goes to half, it will be 1.75%. You know, those are kind of amounts which we will easily absorb through further efficiencies and, you know, production efficiencies and improvements. In fact, we see wage cost increases. In fact, this year our wage cost increase itself has been about 8-9% and wage being 25% of our revenue, the impact of that itself was over 2-2.5% and we have absorbed that. So, I am not particularly concerned about that we will be able to absorb. In fact, we are working towards absorbing that in the quarters ahead.

Sure. Thank you so much, sir.

Thank you. The next question is from the line of Kumar Saurabh from Scientific Investing. Please go ahead.

Congrats on a good set of numbers, sir, both on the P&L as well as on the balance sheet and cash flows. My first question is, sir, on slide number 16 where you have discussed the inventory de-stocking. At the same time, you also mentioned that September has shown the first positive growth of 14% versus a minus 6%. And given we are done with October and November is also shaping up, based on your experience continuing with September, How you are seeing this trend shaping up? Is it a continuous trend improving if you give some color to it?

So, we will have to see those numbers will be, you know, these are aggregate imports. So, you know, I can't extrapolate Gokuldas' numbers because we are seeing growth, but that doesn't mean that aggregate imports will be growing or declining. We will have to wait for the numbers that the U.S., you know, trade bodies release. But my sense is that, you know, U.S. imports have been on a downward trend for almost a year, while the retail sales have been on an upward trend. So, inventory de-stocking has been there. Now, whether anybody can sustain at these low levels, I'm not sure. It also will be heavily dependent on the holiday season sales. That's between Thanksgiving and December. If that goes well, which is what the prediction says, right, there's the 4% growth expected this holiday season. If that happens, then I think the buyers will come in strongly for next year. The worry which many retailers have, which is what is baked into the lower imports, is that in the next year, calendar 27, high inflation, high oil prices, if a round war continues, etc., what will happen to consumer sentiment? Consumer sentiment so far has bucked every trend and has continued to be robust. So, we need to, my sense is if consumer sentiment is good, holiday season sales are good, there will be a continued improvement in U.S. imports. And same will apply in Europe.

Got it. Sir, my second question is, in the last one and a half years, we have done fair amount of consolidation. And in Q4 or Q1, certain guidances have been given, of course, with a range on, you know, how Africa will scale up the margins, the BTPL consolidation, India. I'm not asking on each of the parameters, but looking at overall things, whatever guidances on margin and growth has been given. From the lower end, I'm not asking the upper range, at least the lower range, are we certain that, you know, all of these things are going in the right direction, where, you know, the African margin, BTPL margin, Africa margin, India margin, the lower end of the growth and the margins we should be able to achieve? Okay, okay. And the last question on the working capital side, I think there has been some improvement in the working capital. If you could some color on how we will land on the working capital days this year and FY28 if we have some visibility into it?

On an average, we are targeting around 75 days. We are, the only challenge, even though we have achieved 72 in this quarter, we should budget 75 on an overall basis. We are still working on some working capital improvements, especially in, you know, a track operation because there, because of the supply chain related issues, we are stocking up and there, at least about 20 days, incremental working capital days is being deployed over there. I do not see that get released in this financial year, but at least in the next financial year, it will get addressed. So we are working towards that. We see at least, you know, 75, we should be able to steadily maintain, while our internal target is a little lower than that.

And one last question, sir, in most of the textile calls, and I think even in your commentary, the EU trade deal, it seems to be that we are very close to it, and it should happen. So, all the targets which we have met, is this EU deal already a part of it, or let's say this deal goes by in the next one or two months, do you see any additional benefits coming in out of it?

No, see, any benefit from a trade deal will happen only after the trade deal is announced. Nobody gives incremental business anticipating a trade deal because, you know, at this moment, any exports to Europe goes in at 12% duty. So, you know, commercial benefit, every buyer is commercially savvy, and the real benefit flows only post an FTA benefit kicks in. Now, that's point number one. Point number two, orders are placed at least four to six months in advance. So once a trade deal happens, for the next six months, most of people will be working on orders obtained prior to the FTA being in place. So the real impact will come only six months later. So real benefit of EU FTA, let's assume that it comes in first quarter of next calendar year or second quarter of next calendar year, the benefit will start really flowing through by end of 2027 calendar.

Great. Thanks a lot, sir. I wish you a very happy Diwali, and congratulations, and wish you all the rest for next quarter.

Thank you so much. Happy Diwali.

Thank you. The next question is from the line of Sherish Pardesi from Motilal Oswal Financial Services Limited. Please go ahead.

Hi, Shiva and team. Good afternoon, and thank you for the opportunity. Just two, three points which comes to my mind. In July, we had a tariff clarity in the U.S., and then we also have a clarity on Ammoa extension. I'm not looking too much into Bangladesh unrest, but I'm more keen to understand, is there any meaningful change in the client behavior? And the reason why I'm asking is that now autumn is there, winter is, you're talking about big numbers. But is there actually a client is giving you a why? Because when you share the ODEXA data, I think the U.S. inventory is coming down. Now, I fail to understand why it is like, or is it a natural phenomenon that August inventory is not the way we should look at, and there would be some shipment delay which would have got recovered in the month of September?

So, I think the U.S. imports are largely dictated by... By, you know, the fear of American customers in, you know, mass market retailers are actually leading that, you know, inventory de-stocking or, you know, reduced buying, primarily fearing that there is an inflationary trend in the economy, it is not yet worn out by retail sales at the moment, right? So, there is a fear that they will foresee a lower sale. This is the fear factor. So, what they tend to do is that instead of ordering well in advance, Americans have a much longer ordering cycle, unlike the Europeans. So, they are coming in now closer and closer today. So, effectively, when the lead times shrink, There will be a period where while retail sales can continue to be high, your buys can continue to be low because your need to stop that much inventory will be less because lead times are shrinking. And people are driving towards that. Most retailers are driving at lead time shrinking. For example, in, you know, our Q4 order book got placed now, which is effectively, you know, going to be sold in retail in summer 27, which is no way out. So, you know, we are talking of July, August, September next year, right, for which, you know, I hope I have answered your question, but if your question was something else, then Then, do let me know.

The basis of information is quite different. The retail sales during my business... The retail sales is happening, but the disconnect is that the export data, which is showing the lower number. So, I'm just seeing a fear that if the business is getting diverted to some other countries like Bangladesh or maybe some other countries, because now we have the answer.

Sorry, sorry. Are you talking India's exports or total US imports?

No, no. India, I mean, US apparel import and India export.

So, okay. So, India Apparel Export, yeah, see there are multiple things here, right? So, we don't tend to track too much on India Apparel Exports because, you know, that is at a whole country level and there could be tariff related or multiple other reasons. Typically, you know, Gokulda's does not track, or larger companies don't track the countries' apparel exports. We, you know, there is a consolidation towards larger suppliers, and in India, the number of larger suppliers are fewer. In Bangladesh, there will be many more larger suppliers. Vietnam, there will be larger suppliers. So the general consolidation towards larger suppliers then tend to favor other regions. But, you know, I wouldn't read too much into India apparel exports. Read more U.S. apparel imports and then see how that trends. Because for Gokuldak, that will be a more appropriate...

Thank you. The next question comes from the line of Neeraj Mang Sinka from White Pine Investment Management, Private Limited. Please go ahead.

Yeah, thank you for the opportunity. I just wanted to know on this revenue capacity, if you break down the three parts of the company, standalone, India and BTP and Agoa, what is it right now and what it would be, say, a year and a half, a year from now?

So, first of all, standalone is not India. So you have to understand that. There are a lot of other, like, you know, our Bhopal entity is not part of standalone. It's a different entity, which we have set up for PLI reasons, etc. So, and also getting tax benefits. So, you know, India is not standalone. I meant India.

Sorry for this. I meant India.

Okay. So what's the split between India at RACO and BTPL, say, next year? That's what you're asking?

The revenue capacity, yes.

4,000 crores. Africa will be about 1,250 crores. Okay. Revenue capacity. And BTPL will be about, I would say, 1,200 crores revenue capacity. So, to the extent that Gopaldas buys from BTPL, that will be netted off as it will be an intra-company transfer. So, out of that, you could assume some 35% netting off.

Okay. The other question is, you said India's utilization. I think you're talking about the revenue capacity year down the line, right?

Yeah, 28, I would say.

Yeah, and what would be the EBITDA margin of these three entities if they reach an optimal utilization during that time?

So the India EBITDA margin in my assessment should be 18%. The Africa EBITDA margin should be 10% and for the first year, which is FI28, the BTPL or the Fabric EBITDA margin should be 10%.

And you have fair visibility of the optimal utilization today, right, for those capacities?

Yeah, we can see that here.

Okay, so going forward henceforth from there, What are your thoughts on your growth? Like, you said that you were looking at two more capacities in India. So, how are you thinking? Yeah, because this is an opportunity, the Europe and the U.S. opportunity has suddenly started looking positive.

Let's start, right? Because, you know, after the startup challenge, which I think she reached was also a new... I am seeing a fair amount of traction for India-related growth. Supplier consolidation, for us to target a 15% growth is not that much of a challenge in our parallel. Okay.

And henceforth, you would be looking at putting up assets after those expansions in FI28 is over. You are already looking at them right now.

We are already planning those expansions and aligning those expansions because it takes time to build a factory store.

Yes, yes, yes. Okay, that's all. Thank you.

Thank you. The next question is from the line of Tushar Donde from Sangvi Family Office. Please go ahead.

Hello. Hi, Tim. Most of my questions were answered through previous participants' questions only. I would like to just draw your attention back to the Rothschild scheme. If you can share the number. I guess you mentioned some number that we are dependent on the Rothschild scheme, and how do you plan to offset the dependency if the Rothschild scheme were to not extend from December onwards?

So, ROSCTL comes in at about 3.5%. Duty drawback for us is about 1.5% to 2%. Duty drawback, we anticipate it to remain. So, ROSCTL 3.5%, there is a possibility it may go half. If it goes half, then it is 1.75% is the drop in that ROSCTL numbers or percentage. And that 1.75, we will absorb in pricing, we will absorb in our productivity, etc., going forward.

And this percentage is of EBITDA.

Yeah, 1.5% of the revenue is this, you know, ROSATL comes then on export revenue, right? So that's the percentage, yeah.

No problem. Thank you.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to two per participant. Should you have follow-up questions, please rejoin the queue. The next question is from the line of Lakshmi Narayan from K. Seema Wealth Private Limited. Please go ahead.

Sir, just wanted some numbers. Could you just share the expected capacity in Indian people by year-end, and what it would be in effect, indeed, sir?

Yeah. For India operations, the expected total capacity by the end of this year would be around 59 million. And for Africa operations, it will be 45 million.

Okay, sir. For next year, sir?

Next year, for each of the, you know, we are targeting at least, you know, at least two to three factories to come on board. Each factory will add 3.5 million pieces incrementally.

Okay, sir. That's it from my presentation. Thank you, and I'm wishing you and Judy happy day. Thank you.

Thank you. The next question is from the line of Prerna Junjunwala from Dam Capital. Please go ahead.

Hello. Thank you for the opportunity. Hi, sir. I just wanted to understand the increase in creditors' days in working capital. Is there any reason to this increase, or we should just let it go as a balance sheet date?

You know, we have worked out with our, you know, vendors trying to really get it, you know, in terms of financing to really take care, extend the credit period, aligning with the customers. Credit period, what I enjoy, that was one of the activities which we were, you know, taking it up to take care of our working capital. We were aligning the pay cycle in line with my, you know, the credit cycle with my customers. That was one of the things which we are, you know, we are able to achieve it, and that's the reason you see the credit as increasing.

So does that increase the cost of procurement?

It is part of the regular commercial transaction. Normally, they extend the credit period what you work. My customers keep extending, so I keep extending my credit period. We have not seen a cost increase of that nature.

Okay, that's what I wanted to check. Second question, sir, in BTPL today, how much of the production is being...

About 33% or a third of it.

Currently also the ratio remains same.

Correct. Going forward, we intend to increase it to 50%, but that will take a little time. Primarily because we need nominations securing from our customers. Our intention is to increase it as much as possible. Our aim is to get to at least 50%. But I don't anticipate that in FI28. I will probably anticipate 50% plus in FI29.

Okay. And so what kind of synergistic benefits have you seen over the last one, two years that you have?

Ma'am, I'm sorry to interrupt you. If you have follow-up questions, please rejoin the queue.

No, it's on DBTPL only.

So I'll just answer this question, maybe. What sort of logistic benefit do you ask?

No, synergistic benefits that you've seen after taking control of BTPL in minority and now in majority.

So, what happens is, with a lot of customers, you know, we can do a fair amount of advanced planning, where we can prepare and hold fabric at BTPL. We can run for large-scale orders, sizable orders. So, this will enable us to grow faster. With our customers, especially also look at platforming fabrics, look at fabric innovation. So some of those things will get start driven from FI28 onwards, where, you know, we are strengthening our fabric innovation side going forward. So in a garment, a fabric and the design or the sewing structure of the garment are the two inputs which a customer sees. And by controlling both those elements, we will be able to Anytime, by 10 days, 14 days, you know, having an own mill certainly helps from that perspective.

Have you seen any of these panning out is what my actual question was?

It is coming in. I can see that pan out based on the orders that we are securing for fall, winter, next year.

Thank you, sir. Thank you, and all the best, and happy Liwali.

Thank you.

Happy Liwali.

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

Yeah, hi. Hello. Yes, sir. Thank you for taking my question. So, I just have one question, rest of my questions have been answered. On the BTPL acquisition, I was reading in a business daily about a SFIO investigation going on with Bombay Rayon, the publicly listed company, as well as BTPL. In the early 2020s, they had done some asset transfer. So, just wanted to understand whether post-merger of BTPL, will we have any legal or financial recourse if things were to go south with the SFIO investigation?

At the moment, you know, we are getting legal inputs on this topic, and early indication seems to be that there seems to be, you know, no strength in those allegations. In fact, we have derived the comfort from the sellers also that, you know, there is no, you know, all the procedural requirements have been fulfilled and they are also extending that comfort to us. So, I don't anticipate it, but nevertheless, we are further digging in from a legal... You know, we don't see an issue. You know, for instance, they have been saying that some of the banks have been, you know, have taken an extra haircut, but those are all, you know. Flowing out of banks selling their credit to an ARC. So some of those, the comments there don't seem to hold water, but nevertheless we are getting all this checked out legally as well.

Understood, sir. So, just a small question on that. So, have we received the final NCLT approval? Because last I checked, I think we received the shareholder approval under NCLT. So, the final one is still pending, right?

Correct. It was heard today and the judgment is reserved. We are expecting the German verdict in the next 10 days time. So, hopefully the process will get completed in this quarter itself.

Okay, okay. Thank you so much, sir.

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

Hi, thank you for taking my question. I just have one question. For any new CapEx that we do, what is the kind of asset turnover that we look for?

Normally, Forex.

Of course. Okay. Thank you.

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

Hi, sir. Your line was a bit disturbed in terms of EBITDA improvement Q3 over Q2. Could you elaborate once more? And secondly, when do you expect to hit a billion dollars revenue console basis? Which year? And one more question, thirdly, do we expect to become dividend paying anytime soon?

So Q3 over Q2, as I said earlier, you know, there is an exchange rate benefit itself, which will yield about 1.3%. And, you know, the tariff discount elimination will yield another half a percent. So, you know, approximately, you could say about 2%. And then there is, you know, what else was the, and there will be a further. Upside coming in Q4, because even our Q3 is only at about 93 rupees to a dollar. So, you know, Q4, we will see a little more growth. That's point number one. Point number two, when will we hit your billion-dollar revenue? Billion dollar today would be about. What about? And I think once there is some plan, Since we are profitable, there is enough cash flow being generated by the business, we will take a call on paying dividend once there is a little more stability on the tariff front as well as geopolitics front, you know, the volatility in oil prices, etc., once that settles down. So, we want to see a couple of quarters of clarity on that before we take some calls like that.

Okay. Anyway, business volatility of these sorts will remain. But still, I think…

Business volatility or like tariff has been extraordinary on India, right, in particular. So, we didn't get significantly impacted. I mean, even this financial year, for a good part, we were facing a 50% tariff. So, you know, it is… I'm sorry, the previous financial year. So, we do want to be watchful of how things are, and now I'm hoping that these things will settle down. We want to see that for a little while before we draw that comfort.

Sure. So, you mentioned about 2% because of various reasons you highlighted in terms of EBITDA. Because of the seasonality also, some improvement comes in Q3 and Q4?

A little bit comes in, but that's, again, you know, if I look at why or why, then that seasonality gets taken care of, right?

Quarter on quarter?

There could be some. Okay, great. Thank you.

Thank you. That was the last question for today. I now hand the conference over to the management for closing remarks.

So, you know, the growth bullishness for the next 3-4 years is strong. We are seeing most of our customers continue to want to grow with us. We are also adding customers, and I am confident that with higher revenues, operating leverage will kick in. Margins will go up. We are yet to fully realize the full benefit of India's currency depreciation. So some of this will also pan out in the periods ahead. Fabric will aid business growth. And drive margin growth. So as and when BTPL comes in, that benefit will also start kicking in primarily from FI28. So there are a lot of moving parts in the business which are all coming together. And most of that will get played out in FI28. So I want to leave you all with that thought that, you know, some of the investments that we have done will start playing out from FI28 onwards. Thank you so much for listening to us, and happy to connect and address any specific questions later. Happy Riwali to everyone.

Thank you. On behalf of Gokal Das, Exports Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.