Earnings Call Transcript - XNSE:ICIL 2026-11-05

Operator

Ladies and gentlemen, good day and welcome to Indocount Industries Ltd. Q2 and H1 F527 earnings conference call. This conference call may contain forward-looking statements about the company which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. 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 per pressing start and zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Jain, Executive Vice Chairman. Thank you, and over to you, Mr. Jain. Thank you.

Mohit Jain, Chairman

Good afternoon and a very warm welcome to all of you joining us for the Indocount Industries Limited Q2 and H1 FY27 earnings call. I am also joined by our group CFO, Mr. Mullidharal, Manish Bhatia, our CFO, and Strategic Growth Advisors, our Investor Relations Advisors. We hope you had the chance to review the financial results and investor presentation available on the Stock Exchange and on our company website. Before we begin, on behalf of Indocount Industries, I would like to wish everyone a very happy Dibabli and a happy, healthy, and prosperous New Year. Coming to the company's consolidated performance. Continuing with the Q1 momentum, we have delivered our highest ever quarterly performance in Q2. The results reflect the benefits of our strategic investments, expanding business portfolio, and improving operational efficiencies. Total income for Q2 FY27 stood at Rs. 1,699 crores compared to Rs. 1,082 crores in Q2 FY26, registering a growth of 57% year-on-year. And on a sequential basis, the growth was 39%. EBITDA more than doubled to Rs. 259 crores on a year-on-year basis from Rs. 123 crores. With margins expanding to 15.3%, well above a full-year guidance of 13%. The performance was revealed by market share gains, increased wallet share, strong branded business momentum, and increasing contribution from our newer businesses. Our continued focus on sweating our existing assets, optimizing resource utilization, and driving operational efficiencies has resulted into margin expansion. More importantly, the benefits of our strategic investments are now translating into meaningful scale, further strengthening the depth, breadth, and overall quality of our business. Core business performance. Product mix, market share gains, and increased wallet share from existing customers drove strong revenue in our core business. The industry continues to navigate tariff uncertainties, evolving trade dynamics, and varying consumer demand across markets. Our focus remains on strengthening our product portfolio and improving operational efficiency. We are also driving better utilization from existing manufacturing capacities to enhance returns from our asset base. Going forward, our priorities remain towards strengthening the core bed linen business, Increasing customer wallet share and gaining market share. Coming to the unknown U.S. core business, the UK and EU markets offer significant growth potential with an addressable opportunity comparable to the U.S. market. Our established relationships with leading retailers provide a strong platform to expand our presence and increase our wallet share. We also expect free trade agreements to further strengthen our competitiveness in these markets. As indicated in our previous earnings call, we expect our non-U.S. revenues to grow by over 20% in FY27. New business performance. Our new businesses are increasingly contributing to Indocount's growth and expanding our presence across the home textile value chain. While bed linen remains our core strength, we have expanded into utility bedding, branded businesses, and other home textile categories such as quills, comforters, blankets, towels, curtains, etc. This enables us to engage with customers across a wider product portfolio and address a much larger market opportunity. This progress is clearly reflected in our performance with our new business generating quarterly revenue of approximately 502 crores. And contributing approximately 30% to total income. Notably, we have already achieved 60% of our FI27 revenue guidance, demonstrating strong momentum and the growing scale of these businesses. A key development during this quarter was the expansion of brand Vansuta beyond direct-to-consumer platform into the broader U.S. retail markets. This strategic move aims to enhance brand visibility, reach a wider consumer base, and unlock new growth opportunities through deeper retail penetration. Going forward, we will focus on scaling these businesses, continue expanding product offerings, and strengthening our distribution across markets. Update on our Bhilad flood claim. During the quarter, Abhinad Manufacturing Facility in Gujarat was temporarily impacted by unprecedented rainfall and flooding. All the assets in the facility, along with the business interruption losses, are covered under a comprehensive insurance policy. Following the damage assessment, the insurance company has acknowledged the claim. An interim payment of Rs. 14.99 lakhs was approved after the quarter end, pending final settlement. Based on our assessment of the losses and the progress of the insurance claim, we have recognized in the profit and loss statement an inventory loss of Rs. 45 crore, 2 lakhs, net of salvage, along with an equivalent insurance claim as exceptional item in the statement of profit and loss. To conclude FY27 guidance and roadmap ahead, Let me now update you on our progress against FY27 guidance. We remain confident of achieving our full-year targets, with H1 performance providing a strong foundation. On the volume side, we achieved 51 million meters, approximately 49% of our full-year guidance of 105 to 110 million meters. On the revenue side, total income stood at 2,923 crores. Achieving approximately 52% of our 5,500 crore guidance. On the EBITDA margin, H1 EBITDA margin stood at 14.4%, already exceeding our full year guidance of 13%. Given the strong H1 performance, we believe we are well positioned to exceed the guidance given for the current year, both for the top line and the EBITDA. At the business level. Our core business, H1 Revenue, of Rs. 2,033 crore, helped us achieve approximately 50% of the FY27 target of 4,000 crores. New businesses, H1 Revenue of 890 crores, achieved nearly 60% of FY27 target of approximately Rs. 1,500 crores. Our balance sheet has further strengthened, with net debt declining to Rs.518 crores and net debt to equity at a healthy 0.2x, marking our lowest ever net debt position. Annualized, ROC stood at 21.4%, while ROE was 15.3%, reflecting improved capital efficiency and enhanced returns. Overall, the combination of strong growth across our businesses, improving margins, and a strong balance sheet positioned us well and gives us confidence in outperforming our FY27 guidance. With this, I now hand over to Manish to take you through the financial numbers.

Manish Bhatia, CFO

Good afternoon, everyone. I will take you through the key financial highlight for Q2 and H1FI27 before we open the floor for questions. Q2 was a strong quarter with robust revenue growth, significant margin expansion, and continued improvement in our balance sheet. On revenue performance, consolidated total income grew 57% year-on-year to Rs. 1699 crores in Q2FI27 compared to Rs. 1082 crores in Q2FI26. For H1 FY27, total income stood at Rs.2923 crores compared to Rs.2049 crores, registering a growth of 42%. On profitability, consolidated EBITDA for Q2 FY27 more than doubled to Rs.259 crores compared to Rs.123 crores in Q2 FY26, with margins improving by 380 basis points to 15.3%. For H1 FI27, comforted Ibitda grew by 23% to Rs.420 crores, compared to Rs.243 crores in H1 FI26, with margins expanding by 250 basis points to 14.4%. The improvement was driven by higher capacity utilization, better cost absorption, and operational efficiencies. All three utility bedding facilities in the U.S. have ramped up and are currently operating at utilization level of over 65%. Consolidated pads for Q2 FY27 grew by 2.5 times on year-on-year basis to Rs. 132 crores compared to Rs. 39 crores in Q2 FY26. For H1 FI27, P8 PAT stood at Rs. 195 crores compared to Rs. 78 crores same period last year, a strong growth of 150%. Balance sheet and returns. We continue to strengthen our balance sheet with net debt declining to Rs. 518 crores as of September 2026, our lowest ever level. Cash and cash equivalents increased to Rs. 315 crores compared to Rs. 114 crores at the end of March 2026. Analyzed ROCE stood at 21.4%, while ROE was 15.3%, reflecting improved capital efficiency and stronger returns. To conclude, Q2 and H1FI27 demonstrate strong business momentum, improved profitability, and a healthier balance sheet. With this, I would like to open the floor for questions.

Operator

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one only touched on the telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Sani Vishay from PL Capital. Please go ahead.

Sani Vishay, Analyst — PL Capital

Yeah. Thanks for taking the question. I'm just trying to understand a couple of dynamics here. So given that the input costs continue to rise, and while we see the demand is steady, so do you think the impact of the rising input costs is already factored in, or can we expect some pressure going ahead?

Mohit Jain, Chairman

Yeah, so the main input cost, in our case, cotton and cotton-related products, prices have been going up, and, you know, normally we keep inventory of about four to five months. So, that's, you know, acting as a cushion period till we go back to the customers and ask for price increase. So, naturally, whenever there is an abnormal increase in the prices, we can go to the customers and ask for increase.

Manish Bhatia, CFO

And just to add that the impact of the previous raw metal price increase has already been passed on to the customers.

Sani Vishay, Analyst — PL Capital

Okay. So how long does it take to pass it on? So what I'm trying to understand is that there is a possibility of some pressure in the coming quarter or the second half. Is that a possibility? Is there a downside risk to the margins that we have already achieved is what I'm trying to understand.

Mohit Jain, Chairman

No, there won't be any pressure on the margins. You know, as you know, we have been doing the business as a normal business practice. If there is any significant increase in the input cost, then we go to the customers. Otherwise, you know, we are able to maintain this margin.

Manish Bhatia, CFO

Sir, as we mentioned that we keep a buffer of four to five months, and the... Cost increases get passed on to a lag of quarter, within one or two quarters, so that's why it will not have a major impact on profitability, on margins.

Sani Vishay, Analyst — PL Capital

Okay, so basically your pricing is done based on the inventory that you have. Understood. Great, sir. So, thank you and best of luck for the next second half.

Soham Sambrani, Analyst — Motilal Oswal Financial Services

Thank you.

Operator

Thank you. The next question comes on the line of Abhishek Shankar with ICSA Direct. Please go ahead.

Abhishek Shankar, Analyst — ICSA Direct

Yeah, thanks for taking my question, and congrats on a very good set of results. So, first of all, my question is regarding the operating environment, you know. I just wanted to understand that, keeping in mind that we've seen the mid-term elections pan out, and we've seen the results now. So, how do you see the operating environment in the U.S. going ahead? And how are the order book trends going into H2O? Are you seeing a stable environment going ahead? Just wanted to get a bit off.

Mohit Jain, Chairman

So, about the midterm election results, it's been a very recent one, so we are unable to comment at this point of time. What we, of course, feel is that the business will be as normal as what has been. So, we don't see any sort of a, everything is going to be positive, we feel. Order book position is healthy, so that's the reason why our guidance stays put. We have also mentioned that we will be exceeding the guidance which we have given for the year.

Abhishek Shankar, Analyst — ICSA Direct

And my second question, again, if I've missed out, I'm sorry if you've answered this before. My second question was on the gross margin side. So, on the gross margin side, what exactly happened that, you know, you have seen a decline there? Of course, EBITDA margins have significantly improved, but what has happened on the gross margin side?

Manish Bhatia, CFO

So gross margin should be looked at on annual basis, don't go with quarter by quarter, and there is an impact on product mix, so GP margin can fluctuate, but they should range between 50 to 55 per turn on an annualized basis.

Abhishek Shankar, Analyst — ICSA Direct

Okay, just one last question. I just wanted to just get a bit of clarity. We have seen a bumper quarter this year. If I see the YNY basis, we have seen a bumper quarter. So I just wanted to understand what has been the mix in the sense that has this been driven a lot by new customers who got added or is it just that existing customer wallets that have grown so much that has driven the whole performance?

Manish Bhatia, CFO

So both, I think, we have gained market share also, and we have gained customer wallet share also.

Abhishek Shankar, Analyst — ICSA Direct

Okay. Okay. I'll get back into the queue. Thank you.

Operator

Thank you. A reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Jitain Toshi with Inam Asset Management Company, Private Limited. Please go ahead.

Jitin Toshi, Analyst — Inam Asset Management Company Private Limited

Anilji and Mohitji and team, many, many congratulations on what you have achieved. I think the entire strategy, what you spelled out two years ago, has unfolded beautifully. Just very proud that Indian company has been able to buy out a brand in the U.S. And create history. We definitely believe that, you know, the numbers that you spoke about in terms of your revenue guidance, I think you should achieve much, much more. But I think given the environment and given the way you all have been able to establish a manufacturing presence in the U.S., which is commendable in a very short time and ramped up that capacity so well. I would believe that from this year, that is F-27 to F-30, it wouldn't be inappropriate to expect you to double the entire company's size in three years. Would that be a realm of possibility?

Mohit Jain, Chairman

Thank you, for your kind words, you know, we, of course, are on track to, you know, surpass We hope that this momentum continues into the next few years also. We wish that we are able to achieve the goals which you are also guiding us. We will be able to achieve those numbers.

Jitin Toshi, Analyst — Inam Asset Management Company Private Limited

No, there is no reason because you have been the only company who's gone there, acquired brands, built the front end, you've built a manufacturing base, you've done extraordinarily well by building capacity in India. And I think on your core business, we are seeing that you've already made an 18% margin. And, you know, that margin is, again, a new high compared to the recent years. Now, given the current situation, the FTAs opening up, etc., would it be possible to, for us, shareholders, to at least dream of a doubling in, you know, from 27 to 30, because there is no reason why U.S. demand won't bounce back, you won't see growth in other markets where the FTAs are opened up, plus you're getting ready with the manufacturing capacity suggesting that all of this should lead you to a 20% EBITDA margin with 10,000 crores plus of, I mean, this is our expectation and we don't see any reason why a capable team like y'all will not achieve it.

Manish Bhatia, CFO

Jitin Bhai, as of today, we will continue with the guidance which we have given by CY28 to double up the revenue from FY25 from 4000 crores to 8000 crores. Naturally, with whatever you are saying, it goes in our mind, and then we will work it on, and be hopeful, yes, what we are just saying.

Mohit Jain, Chairman

We will definitely work towards achieving greater.

Jitin Toshi, Analyst — Inam Asset Management Company Private Limited

I think, you know, there is no reason for us to believe that this will not happen. It's just that, on the contrary, we as shareholders would challenge you, given such great capabilities, such great intent, and kind of execution that you have demonstrated, and the kind of facilities that you have created. I think, first of all, congratulations. It's hats off. You have done an extraordinary job. From this, I think this should make you one of the fastest-growing companies in your space globally. That's our expectation. So that's what we believe. And I think margin should ramp up. Where do you see your margins ramping up in the next three years as you go into utility, 100% utilization? Where can margins really go?

Manish Bhatia, CFO

Sir, right now we are saying for this year our guidance will exceed both on top line as well as on bottom line, EBITDA percentage also. For next year, we will come back with proper numbers and guidance.

Jitin Toshi, Analyst — Inam Asset Management Company Private Limited

No, I think you all have done an extraordinary job. We really do believe that you are heading toward the 10,000 crore top line with a 20% EBITDA margin. I just hope you don't disappoint us out there because I think with such a capable management doing such extraordinary execution, anything, you know, to expect anything less. Would not be acceptable. So anyway, all the very best. Continue with the growth that you have shown and demonstrated great execution. And we look forward to you reaching 10,000 sooner than later with a 20% EBITDA margin. All the very best.

Operator

The next question comes from the line of Pritesh Cheda. With Lucky, please go ahead.

Pritesh Cheda, Analyst — Lucky

Sir, I have three questions. One, this 8,000 doubling of revenue in 2028, I am assuming this 2028 is actually a calendar year 2028.

Manish Bhatia, CFO

Yes, it's a calendar year 2028.

Pritesh Cheda, Analyst — Lucky

Okay. My second question is, what is the margin difference, either at the GP or at the operating, between core product and the new business, the core business and the new business?

Mohit Jain, Chairman

The core business, we have already given a guidance that, you know, it's, you know, about 15 percent EBITDA, and, you know, this quarter, it has shown even better than the 15 percent, which we had spoken about at the start of the year. As far as the new businesses are concerned, It has not come up to the same level, but over a period of time, I think, in the next few quarters, it should catch up. We would see by, I think, next two, three quarters, we should be able to still come to the same level as such.

Pritesh Cheda, Analyst — Lucky

Okay. And my third question is, what is the extent of non-US business in the core business in X1? So when you do 2,000 crore and when you do the volume number, which is mentioned, what will be the non-US business size in it?

Manish Bhatia, CFO

As of today, non-core non-US business is around 30%.

Pritesh Cheda, Analyst — Lucky

Okay. And this, let's say now, over the next three years, based on whatever FTAs, etc. that India has signed, So this core non-US business, which is about 30% today, and whatever the size is, what it should be over the next three years?

Manish Bhatia, CFO

It should change, say from 70-30 ratio, it should go to 50-40, we'll see. But yes, the ratio will change on core business.

Mohit Jain, Chairman

I think our core non-U.S. business is also growing by 20%. So, we would expect this ratio to be in favor of the non-core U.S. business.

Pritesh Cheda, Analyst — Lucky

60-40 means 60% will become non-U.S. core business within the core, right? That's how 60-40, right? Today, what it is?

Manish Bhatia, CFO

No, no, no, 37. As of today, 70% is US. So 70% might come down to 60%, but we don't want to put any number. Something will change.

Pritesh Cheda, Analyst — Lucky

Okay, and my last question is, on the US business, on the core US business, we have come back to the size. Have we come back to the size where we left two years back, which is in FY25? Or it is the non-US business which is actually bringing you back to the 4tharm crore revenue or the 100 million meter volume.

Manish Bhatia, CFO

Say for FY25, we achieved a volume of around 106 million meters. Correct. This year again, we are going back to almost the same level.

Pritesh Cheda, Analyst — Lucky

So my question is, sir, has the US business within that come back or it has not come?

Manish Bhatia, CFO

So yeah, both put together.

Pritesh Cheda, Analyst — Lucky

Okay. Okay, sir. I'll come back. Thank you.

Operator

Thank you. Next question comes from the line of Harsh Mittal with MK Global Financial Services. Peace out.

Harsh Mittal, Analyst — MKM Global Financial Services

Yeah. Thank you for the opportunity. Good afternoon, team. Firstly, congratulations on a superb set of results. I have a few questions. First question, and apologies if this has been answered, but despite a sharp jump in the realization, so this jump in realization is basically covering your raw material expenses, or is it something related to refunds pertaining to the U.S. status? This is the first question. Thank you.

Manish Bhatia, CFO

No, refund of tariff is not included in this, so it's basically overall operating efficiencies. And product things.

Harsh Mittal, Analyst — MKM Global Financial Services

Understood. Understood. Second question, sir, is the change in the working capital. So, this first half, we have seen outflow in the working capital. So, compared to the last one, any explanation of the same? Why has it changed so much?

Mohit Jain, Chairman

No, in fact, the working capital cycle has improved from March, if you see. You know, the number of days has come down by at least three weeks. So the overall cycle has improved as of 30th September.

Harsh Mittal, Analyst — MKM Global Financial Services

Oh, thank you, sir. I'll call back in.

Operator

Thank you. Next question comes from the line of Prerna Chinchunwala. With Dan Capital, please go ahead.

Prerna Chinchunwala, Analyst — Dam Capital

Hi. Thank you for the opportunity and congratulations on a strong set of numbers. So, my first question is on account of average realization. Now, what is the reason for sharp improvement in average realization? What kind of product mix improvement has happened, and could you give some idea about the same to have a better understanding?

Mohit Jain, Chairman

Prerna, basically the product mix in the sense that it is a higher value product which we have, orders which we have executed in this quarter, that's the main contribution towards this one, you know, the average decision going up.

Prerna Chinchunwala, Analyst — Dam Capital

The follow-up on this is that, is this sustainable, or this will change as per quarter, then we should not put in much thought to this quarter's average realisation?

Mohit Jain, Chairman

The product mix is sustainable. So, you know, in any case, as earlier we mentioned that, you know, product relations should not be looked at only for the quarter as such. So, the overall, this one, you know, margins will, gross margins will get maintained over a period of a year.

Prerna Chinchunwala, Analyst — Dam Capital

Okay. Second question is on the new businesses. After this sharp improvement in new businesses, do we continue to maintain the two-third, one-third ratio between utility and USA brand business, or there is any change in this quarter?

Manish Bhatia, CFO

As of now, yes, same, two-third, one-third between utility and brand.

Prerna Chinchunwala, Analyst — Dam Capital

Okay, so this sharp improvement in the branded business has come because of Vamsutka. Is it fair to assume that?

Manish Bhatia, CFO

Yes, Vamsutka has played a big role, yeah.

Prerna Chinchunwala, Analyst — Dam Capital

Okay, understood. And third question, lastly, is the greenfield plant also is operating at 65% utilization, or you've been talking about 65% at an average level on total capacity?

Manish Bhatia, CFO

All three plants are doing

Mohit Jain, Chairman

higher than the 65% utilization.

Prerna Chinchunwala, Analyst — Dam Capital

Understood. Sir, one macro question on UK and Europe. You have answered the... Geographic distribution. I just wanted to understand how are the consumers, you know, customers reacting to the FTAs now that, you know, we've been already three to four months into implementation. So, what kind of improvement, you know, negotiations and product developments, what kind of products you are actually negotiating for. So some highlights on UK geography should be helpful to understand what we can expect in Europe as well.

Manish Bhatia, CFO

So, President, UK FT work was implemented in July, EU is yet to happen, but as we mentioned in our last call also that we have seen much better interactions with the customers, so there is lots of inquiries already coming in, so there is lots of interest in this geography. So, let's see when this starts coming into the final end volumes.

Prerna Chinchunwala, Analyst — Dam Capital

Understood, sir. Thank you, and best wishes for festivities and for future performance. Thank you.

Mohit Jain, Chairman

Thank you.

Operator

Thank you. Thank you. Next question comes from the line of Ashish Vanwadi with Nuwama. Please goodbye.

Ashish Vanwadi, Analyst — Nuvama

Hi, sir. Thank you for the opportunity. Congrats on a very strong performance this quarter. So my first question is regarding the current guidance. Given the H1 run rate and the soft days that we had last year, don't you think it's 5,500 crores is kind of on the lower side of what we can achieve?

Manish Bhatia, CFO

Yeah, we believe that we will be exceeding our guidance for this financial year. As of today, we believe so.

Ashish Vanwadi, Analyst — Nuvama

Sir, if you can provide any color as to what to expect on that front, that could be great. Secondly, sir, on the volume front as well, if I see that our current utilization stands at about 73 odd percent, And given that the UK EU is just opening up, are you forcing any CAPEX or is any CAPEX plan in, is any CAPEX in plans from the core business side in the next, let's say, six months or one year's time?

Mohit Jain, Chairman

Yeah, so, you know, on the guidance which you had given in the, you know, we gave this guidance much before the year started, so... You know, the guidance of 5,200 votes for revenue. Over a period of time, we are seeing a good business adding to our kitty. So, we are seeing this, you know, we will be able to surpass this at this point of time when we have seen the performance in six months. As far as the utilization is concerned in the core business, yes, we have still some space or capacity to exploit. The management has also, the earlier calls we have told that at appropriate time, the board would take a decision on the further capex for adding any capacities.

Manish Bhatia, CFO

So, Ashish, just to add that, to reach to our guidance of CY28 of 8000 crore, we don't need any growth capex for that. But beyond that, we'll see that.

Ashish Vanwadi, Analyst — Nuvama

Sure, sir. Just one last bit. Sir, can you help understand how are the margins in the newer business segment in the current quarter? I understand that we achieved break even sometime back in Q4. So, just wanted some colour on that.

Mohit Jain, Chairman

The new businesses, you know, the EBITDA margins are at the, you know, lower double digit at this point of time, and, you know, we expect when the full scale of operations comes up, we should be able to reach the same level of margins which the core business has.

Manish Bhatia, CFO

So, overall, the blended margin for this year, we have given it 13%. So, overall, we should be exceeding that. And in near term, when we reach to a full capacity utilization for new business, we should be equal to our core business, which is 15%.

Ashish Vanwadi, Analyst — Nuvama

Sure, sir. This is quite helpful. Thanks and greetings for the session. Thank you. Thank you.

Operator

Thank you. The next question comes from the line of Soham, Samantha, with Mudlal Usal Financial Services Limited. Please go ahead.

Soham Sambrani, Analyst — Motilal Oswal Financial Services

Yeah, thank you, sir. Thank you so much for the opportunity. Just wanted to check a couple of things on CapEx. We have guided 250 crore for full year, and half year, in our H1, we have done only 40 crore. So are you confident that 200 crore will be deployed in H2, or some CapEx will be go forward in H28?

Manish Bhatia, CFO

See, when we given a guidance of 250 crore, as we said, it will be 12 to 18 months. So, the full 250 crore will not be spent during this year. Okay.

Soham Sambrani, Analyst — Motilal Oswal Financial Services

And the second thing on your new business, when we are saying that a low double digit margin, so there will be 11 to a percent of the margin, and we are already utilizing 70%. So, what we are saying that from 70% to 100% jump, the margin will go from 11 to 11 or 12 to 15%. Is that right?

Mohit Jain, Chairman

This will be more from, you know, from the benefacting operations as well as the branded business which we are already in. As more products are sold under brands, I think we will be able to get better margins.

Pritesh Cheda, Analyst — Lucky

Got it. Got it. Okay, thank you very much. Yes, thank you.

Operator

Thank you. Next question comes from the line of Pritesh Cheda. With Lucky, please go ahead.

Pritesh Cheda, Analyst — Lucky

Sir, just a small bridge I wanted to understand. So, let's say from H1 this year versus H1 last year, what will be the blended price height? What will be the currency change? So, these are the two changes in the benefit side. Then on the cost side, you will have a higher freight cost and a higher geometry cost in the form of yarn cost. So just the percentages, broader percentages, not the precise ones, what it should be, sir?

Mohit Jain, Chairman

Look, Pithesh, we may not be able to divulge so much of details, actually. So, what I can say is that as far as the freight cost is concerned, we are doing most of our business on FOB or CIF basis, so very less impact on this one. All these freight heights are borne by the customer.

Pritesh Cheda, Analyst — Lucky

Okay.

Operator

Mr. Chayda, are you done with the question? Yes, sir. Next question comes from the line of Karina with Smiths Ltd. Please go ahead. Yes, you are.

Karina, Analyst — Smiths Limited

Thank you for the opportunity and congratulations on a good quarter. Just a few questions. One is the capacity utilization for the U.S. units currently stands at 65%. Could you help me understand when will we see this reach, you know, peak utilization? That's one. Considering how you plan on expanding Vamsutra and, you know, we have newly licensed Tommy Hilfiger and other banks, do you see us exceeding this 100 million target, you know, by FI28 that you all are guiding for? Do we see this exceeding? That is my second question. Lastly, considering we have good operational cash flows, we do have CAPEX coming in, but do we see any sort of debt reduction plans in the near future? And just lastly, on a follow-up question to an earlier participant, the CAPEX is planned for the next. A year, year and a half. The rest of 250 crores, could you give a breakup of how much can we expect in H2 and how much will sort of go into FI28? Yeah, this will be my question.

Manish Bhatia, CFO

Yes, Kanika. So, a couple of questions. So, first of all, on this 65% going to 100%, we already mentioned that it will be by CY28. We seek to go to full capitalization of our utility business. Second question was on... As of today, the overall guidance for branded business to be at 100 million by CY28, so we go with that. We will see if there is any uptick if possible. On cash flow for capex, yes, today, for this financial year, we have announced capex of 250 crores, which will be spent in 12 to 18 months. During first half, you have done around 40 crores. So rest will continue from that same perspective. The last question was on the net debt reduction. Yes, definitely with this whatever cash. So, profit comes in, and with this, after the capexes, which we announced, there will be a reduction in net debt.

Mohit Jain, Chairman

And the company has been following the, whenever there is, you know, cash flows, surplus cash flows, or free cash flows, we have been able to reduce the debt, which you have seen the numbers coming down.

Karina, Analyst — Smiths Limited

Yes, just on the CAPEX part, how much do we see in the second half in FI27, and how much do you think we'll flow through like FI28?

Mohit Jain, Chairman

You know, the major two projects that you have taken, effluent treatment as well as the spinning, you know, spinning could happen probably in this current year, majority in the current year, but the effluent treatment probably would spill over to the next year. We are not able to give any specific number at this point of time. But, you know, spinning could get, you know, most of it should be done before this year, I believe.

Karina, Analyst — Smiths Limited

Understood. So just one last question I'd like to squeeze in is, you know, any, I know you've not given any updated guidance on the margin, but considering, you know, such a strong quarter of the first half and these, as you mentioned, the core to new business mix will change, UKFA, like so many positives. Do we see that the margin guidance could be updated to say 18-20% range?

Manish Bhatia, CFO

Karinka, not on an immediate basis, but for this year, from 13%, we can go up to 14-15%. Let's see. But we will not go beyond that.

Karina, Analyst — Smiths Limited

Understood, sir. Thank you so much.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. We have reached the end of question and answer session. I now hand the conference over to the management for closing comments.

Mohit Jain, Chairman

Thank you, everyone, for joining us today. We hope we have been able to address all your queries. Should you have any further questions, please feel free to get in touch with the SGA, our Investor Relations Advisors. Thank you once again for the continued interest and support. We look forward to connecting with you on our next call. Thanks.

Sani Vishay, Analyst — PL Capital

Thank you.

Operator

On behalf of Indocount Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.