RSWM Limited (RSWM) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good evening, and welcome to the RSWM Limited Q1 F527 Earnings Conference Call, hosted by Rick Capital. As a reminder, all participant clients 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 call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Richa Singh. Thank you, and over to you, ma'am.

Thank you, Reo. Good evening, and welcome, everyone, to RSWM Limited Q1 FY27 Earnings Conference Call. Today, from the management, we have Mr. Rajiv Gupta, Joint Managing Director, Mr. Manoj Pansal, Chief Transformation and Risk Officer, Mr. Nitin Talyani. President and CFO, Mr. Surendra Gupta, Chief Compliance Officer and Company Secretary, Mr. Rakesh Jain, Senior General Manager, Corporate Finance. Before we proceed with this call today, I would like to take an opportunity for the reminder. of disclaimer related to this conference call. Today's discussion may be forward-looking in nature based on management's current belief and expectation. It must be viewed in conjunction with the risks that our business faces and the costs that may cause a future result. Performance and achievements will differ significantly from what may be expressed or implied by such forward-looking statements. I now hand over conference to Mr. Rajiv Gupta for the Industry Outlook. Following that, Mr. Nitin Tuliani will take over the financial overview. Thank you, and over to you, sir.

Thank you. Good evening, everyone. So, it is my pleasure to welcome you all to the RSWM Limited Quarter 1 FY27 earning conference call. Let me take to the industry outlook and the business environment for the quarter ended June 30th, 26th. Our financial results, investment presentation, and press releases for the quarter have already been uploaded in the stock exchange. I hope you got an opportunity to have a look on these. The global textile industry continues to operate in a gradually improving, yet uncertain environment. With the demand across the pre-international markets showing sign of stabilization as the inventory correction has already largely moderated. Discretionary consumer spending in the several developed economies remains subdued, resulting in a gradual rather than broad-based recovery in textile apparel demand. At the same time, sourcing strategy of global brands continue to evolve with increasing efficiencies. On supply chain, resilience, sustainability, and value-based products. However, on micro-level, operating environment during quarter one was influenced by mixed demand trends across geographies. With increasing domestic demand, while export markets continue to witness a major recovery with the select customers' ordering patterns. Demand. From certain export markets, including parts of Middle East, remained subdued during the quarter. Global brands increasingly focused on reliable suppliers capable of delivering quality, sustainability, and product innovation, reinforcing India's position as a preferred sourcing destination. The quarter also witnessed India government's encouraging policy developments, including continued progress on international trade agreements. The initiatives aimed at improving round-train availability. At the same time, geopolitical developments, including the West Asia conflict, contributed to slight change disruptions and volatilities in energy costs as well. Have influenced input costs for synthetic yarn particularly. In addition, the evolving global trade landscape, including the recent U.S. tariff developments, may lead to shifts in global sourcing patterns, creating selective opportunities for competitive Indian textile manufacturers over the medium term. Overall, volatility in romptial prices, geopolitical uncertainties, and evolving global trade dynamics. Continue to require prudent planning and operational agility. Now, sharing the outlook that we feel, for the Indian textile industry, the long-term outlook remains encouraging, despite the near-term volatility, supported by a strong manufacturing ecosystem, vertically integrated value chain, skilled workforce, and improving policy support. Structural governments including recently concluded India-UK free trade agreement. Ongoing discussions on India-EU free trade agreement and increasing diversification of global sourcing from concentrated manufacturing hubs are expected to create meaningful opportunities for Indian textile exporters over the medium to long term, particularly for the value-added and forward integrated products, improved cotton availability, and softer cotton prices. Supported by a favorable policy environment and a better crop outlook are also expecting to benefit for the cotton value chain. Our strategic priorities of RSWM remains unchanged, strengthening the product portfolio, improving operational excellence, expanding our presence in value-added segments, and maintaining disciplinary cost management under RSWM 2.0 initiative. At RSWM, we remain focused on factors within our control. By increasing the share of value-added products, improving manufacturing efficiencies, and strengthening customer relationships across domestic and international markets, we continue to leverage our diversified product portfolio and integrated manufacturing capabilities to respond effectively to changing customer requirements while maintaining discipline on cost and capital allocation. Further, as India-UK fated agreement opens new opportunities for the Indian textile sector, we are actively exploring forward integration activities to maximize our potential arising from this FTA. This aligns our long-term strategy of increasing valuation, strengthening customer relationship, and expanding our presence in the high-value textile manufacturing products. As we all have been discussing, sustainability remains to be an integral part for RSWM in our long-term strategy through increasing use of renewable energy, resource efficacy, and circular economy initiatives. Thank you. I will hand over the microphone to our CFO, Nitin Tuleani, to take over through financial performance for the quarter and the 30th year.

Good morning, everyone, and thank you for joining us today. I will now take you through the financial and operational performance of RSWE for the quarter ended June 30th, 2026. Starting with the business environment, the first quarter of FY27 reflected steady progress in operational performance, despite a mixed business environment across domestic. The service in India remained heavy across several customer sections, supported by stable consumption and improved order education. We are relatively softer on a sequential basis, remain in line with the expectations as international customers followed a calibrated procurement approach amid evolving global economic conditions. Our emphasis on product mix optimization, discipline procurement, and manufacturing efficiencies enable another quarter of improvement in operating profitability, supporting higher gross margins, and a stronger EBITDA performance. Moving to the financial performance for Q1FY27, revenue from operations stood at 1161 crore, compared to 1142 crore in Q4FY26, registering a sequential growth of 1.7%. Domestic business sales increased to 825 crore, from 774 crore in Q4FY26, reflecting healthy demand across key customer segments. Export revenue stood at 3.36 crore, lower than the immediately preceding quarter through the business maintain, are diversified customer base across multiple international markets. Gross profit increased to 4.66 crore compared to 4.34 crore in the preceding quarter, with gross profit margin expanding to 39.8% from 37.4%, supported by favorable product realization. Better inventory management and efficient raw material utilization. EBITDA for the quarters stood at 94 crores, registering a sequential growth of 10.1% and a year-on-year increase of 16.1%. EBITDA margin improved to 8% compared with 7.4% in Q4 F526 and 6.9% in Q1 F526. The expansion in gross margins provided sufficient cushion to absorb higher operating expenses while delivering a healthy improvement rate in EBITDA. Moving to the operating level, finance costs for the quarter stood at 31 crore, compared to the 30 crore in the preceding quarter, primarily attributable to the increase in working capital requirements. Profit before tax increased to 24 crore, representing our QOQ growth of 33.5%. and a YOY increase of 153.7%. PPT margin improved to 2.1% compared with 1.6% in Q4 F526 and 0.8% in the corresponding quarter last year. Profit of the tax for Q1 stood at 17 crore compared with 7 crore in Q1 F526, while that was lower than the immediately preceding quarter. Q4F by 26 had included a significant one-time tax benefit arising from the company's decision to adopt the Congressional Corporate Tax regime under the Income Tax Act 2025. Excluding this non-recurring benefit, the underlying earnings trajectory still remained healthy. Our priorities for the remainder of the financial year are as under. Capital allocation philosophy continues to remain disciplined and value-oriented, prioritizing investment that enhances manufacturing efficiency, improve product capabilities, and generate sustainable returns over the medium term. We remain committed to strengthening our portfolio of differentiated and sustainable products, supported by changing customer preferences and demand for environmentally responsible manufacturing. India's position as a preferred global sourcing destination continues to strengthen supported by its integrated textile value chain, improving policy environment, and growing emphasis on quality, reliability, and sustainability. With that, I conclude my remarks. We thank all our shareholders, customers, business partners, lenders and employees for their continuous confidence and support. We will now be happy to take our host.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. This is from Amit Gupta from ICICI Securities. Please go ahead.

Yeah. Good evening, sir. Am I audible? Good evening. Thank you. Thank you for the opportunity. Sir, my question was on the, like, you know, initiatives to develop new products. So if I recollect, last year, there was, like, you know, a joint development agreement with Birla Cellulose to develop a specialty, like, you know, fabric or textile application on graphene technology. I believe there was some further progress as well. To like, you know, with some tie up with bilicellulose and then further, I think there was some tie up with salon related entities. So my question was, what is the update on this particular initiative which was taken last year? Is it gaining traction or it need not be a meaningful, like, you know, special application to textile, so to say? Is it really evolving to make a difference? Not as great as we initially thought.

So, thank you, Amit, for a very important aspect of business. NPD has been focused, and last year when we started working on Grafine, and we had a tie-up with Virla Cellulose for the viscose application of this Grafine-based fiber. So, as RSWM is a part of LNJ Bheelwada group, so we are going to have a graphene plant which will offer graphene. And we'll be using this for fiber, both in blister as well as viscose. And then finally giving impact on both PV, blister, and viscose yarn separately. So this project is very much on.

Can you expect some revenue traction or commercial, what do you say, adaptation of this initiative, or it would be still, like, no, a little difficult to hazard and get at this stage?

So, I will not be, you know, absolutely clear on this, but I expect within this financial year, we should get its ruling.

Understood. And my last question was, is there any thought or a study as to how big the total addressable market for this particular initiative will be? That will be my question. Thank you so much, sir.

So, in fact, this is not a product which already is used commercially very aggressively. So, there is a potential to use in all possible uses of fabric at this point of time. This is one of the very, you know… High potential product will have many performance as well as, you know, medicinal, beneficial attached to this product. So I think market will be really, really big. Now how quickly and how efficiently we are able to capture it is yet to be, you know, evaluated. So let us first. We're going to work out.

Congratulations on budget.

The next question is from Prerna Junjunwala from Ilara Securities. Please go ahead.

Thank you for the opportunity. I just wanted to understand the demand scenario for yarn and fabric business separately in terms of how the prices are moving and how volumes are in the current quarter, whether it's the growth or it is flat. Some color on Granular volume and dry fetus would be helpful to understand the results better.

Thank you for your question. I could get the first part which is market outlook on fabric and yarn. I could not really get the second part of your question. If you can elaborate, if it is only subset of the first, then I'll be able to answer. If there is something else you want to target in the second question, please elaborate again.

The second question is on volumes. What are the volumes in yarn and fabric businesses and how the prices have moved during the quarter? And how are we seeing them in current volatile times? That's what my question was on the second part.

So, the quarter under review has been really, really volatile. You know, we had all sort of variables affecting us. This West Asian war, you know, crude prices, thereby prices went up very, very high in March. So, started impacting volumes in April, May. As high as to the tune of 30%, so thereby uncertainties did present. Thank you. Both international and domestic demand has been volatile, but domestic demand has been comparatively less volatile than international demand. So thereby, in synthetic yarn business, RSWM could do reasonably good sales in this quarter, and the current quarter is also going in more or less the same way. For cotton and minaj yarn, the quarter under review, that means the first quarter, has been really good because of the delta. Yarn prices and cotton prices and the spread because of a certain amount of stocking that So, volume both in yarn and fabric are reasonably good, but the challenges continues to be there in second quarter as well.

If you could elaborate on the numbers, that would be helpful in terms of yarn volume during the quarter and how it has grown for yarn and fabric booth businesses.

You want number in terms of revenue? Volume. Volume.

How much metric tons of yarn would you have sold, and what kind of volume you would have done in the fabric business?

So, you know, I am not having the figures in terms of the volume, but I can share with you that the capacity utilization has been in, you know, mid-90s. So we had in Melange, it was around 92, 93. In synthetic yarn, around 96. And in cotton yarn, it was around 98. So all the businesses, the stock has been maintained. And, you know, the volumes have been utilized fairly nice. In fabric business, in denim, our capacity again has been in 90s. Whereas in knit business, it has been in mid 80s. So, I think that is probably what you intended to get from this exact number in terms of production, I am not, you know, having at this point.

On the recent joint venture that you have signed for garment unit in Denning, I wanted to understand what will be your share of JV and when this unit is likely to commission, plus what kind of revenue potential, what capacity of Denning garment in terms of units would be there. Some color on this JV would be really helpful.

Okay. Suprella, it is too premature to really have the final figure on this. Today, the first day, we discussed this in board, and we have got the principal approval from board for this. Sharing is still under discussion, but RSWM will be a major majority shareholder in this. to work on this. Commenting will be in phases. In the first phase, we may go up to 5 lakh pieces per month, which may further be, you know... In line with what we have been discussing in last four, five investor call meetings, that we see potential in garmenting and downstream expansion from RSWM. RSWM has been doing fiber, we have been doing yarn, we have been doing fabric, and now logical extension of this is going into garmenting.

This, uh, uh, this year. I'm looking forward to manage it as an independent unit of commenting.

This is not a dedicated garmenting unit for our own capacity. We are open to buy from outside, and wherever we require some particular fabric from outside, we will buy. Wherever it is the same fabric, both internal and external will... We are running for the commercial viability.

You'll be also interested in doing knit garmenting as your knit fabric capacities are also in place, and the logical extension for knit fabric business is ideally garmenting. So, any color on that?

So, at this point of time, it is for denim. And, you know, our exposures in garmenting will start with denim. In second or third phase, we may consider the knit also. But at this point of time, the first phase clearly is for denim garment.

Understood. And I would also like to understand the pet to the food grade chip business that you are entering. If you've already started allocating capital to it, about 100 crores has been allocated already, as I see in your results. Sorry, I may be wrong in capital allocation one minute.

So, Pran, I can update you on B2B project, which is making, you know, food-grade granules, which will be used for creating the bottles. So we have started this project. This project is on ground in reality. So we have the civil construction on. We have placed orders for all critical machines, and the project is likely to be completed in fourth quarter this year for trials, and commercial production may happen in quarter one of next financial.

Okay, and so here, what is the kind of revenues or margins that you are seeking to generate largely because this is a new business, new category. The clients will also not be textile clients. So, any tie-ups with any customers that you have done to escalate, accelerate the utilization levels?

So, this will have 50,000 metric ton per year capacity, and we'll be expecting revenue of 500 CR from the project which we are implementing as the first phase of B2B, and normally this industry clock beta of around 15%.

15.000 EBITDA is the general margin. Fantastic. Okay.

Any tie-ups you have done with any customers

to scale up utilization? You know, we have not done any tie-ups at this part of time. We are largely focused on creating world-class facilities which will have state-of-the-art machinery and also one of the best products in terms of quality in India. So, at this moment, more focus is that maybe in the due course, we go for some high-up. At this moment, we have not done any time.

Understood, sir. Thank you, and best wishes. I'll come back to you for the session. Thank you.

Thank you, Brena. Thanks a lot.

Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Pushkar Jain from Millie Capital. Please go ahead.

I would just like to ask you the growth guidance for September 7th.

Sir, can you be a bit louder? Your voice is not properly audible. Can you come near to the mic?

Is it audible now? Is it audible now?

Yeah, yeah.

Yeah, so I was asking you about the growth guidance for the year and the margins that you expect for the full year, EBITDA margins.

It's a really forward-looking thing. I can only promise you that, you know, the performance of the first quarter is positive. We have improved almost 12% over the previous quarter in terms of cash profit, and beta is 94 CR, which again is around 8%. So if you look at business-wise, outlook remains positive. As a prudent management, we are fully working in terms of operational excellence and for, you know, rightful deployment of all resources. So, let's keep our fingers crossed. We expect all quarters to be similar or better than this. Right.

And so, like, the growth did not come from the export segment, right, in this quarter? In fact, due to the export demand, right?

So, a lot of uncertainties impacted all this growth for this period.

All right. Thanks a lot.

Thank you.

Participants who wish to ask questions, please press star and one. The next question is from Avinash Nata from Barami Financial Services. Please go ahead.

Thank you. Am I audible, please?

Yeah, please. Go ahead.

Yeah, I have three questions. The first is, we show the fabric segment on EBIT level, which is like even Stevens, there is hardly anything. So, is there a change in transfer pricing? Last year, I could see whether to the extent of 35-36 crores. In this March quarter and June quarter, there is hardly anything as far as the PBIT segment results is considered. That's question number one.

Okay, so should I respond to this?

Yeah, we can take it one by one.

That will be better, you know. You observed absolutely… I think the quarter in the discussion has been tough for fabric business because of global uncertainties and the tariff things which happened earlier. The demand, particularly in knitted fabric, was subdued. Customers were operating at fairly low level of production. So thereby, the demand and the cost led pressures because of increased prices of fiber, gas prices. Freight prices, resin chemical prices, everything put, you know, very adverse remarks in terms of cost. And thereby this quarter, a lot of pressure in terms of cost and demand side resulted in low beta margins for fabric. So this is applicable to both knit and denim, but more so in knit because denim, we are equally balanced for export. In case of NIT, most of our customers are dependent on exports. So, garmenters whom were working closely, they are export-oriented and their demand was affected. Fortunately, for the last two months, we are seeing positive demand, a lot of inquiries, and outlook seems to be better for current quarters.

So basically, so which means the yarn has done even better because fabric not only in June quarter, March is also negative to the extent of two crores.

We are still doing better because overall demand for yarn was still good. Fabric had more challenges.

The second question is relating to power cost. We can see on an absolute basis over the last two, three quarters power cost coming down. Give us a sense related to the per unit cost or what kind of reduction has already been captured by our investments into renewables. And over the next seven, eight quarters, what is the further reduction which is possible? This is my question number two.

So, the impact of the efforts being done in... The energy in terms of going more for renewable sources is something which is now reflected. Second, a lot of effort has been done by each production team to reduce the consumption. So, this is a combined effect of both of these. But just to share with you, our renewable energy now is improved from last year of mid-20s to mid-40s. In the current quarter, we are even going around 60% of power consumption from renewable sources. So this is a result of the effort which we started last year that is reflecting now in per unit cost will keep on varying month to month because both solar and wind. Quarter to quarter, you may still have the deviation. On an average, year-over-year basis, because of the impact of all these renewable sources we are using.

Sir, in absolute rupees crores, it will be how much?

The impact of 10% is already seen. I'm saying impact of 10% is already seen in the current quarter results, like power and fuel was 123 crores in last quarter versus... 112 crores which we are reporting in current quarter. So almost a 10% decrease is already there. So over the next quarter, you will see a further decrease.

Yeah, so I could see that. So that's why my question is that on a full year basis, on rupees crores, what is the broad range of savings we can do over 26?

So we are targeting to close it somewhere around 100 crores.

You are talking about money or units?

In rupees crores, what kind of savings we are targeting? In power cost, like full year basis, we reported 495 crores under power and fuel last year. March 31st, March 26th. So, in rupees pro basis,

So, Abhinash, this is a function of three things. Number one is number of units consumed, and number two, the kind of, you know, utilizations we clock in all of our manufacturing units, and number three is power, unit cost per unit of power. Now, if you look at the efforts that we have done in terms of reducing the power cost, I think that should give us advantage to the tune of 40 crores for the year. The rest, overall number will depend on if we increase more units and add more spindles or add more machines. That may still go up.

No, so I understand. For the same amount of utilization, A is your cost per unit coming down, which you mentioned, 40 CR. So that's the minimum reduction we could see for the same utilization. Yes, that's right. And this ramp-up of this pet project, like you had mentioned, 500 crores on a decent utilization with 15% EBITDA margin. So 28, we are likely to start this in first quarter 28. So what is the kind of utilization? How are we mapping the utilization for this?

I shall request Mr. Manoj Bansal to respond to it.

See, the first year is going to be 75% and probably will scale up the entire production in three years. So third year will probably be full potential. We are going very conscious. We understand the industry standard. So 75, 85 and then probably up to 90, 91%. So three years will take to scale up the entire full production.

Understood. And sir, can you come once again?

We have considered all the trials and everything because, you know, this is a food-grade product, so we need to take all kinds of trials, all kinds of certifications before we actually approve, etc. So we've been very conscious, understanding the analysis, you know, standards that we are proceeding as I've mentioned to you.

So, government business is slightly more labor-oriented and requires a very different kind of operational skills and management. So, do we intend to do a new team under this JV? Can you just spend one minute more on this? Although I understand this is slightly very early, but if there is a thought towards that.

No, you are absolutely right. This is a new venture and new business. But we definitely will be hiring a competent team which will be doing this. So, you know, we'll take care of all the challenges that this business involves, including the skilling and taking care of the quality standards. So we'll also try to work very strongly in the machine design, fairly good degree of automation. And then the skill level, of course, has to be its topmost priority. So all those things, we'll try to take care of this while planning for execution for this project.

Okay, one last question. In your slide number 14, where you speak about your expanding meeting operations, so you're saying that the expected benefits are likely to reflect from Q3FI27 onwards. Can you just quantify or qualitatively and quantitatively this 92 crores investments in... What kind of benefits can we see in the second half?

Yeah, see currently we have a capacity of 650 tons. So after this expansion probably will be touching around 900 tons per month. So in 900 tons, 150 tons will be of printing, which is not there as of now. So one of the benefits which we say is the printing over a product mix will get enriched. So this is how we have actually planned. So first, the product mix gets improved, and then obviously, our offer to the different customers, so we can actually give a complete range. So these are two ventures each year in staging, and that's why we say we are actually expecting that in Q3, probably will, you know, this expansion will be complete, and we start getting, you know, kind of trials, and then obviously scale-up of the production.

So, if I got it right, you're saying from 650 tons to 900 tons, and you have a value of over 150 tons of printing. Is that correct?

150 tons of printing capacity, exactly. Absolutely correct. Okay.

Okay, one request to the management, sir. Our presentation was uploaded at 5 o'clock and this was scheduled at 5.30. I mean, we as investor fraternity should have at least one hour of time to scan through the presentation. It makes more sense. Leads towards a meaningful discussion. If you can leave 45 minutes.

So your point is well taken. Normally we schedule this call on the next day, but because of certain other engagements, statutory engagements, we had to schedule it today itself. Board meeting continued till around 4 o'clock, I think. I did it immediately after that, but point well noted, and we will take care in the future.

Thanks a lot, and all the very best to the entire team.

Thanks a lot. Thank you very much. That was the last question. I would now like to hand the conference over to the management team for closing comments.

I extend my sincere gratitude to all of our employees, stakeholders, and partners for their unwilling support. With collective effort and a shared vision, we are all well positioned to drive innovation, strengthen our market presence, and deliver sustainable value. The road ahead holds great promise, and we are confident in our ability to grow and succeed in the years to come. Thank you. Thank you.

Thank you very much. With that, we conclude today's conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.