Earnings Call Transcript - XNSE:RSWM 2026-11-03

Operator

Ladies and gentlemen, good evening and welcome to the RSWM Ltd. Q2 and H1FY27 Earnings Conference Call, hosted by RIC Capital. As a reminder, all participant lines will be in the listen-only mode, and you will have the opportunity to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Reja Singh from RIC Capital for management introduction.

Reja Singh, Head of Investor Relations

Thank you, and over to you. Thank you, Yashashvi. Good evening, everyone. Today, from the management, we have Mr. Rajiv Gusta, Joint Managing Director, Mr. Manoj Kansur, Chief Transformation and Risk Officer, Mr. Nitin Gulyani, President and CFO, Mr. Surendra Gusta, Chief Compliance Officer and Company Secretary. Before we begin, I would like to remind everyone that today's discussion may contain forward-looking statements. These statements are based on companies' current expectation assumptions regarding future events are subject to various kinds of risk and uncertainty. Actual results may differ materially from those expressed or implied in this statement. We encourage participants to refer to companies filing with stock exchange for detailed discussions for the risk factor. I would now like to hand over call to Mr. Rajiv Gupta for his opening remarks, followed by Mr. Mithim Tuliani for financial performance for the quarter. Thank you, and over to you, sir.

Rajiv Gupta, Other

Good evening, everyone. So, I welcome you all to RSWM's quarter 2, H1 F1 27, earning calls. Today, I'll briefly discuss the economic environment, key developments in the Indian textile industry during the quarters and half-year and the 30th of September, and important developments at RSWM. During Q2 and by 27, the textile industry continued to face challenges arising from geopolitical tensions in West Asia, including U.S., Israel, Iran, conflict. These developments created uncertainty in the international trade, higher ocean trades, and fluctuations in energy prices added pressure to transportation and manufacturing costs. At the same time, rising prices increased the input costs for synthetic yarn and fabric manufacturing, while the ability to pass these increases to the customers remained limited, putting pressure on our margins. For H1 FY27, India's textile and apparel exports recorded moderate growth, supported by cotton and man-made textile products, while apparel exports are experiencing slowdown in demand.

Operator

I'm sorry to interrupt, sir. There's some disturbance and you're sounding distant. Can you come closer to the microphone, please?

Rajiv Gupta, Other

During the quarter, Resibium continued its transformation journey 2.0 to strategize its force to domestic stations, remain agile, productive, and sustain performance in spite of challenges. Thank you. Productivity improvements, tighter working capital management are also the central of this transformation journey. RSWN's diversified portfolio across synthetic, cotton, blended, and milaned yarns, denim, and knitted fabric helps this cater different customers' requirements and the different market segments. Investments in automation, digitalization, manufacturing, modernizations are aimed to improve the process visibility as well as the feasibility for efficiencies. All these initiatives have helped the company to improve its asset utilization and profitability as a fluct in quarter two results, wherein we could register 15% revenue growth in this period, and the beta grew at 47.9 crores, while the pads increased to 24.5 crores from 6.3 crores in quarter two last year. Now, if you look at the future outlook, RSWMs, and sustaining this momentum currently, the RSWM 2.0 transformative program, which is built around the people, process, planet, and profit, will remain the center of companies' focuses on improving utilization, resistance, and melange, while expanding the value-added textile fibers, differentiated fabric offerings, We will focus on a strategic venture, 4% stake in this subsidiary of RSWM, and we will focus on premium denim and knit garments manufacturing. For phase one, we will be having an investment of 208 roads. This partnership combines RSWM's manufacturing capabilities with the NDS design expertise and the international market reach. We will focus on value-added approach, and we will be having the full textile value chain exposure after this expansion. Our focus continues in the coming quarters. We will work on strengthening our product mix and increase contribution on the value-added offerings. We execute the ongoing expansion projects, and the new projects which we are discussing now in this quarter will also be taking shape. LNJ GreenPath, which is an already ongoing project, is likely to be commencing the commercial production in the first quarter FY28. The broader focus remains on consolidating core operations while building the new growth opportunities through forward integration. And with this, I would now like to hand over to you, sir, and H-127. Over to you, Nitin. Thank you.

Nitin Gulyani, CFO

Good evening, everyone, and thank you for joining us today. I will take you to the RSVM Limited financial and operational performance for the quarter and half-year end of 13 September, 2026, covering our revenue performance, profitability, and key operational priorities. Moving to our financial performance for Q2 F527, revenue for operations increased by 13.9% sequentially to $1,022 crore from $1,161 crore in Q1 F527. On a year-on-year basis, revenue grew by 15%. Domestic sales increased by 12.5% quarter-on-quarter and 16.5% year-on-year, while export sales grew by 17.2% quarter-on-quarter and 11.6% year-on-year. This reflect growth in both domestic and export chains during the quarter. During Q2 F527, EBITDA increased by 23.2% quarter-on-quarter to 116 crores, with the EBITDA margin moderating slightly to 8.7% from 8%, expanding by 66 basis points quarter-on-quarter. On a year-on-year basis, EBITDA grew by 47.1%, And the margin improved by 191 basis points. Finance costs remained broadly stable at 31.5 crores, increased to 35 crores from 24 crores in Q1 F527, while profit after tax rose to 25 crores from 17. Compared with Q2 F526, profit after tax increased from 6 crores to 25 crores. For the first half of F527, revenue from operations increased by 7.1% year-on-year to 2,484 crores. Domestic sales grew by 8.2% to 1,753 crores, while export sales increased by 4.5% to 750 crores. For H1 F527, EBITDA grew by 31.4% to 210 crores, while the EBITDA margin expanded by 156 basis points to 8.4%. Profit before tax increased to 59 crores from 20 crores in H1 F526, while profit after tax goes to 41 crores from 13 crores. Overall, the half-year results remain reflect improved profitability compared with the corresponding period last year. Our EPS has increased to 8.76 from 2.81 in H1 F526, reflecting a 3.1x year-over-year growth. Our operational priorities remain focused on equipment modernization and utilization of resources. During H1F527, power and fuel costs decreased by 16.9 crore, while finance costs reduced by 1.3 crore, compared with the corresponding period last year. Return on capital employed improved from 5.1% in F526 to 6.5% in H1 F527, reflecting an improvement in the reported measure of capital efficiency. The equity in the balance sheet increased from 1,325 crore in F526 to 1,531 crore in H1 F527, an increase of 206 crore. This was primarily attributable to an unrealized fair valuation of gain on 181 crore recognized in the other comprehensive income. The gain arose from the fair valuation of the equity investment received pursuant to the composite scheme of arrangements involving HED Limited, HED Graphite Limited, Elwara Energy Limited, and other listed entity shares which we hold in our balance sheet.

Operator

Thank you very much. We will now begin 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. I repeat, to ask a question, please press star and 1 on your telephone. We'll take our first question from the line of Avinash Nahata from Parami Financial Services. Please go ahead.

Avinash Nahata, Analyst — Parmi Financial Service

Audible, please.

Operator

Yes, please go ahead.

Avinash Nahata, Analyst — Parmi Financial Service

Yeah, thanks. Congratulations to the team for a good set of numbers. Sir, my first question pertains to the fabric division. On three back-to-back quarters, we are seeing no meaningful profit, and this time the PBIT number was negative 6 crores. Please explain on the denim side and knit, because one of the players in denim is doing phenomenally well. So, on the fabric side, what is the denim and knit? And objectively, what is that we are trying to do? We are talking about 90 crores of KPX and knit. So, please explain us objectively what kind of benefit can come and by when.

Rajiv Gupta, Other

Thank you, Vinash, for putting up a very relevant question. I'll respond to the current performance, and then I'll share about the project. The fiber prices, cotton, as you know, have improved by almost 16,000 per candy. 16,000 per candy would mean almost 60 rupees per kg increase in fact on the cotton yarn prices. Similarly, crystal prices have increased in the last six months from 96 rupees to 146. So, then gas and dyes and chemical prices increase in addition to the freight cost, increased cost. Overall, this cost, the N.A. market, we get to a large extent. A lot of pressure because of the cost push and not able to pass on the entire increase in the cost to the customer. So, this is a temporary issue which we are experiencing. Now, discussions for the next season for the pricing to brands and to be taken accordingly. To talk about the project which is underway for implementation, 92 crores of expansion would be completed by December. The printing as well as 250 metric ton of additional knitted production will be available in the fourth quarter. So, accordingly, we should expect our revenue as well as the beta from when we are likely to finish this.

Avinash Nahata, Analyst — Parmi Financial Service

Sir, as you said, in Denim, despite near 100% utilization, we are not able to make money because of higher yarn prices. So, I mean, but we have seen the trend, we have been following the company. So, in the fabric, before we started, it was not like that until 2017-18, there was again this yarn cycle is there every 3-4 years, but we have made money. I mean, I'm not able to understand ki ek industry 100% peh chal rahi hai. The profits could be down, but I mean, we are not able to do positive contribution woh nahi samaj meh a raha hai. So I'm not able to understand that. And if it is not a contribution challenge, this is positive only, you know, let me just, let me just, would you like to add it? I mean, we are not able to pass on 25%, 50%, but this suggests that whatever raw material escalation, price inflation is there, we are not able to pass on anything.

Rajiv Gupta, Other

So, the figure you are referring to probably is TVIT. In terms of contribution, we are not selling anything which is inactive contribution. The figure 5.24 you are saying because part of the new capex is implemented. So, interest and depreciation of that is starting, impacting, whereas impact of that is yet to come. So, and the part of cost push prices, which you are saying, are also taking shape. You know, normally you have...

Avinash Nahata, Analyst — Parmi Financial Service

Are you confident you will be able to turn around by end of quarter 4 or Q1?

Rajiv Gupta, Other

I can only assure you the best of the efforts. So, we expect at least in fourth quarter we will be better off, And first quarter, definitely, we are looking much brighter than what we have this quarter in fabric. Things are improving because this capacity expansion, which is also impacting some amount of current utilization, will also be better off. And both the marketing teams of Knit and Denny are trying to push the prices led by the cost increase.

Avinash Nahata, Analyst — Parmi Financial Service

Sir, my second question is, sir, right now we are doing an EBITDA run rate of 400-450 crores. So, even if we assume that there is around 125 crores, and there is something which goes towards maintenance. So, what is the management thinking? Where are we deploying? What is the... So, we are aware of phase 1...

Rajiv Gupta, Other

This likely beta posts our interest, whatever we are getting in terms of cash profit. One most important utilization of that is the repayment of current. So once that is done, then our normal capex. And then we have two ongoing projects with that hand. One B2B project where company is infusing our equity stake. And second is the new government project which we are having. So, the company is on growth phase, and both these new projects will involve equity participation to the extent that we are trying to...

Avinash Nahata, Analyst — Parmi Financial Service

208 crores and LNG Green, how much will the equity contribution come from RSWM's balance sheet?

Nitin Gulyani, CFO

Approximately 46 crores. Sorry? Approximately 46 crores in the new management which you are doing, LNG, NDS,

Avinash Nahata, Analyst — Parmi Financial Service

In LNG, we have

Nitin Gulyani, CFO

already infused 29 crores.

Avinash Nahata, Analyst — Parmi Financial Service

How much is done? It is already in the balance sheet. 29 crores is already drawn. Okay, sir, one last question, how many shares in our balance sheet are in our balance sheet? Can you just quantify the restructure of Vinwala Energy?

Nitin Gulyani, CFO

Yes, we have done this measure in our notes to account also.

Avinash Nahata, Analyst — Parmi Financial Service

Because we were already holding and through this restructuring we have also got from Vinwala Energy. I can explain to you, I can explain to you the swap ratio. Mr. Swap, let me tell you the quantity, as on date, how much is the quantity?

Nitin Gulyani, CFO

And HEG Limited? Like $91.

Avinash Nahata, Analyst — Parmi Financial Service

So verify, so the numbers are matching. Thank you, and all the very best.

Operator

Thank you. Next question is from the line of Jatin Damania from Swan Investments. Please go ahead.

Jatin Damania, Analyst — Swan Investment

To carry on to the earlier participant question, as you indicated that this quarter, since you capitalized about the incremental depreciation and the interest that has came to the quarter during this quarter,

Nitin Gulyani, CFO

so you are asking about the incremental depreciation?

Jatin Damania, Analyst — Swan Investment

Yes, I am asking.

Operator

I am sorry, your voice is breaking. Can you repeat, please? I am sorry, you are still sounding muffled.

Jatin Damania, Analyst — Swan Investment

We have seen the yarn prices get passed on with a light effect. So, how do we see a pricing monetary on the fabric front in the coming quarters, and with a new expansion coming in from the Q4 onwards, how shall one estimate the growth prospect on the knitting going ahead from the current quarter?

Rajiv Gupta, Other

Very quantum difference from this. Of course, it is improving, and And both in Danim and mid, we have, you know, initial phase over where we had booked the orders and price increase of yarn happened much sharper than the pass on to customers. So there will be definitely improvement, but this expansion will give impact in last quarter, partially where we will have the printing, sampling being done, and the order of printed fabric will start pouring in. The full impact of this expansion of knitting will be visible in the first quarter next year. But definitely third and fourth quarters would be better in terms of price.

Jatin Damania, Analyst — Swan Investment

How do we see now the industry is panning out and how do we see the spread? What was it included too and what are the spreads currently?

Rajiv Gupta, Other

So, in yarn, fortunately, as I mentioned, the cotton prices increased, and fiber prices of blister also increased substantially. Fortunately, we were able to pass largely to customers, but that has created more issues with the fabric and such. So, overall, textile is struggling with this brown trivial. As a spinner, most of the spinners have been able to pass on largely. And secondly, in cotton, as you know, that you stock for

Jatin Damania, Analyst — Swan Investment

26% of the revenue came from the fabric. With the expansion coming in, I mean, not the JV1, but with the knitting expansion coming in of 92 growers starting from Q4, what sorts of overall fabric contribution one can see starting from Q4 or probably FI28?

Rajiv Gupta, Other

So, I think, ultimately, it will go to two-thirds, one-third kind of position in Q1, where, you know, from three-fourths, it will come to two-thirds yarn, and from one-fourth, it will come to one-third for the public. So, that is the likelihood change of balance sheet revenue composition in next year in comparison to the current half-year, which we are reviewing.

Jatin Damania, Analyst — Swan Investment

So, with this 5% increase, more of the contribution, any passing of the higher yarn cost, and with the increasing of the melange coming in, how do we see our operating performance? Because as a company, we have taken various cost initiatives as well, which is visible in the current quarter performance. So, going ahead, what sorts of EBITDA margin one should assume on the fabric division? And in terms of the ROC, because since now, a majority of the capex on the standalone books will be over, the JD will be there, Where part of the expansion have already kicked in. So on the ROC front, on the standalone, I mean, if you exclude the denim business, what should be the ROC once you look on the standalone business, including the denim JV? What, garment projects? Yeah, so current yarn and the knitting business, after knitting expansion and the yarn business that we are currently in. On that business, what should be the ROC once you'll assume it?

Nitin Gulyani, CFO

You are asking about the standalone ROCE, right?

Jatin Damania, Analyst — Swan Investment

Yes, yes, yes, standalone ROCE.

Nitin Gulyani, CFO

From the existing level.

Jatin Damania, Analyst — Swan Investment

Because you were at 6.5% in this, as per your presentation, you were at around 6%, 6.5%, so how shall one look at it, expand that front?

Rajiv Gupta, Other

So it will be difficult to, you know, share a number, but it is going to, going in the right direction if you look at the last deep oak waters, so it will be this or slightly better than this.

Jatin Damania, Analyst — Swan Investment

Okay, and the last question, on the debt, now with the 1,700 odd crores of the gross debt on the book, what will be the peak debt once an expansion is completed, and how shall one look at the annual repayment of the debt?

Nitin Gulyani, CFO

The debt stands at 1,480 crores, out of which 95 crores has to go.

Jatin Damania, Analyst — Swan Investment

Okay, 95 crores. And going ahead, annual repayment will be what, 150 to 100 crores, or it will be 95 to 100 crores?

Nitin Gulyani, CFO

So, next year, it would be somewhere around 180 crores, if we talk about next year, 180 crores.

Jatin Damania, Analyst — Swan Investment

Okay, so that's all from my side. Thank you. All the best. I wish you and your team a happy Diwali and a prosperous movie.

Operator

Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. Next question is from the line of Saket Kapoor from Kapoor Company. Please go ahead.

Saket Kapoor, Analyst — Kapoor & Co.

We have joined a bit late in the call. So, sir, just firstly, the reiteration that these are all operational numbers that we have posted for the quarter, and there is no one of inventory gains or things that have been brought into the PVT, or can you clarify? How should we read this number for the quarter?

Rajiv Gupta, Other

Oh, number four, the quarter, you know, we are a company which is diversified. So, our revenue comes from synthetic yarn, milan yarn, cotton yarn, denim, and knit fabric. So, you know, the trading or the inventory gain largely happens to the cotton yarn business, where you, you know, have stocking of cotton and you get trading gain on that cotton. In our business, cotton yarn business contributes less than one-fifth of our total turnover, and thereby the impact of this gain would also be limited. The currency of uniform continued purchase throughout the year. So, of course, this gain on the sudden increase in cotton prices for a couple of weeks definitely has been reflected, but that is part of the operations. When cotton goes down, that also reflects as a buying strategy that we work on additional stocking or less stocking, the string of yarn.

Saket Kapoor, Analyst — Kapoor & Co.

That point is well taken. You just mentioned that it is only 1% that is the cotton part, so not a large part flows into it.

Rajiv Gupta, Other

No, not 1%. We have 1-5. 1-5, okay. Less than 1-5 of the turnover comes from cotton yarn.

Saket Kapoor, Analyst — Kapoor & Co.

Sir, taking into account how the quarter, exit of the quarter, how are the current spreads for us, and moving into H2, what should be the likelihood trajectory in terms of our margins, utilization levels, what do we expect going ahead, sir?

Rajiv Gupta, Other

So, Kapuji, if you look at the last four, five quarters, we have been trying to work on And the internal efficiencies where, you know, we could improve. So when that approach continues, we still have certain plans for us to work on. Second agenda that we are driving is moving up the value chain. That means eliminating the products which are not contributing and adding to the products which will make more sense. So thereby augmenting our product page. That's the second journey we are going around. And third is overall shifting in the product mix, going to better markets, going to better products, focus more on the new product development, and making sure that everybody in the organization is contributing the required value from him. So looking at all these internal steps in spite of external environment being challenging or uncertainties around the export markets at the current level and slightly better if you compare the half year with the possible next half years. Of course, this is more like an estimate or projection at this point of time. It will be difficult to share any number, but the second half should be better than the first half that we have reported so far.

Saket Kapoor, Analyst — Kapoor & Co.

Okay, sir. Okay, sir. In case of any follow-up or one-to-one discussion. Sure. You are most welcome.

Operator

Thank you. We'll take our next question from the line of Adarsh Sharma from Springtree Investor. Please go ahead. Adarsh, can you use your handset mode, please? Your audio is not clear.

Adarsh Sharma, Analyst — Springtree Investor

Hello.

Operator

Yes, please go ahead. Adarsh, we can hear you. Please go ahead with your question. Yes, Adarsh, we can hear you. Please go ahead with your question.

Adarsh Sharma, Analyst — Springtree Investor

Looking at competitive textile industry, what are the main strategy management is planning to the growing revenue over the two, three years?

Rajiv Gupta, Other

So, the strategic direction of the company, first is consolidating ourselves and continue to work in terms of improving our product mix and ensuring that we are in the right product in each segment of the product that we are. The second aspect of strategic direction is growth. So, where we have three projects already indicated or started, our net expansion is likely to complete in next quarter. Our B2B project, which is part of our subsidiary LNJ Green Pet, is likely to take two more quarters. In the first quarter next year, it will be operational. Third is about our LNJ NDS 9 global private limited denim and knit garment project, which is just starting and will take more than 12 months. The last quarter of next fiscal.

Adarsh Sharma, Analyst — Springtree Investor

Second question is, how will the NNG GreenPack project contribute to the company overall to renew and profitability?

Rajiv Gupta, Other

See, NNG GreenPack, we will do B2B, that is the bottom-to-border rate of food chips. So, as we mentioned, probably we are expecting the commitment of this project in the first quarter next year. So, the total revenue we are expecting from this is almost 400 crores. So, that is going to add to our turnover. So, that we are expecting in the next year.

Adarsh Sharma, Analyst — Springtree Investor

Thank you.

Operator

Thank you. As there are no further questions, I now hand out the call to management for closing comments. Over to you.

Nitin Gulyani, CFO

Our employees, stakeholders, and business partners for their continued cooperation and contributions. Their support remains important as we work towards improving operational performance, strengthening our business capabilities, and creating long-term planning. Going forward, we will continue to focus on operational priorities, responding to evolving market conditions, and pursue our business objectives with discipline and commitment. Thank you, and have a nice evening, everyone.

Operator

Thank you, members of the management team. On behalf of RSWM Limited, that concludes this conference. Thank you all for joining us today. You may now disconnect your lines.