S. P. Apparels Limited (SPAL) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the SP Apparels Limited Q4F526 Earning Conference Call. As a reminder, all participant line will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Prerna Janjanwala from Ilara Securities. Thank you and over to you, ma'am.

Thank you, Ria. Good afternoon, everyone. On behalf of Ilara Securities Private Limited, I would like to welcome you all to 2-4 and full year F526 Post-Result Conference and Business Update Call of SP Apparels Limited. Today, we have with us the senior management of the company, including Mr. P. Sundararajan, Chairman and Managing Director, Mrs. S. Lata, Executive Director, Mrs. S. Shanta, Joint Managing Director, Mr. S. Chanduran, Joint Managing Director, Mr. P. V. Jeeva, Chief Executive Officer, and Mr. V. Balaji, Chief Financial Officer. I would now like to hand over the call to the management for opening remarks. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. This is T. Sundar Rajan, Chairman and Managing Director of HBFL Limited Group. Thank you for joining HBFL Investors Call. FI26 was a year where the global apparel market remained dynamic. While customers continued to prioritize compliance and reliable suppliers and diverse resources, the year also saw short-term volatility from trade and geopolitical developments. Overall, we stayed focused on execution, customer relationship, and building long-term capability. Before I move to division updates, I want to provide the right contract for Q4. Sequentially, export volumes in the garment division were softer in Q4. This was driven by two factors. The first, the after-effect related description that began in Q2 and impacted booking and shipment schedules across subsequent quarters. The second short-term disruption is... The strike of bombers which affected cargo movement and timing. Importantly, realizations remained broadly intact, and the quarter was largely volume lit rather than rising lit.

It is also important to highlight that the sequential

impact in Q4 was more visible in SPAL standalone. Let me now talk about our garment division. Which remains the core of the business. For FY26, the government division including N brand apparel delivered operational revenue of 1421 crores and EBITDA of 230 crores. Maintaining a healthy margin profile. Our integrated operations including spinning and dying continues to support quality, consistency, delivery, reliability. This integrated capability remains particularly important in infants and kids where the compliance and product safety standards are stringent. However, as explained to you during the last call, our garment division during Q4 faced little pressure in the auto-booking due to US fabric volatility. Our capacity was brought down due to this. Now the customers from the US are coming back and are placing orders. We are expecting the pace to improve from August 26th. In India, government division, we continue to broaden the customer base. We have added couple of new customers to our portfolio. We are strengthening the Sri Lanka operation, which will drive growth in coming years. Sri Lanka is a key strategic initiative for us. We commenced our first factory operations around mid-April 26 and are progressing on scaling to 4 factories within 12 months. This expansion strengthens our manufacturing footprint, improve geographic diversification and reduce concentration risk. We will keep our external communication at a high level and our focus remains on stable ramp-up, compliance and customer onboarding. YoungBrand remains strategically important for the group, strengthening our presence in intimatewear exports with market global customers. In FA26, YoungBrand reported adjusted operational revenue of 321.26 crores and adjusted EBITDA of 49.23 crores. As mentioned earlier, Young Brand was infracted during the year because it is 100% US customer base. The US status situation in Q2 temporarily disrupted the booking, and we provided calibrated commercial support to maintain continuity, which had a spillover effect into later quarters. The good news is that the situation has now stabilized and demand has revived. Some policy-related elements remain outside management control and we will continue to communicate conservatively on those. Additionally, I would also like to highlight that the Salem expansion is underway and will continue to bring incremental growth to the division. Our SBUK business has improved meaningfully and I am pleased to share that SBUK reported positive EBITDA during FY26. Reflecting progress in operating leverage as scale improves. FI26 revenue for SBUK was GBP 7.5 million. On the retail side, our focus remains on improving discipline and moving towards sustainable profitability. A key milestone is that the retail division reported positive EBITDA consequently from Q2 to Q426, reflecting better execution and control. For FI26, retail revenue was 71.54 crores, and the losses have narrowed materially versus prior years. We will keep external commentary limited unless required, while continuing to focus internally on improving performance. Our current order book for all the divisions is SPA's gramatic division is 380 crore. End plan apparel is 142 crores. SP UK is 6.1 million pounds. All putting together approximately 600 crores is the order book currently. As we enter FI 27, the key message is that the temporary disruption phase is behind us and we are seeing normalization in customer engagement. We are increasing focus on the US market. It's ongoing discussion with the three to four large customers. The rationale is clear, higher order sizes, better realizations, and strategic importance for scale. Over time, we aim to improve the move towards a more balanced geographic mix. On profitability, raw material costs have moved up during the year. We are addressing this through a combination of selective pass-through to customers where feasible ongoing commercial discussions were required and the internal efficiency initiatives. Despite these cost pressures, our overall margin spans remain and change, and we continue to guide for EBITDA margin of around 15%, supported by pricing discipline and tight cost management. There is a potential contingent upside relating to the commercial support extended earlier to customers during the tariff disruptions. We believe there is a strong probability that a portion of these discount credits will be reimbursed by customers once the relevant refunds are received. However, the timing is not within our control, and we will remain conservative and recognize any benefit only when it materializes. Foreign exchange remains a sensitivity. We will continue to manage this prudently and keep our messaging directional rather than tied to a precise currency assumption. At the same time, where we benefit from favorable currency movement, it can partially offset higher input costs, which supports our efforts to keep margins broadly intact. And here's your friend. We continue to invest in renewable energy. Our solar capacity expansion is progressing, and we are committed to reaching around 4.5 MW by March 27. This supports lower energy cost volatility and strengthen our ENG positioning. Looking ahead, we remain confident in our growth trajectory. We continue to work towards our 2004 top-line ambition. As the business normalizes and operating leverage improves, we also expect the core garment export business to sustain an adjusted EBITDA margin in the rate of 17 to 18 percent. While our overall profitability plans remain disciplined and consistent with our broader margin guidance. With that, I will now request our CFO, Mr. Balaji, to take you through the detailed financial items for Q4 FY26 and full year FY26. Thank you.

Thank you, sir. Good afternoon, everybody. I'll just run you through the financial performance of the company of FY26. On a consolidated basis for Q4 FY26, revenue from operations stood at 364 crores compared to 399 crores year-on-year. EBITDA for the quarters stood at 44 crores as against the 54 crores EBITDA. Year on year. EBITDA margin stood at 12.2% compared to 13.6% year on year. Profit after tax for the current quarter stood at 18.59 crores as against 13 crores year on year. On a full year basis, consolidated revenue from operations increased to 1578 crores as against year on year number of 1395 crores. Reflecting a growth of 13.2% year on year. EBITDA for FY26 grew to 217 crores from 187 crores in FY25. A growth of 16% with EBITDA margins of 13.8 compared to 13.5 last year. Profit after tax for FY26. Stood at 100.95 crores as against 95 crores year on year. On a standalone basis, revenue from operation for current quarter stood at 251 crores as compared to 277 crores year on year. Adjusted revenue for the quarter stood at 249 crores compared to 279 crores of adjusted revenue year on year. Adjusted EBITDA for Q4 stood at 42.94 crores as against 45.35 crores year on year. And adjusted EBITDA margins improved to 17.2% from 16.2% year on year. Profit after tax for Q4 stood at 21.36 crores compared to 24.74 crores Q4 FY25. For the full year, on a standalone basis, revenue from operations stood at 1113 crores as compared to 981 crores year-on-year. Adjusted operational revenue for FY26 stood at 1100 crores as against 184 crores year-on-year. Adjusted EBITDA for FY26 increased to 181 crores from 164 crores year on year. And adjusted EBITDA margins was 16.5 compared to 16.7 percentage year on year. Profit after tax for FY26. was 87.85 crores as against 83.53 crores year-on-year. Segment-wise performance, moving on segmental performance of garment division, which includes the N-brand apparel, reported an operational revenue of 316 crores versus 361 crores year-on-year. On a full-year basis, governmental operation revenue stood at 1,421 crores as against 1,308 crores year-on-year. Government EBITDA stood at 51 crores for the current quarter compared to 58 crores year-on-year. And for the full-year basis, government EBITDA stood at 230 crores against the government EBITDA. Reported an adjusted operational revenue of 66 crores for the current quarter, as against 81 crore year-on-year. Adjusted EBITDA for the quarter stood at 8.47 crores, as against 12.85 crores year-on-year. For FI26, N-brand adjusted operational revenue stood at 321 crores. S-P-U-K. We have a positive EBITDA of 1.1 crore for FI26. Retail reported operational revenue of 17.77 crores for the current quarter versus 23 crores year on year. For FI26, retail revenue was 71.5 crores compared to 79 crores year on year. And the retail EBITDA losses reduced to 6%. million in FY26 compared to 6.8 crores year on year. On the balance sheet numbers with respect to the debt position, on standalone basis, long-term debt stood at 53 crores and working capital stood at 207 crores. Gross debt, 271 crores and net debt, net of cash and cash equivalent stands at 217 crores. On consolidated basis, long-term debt stands at 63 crores, and working capital loans stands at 334 crores. Gross debt at 397 crores, and net debt, including net of cash and cash equivalents, stands at 338 crores. We also have liquid investment of 60 crores in various instruments. All the other information is available in the presentation, and it's time for us to take.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Rehan from Coheron Belt. Please go ahead.

Hi, good afternoon. Thank you for taking my question. Am I audible?

Yeah, yeah.

Thank you. So, I just had a couple of questions on the quarterly performance. The Forex structure right now is, I think we had some part of it and we don't have some part of it. But from a currency standpoint, are we seeing any inflow of volume for us? Because, you know, rupee depreciation should play a role for us in volumes.

You are talking about volumes in pieces?

Yes, like the depreciation of rupee now is at about 95, 96, which was 90 earlier. So your customers would find your product cheaper at the moment. So is there any more volume that is being asked for or, you know, purchase orders? How are they lining up with this rupee depreciation?

Yeah, we have, yes, you know, this global competition against Bangladesh and other countries, so this is helping us, we being a duty, we are coming under the duty pay, we are not in the duty free as against Bangladesh and Sri Lanka. So this currency depreciation of rupee is helping us to compete with this. Not only for this, and also the raw material prices have gone up here. That is all over the world. So that is not only for us. So it is supporting us now. Definitely it's a helpful process. And that is the reason why we are able to get more business.

The FDA, any idea when it will click in further? Because I think there was a small delay from the UK house. So any idea on the same?

There is a stop going on for the steel. There is a negotiation for the steel importing. So that is over at any moment. It is expected in the next 2-3 months' time.

Okay, that's great to hear. Thank you for that.

The EU will also be through during the same time, duty-free.

Oh, okay. Okay. And, you know, there's been, because of this global uncertainty, there's been a delay in ramp up, I think, with Sivakasi and Sri Lanka and the Salem expansion. So, considering now that the headwinds are largely behind us, as the management also said, are we looking at Sri Lanka ramping up meaningfully in FY27, the Q1, Q2 onwards? Are we expecting something? Because as of now, I think we're closer to 1,000 machines that have been installed, and I think one or two factories are also up. But there's no business that we can see on a top-line level at the moment. So if you can throw some light on Sri Lanka specifically, because that's our largest growth driver.

Okay, this April 26, we have been able to do about 40 crores, 45 crores of FOV business, export top line, within this one year time, and we are aiming for 200 to 250 crores during the next financial year out of Sri Lanka.

Okay. I thought that was supposed to be 400 crores, right, at 2,000 machines?

Yes, that is the capacity what we have acquired is this can generate 400 crores, but we are aiming at 200 to 250 crores, and probably in FI 28, we will be able to do 400 to 450 crores.

And Salem will add, now Salem expansion is back, so that would add about another 60 crores, because it's 300 machines, right?

It's around 50 to 60 crores. We have just, you know, slowed down the project because of the years there in uncertainty. Now we have geared up the project, and that will definitely bring another about 50 crores, but not immediately, maybe FI 28.

But, wouldn't that contribute now? Because we've already, that was supposed to be done in Q2, and now we're already at Q1 of FY27.

We have put that project on hold because of the uncertainty with the U.S. tariff issue. So, we were wondering whether we should go ahead with another project or not. So, now that since the tariff issue has been very clear, so we have assumed the project activities. So the order of books, we have to recruit and start the production, commerce the production, and you know, it will take another six months to reach a level to make a commercial production. So, safely, we are betting on FI28 for Salem Factory.

And Sivakasi, how is Sivakasi ramping up?

Yes, Sivakasi also because of the used damage, the sale of one is with regard to N brand apparel. So Sivakasi is for SPAL. For SPAL also because of these tariff issues, we put that factory on hold. In fact, we closed that factory for a while. So now that since everything is been on track, we have already started the production now. Probably in the next three months time, it will be fully up and running up to 200 machines to 300 machines.

So, that would also add about 40-50 crores of top-line in FY27.

Exactly. See, that is why, you know, we are giving you the, see, we are aiming for 2,000 crores next year is confusing all these things.

But you are holding this guidance of 2,000 crores with 15% EBITDA?

So, yeah, with respect to the guidance, we are looking at 2,000 crores next year. On a consolidated basis, with a 14 to 15% EBITDA.

That is including SDA in India, SDA in Sri Lanka, and the young brand apparel, all put together.

No, but right now you're at 1600 odd crores, like closer to 1600 crores, 200 odd crores will come from Sri Lanka, that's 1800. Where will the balance 200 come from? Another 40 crores from Sivakasi, that's 1840. Where is the balance 150 going to come from?

So, if you look at our utilization for the current quarter, our utilization is only 64%. Right. Indian factories. So...

Okay, so you're saying, basically, second half, so basically, your second half will show better result, because as of now, this consolidated figure is adding to about 1850 crawls. Baraji, sir, 1600, you've done almost 1600 this year, 200 crores for Sri Lanka is on the lower end, and 50 crores from Sivakasti, so that's 1850, right?

All will be happening in the second half, because Q1, Q2, still we have the upper effect of tariff issue, and recovering the machine capacity, running capacity, all these things will happen in Q1 and Q2, then takeoff will be Q3.

Okay, but I just want to understand from a business perspective.

Sorry, can you please reach out to me?

No, it's just a follow-up on the screen, if you can allow me.

Sure.

Q2 was when the tariffs came in and we saw better numbers in Q3 despite a 50% tariff. So Q4, now the tariffs are mid of Q4 was knocked off in mid-Feb. And now we're already in early Q, almost ending Q1 rather, sorry. And, you know, why is that effect still being seen according to you? Like, what is the problem that we're seeing from?

If we booked an order, the execution will be three to four months later. That is how we know we got this Q2 and Q3 were better. So now after the starting thing, only the order started coming now. For which the shipment will happen end of Q2 or Q3?

Okay, so it's a three-four month, basically a 90-day cycle.

Thank you, sir.

Okay, thank you. Okay, thank you so much.

Thank you. Next question is from the line of Murtaza from Pinpoint Capital. Please go ahead.

Hi, sir. Good afternoon. Am I audible?

Yeah, yeah, very much.

Thank you for the opportunity. I just wanted to start with regarding SPUK. It's just turned a bit positive this year. So, what sort of revenue run rate are we entering with in FY27? What sort of... What are we exactly saying as of now? And I just want to understand what sort of, how confident are we in the two anchor customers who were earlier mentioned, like, as a potential ATCR contributors, just wanted to understand that better.

With respect to ESP UK... See, we have already had 6 million order book as of today, and we are looking at another 6 to 8 million in revenue for the whole year. So, put together, we should be anywhere between 12 to 14 million on the numbers for SPUK for the whole year, for 27.

What is the second question? Two customers of SPUK. We are going very strong with those two customers. We expect at least about 8 million each customer, which comes straight away at 16 million for the next year, for FH27. And also we are having another 2-3 more customers. So I think SPUK is now taking off.

Okay, that's great, sir. And so secondly, regarding the retail effect, it's going to almost break even in one year. So, we just wanted to understand it better, whether this improvement is structural from the better rationalization and cost discipline, or is there a revenue recovery element, and when can we expect it to consistently become a packed positive?

On retail, there are a lot of... Strategies that needs to be done, which we have worked, and is working out well in our favor. However, there is an elevated interest cost on retail venture, which needs to be supported through equity. So, whenever we raise equity in retail, I think it will be even that positive. So, the depreciation is not an issue, but it is only the finance cost which is pulling down the bottom line.

Okay, sir. So, are we planning to deliberate a little?

Yeah, we have been telling this quite regularly. So, we are trying to raise equity there in retail ventures. So, maybe once we are all quarters of the year is positive, then we will reach out for. Raising equity with, even we are ready today. If somebody is interested, we would like to open up. No issue.

Right. Okay. Answer regarding the cotton price volatility, whether selling and dying plants that were integrated. I just want to understand how does the... Cotton cost environment compared to the year ago, and is there any pricing lag between the input cost and the export realizations that is sort of creating a margin pressure on us? Yeah.

Yes, this is actually, yes, now the cotton price has gone up, and now it is stabilizing, and slightly it is coming down now. It went up to 75,000 rupees, now it is about 78,000 rupees. So it will somehow stabilize in between, and which is, this price is workable first for making a good margin of EBITDA, as far as spinning is concerned, and because of even the yarn prices have gone up by both. Say about another 5% or so. So this will help us spinning to be sustainably, profitably sustainable. That is one thing and we are passing on this also to the customers because it is a global issue. So the customers are liberating it. I mean, they are accepting the price increase. Plus, as I told before, rupee depreciation is also supporting us.

Okay, sir. Lastly, I just wanted to understand, it's a bit a future-cited question, but with Bangladesh losing its EU LTC status by 2029, European buyers will have to diversify over the three, four years. So, are we seeing any early inquiry flow, especially because of this shift, or is it a little too early?

Now, even just one hour before we got a customer who never did in India, who is only doing in Bangladesh and Sri Lanka, has come to us, and he insisted that by 2029, this will be no longer duty-free in Bangladesh. So now they are getting ready for India, and on the other hand, they are expecting FDA to happen in the UK and EU at the same time, very shortly. So the message is very clear from the customer's point of view that they are reducing, or if not reducing, they are not increasing the existing business out of Bangladesh, and they are coming to India. And of course, Sri Lanka is an extension of India. That is how we look at it. So, it's a very good opportunity for the next three years and people, customers have started moving the business to India.

This is great to hear, sir. It opens a lot of opportunity for us.

Opportunity for India, great opportunity. There are two things. Bangladesh is going to lose the duty-free status and India is going to take duty-free. So, this is a double win situation.

Right, totally agreed. These were all my questions. I'll get back into the queue. Thank you very much. All the rest for the future. Thank you.

Thank you. Next question is from the line of Ms. Prerna Janjanwala from Ilara Securities.

Over to you. Hi, sir. I just wanted to understand the geographical diversification point that you mentioned in your opening remarks and addition of new clients. Could you show some light over there on how we are looking forward to diversify geographic contributions and… Who would be the new client in the bibliography that you're talking with and holding a contract?

Okay, yes. Currently, our exposure with the US is only 22%. And now, because of the tariff issues, we had some issues, and it has come down to 17% this quarter. And now because the tariff is coming up and we are also adding a couple of customers from the Eurozone. Which will give us some more comfort in terms of diversifying and having a balanced approach with UK, US, and Europe. So, we are looking at 35, 35, 30, with respect to 30% with US, 35 with Euro, and 35 with... So, we are moving towards it, and we hope by FY27, this target will be achieved.

Yeah, the customer base will be well mitigated by end of 2027, that's right.

Okay. And so how many customers do we have now between US, UK and Europe?

In the group, I think we have 12 customers. We have 12 customers, out of which American customers are about 4 customers, 4 or 5.

So, about five to six customers, and about seven, eight customers of Europe and the UK.

Understood, sir. Sir, next question is rupee depreciation. In the past, whenever rupee is depreciated, what kind of benefits we have seen coming to us as well as India? And... How are you seeing this depreciation? Because, relatively, we have outperformed against other countries. So, some light over here.

In terms of currency, see, whenever we get the orders, we are covering 80 percentage, and only 20 percent is kept open. So, we don't have this... We cannot look at currency depreciation as a point of getting more business, but in terms of coverage, we do cover immediately when we take orders. So there is no leverage for us to use the currency depreciation in our favor.

Okay. Understood. And so could you please help in your current machine capacity and what should we expect by FY28?

FY27, we are looking at 5,700 missions in India, 2,000 missions in Sri Lanka, and 1,400 missions in Anbran. So that's the range in which we are working at. FY28, I think it will be, we are not looking at expansion currently. Provided we are utilizing the current capacities, we are sweating on the current assets what we have. So, FY28 will be decided once we have the current utilization level moving up.

Understood, sir. And so, how is the inquiry for UK FTA? Can we see immediate benefits coming in if the... If the FDA is signed in the next two, three months, so any dialogue that you can share to see what kind of benefits we can accrue with FDA coming in.

See, the benefit will definitely be passed on to the customer because they will take advantage because they currently they are paying the duty which they are no longer going to pay the duty. There is not a big change in the pricing. Only thing can happen is they will be giving more business to us versus Bangladesh. So we have to get ready with the enough capacity to accept that kind of volume and which we are ready now. That's the only advantage we can have.

Okay, and because of this advantage, how do we see the revenue growth of utilizations and employee additions going forward, at least in the next one year?

So, for the FY27, we have enough capacity to fill in. So, if the FDA comes, we will immediately get all of our capacities filled. But probably from FI28, we will be adding more capacities in India and Sri Lanka both. So we will be in a position to take any kind of volume from any customer, including American orders. So that is the plan. So we are expecting EU and UK to be inflowing of more orders once the FBA is announced. And as such, Sri Lanka is already duty-free. So, we are in a very position for the next year to accept all the orders with the flexibility between India and Sri Lanka, which is good for us.

Well, sir, I'll come back to the question queue, and that's Rishi.

Thank you. Next question is from the line of Bhavika Jain from Niveshay. Please go ahead.

Thank you for the opportunity. Sir, I want to understand as we are like integrated facility, so how the current spread situation which is going on in the industry will advantage us because as we see the players in the textile sector have benefited from the spread and we are expecting that this benefit will continue going forward for two to three quarters. So do we expect the same? And the second question, I want to understand that, like, as we are expecting to increase our adult clothing segment, so I want to understand that how the end market is, for my understanding, US and Europe is the biggest market. So, do we see any growth guidance given by those geographies? I want to understand from the industry point of view, what's the view of the end market?

Retailers' margin, okay, that is something, you know, they always, you know, there is an acute competition between the retailers. So, probably, they will not be benefited, they will also reduce the retail prices. That is what is going to happen, because they have to compare with their competitors. So, this benefit will finally go to the consumers only.

My question is that, first, talking about the margin side, I'm asking that currently, like we are doing 15, like recently we did quite a little less margin. So, I'm just asking that, seeing the current scenario, do we see improvement in our margin profile? And will it be sustainable?

There is a possibility because since they have enough room, due to duty free of 10% benefits, probably we will be able to get 1 or 2% we can get as an extra margin on the prices. Good evening, everyone.

Thank you. Okay, watch it.

Thank you. Next question is from the line of Bhavin Cheda from Inam Holding. Please go ahead.

Good afternoon, sir. Good setup number in challenging environment. Regarding the machine counts, sir, you mentioned in

FY27 availability, you said in India 5700 machines, I suppose it was...

Supposed to go to 6,000 machines in March 26 only. So have you postponed this 300 machine expansion?

We planned to increase 6,000 by end of March 26th in the first quarter, which now we are sticking to 5,700. Tsiprasasi expansion of 440 emissions, we are still slowing down because of the U.S. tariff volatility.

But U.S. tariff is now at 10%, so what is slowing down? Basically, I think, I believe the tariffs are now equal for everyone.

I think you have missed a couple of questions before. There was information asked about why there is a, now that there is a tariff issue is being removed, why the sales is coming in the second half? So, we said that there is a gap. So, now only we have started recruiting people in Siwagasi. By end of March, we will definitely improve the utilization level, but we are not adding any missions until we are confident about the utilization going on.

There are two issues. One is... U.S. customers only now after the static things, the more clarity, now they are going to start the orders from the next season because already they diverted the business to Bangladesh and other countries because of this static issue with India 50% penalty, this one. So now they start placing the orders which will come to us by end of June or something. And we'll start the production somewhere in August or something like this. See, this is how it goes. So, the after effect is, you know, because of that issue, it was a big hit for us for at least for two quarters. So, now only we are going to remain from Q3.

Okay. Despite this, you are expecting 2,000 crores top line in FI 27, so second half will... Can you cover whatever you miss in first half?

Yes.

Okay, so 2,000 crores turnover from current capacity and as you are discussing with the U.S. plant is not a problem with 15% margin. Okay, and so in terms of capacity addition, now by end of the year, once U.S. clients are back, you will be again adding that 300 machines towards the end of the year or next year?

Two things. One, 15% margin guidance is with respect to the government. Governmenting is not on a consolidated basis. 2,000 crore revenue is on a consolidated basis. 15% margin is on the environment division. Point number two, adding missions of 300 missions is going to cost only 200 crores of money. It's not about adding a mission as a capacity, but you need people. So once we start utilizing the capacity, well, we can add up at any point of time. That should not be a, adding capacity should not be a big hurdle.

I understand you said government division, so retail and SP, UK, what kind of margin do you expect next year?

Just now picking up, we are breaking even at the EBITDA level. SP-UK, we are looking at anywhere between 4% to 5% on the EBITDA level.

Great. And all the, once you, current capacity and say two, three hundred machines you said can be added easily in India, after that, what is your peak potential turnover, which I assume can be achieved in Fi28 from the current capacities?

You are talking about the full peak capacity which will reach around 2,500 crores of revenue, peak capacity, 2,500 crores,

2,000, customer base and the capacity base.

You also mentioned Bangladesh will lose a duty-free status by 29. Is it similar for Pakistan also?

Pakistan is duty-free.

That's duty-free. So I think by 29, you said that Bangladesh will no longer be duty-free in EU. Same is the case for Pakistan?

Thank you, and best of luck. Thank you.

No problem. I'll take it. I'll see you later. No problem.

Thank you, sir. Thank you.

Thank you. Next question is from the line of Utkarsh Soumya from EcoQuantum Solutions Private Limited. Please go ahead.

Thank you for the opportunity. I just wanted to reconfirm that you said your consolidated guidance for FI27 is 2,000 crores and 14% EBITDA margin. Am I right? Yes. And for FI28, did you say 2,500 crores and 15% EBITDA margin?

No, no, no, no. He said when you utilize all the missions, what will be your revenue? I said 2,500 crores. And at an EBITDA margin of 15%. That is what we said.

I get that, but I assumed it will be fully utilized because you said you may add machines in FI28. So I assumed only if you fully utilize this, you'll add machines. So anyway, can you tell me what you think you'll do in FI28?

FI-28, currently... Logically, it should happen. Logically, it should happen, because once we fill all the capacities, including Sri Lankan, the young brand expansion, and the same factory filling, increasing the existing factories in India of FVAL, so we will rapidly go up to, say, 9,000 to 10,000 machines fully. So, it should be, when you fetch 10,000 machines, then it should happen for 200, I mean, 2,500 pros. Easy calculation.

And are you able to operate at 100% utilization or your optimum is like 80-90%?

We are working towards that. You never know. Anything can happen. We are working towards that.

No, no. What is your general optimum utilization level?

90%.

90%. Okay. Okay. Thank you so much.

Thank you. Next question is from the line of Shubhankar Gupta from Equitry Capital. Please go ahead.

Hi, sir. Just two questions from my side. First is on the FY27 guidance, right? A lot of numbers have been thrown. Just want to get clear clarity on a segmental breakup level. So, you said console is 2,000 crores, right? With margins of 15% on garmenting. And 4251, FPUK, correct? Just want to get clarity on the segmental revenue break, F527, the estimate which you have made.

Do you need revenue break-up? That is what you are asking?

Yes, sir, for all segments.

So, in terms of revenue, 1,800 crores from SP Apparel's Darmantian division? Include in N brand. And Sri Lanka put together. And we're looking at 150 crores revenue from SP UK and 80-90 crores of revenue from Krokodai, the retail venture.

That's helpful, sir. Second question from my side, so I think across industries, one common thing that has come out is labor disruptions, which have been there, right? I just want to understand, you must have said something similar. So how grave is it, one. And second, given that you're giving good growth guidance for FY27, around 25%. Right. Are you not seeing any sort of major or grave disruptions for the labor bit in Q1 already?

Labor disruptions, you said, Matt.

Yes, I think across industries, this is a common theme, which has come out that labor, because of multiple LPG issues, labor returning to Bengal for voting, etc. had been an issue of Q1. So my question is, have you not seen any sort of labor turbulence in the Q1 already? And if yes, then how do you see it going forward? If no, then it's perfect.

Actually, it is not a labor disruption. As M.D. said, there was a recession in the U.S. business. We were forced to reduce the capacity because that is why the labor, they have all returned to their native places. Now we are again calling them back to be able to fill the capacity into CMQ4.

If you're calling them back, we just want to understand like, have we been able to get success in getting them back? If yes, then let's say you call back 100%. How many have come back? How many are yet to come back? Sort of a scenario is what I'm asking for.

Yeah, it will not happen 100%, but after 30 to 40%, they will come back. Again, we have to newly recruit and train them. That is a continuous process that will happen.

Got it, got it. But if that is the case, then again, capacity utilization.

Can you please join the case for follow-up?

Okay, sure.

Thank you. Thank you. Due to time constraints, that was the last question of the day. Now, I would like to hand the conference over to management for closing comments.

Thank you, everyone, for the various questions, and I am confident that we have been able to answer all your questions to your expectations. To summarize, FY26 was a year where we delivered growth while managing temporary disruption. Q4 was softer mainly due to volume timing and short-term disruption in global trade groups, while realization remained stable. With normalization in demand, Sri Lanka scale and progressing well, and a clear focus on disciplined growth and marbling, we believe that we are well positioned for stable and sustainable growth going forward. Thank you. Stay confident in our company, and we are very confident about our way of working and the growth. Thank you.

Thank you. On behalf of Elara Securities and S&E Apparel Limited, that concludes this conference. Thank you for joining us, and you may not disconnect your lines.