Sumeet Industries Limited (SUMEETINDS) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Summit Interstit Ltd. Q1 and 527 Results Conference Course. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on a touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Pat Asaryas from Karin Advisors, Private Limited. Thank you, and over to you, sir. Thank you.

Good afternoon, everyone. On behalf of Karin Advisors, I welcome you

all to the conference call of Komit Investors, Limited. From the management team, we have Mr. Pratik Jaju, Managing Director, Mr. Rohan Moth, Executive Director.

With that, now I hand out the call to Mr. Pratik Jaju for the opening remarks. Over to you, sir. Thank you.

Good afternoon, everyone, and a very warm welcome to all our investors, analysts, and stakeholders. Joining us today for the quarter 1 FR-27 Earning Conference Call of Philips Industries Limited. It is a pleasure to have you with us today. And I sincerely thank all of you for your continued support and support. For the benefit of those joining us for the first time, let me briefly introduce Sumit Industries. Established in 1988, Sumit Industries has built a strong presence as an integrated producer manufacturing unit with a diversified product portfolio comprising of pet chips, partially oriented yarn, solid rod yarn, and police texturized yarn. Our products cater a wide range of end-users, industries, including apparel, home textile, and industrial applications. Operating from Surat, one of India's largest synthetic textile manufacturing hubs, it provides us with a strategic advantage in sourcing, manufacturing, logistics, and customer services. The new phase of the company's journey began in 2024 under the leadership of Eagle Group, a textile-focused industrial group with over 4 decades of experience across the Pulitzer Valley chain. Since then, our focus has always been on strengthening operational excellence, improving manufacturing efficiency, and building a scalable platform that can support, sustain, long-term growth. Coming to our financial performance, we delivered a resilient quarter despite an exceptionally challenging operating environment for the producer industry. During our quarter 1 FY27, our income increased by over 9% year-on-year to 272.74 crores. Our EBITDA skewed at 8.85 crores with an EBITDA margin of 3.24%, which 280 for the quarter was 1.14 CR. Although revenue growth remained heavy, profitability during the quarter was impacted. Now, this impact was due to temporary industry-wide red winds. Due to the geopolitical tensions in the Middle East and US, there was a sharp increase in the crude oil prices. This resulted in significant volatility. In our raw material, such as PTA and energy, along with elevated freight and logistic cost, this factor created margin pressure across the polyester value chain and affected manufacturing across the industry. Importantly, the underlying demand environment has been increasing. Demand across federal own textile industry application continues to be healthy, and the challenges witnessed during the quarter were largely driven by input cost inflation rather than any weakness in end market demand. Encouragingly, the operating environment has already started improving, the crude oil prices has largely stabilized, the raw material availability has improved, and the supply chains have normalized, and the price volatility has moderated. We believe this for temporary disruptions and with industry conditions steadily returning to normal. Alongside navigating this near-time challenge, we also achieved one of the most important milestones in the company's recent history through the successful completion of our right issue. I would like to sincerely thank all our shareholders for the confidence we have shown in the company and for their strong participation in the capital gains. The Board has approved the allotment of 15.84 crore equity shares. At an issue price of 11.86 per share, raising 199.75 crores, with net proceeds of approximately 194.90 crores available for deployment to other strategic growth initiatives. This net proceeds from the issue has been earmarked for clearly defined priorities. Approximately 100 crores will be utilized towards strengthening working trajectory to support higher production levels and efficiency procurement of raw materials. Around 50 crore will be invested towards the operationalization and integration of the new acquired CPC. Approximately, 23 crore will be applied for the repayment of borderings, which is expected to lower our finance cost, and step on our balance sheet. In addition, 22 crore will be invested in solar capital power plants, which will help to reduce our power power.

Among these strategic initiatives, the operationalization of the

company is one of the most significant road drives of other companies. Earlier in March, two utilities were declared the successful leader for the acquisition of Narcoda Limited City plant under the CIRP for a concentration of 23.47 crores. This plant has an internal manufacturing capacity of 1,40,000 tons per annum. of TPCs, a key raw material for our downstream T1 Oblira operation. Once we commissioned, it is expected to approximately double our existing product capacity by significantly abandoning backward integration, improving operating efficiency and enhancing our overall cost competitiveness. We believe this project will serve as a key growth energy for the company over the coming Looking ahead, we are optimistic about the opportunity before us, with industry conditioning stabilizing, a significant stronger balance sheet, lower expected finance cost, and the execution of our strategic growth. We believe the industry is well positioned to enter its next to the sustainable growth. Based on the current demand environment and our execution roadmap, we remain confident of delivering more than 30% revenue in the financial year 2020. Along with the EBITDA margin of around 6% and a profit of a tax in the range of 3.5-4%. Our focus remains on discipline execution, operation excellencies, and creating reasonable long-term value for our stakeholders. Before concluding, I would like to thank our shareholders, customers, landers, business partners, and every member of the Summit industry family for their continued trust and support. With that, I thank you all once again for joining us today, and I now open the floor for questions. Thank you.

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 the touch phone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Himanshu Duker from Stylus Holdings. Please go ahead.

Yeah, hi Prasik. First of all, congratulations on the successful writing to you. Am I at the end?

Yes, please.

Yeah, please. Okay, thank you. So, I wanted a few questions I have. Number one is, on the volumes that you have delivered for Q1, if you could share, you know, what was the volume that we did between POY and FDY?

I would like to inform you that the production was affected due to be highly volatile and the sector of the material and plus we also took a maintenance down for 15 days and that is why our volume production volume begins by 17% during this quarter, then the last quarter. Till we were able to manage the sales because we had stock which we were able to liquidate.

Got it. So, understood. The other question I have is for the exchange filing about the conversion of debt as well, the optionally comparable dipenture. So, net net, as of currency, what is the gross debt if you could share a number? Gross? Gross debt that we have in the balance sheet right now.

Oh, okay.

After the repayment from the right issue proceeds, and we have the long-term debt is reduced to ...

Right now, we have long-term debt of 86 crores and short-term borrowing of 74 crores. Yes.

That is a mass contingency, right? Now it will have to change, I think, because of the conversion of debt, etc.

No, no, the conversion of debt, the preferential shares are already given. Only the preferential shares are converted, this is before start of the deal, then we took over in 2024.

Okay, so that was part of equity. Yeah, that is completely different, that is OCTR.

Okay, it was already part of the long-term borrowing, it was showing the balance.

No, no, no, no, no, no, no, no. In fact, after the mark balance, as informed Mr. Bohan, we have paid 23% to our banks, so our debt has reduced, and even the short-term borrowings like working capital, all has been serviced to the financial cost to be reduced in the current financial aid.

Okay. So, we also had some capets that were getting commissioned, right? There were some 20,000 TTAs that were supposed to happen, right, 20,000, so.

That is already commissioned. Part of it was commissioned in July, and the other part is commissioned right now in August.

Okay, so now our capacity is, what is our polyester capacity versus what is the furred on yarn capacity?

Our CP capacity is 300 tons, and our yarn drawing capacity is around now, now it has become 240 tons per day.

Are you 340, 240?

240. 340, okay. Yes, the plant capacity is 300 tons, and we are drawing now 240 tons into yarn.

Okay, understood. So, uh... After this, coming back to the debt, after this conversion, except for this right situation that we have done and we are repaying, roughly, what is the finance cost you are expecting, say, from next quarter?

We expect a significant reduction in the financial cost, but as we were saying, the overall date, 23 CR, is busy, the rest of the date, finance cost will be there. And for short term, the CC interest, the capital, because of the working capital, we have received the working capital, the CC cost will be also much negligible. So all that will increase our financial cost.

Okay. Thank you so much. I'll join the team.

Thank you. The next question is from the line of Riti Jain from Orient Capital. Please go ahead.

Hello.

Yes, ma'am.

Hi, I have a few questions. So, what annual power cost savings are expected when renewable energy reaches around 60% of total consumption?

We expect an overall reduction of the power cost we would expect. We expect the benefit of around 25 crores per annum after all of our renewable power is commissioned.

Okay. Q1 EBITDA margins stood at 3.24% against the FY27 guidance of around 6%. What are the key drivers required to bridge this gap over there?

As I informed you that the first quarter, the demand, the supply and everything was very volatile due to the constant change in the raw material prices. Romo Dukakis were highly volatile, weakly. So, the demand was also changing and the margin was also changing. Now, things have come back to normal. We are running as a plant at full capacity and we are expecting a good demand ahead. Apart from this, the new 30,000 cents per annum capacity is already commissioned in the second quarter. So, that will add up to our margins. Further, renewable power will also be added up in the second half of the year that the margin will be added and we expect a good demand now. Good demand and good, and as the raw material will come down, we expect the margin to improve further.

Um, and what percentage of the current product mix comes from value at YAM?

Currently we are at 30%, 30 to 35%.

Sorry, uh, I lost it.

30, 30 to 35%. Yes, 30 to 35% of our YAM production is very very YAM.

And what utilization level is targeted for the NACODA facility in the first full year of operations and how long is expected to reach optimum utilization?

These plants, when they start, they lose the optimum capacity within one to two months. So once it starts, within 50

days, we expect it to reach to the optimum capacity.

Okay, fine. I'll see you back then. Thank you.

Okay, thank you. Thank you. The next question is from the line of Kuren from Tamada D&T. Please go ahead.

Hi, it's Rathir again, and congratulations on a great quarter. A couple of questions. You've talked about decrease in 17% decrease in volume, but increase in sales from existing stock. So what are the revenue growth expectations that we have in the next couple of quarters? Do we expect the same growth quarter on quarter?

See the expected growth quarter and quarter because in the first quarter the production was less but due to the highly volatile prices we were able to maintain our top line. Now in this quarter our production will also increase and the prices are also we are also trying to sustain the prices. So, yes, overall in the financial year 27, we expect revenue growth of approximately 30% than the last financial year.

Okay, fantastic. And from an EBITDA perspective, what is the guidance of perspective that we expect for the next three quarters? I don't know if I missed this in the initial part of the conversation, but.

Yes, we are really pretty confident that by the end of financial 27, we will be going to achieve our data level of 6%, which we have targeted.

Okay, okay. And the NACORA facility, is it on schedule? Yes, it is on schedule. Okay, and when do we expect it to be adding to our top line and bottom line? When do we start and what is it?

We expect the natural financial commission in the next financial year.

Okay. So, so, to your answer to the previous question when it gets commissioned in the next financial year within 60 days it will be 100 percent.

Yes, yes, yes.

Thank you so much.

All right, thank you.

Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the touchroom telephone. Ladies and gentlemen, if you wish to ask a question, please press star and one on the touchroom telephone. The next question is from the line of Kval Gala from Gala Adventures. Please go ahead.

Hello K1, please go ahead. Hello, Kevin, please go ahead. As there is no rebrand from the line of favor, I will promote the next.

Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and 1 on the test room telephone.

We will wait for a moment while the question queue assembles.

The next question is from the line of B.T. Purohit from Phoenix Capital. Please go ahead.

Hello.

Hi, sir. Could you share an update on Nakura CP plant and what work you've been planning to make it operational and when you expect commercial production to begin?

From the Nakura CP plant, the work of The new machines orders have been given, the work of installation is already going north, and we expect that in the next financial year, it will commission, and once it commissions,

as I have already informed you, within 60 days, it will be at optimal capacity.

And around 100 crores from the right issue is being boosted for working capital. So how much additional revenue do you expect this to support?

As I have told you that about 30

percent additional capacity is already sufficient and we are moving into validated lands as well. So, to support all this the working capital is being used as well as when the when ACOBA starts that the working capital requirement will also be fulfilled We did this, which is the requirement. And the current working ticket what we are using of bank limits, we have already filled up, so our financial cost will be reduced.

And, sir, I mean, how much of your overall power requirement is currently made through renewable energy sources?

Currently, only 30% is being serviced, or 30% will be serviced through renewable power, and further 30% will be done once I would be sold out at this commission.

And what is expected timeline for commissioning the new 6.5 megawatt captive solar power plant and also from which quarter do you expect this cost savings to start reflecting in the business?

The remaining power, we are expecting the remaining power plant to be commissioned in the last quarter.

Okay. Okay, sir.

Thank you. Ladies and gentlemen, anyone who wishes to ask a question may press star and one on the touch room telephone. The next question is from the line of Rohan Shah from SK Capital. Please go ahead. Hello, sir. I have one question regarding the current market conditions like the stock is facing. The stock has been in a lower circuit since the last 12 to 14 days. So what are your actual views on it? Because retail investors are not getting the exit that they require after the right issue.

I can't comment on the share price, why is it going down and all, but it was expected as our share prices were at 34-35 level and the right issue was at 12, 11.86.

Okay.

So, everybody wants to sell now.

Yes. But the share price was also taken in the last one month from 22 to 35 rupees also, sir.

Therefore, the trust of the investors on the currency also, we don't expect any panic situation among the investors. We are very confident that with our results and with our future projections and all, that our share package will sustain.

Okay, sir. I wish you were very best. Thank you.

Thank you.

Thank you. The next question is from the line of Himanshu Rubeh from Stylus Holdings. Please go ahead.

Yeah, thanks for the follow-up opportunity. So, first question was, you know, in terms of our margin, when you say 6% guidance is given, right, is the margin. Where can we do the gross margin given? We recorded at least 15% gross margin for FYI for the first quarter. So can you see that 30% of gross margin which used to be prior to the entire bankruptcy effect that happened? Um, I can't hear you properly. Uh, Ron, if you can do the answer, did you answer? Should I repeat?

Yes, yes, yes, yes, yes, yes.

Yeah, sorry, sorry. So, my question was, so, prior to, you know, uh, us, uh, the bank of Chexatra, the company used to operate around 20 to 25% gross margin. I think last three or four quarters we have been oscillating. We reached 20% plus, but again in this quarter we are at 15% gross margin. So I just wanted to understand, say for the full year, when we are guiding for 6% operating margin, what is the gross margin that you are expecting?

Hello, Ami, how are you? Yes, yes.

So we are expecting our margin to increase. This cross water, as I told you, was very volatile, and that is because we were not able to achieve the cross margin, but we are very confident that we will be able to achieve our cross margin over 25% and maintain the same so that we can achieve our EBITDA level.

So, usually the business model is, you know, it's because of crude price going up, your government prices are going up, then how soon are you able to pass on the price to the customer?

No, as I told you, if the prices go up, we are able to pass it on immediately, but the prices are very volatile. Today it was going up after 3 days it was coming back. So that is why the distance to parity was too much in the demand and supply. And that was the reason that we were not able to pass on completely to our customer already.

Okay, I understood. Next question I have is on the order. Yes. Sorry? So, you are saying something we're working completely. Sorry to interrupt you.

Yes, our order cycle is around 15 days. So, if the rates are sustained for 15 days, then we are able to pass it on easily. But within the 15 days, if the time goes up and comes down, we have to take raw material constantly. So, that is where the gas came.

Understood.

Okay. So, this question goes around tax losses. So, because prior to the acquisition, the company had huge amount of losses which had suffered. So, are we having unabsorbed deposition and losses, you know, that we can now utilize, because of which our tax outflow may also, you know, reduce?

Oh, no, we are kind

of a tax benefit because we already used it in past quarters. Basically, basically, they are asking that we have any tax credit or something like that because we, at least, because the Smith Industries, before NCLT, they have a huge office. So, he is asking whether we have any tax credit or not.

No, no, because everything was used first and we had to clear the balance sheet. Then the amenities were written off in that entity position.

Okay, got it.

Also, we have some, you know, investments and loans advances in the balance sheet, I think, 14-15 crore fee, that was smart. So, this is just, like, what are the utilization of that? You have some?

Some investments is shown in the balance sheet, right? 14 crore.

Out of the 15 CR, the 9 CR is in the high Urdja, that we have the stake in the high Urdja, that is basically the power plant that we have given in the first CR. So we have given 9 crores for it.

Got it. And what about the capital work in progress? So we had around 32 crores, and you mentioned some of it has now become operational. So entire capital work in progress has now been operational from this month, like you mentioned, and there's also some capacity coming online.

So is it fully operational now, the entire project that we have done? Yes, the test, the participants for the

plant is operational now, and it is operational in the second quarter.

Okay, and this will also be utilized like immediately can be a least optimal utilization or it will take time?

No, it will be operational, I guess only any which is in our cycle, once it is commissioned, maximum within a month, it comes to its optimal capacity.

Okay. In a month, it will come to operation. Understood. Just one last question from my head, which is on trade receivables. Actually, that is also, I mean, I can see that both payrolls and receivables are that way slightly higher, but are there any receivables that are like more than six months older?

No, we don't have any receivables.

Okay, everything is recent only that way.

Yes.

Understood. You got it. Thank you so much for the opportunity.

Thank you. The next question is from the line of Nikita Aheer, NHNI. Please go ahead.

Hello. I'm Audible. Sir, for my first question is, do we currently have any export revenue, and are we planning to export value-added yarns, or do we need any additional certifications for exports?

Okay, first of all, we didn't have any export, but now yes, we are planning for export. We are already doing doing export, and we don't get any

specific in export.

Okay. So, has the Rs.23 crore NACODA acquisition amount already been paid and is it included in the Rs.90 crore capex or separate from it?

No. It is only the Rs.90 crore capex.

Okay. Thank you, sir. Thank you for answering my question. Thank you. Thank you.

Thank you. The next question is from the line of Cable Gala from Gala Ventures.

We'll go ahead. Oh, yeah. Good afternoon, sir.

Sir, are there any further scheduled maintenance shutdowns planned for the remaining part of FY27? And if so, what would be the expected impact on corruption volumes?

There is no scheduled maintenance for the next remaining of the year. We have to take one, it should be maintenance in a year, did that during this time and we thought it was right to do it due to the highly volatile market fluctuations.

And which end-use segment currently has the strongest demand among apparel, like apparel, home textiles, and industrial applications?

We have good demand from industrial applications, we have good demand from apparel sectors, like garments and living sectors, and... There is always a good demand before Diwali. So, we expect the market to go better only from here till Diwali.

Okay. And also, can you give us a limelight on what proportion of revenue comes from the top 10 customers, and has the customer concentration has also been reduced?

So, let's see. Our business model is a little different in textile in this industry. The business model is we sell material to our agents who sell it to the final users. Now there are thousands of final users. There are not like any top 10 customers. Our customers are our agents. But the final customers are many, more than thousands. And with the new diversity of our product range, we have introduced new products, and due to that, more and more customer ratings are adding up. So, we are making our product actually so dynamic that we are able to cater to many new customers and many new segments all over India. Now, we are not only focused in the graph of Europe, we are focused all over India.

Okay. So, you meant to say that customers are in mass and there are few agents, right? Correct?

Yes, yes, yes.

Okay. So, can you give us a limelight like what are the proportions of top 10 agents from that revenue are coming from?

Approximately 50%.

Okay. Got it. And also, what is the current demand and size for FDI? What's the right demand?

Hello.

Sorry, Mr. Cable, your voice is not audible.

Hello.

I'm audible. Yeah, so what is the current demand and price environment for DOY, F-Price, and Texture ITR?

The current demand for PO bar, texturals and FBO all are pretty good and we expect it to rise day on day.

Okay.

We don't see any issue right now in demand.

If the war is settled, then things become stable.

Okay, and following the 23 crore debt statement, what will be the expected gross debt and net debt position by the end of FY27?

We had a 23 year, we are reducing this, so we are, then our debt will.

Yeah, approximately, uh, from, uh, from a, uh, machine common, the debt will remain only around 30 CR.

Uh, sorry, uh, what is the number you're saying?

Approximately 30 CR will remain.

30 CR, okay, okay. And, uh, uh, what are the normal inventory, receivable, and payables, uh, payable debt for the business?

Sorry, sir, I will remember 30 around 50 CR.

It will be 83 CR and we will clear 20 because it will be around 50 CR.

Okay, got it. Sir, what are the normal inventory, receivables and payable days for the business?

Our inventory, normally in 30 days, you are asking about the later and greater conversion ratio?

Yes.

We expect our payments approximately in 30 to 45 days, we receive our payments, and the payable is also after the credit, we get credit of around 30 days.

Okay. Okay. Got it. Got it, sir. Yes. So, that's all from my side, sir. Thank you so much for giving that advice about the business. Yeah. Thank you. Thank you.

Thank you. The next follow-up question is from the line of coolant from Canada Realty. Please go ahead.

Yeah, hi. One question, given that we've finished the rights issue and acquisition of Nakoda

and OG RPS conversion,

for my shareholder perspective, what are the important milestones that we should be tracking over the next 12 months to see or

access how the transformation is progressing?

So, is it clear now? Yes. Yeah. So, given that we kind of come out of the restructuring phase, from a shareholder perspective, what are the most important milestones that we should be tracking to see or assess whether transformation is progressing as planned?

Sir, we have come out of this research and the major milestone we have done is aggradation of machinery and expansion plants. The major milestone we are expecting is the fully commissioning of our renewable solar power plant so that our power cost is reduced. Due to the right issue proceeds, our financial cost will go down drastically. The major, most major milestone is the Nagoda city plant. Once it commissions, There will be a straightaway effect on our top line as well as the bottom line. We expect our top line to double after this. So that is our major milestone we are targeting right now.

You got it.

And also due to our today's diversity and adding our value at the beyond to our portfolio, we are expecting our market to go further better.

Above the 6%?

Yes.

Fantastic. And you just say that the Nakoda plan commission is expected in FY27. Do you know which quarter? Can you comment on which quarter?

The Nakoda commission is the next financial year, not this annual.

Correct, correct. But which quarter in the next financial year?

Uh, we are targeting the second cost of the next year.

Cost, right. And one last question, uh, you did say the margins in Q1 were impacted because of crude price, uh, uh, uh, fluctuation and volatility. Um, in case you see that going forward, how are we protecting the editor, or, or will you still see the frustration if the volatility continues?

If the volatility continues, we have a plan to procure more raw material at the right time, because we were not expecting this war to fuel for so long, and that is why we never got the chance to procure raw material at a better price. So, if it goes further, and if we think it is escalating, then we will put back our margins by not reducing our finish prices, and rotating the raw material at the right time.

Got it. And at this point, have we got raw material, or are we getting raw material at days prior to the volatility we saw?

The prices of the raw material have come down, but they have not come up or come to the pre-war level. That will take time. As you know that the crude just got down last week. So, the effect doesn't come out so easily when it comes down. So, yes, we are looking at good signs. The raw material prices have started coming down. We are looking at a good sign of that and we expect it to get normalized by the end of this month.

Got it. Thank you so much, and wish you the best. All right. Thank you.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Pat for closing comments.

Yes. Thank you, everyone, for joining the conference call of Summit Industries Limited.

If you have any further queries, you can write us at research.experineadvisors.com. One second. Thank you, everyone, for joining the conference.

Thank you. On behalf of Kirin Advices Pvt Ltd, that concludes this conference. Thank you for joining us and you may now disconnect your line.