Ladies and gentlemen, good day and welcome to the Vardhman Textiles Ltd Q2 FY25 Post Result Earnings Conference Call, hosted by Batlivala & Karani Securities India Pvt Ltd. As a reminder, all participating lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference call is being recorded. I now hand the conference over to Mr. Roshan Nair from Batlivala & Karani Securities India Pvt Ltd. Thank you, and over to you, sir. Thank you. Good evening, everyone, and welcome to Q2 FY25 Earnings Conference Call of Vardhman Textiles Ltd. On behalf of B&K Securities, I welcome all the participants and management of Vardhman Textiles Ltd to the call. We have with us today Mr. Neeraj Jain, Joint Managing Director, Ms. Sagrika Jain, Executive Director, Mr. Sushil Jhamb, Director of Raw Materials, Mr. Rajeev Thapar, CFO, Mr. Mukesh Bansal, Head of Fabric Marketing, and Mr. Varun Malhotra, Head of Finance. Without further ado, I would like to hand over the floor to Mr. Neeraj Jain for his opening remarks, after which we can have a Q&A session. Thank you, and over to you, sir. As we discussed earlier, also, on one hand, we have a concern on the minimum support price of cotton, which is making the cotton more expensive in India. Sorry, I'm sorry. This is the operator. Can please start over the presentation as we lost the audio? Am I audible now? Yes, sir. Please go ahead. Good afternoon, everyone. So this is the welcome, first of all, welcome to the September end call. The period under review continues to be challenging for the company. We started the quarter where the New York Future was much better, almost in the range of $0.85 per, and so it came down to $0.67-$0.68 also, and today also it's hovering about $0.72. Whenever the New York Future is higher, then the international yarn prices will get adjusted to that, and accordingly, the Indian spinners will also be selling their products both internationally as well as domestically. But the New York Future kept coming down. As a result of that, the yarn prices also came down over a period of last three to four months, and I think today are definitely much lower than when we started the quarter. The Indian spinning industry continuously passing through two difficult issues. On one hand, we have a concern, or we have a regulation of minimum support price by which the Government of India has to support the farmers, and the CCI did big operations last year where selling cotton after buying it from the market later on to the spinners. Going by the minimum support price and today's spot prices and the realizations, etc., the Indian prices will not be less than $0.84-$0.85 in India, whereas with the New York Future of about $0.71-$0.72, even the American cotton, which is far better in terms of quality, will be available to the Vietnamese or to the Indonesian in the range of about $0.84-$0.85 only. That's on one hand where the Indian cotton is comparable to the international cotton, which is definitely the Indian cotton is definitely because of contamination is much inferior. Again, we can't import also cotton because there is a duty of 11% on the import of cotton. As a result of that, we want to buy it even under Advance License because it will be about 4%-4.5%, and we want to use it for the domestic consumption with the 11% duty. As a result of that, the import possibility is much less, or it's much expensive, and MSP also is a concern in terms of the availability of cotton at the international competitive prices. In terms of the operation, in terms of sales, I think companies can reasonably do well. At the same time, I think raw material cost, since it is almost 60% of our total cost, is definitely one of the big concerns for us. On the fabric side, the company continued to do good with all the changes which have happened where the more and more brands are coming in, and the company's strategy for better products, for new ranges, etc., etc., companies have done very well in this period on the fabric sales side and the margins also, and we are now running at almost full capacity utilization for most of the products, which include printing, which includes yarn dyed, which includes T-shirts, etc., etc. And probably the results which you have seen, I think the major contribution is coming from the fabric side as of now, and as a result of that, the overall results are quite good in this period. Coming back again to spinning to some extent, I think this has been a period because of these challenges. We understand lots of spinning in India has stopped over the last two years' time. As per the industry estimates, it is estimated almost 6 million spinners have stopped permanently, more than 6 million, and maybe another 3 million spinners are running on a job or on a marginal basis, which may or may not continue for a long period of time unless the situation improves. In terms of overall demand in the world, I think by and large the demand is okay now. Of course, since there are some issues in general, the third challenge is which has started coming from the sustainable fibers. Most of the Western world has started talking of some amount of recycling or reuse of the used garments. So, I think to some extent it's very difficult to estimate as of now the numbers, but it can be believed reasonably there will be some demand which will get reduced because the older garments are being resold at most of the stores in Europe and the U.S.A. because of the sustainability. So to that extent, I think the growth which was earlier coming in may not continue as of now till the time the first recycling cycle gets completed. On the expansion modernization side, companies, whatever the plans that have been taken, I think by and large all those plans in terms of implementation, both on the spinning as well as the fabric side, we are by and large on track. In terms of our cost optimization, lots of initiatives have been taken by the companies. They are all on track. In terms of customer new products, value-added products, whatever we can do, there is a great effort which is going on, and the customer definitely is improving both for both the business of the company. So the next season of cotton is started. The arrival has just started as of now. The arrival pickup will happen maybe next week and so, and then we'll have to look at how does the CCI operate and what kind of challenges or what kind of difficulty we find in procuring the cotton right price. But I think it's only next one and a half months is going to be more critical in terms of the strategy to be decided by CCI, the amount of procurement they do, and what kind of arrival starts in the market so that whether they'll be in a position to buy cotton or they'll continue to buy hand to mouth and they'll rely more on CCI. And next one and a half, two months are more critical from that perspective as one of the major components of our cost, and it definitely determines the profitability of the business for the next couple of months. I initially stopped my discussions on this. I think we can start with the Q&A, and then remaining queries can be addressed in Q&A stage. Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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'll wait for a moment while the question queue assembles. Our first question is from the line of Falguni Dutta from Mansarovar Financials. Please go ahead. Yeah, good evening, sir. So firstly, your voice is not very clear. I mean, maybe the audio, we are not able to distinguish between each word. One is that. And sir, I had a question, why is the consolidated numbers lower than standalone this quarter? So we got dividend comps some of our associated companies and subsidiaries, which got knocked off while calculating the consolidated figures. Okay. And sir, if you could, because the voice wasn't coming clear, I didn't clearly understand how the cotton situation when you were explaining vis-à-vis the international cotton prices. So, I'll cover that part once again. International prices today are New York Future at about $0.71-$0.72. And generally, the cotton, the American cotton is available to the spinners in the range of about 1,200-1,300 basis points over New York Future. So that means the cotton will be available to any spinner in the world in the range of about $0.83-$0.84 per lbs. So the Indian cotton as of now, whatever is the price available in India, is almost $0.84-$0.85 Indian cotton. Indian cotton definitely is inferior to U.S. cotton in terms of contamination, etc., and generally, it is at a discount of $0.06-$0.07 compared to the American cotton. Since our costs are equal, we have inferior cotton, that's why we have this disadvantage of $0.06-$0.07 per lbs in India. Also, since there is an 11% duty we charge for the cotton also from outside, as a result of that, our domestic costs are priced up today much higher than most part of the world as of now. Okay. And sir, how are the cotton yarn spreads? I don't know if you covered that. Now, let's say now versus Q1 in Q2, how were they in Q2 versus Q1, and how are they now? And if any outlook you can provide. We looked at the first quarter, almost the spread was in the range of about $0.75-$0.80, which now has come down to about $0.60. Okay. And outlook would be difficult to give, right, given that we'll have to see how the cotton arrivals are and all. I don't think there are only two silver linings available in this. One, the New York Future goes up so that our cotton is comparable to the world market. In that scenario, the spread can increase, or else government intervention either in terms of removing the duty or allowing the CCI to procure cotton and sell it at the normal markup over the New York Future, which has been historical prices in India. If these two things don't happen, then in that case, there doesn't seem to be any reason where the margin would improve as of now. Unless the yarn demand improves in a big way, which also is not looking possible as of now. Okay. Thank you, sir. That's all from my side. Thank you. Our next question is from the line of Rajesh Jain from RK Capital. Please go ahead. Hello, sir. Good afternoon. So you used to operate, if I look at your financials seven, eight years ago, even 10 years ago, you used to operate at 20% margins, and the profitability that you are touching now is the same profitability that you were at 10 years ago. So while your revenue has grown over the last 10 years, the net profit of the PAT is at the same level because of the lower margins of 13%-14% in the last four, five years. So is this the new normal, the 13%-14% EBITDA margin? Is this the new normal margin now? Considering the limitation which the industry has been given in the two major factors of the cotton price, I think this is going to be the new norm only. Because earlier, as I mentioned, our cotton prices will, if you look at the last 20 years' history, will always be about four cents, five cents over New York Future, which used to give us the right margins. Today, we are 1,200-1,400 basis points over New York Future. So our costs have increased big way in India, whereas the yarn rates will get adjusted, will get determined only by way of whatever Vietnam or Indonesia is selling today or Uzbekistan is selling in the market today. As a result of that, the yarn business has got a big hit in this period, and your observation is that till the time there is any fundamental change done by the government, I think this industry will, the margins will not improve. Okay. And sir, can you throw some light on the Bangladesh situation? Because my understanding is that you do a lot of exports to Bangladesh. So how was the demand impacted? And for the brief time that the demand was impacted, did you get replacement demand from India yarn buyers? Can you throw some light on that? Bangladesh is one of the biggest exporters after China as of now to the world market. There has been some disruption for a small period of time, but at the same time, from our company's perspective, there was no reduction in the demand, and we continued to sell in Bangladesh almost same volume which we were doing earlier also. I understand the situation now is far better, and except for a small number of mills, everyone is selling at a full capacity once again, so there is also no concern. In between, when the situation was a little disturbed there, there were some orders which got diverted to the Indian garment, but unfortunately, India doesn't have that kind of a capacity which Bangladesh is offering today. Bangladesh is doing almost $35 billion of exports as of now in the garmenting, while India is doing only $14 billion or $15 billion. So even if the orders are diverted to India, there has not been a decision to take those orders for sure as of now. But in any case, I think the situation as of now looks quite normal from the spinning and fabric which we are supplying to them, and there doesn't seem to be any major issue as of now. Okay. So considering the cotton inventory that you have now, and you said that the yarn prices have trended down even lower now compared to the beginning of the quarter, do you foresee, I mean, the upcoming quarters to be lower compared to this Q2? Very difficult. It's just the starting of the quarter. Very difficult for me to comment on that. But whatever inventory of cotton we have, first of all, that inventory is also exhausted, and we have to start buying the new cotton, or we have already started buying the new cotton. So it all depends upon the MSP, more depends upon the yarn. Even if the New York Future increases by 400-500 basis points, immediately the yarn demand starts coming in at better prices also. So we are very, very speculative as of now to say the margins will be lower or higher, but definitely, considering the yarn prices which we were there in the first quarter and even in the first part of the second quarter, the prices today are definitely lower. As I mentioned, today the spread will not be more than $0.60 for the Indian spinners. Okay, sir. Okay. Thank you. Thank you. Before we take our next question, we would like to remind participants that you may press star and one to ask a question. Our next question is from the line of Anik Mitra from Finnomics. Please go ahead. Am I audible, sir? Yes, please. Yeah. Thanks for taking my question. Sir, due to poor audio quality, I could not get a few points. I wanted to listen to it once again. Sir, this question is repetitive in nature. So, sir, can you tell me what is the spread you mentioned, yarn and cotton spread at this point in time? $0.60 Right. $0.60. Okay. $0.60. Okay, and, sir, U.S. cotton and Indian cotton spread at this point in time? U.S. cotton is available at about 1,200 or to 1,300 over New York Future. Indian cotton is also available at 1,300 over New York Future as of now. So the price of Indian cotton and U.S. cotton is almost comparable as of now. Almost comparable. Okay. And, sir, what is the yarn per kg at this point in time if it is 30 lbs? So it will be in the range of about $3 as of now. $3 Okay. Okay. Thank you. That was from my side. Thank you. Thank you. Our next question is from the line of Awanish Chandra from SMIFS. Please go ahead. Thank you for taking my question, and congratulations, management, on good profitability numbers. Sir, my questions are already connected with what we have discussed. So first thing, sir, cotton season already has started. So I just wanted to have a complete picture. How do you see arrival happenings, and what is your view on overall this season, and what will be the expected pricing, and what amount of cotton inventory you want to create considering all the situation you have talked about? The season has just started two days back, and in fact, during the Diwali period, most of the yards are stopped or closed. It will start, it will be starting in the next two to three days only. The arrival is today in the range of about 60,000-80,000 bales per day, and we expect it to go to 100,000 bales in the next two to three days itself. With just the starting of the season, the overall drop seems to be in the range of about 30 million bales because there is some drop in the area, and maybe there is some reduction of overall quantity because of the excessive rain which happened towards the back end of the cotton harvesting period. Having said that, what will be the prices or what could be our stocking policies? Very, very difficult for me to say as of now. It all depends upon the commercial as well as the pricing. So we have just started buying the cotton, and it may not be possible for me to give any indication as of now because it all depends upon our thoughts what will be the future prices and the international prices of cotton, the demand side. We'll keep taking that view. That's why I mentioned that the next two months are going to be very, very critical or important for us to decide. And we are debating it on a daily basis, but I think since the season has just started, we may not be in a position to give you any indication or idea of what will be our stocking policy as of now. Maybe by the time we'll be discussing the next quarterly call, we'll be more clear on how the season is going as of now. Sure, sir. And sir, second point, you also highlighted, and most of the management so far on the conference call highlighted the Bangladesh situation has improved a lot. Things are normal. Even many management highlighted domestic demand is improving and already improved. And export data, whatever we see, government exports numbers are good. Rather, they are growing for the last three months. Considering all those things, positive point, still you are thinking that margins will not be improved or we don't have much on the margin improvement clarity? No, no, no, no. We are very clear on the margins as of now. It's not that we don't have clarity. I'm saying the margins will not improve till the time our raw material cost is higher than the world. In terms of demand, I also mentioned it's good. Both domestic and exports, we are running full capacity in both the businesses. So our issue of margin is only because of raw material prices are higher. So there is no change in that unless the prices of every product start going up. That's a separate situation, which is not the case as of now. But on the normal demand side, with our expensive raw material, our margins in India may not improve. Okay. Okay. Got the point. And sir, last thing, last conference call, we have talked about even before that our CapEx plan and everything in detail. So just wanted to have the follow-up that what is the status of all the CapEx we have talked about during last two conference calls? So we announced a total CapEx of close to about INR 2,500 crore to be done in this financial year as well as the next financial year for two years. I think by and large, all our CapEx plans, whatever it was the plan, is going as per the plan only. And I hope that this financial year and the next financial year will complete all those CapEx plans. Okay. So everything is working on time, on schedule. Okay, sir. All the best. Thank you very much. Thank you. A reminder to the participants, the team has pressed star and one to ask a question. Our next question is from the line of Hemang Kotadia from Anvil. Please go ahead. Hello, sir. Am I audible? Yeah, yeah. Sir, what is the ratio of cotton or cotton and manmade fiber yarn in the last two years? So how we had improved the share of manmade fiber yarn in the last two years, if you can throw some light? India is predominantly cotton fiber conversion country, and I think the change which is happening on the manmade side is very slow as of now because on the manmade side, also our fiber price, both polyester and viscose, is much higher than the world market. The regulation in India where imports cannot happen unless it is approved by the BIS. Unfortunately, not many companies internationally got registered in that. As a result of that, the import of fiber is not happening anymore, and the prices of both polyester fiber as well as viscose fiber is much higher than the world price as of now. As a result of that, we are not competitive on these manmade fiber also, so all our three major raw materials, which are cotton, viscose, and polyester, today is one of the highest. As a result of that, the competitiveness or the market competitiveness, domestic side and manmade overall are definitely better for the downstream industry. Okay, sir. And sir, on the Indian spinning capacity side and utilization side, if you can throw some light, how things are moving up? And you rightly mentioned 6 million spindles have been stopped working since last few quarters. So if you can throw some more light on the Indian spinning industry, that will be helpful. These are the estimates done by the industry itself. There is no official data available where we know that these are the spindles which have been stopped or not. But going by the different surveys, different organizations keep doing, these are the estimates that more than 6 million spindles have been stopped in the last two years' time. And as I mentioned, we understand almost another about 2.5 million-3 million spindles are running on the job-to-job basis, etc., etc. And if the things do not improve, I think there can be a question mark on that also. Other than that, I mean, our rated capacity was in the range of about 54 million spindles. And if I reduce 6 million, we are today at about 47, 48. And out of that, I think the capacity utilization will not be more than 80%-85% as of now. So as a result of that, even after that, the shortage of demand, there is no excess demand of yarn, which is still true because of the margin pressures. Spinners are not interested to run fully because they are looking at ways wherever they can save money or wherever they can optimize the work; they are producing that. Other than that, they have stopped. They are reducing the capacity utilization also, whether it is cotton side or manmade side. So that's on the spinning utilization. On the fabric side, I think most of the organized players are doing well. So whether it's Vardhman, Arvind, Nitin, or some other shares, they are doing pretty well. Whereas the all-independent processors or the smaller businesses, there is definitely some concerns over there because most of the brands which are coming from outside, they are looking at more on the organized players. So I think there's definitely a difference in the working today of an organized player as well as the unorganized player. Most of the organized players as of now are doing pretty well on the fabric side, whether that's knitted or woven. Thank you, sir. Our next question is from the line of Surya Narayan Nayak from Sunidhi Securities. Please go ahead. Hello. Am I audible, sir? Yes, sir, please go ahead. Yeah, yeah. Sir, just my question is on the macro side. We have been present majorly into yarn side. That is, over the years, is not changing because of our focus more on the yarn rather than the fabric of garments. Or maybe beyond, at least on garment side, we are very much falling short of. So my call is that because we have enough surplus of yarn in India. And in fact, India gets mileage only when the Vietnam or Bangladesh or China or the cotton yarn scenario improves. Then we don't get mileage in the margin side. So keeping these macro things into account, so what does management think of taking the company into an area where at least the margins will be improving overall and even the ROCE and ROE will be also improving? Your first point may be right that historically we are a spinning company, but if you look at last many years, there has been a greater emphasis on the fabric, and our fabric continuously, the capacities are increasing. If you look at the top line today, it's almost 65-35 in favor of spinning and fabric, and I think in the times to come if the situation on the spinning side doesn't improve, the expansion on the spinning side may be low, and we may continue to grow on the fabric side. Also, there's a new initiative company has taken on the fabric side with the manmade fabrics also, which will definitely increase the share of fabric compared to the pure spinning side only. On the garmenting side, there are still no plans to expand it in a big way. It's a small unit we have. We continue to grow it slowly. But I think there's no clear plans as of now that we want to increase it in a big way. So still, we are running it profitably. But I think considering the overall labor component, we are still to make up our mind whether we really want to expand it or not. So definitely going forward, next couple of years, fabric will continue to grow. Definitely both cotton side as well as manmade. And I think personally, the share of fabric in the overall top line will continue to grow from today's level as well. Hello? Hello, Mr. Suryanarayan? Hello. Sir, the line for the participant seems to be disconnecting. We'll move on to the next question. Before we take the next question, we would like to remind participants that you may press star and one to ask a question. Our next question is from the line of Sandeep Baid, who is an individual investor. Please go ahead. Good afternoon, sir. I just wanted to understand how does CCI price its cotton? What is the basis of that? And do they also set it at a loss compared to when you compare it with the procurement price? So it depends upon, first of all, it depends upon all the demand and supply. If the demand is higher, they'll continue to increase their prices. Or if the demand is not there, they'll reduce the prices. Primarily, we understand the last year's CCI policy was whatever is the import parity of cotton, including the duty they were trying to sell it at those prices. But since because most of the smaller spinners, they didn't have a choice to import the cotton, so they were forced to buy it from the CCI at those prices. But when the losses started increasing, the spinners stopped buying from the CCI, and CCI kept reducing their prices. So basically, I thought I understand they look at it that whatever is the import parity of a cotton, based upon that, they generally decide their pricing. At the same time, the industry has been talking to them that if we have to pay the 11% duty, then how will we be competitive? But I think the second part is more on the demand-supply because if you add 11% duty and the spinner is not in a position to make money, the demand will keep coming down only. And that practically or partially happened towards the last two to three months. And if you look at the CCI still has almost about 1 million bales available to them from the last stock. And if we also look at the sale for the last almost 1.5 months, it will not be more than 10,000-20,000 bales, maybe not more than 20,000 bales for them for the last 45 days. So I think it's good. They will try to fetch the maximum prices so that losses could be reduced. But at the same time, to that extent, they're flexible because they want to dispose of the stocks also. But the new season has started. They're still carrying a stock of 1 million bales. So I don't know what policy will they take it, taking it forward, and how do they price the product going forward? So you're saying that if the demand is not good enough, they are willing to sell it at a price lower than your procurement? Yeah, yeah, yeah. Sure. So last year also, I think whatever prices they reserved and later on when they were selling there, it was definitely they're taking some loss also. Right, and given that today they already hold one million bales in stock, they may not be very aggressive in terms of buying from the market yet, right? No, no, no, no. That choice is not with them because that's a mandate given to them by the Government of India that whatever is the minimum support price the government has committed to the farmers, the CCI is obliged to buy the cotton at those prices. So I don't think that's a choice available to CCI. They will continue to buy. Now, what price do they sell? I think that's a separate, better stage they'll have to decide. But it's not that since they already are selling 1 million bales, so they'll not buy. That choice is not there with them. Okay. And sir, can you comment on how is the demand from the home textile players for the yarn? Home textile players are doing reasonably well in India. So if you look at most of them are running full capacity. Especially on the sheeting side, it's doing pretty well. How is that? It's doing well. So most of our customers, we supply lots of products to home textile players. I think they're doing reasonably well. Thank you so much. Thank you. Our next question is from the line of Keshav Garg from Counter Cyclical PMS. Please go ahead. Sir, I wanted to understand the garmenting part which you basically talked about that you are not sure about scaling up the labor in that division. So sir, firstly, sir, is the government has a fixed-term employment already implemented in the textile industry? Yes, yes. So then in that case, sir, what is the apprehension about the scale-up, I mean, hiring more labor? So shouldn't that resolve the labor issue in the industry? No, it doesn't resolve the issue. So there were two issues. One was the fixed-term, which is distinct. One was the permanent labor, which by the fixed-term, the issues are just resolved. Second is the cost part. If you look at the Indian cost today, the worker availability is a big challenge in most parts of the country, except Uttar Pradesh and West Bengal, where most of the industries are either in the down south or in the north India or central India. The cost of labor in India is not less than $230-$240 per person as of now. As the Bangladesh cost is still about 11,000-12,000 Taka, which is equivalent to about $120. In the garmenting industry, the overall labor cost is always in the range of about 25%, 22%-25%. In apparel, cost is double. We're talking of the Bangladeshis' costs are in the range of about maybe 10%-11% of garmenting. We will be at 20%+. So we'll never be competitive even on the debt cost also because our labor cost is going to be very, very expensive. Two, either the industry starts thinking they go to UP, Bihar, where the labor availability would be there. But wherever the migrant labor is coming in, the availability and the stability of labor is a huge challenge as of now. So it's neither available, not stable. The attrition in the industry is almost in the range of about 5%-6% per month, even with a cost of $250 also. And the concern for us is the way the Indian social economic factors are moving, where people do not want to come to the cities to work. They got some support under MGNREGA. They got some support under Ayushman Bharat. They got some support under different schemes. They're happy staying in their places. So either the entire industry moves to those areas, which has its own challenges. Or if the labor doesn't come here, how the labor-intensive industry will work? I think this is a major challenge for next, which will be more clear in the next one to two years, how does it work on. So till the time we are clear on the availability and the cost part, there is no plan for us to expand it in a really big, big, big way. Sir, and also so many state governments, I understand they are giving around INR 5,000 per month per head labor subsidy. That is, the government will pay those wages on behalf of the industry. And sir, plus the central government is also, I think, giving some PF for two years or something like that. So all together, even after including all these basically incentives and subsidies to the industry also, it does not make sense? It doesn't make sense because most of the states which are giving are for the local laborers. And the local labor is not available. It's not trained. And you want to take the people from outside, you will not get this subsidy. Too, I think more than the subsidy, you first have to look at whether that state in terms of the overall ecosystem is a workable state or not. So though many states have given these incentives, for example, now if the Gujarat is given, the local Gujarati is not ready to work in a garment company. So even if there are subsidies available, what will you do with that? I think there are different challenges. I'm not saying the opportunity is not there. The opportunity is there. But looking at the cost and the historic rates, because wherever there are clusters, now there are lots of good clusters in Tirupur and down south. There are good clusters in North India. There's no subsidy available in these areas. Now going to a new cluster altogether and start creating those capacities, I think it's going to take some time. I understand the good initiative of the government on the PM-MITRA Scheme is there. But I think still none of the parks is implemented as of now. Maybe next one year, there are lots of development, I understand, is happening on those parks. And they start allocating or allotting the land maybe next one year or so. So only after that, we'll be in a position to know whether we can make any business case for this. Only on the basis of subsidy putting up a capacity, probably we are a little hesitant to do that. Sir, and also, sir, what about the domestic garment market, which is constantly increasing in size? Sir, what is the import duty on garment imports? And sir, can't we do garmenting for the domestic market in case there is a good protection available in terms of tariffs? No, there is not enough protection available, so there's already a good amount of garmenting, which is happening in Bangladesh, and lots of most of the brands which are operating in India, they started importing the garments also. Okay, sir. So both in terms of garment, even on the fabric trade also, especially the knitted fabric, I think if you look at most of the manmade-based fabric, looking at the import of about 50-70 tons per day, about three years back, today it's more than 1,000 tons per day. Because our raw materials are expensive. All our fibers are expensive. As a result of that, yarn will be expensive. So it's much cheaper for the fabric to get imported. Sir, so lastly, sir, you alluded to the raw material cotton, polyester, and viscose being expensive, more expensive in India. So can't the industry, at least for the exports under Advance Authorization Scheme, they can import viscose and polyester and export the end fabric or the garment? So, I mean, does that not still make sense? I mean, then what's the problem in that case? So there are two problems with that. One, even if you want to import viscose or polyester, the trade component will be there. So we are competing with, let's say, China or Vietnam or Korea. We're talking of the raw material available there. And the raw material which will be available, even under Advance Authorization, will have a component of trade onto that, which will be a one additional cost. Two, I think for the yarn export, we can still do it. But if I have to sell the yarn to the domestic market for the fabric or for the garmenting, then the Advance Authorization work cannot work because there are different duty structures and there are different incentives available on those segments. So if I have to export yarn, I can do that. But again, my cost will be high because my raw material will add the component of trade onto that. And if I want to sell to the domestic market, cost is further export of either fabric or garment. It will not make sense at all. That will not be done under Advance Authorization. So actually, going by all the policies today, I think there's definitely a concern how do we export the end product? Right, sir. Understood. Sir, thank you very much. Thank you. Next is a follow-up question from the line of Surya narayan Nayak from Sunidhi Securities. Please go ahead. Yeah, sir, just the line disconnected. So just my basic concern is that you have been very much showing a concern towards the ready-made garment area because of the labor issues. But on the yarn side also, you see the government issues, government interventions. They have been raising the MSPs. And rising MSPs too doesn't raise our trade. Then we are also at that problem also that is not actually addressable. And resultingly, at least the ready-made garment players from the south, they're able to earn decent return ratios and returns than us. So even the lowest margin happens to be around 11%. That is 10%-11%. That is consistent. But in our case, that is not. In any sense, you will be thinking on the garment side because we are hardly present there. I've mentioned to you the reason for garmenting, because of the non-availability of labor and a very high cost, we haven't made up our mind as of now. Because we are basically a textile material producer, and garmenting and textile are two different worlds. They are two different businesses. We have to look at it on an independent basis. I'm not saying that we have rejected it also. Whatever small capacity we are doing, we are marginally increasing that capacity from 6,000 shirts per day to about 10,000 shirts or so. Maybe we may take another one or two years to make up our mind finally whether we should go in a big way into the garmenting or not. So, in the case when, in successive years, we will be seeing at least a 5% rise in the MSP. That is basically given because the government wishes to uplift the farming community for that matter. So, in that case, we are actually not getting that kind of mileage because cotton happens to be an international commodity. So, what is the recourse for pure yarn players like us? There could be two possibilities. One, your first point is very valid. The MSP will keep increasing 4%-5% every year, which has been doing. And it may continue to do the same. But at the same time, the industry is talking on two issues to the government. One, you allow the import of cotton duty-free. So even if our cotton is expensive, at least we can import as the rest of the world will also be doing. So we'll be competitive. Two, the industry is also talking to the government in case you want to support the MSP, which is important because if the government doesn't agree with the MSP, then the farmer will not be growing the cotton at all. So if you want to support the farmers, whatever the CCI prefers, but their marketing strategy or the targeting should be aligned to the international market. So that's the industry's request to the administration to the government. Let's see whether the government agrees to that or not. Okay, thank you, sir. Thank you. A reminder to the participants [next room at PM MITRA]. Anyone to ask a question. Our next question is from the line of Rajesh Jain from RK Capital. Please go ahead. Yes, sir. I have two or three short follow-up questions. So your blended margins are today 13%-14%. What would be the margins on the fabric side? Definitely much better than this. Sorry? Definitely? Much better than this. We don't share the margin separately, but it's definitely much better than the average. Okay. And I think in the last con call, you mentioned about venturing into technical textiles. So what would be the projected margins? And can you throw some light on how is the CapEx going on there? So on the technical textile, we are going in for a 100% manmade fabric project. It is only on the apparel side. I request Sagrika to answer this question. Yes, hi. So first, about the capital expenditure, it's progressing well. And we've been ordering our machinery as planned, as scheduled. So we are aiming for next year, around September, October, it should be operational. So we are dividing it into two phases. The first phase, we are aiming for a capacity of 15 lakh meters per month. And our profitability of EBITDA to sales would be in the range of about 25%-30%. Sorry, just can you repeat the last sentence? I missed the last sentence. Yes, the PBDIT to sales that we are projecting are in the range of 25%-30%. Okay. And sir, you had mentioned in your opening remarks about the reuse of or the recycling of old garments, which has taken away a bit of demand. So just can you explain this trend a little bit more? Is it a big trend that is catching up? And can it significantly impact long-term demand? Definitely, in terms of thought process, most of the Western world is looking at this. Europe is part of the law where starting next year 2025, which is the landfilling of garments is not possible or will not be allowed. It has to be recycled or it has to be resold. Most of the stores in Europe and U.S.A. have started putting up a counter for the sale of old garments. As well as, if you look at the number of recycling lines in the entire world, they are increasing exponentially, where both post-consumer as well as pre-consumer fabrics are getting recycled into the fiber. The demand and the yarn is again made out of that partially. This trend definitely in the Western world is catching up. In the Eastern world, which are the poor countries like India, China, this trend is not there at all. But in both Europe and U.S.A., there is some change happened. And the next generation definitely is looking at it with a more concern because they want to look at sustainability in a better way. So it's just the starting trend. We'll have to look at how does the demand improve. But going by all the regulations and laws which most of the governments are considering, this will be taking definitely a part of share of the virgin fibers. So can there be an opportunity in us? I mean, is this something that we can also explore doing the recycling? Yeah, we are already doing so. We have one recycling line with a capacity of about 6 tons per day, which is running full. We have already ordered the second line of another 6 tons per day. And most of the time, the recycling percentage in a garment is between 20% to 30%. So if I have a 6-ton line, practically, I can do close to about 25 tons of total yarn. So we have, and our product is well established, well accepted by lots of good brands. And we are definitely looking at this as one of the growth areas for us. Okay. I mean, in the recycling segment, the margins would be better than the yarn manufacturing, or it would be inferior? Generally, a little better. Okay, sir. Thank you. Thank you. Our next question is from the line of Resham Jain from DSP Asset Managers. Please go ahead. Hi. Good evening, sir. So I have just two questions. First is on technical textile. I heard that margins are going to be 25%-30%. I actually went back and saw the quarter four conference call where we actually mentioned that the margins will be similar to company average. Has there been any change in the initial plan versus now? There is no change in that plan. So what we are saying, there could be two segments within that 100% manmade fabric. One is purely on a 100% polyester base, where the margins could be the average. But definitely within that, there are some segments which are a kind of replacement of a technical textile where the margins could be better. Two, I think our knowledge in India today on this fabric or on this product is relatively less. And it's only slowly as we implement the project, there could be a possibility for us to improve the margins because as of now, there is a demand. And whatever estimates we have done, it could be in the range of from average to a little better. And in many cases, we set the average of fabric. The average of fabric in many cases today also is better than the company's average. Understood. Clear, sir. So the second question is on green energy. And you can correct me if I'm wrong. I was just looking at the numbers. Our green energy contribution to the overall energy consumption is close to 5% or 1%. Is that correct? That's correct. Sir, when I look at some of the top five, seven companies in India, it seems that our number and now, these days, in the last three, four years, the green power has become much more cheaper than the traditional power source. Is there any reason why we are a little slow on this front versus others, and are there more accelerated plans to increase the green energy source? Definitely, we are slower or we are behind most of the today compared to lots of good players. There is no doubt about it. But having said that, we have already accepted this, and we are working very aggressively on this. And your idea is correct. But next two years, we are trying to reach from 4%-5% to at least 25% on the green energy in the next two years. And maybe there could be a possibility that we will be crossing this 25% to even 40% also. So there is definitely a very aggressive plan for next two to three years. And whatever delays happen, we are trying to catch it up as fast as we can. Sir, what will be the benefit when you do the ROI or the overall energy cost you have in terms of rupees crores versus this change? What will be the total benefit you are envisaging in the next three to four years? Our idea is, first of all, all these thoughts which we are having is not clearly from the ROCE perspective. I think most of the customers or most of the brands are talking to us about the green energy, where they do not want us to consume coal. They do not want us to use the conventional electricity, etc., etc. So this issue is basically coming from the brands where they're forcing or they're pushing or they're suggesting us to do this. Having said that, every project will be looked at from in terms of the commercial. And I expect every project will give us at least 15%-20% return on the capital employed, at least 15%-20%, if not more. Or maybe most of the cases, it will be more than that. So, I think there are different combinations where we are looking at the roofs, solar. We are looking at the biomass boilers. We are looking at the projects where the power to be taken both wind as well as solar from the outside. So, there are many projects which are going on, and we are evaluating every one of that. I hope we should be in a position to get whatever investment we do, at least 20% return on that. Understood, sir. And sir, last one is on fabrics. Overall, where are you seeing the higher kind of traction in the fabric business, more from domestic or from export business? And the expansion which you have announced, out of that, how much is for fabric, if you can just guide on that? I think 175 million meters-200 million meters. Is that correct? And by when it will get completed? Right. So on the fabric, I can talk on the capacity expansion. So our major is solid dyed. So we are expanding solid dyed by 20%. And this capacity should also be operational in the next 14 months. So that is first. In yarn dyed also, we're expanding a bit to around 20%. Print, as mentioned earlier, we just added a machine of digital print. So we are copying prints as of now. Two questions. Regarding demand, definitely there is a demand pull, especially from the export market. We would say that this is mainly driven by the drying up of inventories by major customers, so for example, U.S. has a good demand pull as of now. We are running at 100% capacity utilization, so that is first indicator, and second indicator is also that we have visibility of good orders up to January, and even further than that. And as for the domestic market, as we know, we just passed through festive seasons, so we're just waiting for some customers to also give feedback on how they have performed, but as of now, it looks okay. Okay. Thank you. All the best. Thank you. Next is a follow-up question from the line of Hemang Kotadia from Anvil. Please go ahead. Yes, sir. My line was disconnected. I just have one bookkeeping question. What is the net cash on the balance sheet right now? Net cash? It's almost INR 2,300 crore rupees. That is 900. And the debt is about INR 1,000 crores. Okay. Thank you, sir. Thank you. Our next question is from the line of Rajesh Jain from RK Capital. Please go ahead. Yeah. Thanks for the follow-up. So considering that there is a good demand from Europe, which you have mentioned in various calls, and that you are undertaking modernization of machinery to have faster turnaround times, because as you mentioned in the last call, the customer needs faster response and quick turnaround time. So considering that, what could be the trajectory of our sales volume growth for the next 12 months? No. Definitely, we are moving more and more towards the brand business. So whether I mean, the brand business, when we say the brand business, that will not be coming directly from Europe. The end product would go to Europe or to the U.S.A., and the garmenting will happen in the different parts of the world, which may include the Asian countries where the garmenting would happen. So more and more brand business can definitely give us a better margin. And for that, we require to make our shop floors more proper so that the deliveries could be given to them in a shorter period of time. Yes. So considering that, I mean, because you will be able to cater to your customers' demand in a quicker time, do you anticipate a good sales volume growth? And also considering the CapEx, the upcoming CapEx, over the next 12 months, what could be the potential sales volume growth do you foresee? Do you have any numbers? No. As of now, we will not be in a position to give that number because the demand is coming every day, is increasing every month, every day. So I think we are only expecting that we require to create that capacity so that the further demand could come. Today, whatever is the capability, we can give them in a shorter period of time. We are already exhausted it. Now, we are further enhancing or increasing it in a big way so that that volume could come. Once that capacity is okay. In other words, by when that capacity is coming up, and how much more firepower it would give you in terms of 100% capacity utilization, how much volume it will add? Most of this CapEx will be completed by June next year. March to June quarter will be completing most of this CapEx. Okay. And that 100% could likely how much would it be able to add? Considering not only the CapEx, but also the faster turnaround times, which this will enable you to do. Our efforts are for the same. Our efforts are on the same. Let's see how the market goes. Okay. Okay. Okay. Thank you. Thank you. There are no further questions from the participants. I now hand the conference over to the management for closing comments. Thank you very much for this conference call. I think it's been a wonderful journey. Though in the challenging times, the business becomes more difficult. But at the same time, I can assure you all the efforts being done by the management in terms of passing through this time successfully and with a decent margin, all efforts are on. And as well as fortunately for us, as of now, since the fabric is doing pretty well, so the company doesn't have any issues in terms of the overall margin growth happening. But at the same time, as the challenges are increasing, we are agile to look at those challenges. And we are internally looking at all our cost structures very carefully. And lots of initiatives the company has taken. And I'm sure by the time the good times come in, we'll be ready to take full advantage of our good times also. Thank you very much for all the patience and your continuity of the holding with us. And I'm sure these things definitely will improve maybe next couple of quarters once the government takes some vision. And we'll definitely look at a much better result in the times to come. So thank you to all the participants as well as B&K to hold this conference. On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.