Ladies and gentlemen, good day and welcome to the Gokaldas Exports Q2 FY 2023 earnings conference call. 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 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 want the conference over to Mr. Binay Sarda from Ernst & Young. Thank you, and over to you, sir. Thank you, Lizanne. Good afternoon to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. Please note that we have mailed the results and the presentation, and the same are available on the company's website. In case you have not received the same, you can write to us, and we will be happy to send the same over to you. To take us through the results and answer your questions today, we have the top management of Gokaldas Exports Limited, represented by Mr. Sivaramakrishnan Ganapathi, Vice Chairman and Managing Director, and Mr. Sathyamurthy, Chief Financial Officer. We'll start the call with a brief overview of the quarter gone past and then conduct Q&A session. With that said, I'll now hand over the call to Mr. Siva. Over to you, sir. Thank you, Binay. Good afternoon, everyone. Happy to have you at our earnings call for the Q2 of FY 2023. We continue our exceptional growth trajectory, delivering a resilient performance in a seasonally weak quarter for the Indian apparel industry, and despite the challenging macroeconomic business environment, we reported a revenue of INR 576 crores, up by 29% over the corresponding quarter of the previous year. The 6% reduction over Q1 FY 2023 is due to seasonal effect. Our strong focus on operational excellence and exceptional service continues to endear us to the customers. During this quarter, we reduced the operating expenses and managed working capital well to generate adequate free cash flow to support our growth ambitions. The net cash surplus, which is cash and cash equivalent less gross debt, was INR 369 crores at the end of this quarter. Our entire team worked hard to deliver exceptional product quality and service to our customers. We continue to outperform on various customer delivery metrics. In this quarter, we earned an exceptional income on account of sale of building amounting to INR 6.05 crores. Excluding this exceptional item, we generated a net profit of INR 39.8 crores. Our EBITDA margin of 12.5% in Q2 is above that of the previous year as well as Q1 FY 2023. We faced supply chain challenges from China as we are heavily dependent on imported fabrics and trims in Q2, but we worked with other suppliers to ameliorate such risks. U.S. monthly apparel store sales have been on the rise consistently, crossing the pre-COVID level. YTD August sales in 2022 is 8.3% higher than in 2021 and 7.9% higher than 2019 pre-COVID level. YTD 2022 e-com clothing and accessories sales also witnessed a modest growth of 7.5% compared to calendar 2021. India's share of U.S. imports has increased to 6% in YTD August 2022 compared to 5.1% in 2021. So overall, we can conclude that the U.S. market has thus far been quite resilient, and the sales growth has been strong. We hope that the U.S. market continues its growth trajectory through the rest of 2022 as well. The coming holiday season sale will indicate the continuance of this trend. Higher inventories and rising inflation may pose a challenge in the near term. We are closely watching the macroeconomic environment for any developments that may be adverse to the business in the short run. The continued military conflict, the extent of global monetary tightening, and the trajectory of China's economy are causes for concern. In the short run, our response is to further strengthen relations with the customers and ensure impeccable delivery. We view the long-term macroeconomic factors as very favorable for the growth of their business. With this in mind, we are progressing with our CapEx plan. We incurred a CapEx of INR 51 crore over the first half of the year and expect to continue spending in the second half as well. The unit in Madhya Pradesh is expected to come on stream in this financial year and the next fabric processing unit in the next financial year. Our growth trajectory for the financial year is intact, and we continue to build a firm foundation for strong growth in the years ahead. With a view to strengthen the ability of the company for the next phase of growth, the company has inducted three new independent directors subject to approval by shareholders. They are Rama Bijapurkar, a well-recognized thought leader on marketing strategy and consumer behavior. George Varughese, a New York-based private equity and investment banking veteran. And Shiv Dalvie, a private equity and technology professional with durable experience. In addition, the company has also elevated Poorna Srinivasan, Executive President leading business operations of the company, to the board as an Executive Director. With Mathew Cyriac moving into the chairman's position, the company has balanced change with continuity. The induction of independent professionals with deep experience and global reach will help the management as we chart an ambitious growth plan for the company while transitioning Gokaldas Exports into a truly professionally managed and board-run company. I thank you all for listening and would be happy to address any questions that you may have. Thank you. Ladies and gentlemen, we will now begin with the Q&A session. Anyone wishing to ask a question, may please press star and one on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants, I request that you use hands-free 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 Atul Mehra from Motilal Oswal Asset Management. Please go ahead. Yeah, hello sir. Good afternoon and thanks for the opportunity. Congratulations on the good results. Yes, sir. Thank you. Sir, just to start to get your thoughts on how are you really seeing outlook from year-on? Obviously, things are quite mixed globally. So could you talk a little bit more about how the order book is building up and what are you hearing from clients, and how are you preparing the business from the perspective that if at all there are any planned deferrals, there are any cancellations, and it doesn't maybe impact the performance? So how are we really going about business in this fairly uncertain global environment, sir? Sure. Thank you for the question. This is an issue that is uppermost in all of our minds. The global macroeconomic situation continues to be uncertain, and I believe that our task as leaders is to navigate these uncertain times with a great degree of focus and a great degree of operational excellence and execution. So the way we are going about is to ensure that the customers that we deal with, we have excellent relationships with. The execution parameters are continuously met, and we focus on markets where we believe that there is growth potential for us. The product category also is equally important, and we thankfully have the depth in our manufacturing capability as well as design capability to produce products which are in demand depending on the circumstances and situations. So if you look at the woven fashion products, we haven't seen as much of an inventory problem or a demand problem in comparison to, say, commodity products like knits. So we have seen a reasonable traction, which is the reason why in the Q2, we had a 29% growth while the Indian apparel industry actually had a decline of 6.3% in exports. So it all depends on which markets you focus and what product category you focus. We've also had the good fortune of having a diversified set of customers, which allowed us to pivot from one customer to another to make sure that our order book is reasonably intact. That said, we've seen that Q3 could be a time of challenge given that the inventory overhang in the U.S. market is at its highest for spring 2023, which is where this is when we produce for which is what we produce in the Q3. Also, the European market is exceptionally weak given the high inflation and war scenario there, and the markets in China are also quite weak from a demand perspective. So given all of this, our choice of market, which is the United States, which has been reasonably resilient, has been good. We have an order book which is reasonably good for the Q3. We are confident of coming at par with last year's revenue for the Q3 and hopefully start growing. Of course, that's even better in the Q4. When I look at the quarter ahead, which is the Q4, that is when we will be producing for summer of 2023, which is almost a year away. If you look at this summer, that is summer of 2022, it was warm and it was long. So the sales were good, especially for woven products. I believe that if the global warming is here to stay, then next summer would also be long and warm, and we would have been retailers would have low inventory, which would mean that reasonably good demand situation for us. So I'm encouraged by certain seasonal cues, weather cues, etc. Global macroeconomic instability is beyond our pale, and we hope that we will be able to navigate whatever uncertain times that come in front of us. We have done that hitherto, and we are confident that we will do our best to handle any situation or any adverse situation that may come our way. We are usually exceptionally prepared well ahead of time and are ready to take any countermeasures if required. Right. Thank you, sir. Thanks for the very comprehensive response. Just one small follow-up, sir, in the sense that given that our share of business with the clients obviously, a lot of our clients are very large in size, is still quite small from the perspective of the client's revenue. Would you say that this macroeconomic environment, while it is true for the economy and broader-level numbers, from our company perspective, given our share is still quite small in these clients, we would be more insulated on a more ongoing basis than the broader environment is suggesting, or those kind of risks remain even with us? So that allows us some reasonable degree of cushion, but it doesn't completely protect you. So for example, if the macroeconomic headwinds are too strong and let us say there is a huge drop in buying volumes, it may affect all the suppliers. But we don't anticipate that sharper drop either. On the contrary, for the product that we make, we will probably see some growth. And given that not all suppliers are held equal by the big brands and well-performing suppliers are usually rewarded, we think that what you said would mostly come true, and a good supplier like us should be able to consolidate the other suppliers and still be able to perform. Got it. Got it, sir. Thank you. So just one other question on Bangladesh. Are we going ahead with Bangladesh as a manufacturing destination, or are we looking at other alternatives and anything like that, sir? No, no, no, no. So we are still definitely Bangladesh is in the radar. Bangladesh caters to Europe because of the duty-free access to Europe that Bangladesh enjoys. European market is weak, but we have not yet stopped our focus on Bangladesh. In fact, we are working on a factory which we hope will come up in FY 2024, early FY 2024. Somewhere during that time, we should be able to get the factory in our control. We are working with our partner in Bangladesh on this. Okay. Great, sir. Thank you very much and wish you and everyone in Gokaldas very much. Thank you. Thank you. Thank you. The next question is from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead. Thank you for the opportunity and congrats on an excellent set of numbers. My question is just to follow up on the demand environment. Do we have science to say that this is just a one or two-quarter issue and beyond that we can continue to grow at 20%, 30% kind of growth rates, or are we not yet sure from a demand perspective? See, I am not, I can't predict some of these macroeconomic events, especially the war in Europe. These are controlled by actors way beyond our prediction capability. But having said that, I don't think that the demand problem will be more than two, three-quarter problem. Beyond that, we should start seeing solid traction as apparel demand has to happen year- on- year. Inventories are already coming down with most of the American buyers, and it will get sorted soon. So they will come back to buying. People will have to buy garments. So I don't see this as more than a couple of quarters or at best three-quarter problem. Right. And cotton prices going up, there's an underlying inflation that has also helped revenue growth over the last 2 to 3 years. Do you think that next 1 or 2 years, that aspect will reverse and therefore impact revenue growth? So see, at the end of the day, raw material pricing for us is a pass-through. So we're not excessively perturbed by raw material prices going up or down because when it goes down, we pass on to the customer. Obviously, it may have some impact on the FOB pricing and marginal impact on revenue growth, etc. But from a margin standpoint, we tend to offset all of that with our with the kind of pricing that we do and with the kind of execution that we do. So I don't see that as a big factor at play. Okay. Last quick question. This is margins. We've nicely maintained at 11% plus last two, three quarters. Now, given this issue, would we have to give away some bit of this over the next two, three quarters as you cycle through this issue? So what happens is when the revenue comes down a bit, there will automatically be a margin pressure because of the fixed costs that we have. Having said that, we have taken a lot of measures to tone down our fixed costs as well in order to protect our margins. So our effort will be to maintain the margins as far as possible, but we may come under pressure for a quarter or so. That's that. Understood. Got it. Thank you and all the best. Thank you. Thank you. The next question is from the line of Ashish Agrawal from Invesco Investment Advisors. Please go ahead. Yeah. Hi. Am I audible? Yes, you are. Yeah. So continuing on the question on the due diligence probably of the customers, and I just wanted to have some feel of we can see that your receivables have come down quite a bit. I mean, if I look at the September balance sheet, so is that kind of strategic kind of initiative where we want to keep receivables lower in the current scenario? And adjacent to that, how would be our customer composition in terms of the credits that we are extending to our customers? Are there any weaker set of clients where we would want to be a bit cautious in the upcoming, I mean, the scenario when the macros are weakening? Would your thought process be like that somewhere, or? I don't know. Yes. Okay. So we are closely watching all the customers, and I don't believe that there is any customer who is financially weak, and we don't want to work with them. So we are constantly monitoring their financials. As far as receivables is concerned, it is also a timing issue. We had a lot of shipments go much earlier to the end of the quarter period, which resulted in collections happening sooner, and hence, the receivables, as we show at the end of the quarter, turned out to be a little lower. I wouldn't read way too much into it. As far as focus on customers are concerned, all the customers that we work with are large and are having a good potential and are showing growth trajectory. So we are not concerned. On the contrary, we draw confidence from the customer base that we have. Okay. Another thing is, if I were to look at the gross margin trajectory, and if you look at the last three quarters versus the three quarters before that, there is a stark kind of decline in the gross margins, though we have made up with the other scale-related efficiencies on the margins. So is it possible to just show some bifurcation as to what has impacted gross margins in the last three quarters versus three quarters before that because currency has been favorable, the raw material has not been, I mean, it has not been favorable at all. It's been the other way. So some color on that would be helpful for us to understand the future. Certainly. So see, the price of the garment the way we price our garments is material cost plus the cost of manufacturing and plus our margin. That's how we price the garments. So when the material costs go up, notionally, the gross margin will decrease because our cost of making remains what it is. The profit margin expectation remains what it is. So effectively, the gross margin notionally comes down because the embedded raw material which goes into making the garment has gone up in pricing. So it's only that. I wouldn't read way too much into gross margins because we'll still manage to get our returns regardless of that. So you mean to say that it's a unit pricing rather than a percentage margin that is the targeted? That is correct. In that case? Okay. Okay. And nothing comes to us from the currency perspective since it's weakened so much, so it should be beneficial somewhere? No. So what happens is most of the brands have they are also well aware of the currency movement and have started asking us for currency benefits to be passed on to them. So it's always a negotiation that we have between us and them. Okay. Okay. And one final. Also, that when currency moves very fast and sharp, the way it has moved now, we hedge our currency. So whenever we secure an order, we tend to determine what is the exchange rate and then do our pricing based on that. So our hedges have been at a certain rate, and the spot rates have actually the spot rupee has actually weakened even further than the hedge rate. So we will have to deal with it, but these are momentary aberrations. We don't indulge in any speculation in currency at all. When we book orders, we naturally go and hedge our forward receivables. Okay. And one last thing I wanted to understand. Is it a good time to expect some guidance on the maybe next six quarters, or is it too hazy for you to even spell that out in a very soft manner as to give some direction as to the numbers, how things could go? So wait. I don't know. How many quarters you said? six quarters? Yeah. I mean, two quarters left for this year and next year's financial year, FY 2024. As I said, the quarter ahead is going to be the most challenging for us. That is the Q3, the quarter that we are going through at the moment. We hope to come at least as far with last year's revenue. We'll try to see if we can do slightly better than that, but that's the kind of situation we are. We hope that post that, that is, the Q4 onward, we should start again looking at growth in revenue further. I anticipate FY 2024 to be reasonably good. We will still have decent growth over FY 2023, notwithstanding these macroeconomic events which are within our visible range. Now, anything which goes completely out of kilter is not something which we can plan on. I'm not sure how the war will end. I'm not sure what kind of severe economic recessions that could happen in the Western world. So no, based on what we can see now, I feel that next year, we should start seeing growth again. Okay. Okay. So I have a few more. I'll come back to this and whatever you have to ask. Thank you. Thank you. The next question is from the line of Mohit Khanna from Banyan Capital Advisors LLP. Please go ahead. Yes. Good evening, guys, and congratulations for a very strong set of numbers here. I just wanted to have a little bit more clarity on the CapEx numbers. So INR 51 crore, you have done for the first half, and the yearly target remains at INR 160 crore. So I mean, what is the expectation? Do you want to change that, or do you think 160 would be met this year? No, we are continuing with our CapEx plan, so we're not changing any of that. INR 160 will continue. Basically, you're confident that you would meet that? That is correct. All right. Any changes or addition to the next year FY 2025 CapEx plan? Any additions over there? See, FY 2024, we have a CapEx plan of about INR 125 crore. For now, we are holding it. We will calibrate it as we go forward closer to May. For now, we should have it in our plans, and we intend doing it. We will take a look at how the macroeconomic situation evolves. And if, let us assume that growth returns and market stabilizes, then we will need this CapEx to get back to growth. But if there is a very severe headwind, then we will take a call accordingly. But that's for FY 2024. FY 2023, we are on track to do this because we see that we should be able to meet that capacity in the next year. Very much so. And second question would be, you've definitely given a very comprehensive answer of your expectations on the revenue line Q3 and going forward. Is the expectation would be the same on the margin or the EBITDA line as well, which is around 12.3%? See, when the revenue declines, there will be a little bit of a pressure on margins, right? Our hope is to come closer to these numbers, and we are putting in every bit of effort to come at this 12% drop level. Hopefully, we should be successful. Very much so. Best effort for that. Thank you so much. Thank you. Thank you. The next question is from the line of Gunjan Kabra from Niveshaay. Please go ahead. So, from that, the question is for a very, very good set of numbers. To my first question, so there are two things happening from the company point of view. We are witnessing a resilient U.S. market, but on the other hand, one of the major customers, if I say, is Old Navy, and it is having a lot of inventory concerns, also the guidance because of their assortment imbalance and size issues; they have a lot of inventory tied up with them. So, has this issue been resolved, and how are you seeing the order book to build up going forward if the issue has been resolved with respect to this? Okay. Which customer are you referring to when you said they said about inventory problems? Old Navy. Old Navy. Old Navy. Okay. So see, the inventory problem that the brands have, it is sorting itself out as we speak. So they are bringing down the inventory. The peak was, I think, about 3 to 4 months earlier, and now their inventories are also coming down. They are also aggressively trying to liquidate inventory as old stocks do have a limited shelf life. Second, most of the inventory that they have are in the knits or commodity kind of garments, which is not where we are majorly present. So for us, while there has been an impact and we have tried to address these issues, it has not been as serious because of the product types that we produce. And the focus of our marketing has also been such that we have bid for businesses which are very difficult for others to produce and hence held on to our revenue share. Okay. So also, I wanted to understand that you guided that the Madhya Pradesh plant will commence this year. So are we initially, I think, two, three concalls that we were planning to do it in two phases. So what would be the total capacity of that, and are we doing it in phases, or the 2 million capacity will come online altogether? No, no, no, no. It will be two phases. As of now, the work is happening only in phase I with certain common utilities being built for both the phases. But what will come in production in the Q4 will be only phase I of the Madhya Pradesh unit. And in the Q4, we'll be running pilots. We'll be running trial orders, etc., with real commercial production more or less happening in the Q1 of FY 2024. Okay. And this would have the capacity of how many pieces? phase I? INR 2.5 million to 3.44 million. About INR 2.5 million to 3 million per annum. Okay. And what would be the second phase? When will the second phase come online? So we will take a call on the second phase as we go forward. It's part of our FY 2024 CapEx in this. We will take a call once the first phase comes on board, how fast we are able to ramp up and stabilize. We will take a call. More likely, we will start the second phase by end of FY 2024. Okay. And the knitting fabric plant, which is coming online next year, so when is that expected to commence? At the moment, we are looking at a Q1 FY 2024 plan. Q1 FY 2024? Yes. Okay. And so these are the two CapEx which is expected to come online for the next year, right? As per FY 2024, right? That is correct. Okay. So next, I wanted to ask is, so generally, Q4 is expected to be a little, so Q3, you guided it as a little challenging, and we are expected to remain flattish. But Q4 is expected to be a is expected to be a little higher on account of, A, sales would be higher on account of high average price because of the product mix that we cater to. So can we expect a better run rate in Q4 and Q3 a bit? So Q4, I don't think the product mix will change much because Q4 is summer products. Summer products are all casual I mean, fashion garments, and these are not outerwear, which are high-value garments which we typically tend to produce in Q1 and Q2. So it's not from that, but in general, summer volumes are higher, and that's why Q4 should be better. And also, last summer, that is summer 2022, the retail sales were good in the U.S., which is our primary market. So we are hoping that by Q4, we should start seeing some traction redevelop for us. So it's not from product mix change or ASP growth, but it's really just the volumes which will drive Q4. Okay. Okay. So also, when you say, when we say that the European markets are not doing well, the Chinese market is not doing well, Sri Lanka is having a problem, and all these, so in this kind of a scenario, we'll have a lot more suppliers. The customers would have a lot more suppliers because the demand is not that high. So how are we seeing that kind of a scenario because it will become a little more very, very competitive in terms of for the brands to source their garment? So how are we seeing that? Understood, guys. That is definitely an issue that all of us are dealing with. As long as there is an excess of supply over demand, it will result in price pressure, and that's evident in the market. The only way to counter that is twofold. One, try to specialize in product types where you can still hold on. And number two, try to become as efficient as possible so that what you lose in pricing, you try to make up in lower production costs. So we are working on all these fronts. There is a pricing pressure, without a doubt, across the whole market. This is across all industries as well. We are trying our best to counter it. A deeper rupee slightly helps us in that direction as well. Okay. How many customers comprises of 70% of our revenue, and how many customers comprises of that revenue? About five. About five is 70% of the revenue. It comes from five customers. Okay. Thank you so much, and good luck. Thank you. Thank you. The next question is from the line of Mulesh Savla from Shah & Savla LLP. Please go ahead. Sir, good afternoon and happiest congratulations on a good set of numbers. Just to continue on the previous question, sir, how are we booked for Q3 and Q4? Our order book, how does it look like? As I mentioned, for Q3, we did have challenges to book on the order book front. Most of the brands were facing considerable overhang from excess inventory in the U.S. European customers were not really buying because they were worried about the market sentiment, the retail sentiment. So we did have challenges. Despite all of that, we feel somewhat confident that we should be able to still come as far as last year's Q3 numbers in terms of top line. So we have worked on it. We are still working on it to make sure that we are able to bring that kind of revenue. So our order book has reached those levels for Q3. For Q4, it is still work in progress. The orders are still coming in; too early to predict how things will go. I think the sentiment in the holiday season, which will start sometime mid-November post-Thanksgiving in the U.S., will drive the brands. If this holiday season sales are good, I think more and more brands will come back to buying vigorously in the market. Okay. Okay. Sir, you have mentioned one of the main aspects in the CapEx as new initiatives. Can you throw some more light on what do you include as new initiatives? So new initiative is our entry into the knits business. So currently, we are focused only on the woven side. Starting next year, we will also have a knits processing unit. So we're building that up, and that CapEx is underway as we speak. So the factory is under construction, which we should hopefully get commissioned sometime in the Q1 of next year. Basically, that knitting garments which we are planning to manufacture, so it is CapEx related to that facility? Yes, please. Okay. Okay. With the improved working capital, we have fairly good cash on hand. So is there any specific plan to use those cash, or you will use it for the growth of the business? So at the moment, the intention is to use it for the growth of the business. Some more CapEx is planned. We also will take stock on how the macroeconomic situation unfolds in the next second half of this year. If things start correcting itself towards Q4, then I think India will start seeing tremendous tailwind of growth coming from China, Vietnam, etc., where the costs have gone up by geopolitical reasons mean that the brands have to buy more from other geographies. So we have to prepare ourselves for CapEx growth as and when the current macroeconomic problems resolve. So we're hoping that we will get some clarity and visibility by the second half of this year. Okay. Okay. That's all from my side. This is helpful, and I wish you all the very best, sir. Thank you so much. Thank you. The next question is from the line of Guneet Singh from PCIPS. Please go ahead. Hello. Yeah, hi sir. I'm new to this company, so pardon me for asking some repeat questions. But you mentioned about setting up two new units, which I guess are coming up in Q1 of FY 2024. So I just want to understand how will these two units add to the revenues for the coming years, and what are the projections? When these two units are fully operational, how much top line and bottom line can the company achieve with this for utilization, and by what time? So the expectation is that between these two units, and there will be some downstream units to the fabric processing unit as well, which will come up as and when the fabric processing unit is commissioned. We are talking of about INR 500-odd crore of top line, which will be delivered by these two CapExes. That's the work which is going on. All right. Do we expect these to be fully utilized as soon as they're commissioned, or? No, no, no. No, no, no. It will take easily a year to year and a half before it reaches that state. So it will be about INR 500 to 600 crore of top line you can expect from these. All right. All right. Thank you. Thank you. Thank you. The next question is from the line of Simranj eet from Omkara Capital. Please go ahead. Yeah. Thank you for your giving me the opportunity. Sir, I just want to ask from you that how do you see the textile industry going forward on the macro side? Because I just want to view on that because the textile has faced a lot of problems in the past 2 or 3 years on the concerns of supply chain constraints, trade costs, low demand in the U.S. So how do you think the textile industry is going to perform in the upcoming 1 or 2 years down the line? Your personal view on that because you're in the because you're in the textile side. So can you give some points on that? Can you read something on that? So I'm very bullish. If you take one to about, say, 2 years 1 to 2 years kind of timeframe or longer, then I'm very bullish. I feel that the government is extremely supportive of manufacturing in India and textiles in particular because this is job-accretive to the economy. The incentive regime which the government is providing, especially certain state governments, to encourage capacity creation is exceptional. That allows India to still remain amongst low-cost producers globally. So that's encouraging. I'm also finding that the macroeconomic situation, at least as far as China is concerned, or U.S.'s resistance towards China is concerned, is not going to go away anytime soon. And also China's cost structures, for instance, which is very high. So say China is exporting about $120 billion of garments. That will come down, and that has to probably be absorbed by Cambodia to an extent, Bangladesh, and India, and maybe Indonesia as well to an extent. Vietnam is also getting very expensive these days, and Vietnam is also pivoting to higher-value electronics manufacturing. So the way I see it is that the confluence of several events is leading to reliance on more and more output from India. The big brands globally have also experimented with Central America, Africa, and all of that, but somehow the volumes have not really kept pace with their expectations. It's only big players in India who can actually step up and deliver to that requirement. Now, the Indian industry also has to mature and start delivering at a quality which is equivalent to that of East Asia and also at volume levels which those countries can deliver. Some of the upstream industry, which is the fabric, etc., also has to evolve to keep pace with it, especially in the synthetics area, especially in fabric processing areas. Those areas and all will develop in phases. I feel quite strongly about how things are shaping up over the next few years. The other factor which can be very favorable to India would be the FTA with the U.K. and E.U. Now, the U.K. FTA could be resurrected with the current Prime Minister in the U.K. indicating that he's in favor of getting it done. There have been exchanges with the current government in Delhi as well. That's encouraging. If that happens and we take up the EU FTA in earnest after that, and let's assume that by the end of FY 2024 or early FY 2025, an FTA with the E.U. happens, that will become a big shot in the arm for the country because the duty advantage or duty arbitrage that we get will result in a massive inflow of orders for Indian apparel producers. So overall, I would say pretty bullish if I take a long-term view. Yes, sir. Great. Thank you. All the best to you and to your team. Thank you. Thank you. The next question is from the line of Arpan from Adecco. Please go ahead. Arpan, your line is in the talk mode. Please go ahead. As there's no response from the current participant, we'll move on to the next. That is from the line of Jignesh Kamani from GMO. Please go ahead. Thank you. Congratulations for a good setup number. Thank you. Sir, how is the competing position of other players in the other country like Pakistan, Cambodia, Vietnam? Because we are hearing that Pakistan Apparel Association mentioned that electricity cost has gone up drastically, and they're not viable now, and they need to shut down the manufacturing. Sir, Pakistan's volume is not too high that I wouldn't say that gives us a big advantage. So the same goes for Sri Lanka. And some of these countries, their currencies have also depreciated quite drastically. So even though their costs may have gone up, in dollar terms, their currency offset also helps them. So I'm not so bullish about business coming from Pakistan or Sri Lanka. They're there for certain reasons. But the business that comes out of China and Vietnam, that's here to stay, and that's more structurally viable long-term. And that's what will drive growth in India. Sure. Second thing, more about the entire supply chain initiative, how active the clients are in terms of sourcing of the raw material because from the post of the Pima cotton and other issue, are the clients now much more serious in associating with the clients on the supply chain where you buy the cotton and the entire supply chain? On the traceability part, to what level are we now able to provide the supply chain to our clients? See, at the end of the day, if the price of one fiber goes up drastically, blends will start. The fiber choice is based on seasons and the weather pattern. So in the autumn and winter, people will want synthetics. In the summer and spring, they will want breathable fabrics. So they will prefer cotton or viscose. So automatically, viscose blends, linen blends will increase. Even polyester blends may happen just so that the brands can keep the costs reasonable. So when cotton prices were going through the roof, we were seeing actually blends share increase quite a bit. So there are ways to mitigate raw material prices, and fiber substitution does happen as and when certain fiber prices go up exceptionally out of sync with the other fibers. That said, for us, we are an apparel manufacturer, and the rest of the value chain, we just depend on fabrics from our fabric suppliers. We tend to price that in based on the orders that we secure from our customers. The high cotton prices may not translate into a proportionate price increase or decrease on the fabric side because there are several other value additions also involved. So let's say cotton prices go up by 40% doesn't mean fabric price made out of cotton will go up by 40%. There are other value additions there which will result in a going lesser amount. Traceability of the cotton, origin of the cotton, and the entire supply chain. So if a customer wants a particular cotton or a particular variety or ESG compliant or, you can say, other aspects. That's okay, right? I mean, then they're willing to pay the price for it. That's fine. No. So where we are right now versus the competitor in terms of traceability, and can we get some sort of market share from the customer which are more, you can say, conscious on the entire supply chain, that traceability part? See, so we don't play too much on the material part except to the extent that India has a cotton base. We have a good fabric base, etc. Our focus is more on designing the quality of our manufacturing, the outerwear, which is very difficult for many other players to emulate or manufacture. So our competitive strength comes from those areas, and that's how we differentiate. Sure. Sure. And my last question, what are the issues right now which lead to delay in the FTA between India and U.K.? You can say expectation was that earlier it might come in June, then might delay. Now, it might look like March. So any issue which you think? I think the issue is very evident, right? The frequent government changes in U.K. is what is the reason. So we need a stability on the bureaucracy on that side for us. Most of the work has been concluded. It's just that we need stability on the government so that it can be taken to closure. Okay. Thanks a lot, and all the best. Thank you. Thank you. The next question is from the line of Rishabh from RBSA Investment Managers. Please go ahead. Yeah. Hi, sir. I just want to understand since you're also getting into knitting, in the current scheme of things, if you were to compare woven versus knitting, which business is more attractive in terms of, say, challenges or competition? If you could help us understand. So each business has its own challenges, and the challenges will vary from time to time, right? If you look at globally post-COVID, the knit business started growing much more. So it was almost 50/50. And then, especially if you look at the U.S. market, knits became almost 55% in terms of knits versus woven ratio. It may cost correct, and wovens may get a share back. But the point here is that there is a synergy between the two. Brands sell both the products. So if you go to a shop, you'll get a shirt and a T-shirt. There's a woven and a knit product there. And we can cross-sell to our existing customers. That's the reason and logic for going into knits where we can cross-sell to our existing customers. The business challenges will vary. At the moment, we are finding traction for wovens. A knits unit will come up next year. By then, hopefully, things will start stabilizing in knits as well. We will anyway, our knits revenue share as a percentage for us will be very small compared to the wovens. So for us, it will be a start, and it can allow us to get a growth engine for us going. Okay. And then from a longer-term perspective, since we are not currently fully integrated, does it make sense for us to get into spinning or other value added for us to enable better customer service going forward, say, 5, 6 years down the line? Or being asset-led is a better way? In the long run, some degree of integration is good. We will have to think about it and work on it. We don't have to go necessarily all the way back to spinning, which is commodity in my viewpoint. Fabric processing, maybe. Anything above that, we will have to take a call. Okay. Okay. Thank you. You're welcome. Thank you. The next question is from the line of Simrat from SS Capital. Please go ahead. Hi. Thank you, sir, for giving me the opportunity. So I'm just. Simrat, sir, your audio is not clear. Sorry. Could you speak to me? Sir, we requested to use a handset mode while speaking and not the speakerphone. Sure. Is it better now? Much better. Thank you. Yeah. So I just wanted to ask on the employee management side, so what are some of the steps that we are taking so that employee management is in place as we scale our? I am not sure I got the question. Yeah. So I just wanted to ask, so when we scale our business, so how do we make sure that we are able to handle a large number of employees? No, that is, we have demonstrated that over the years. So we have had many employees. Currently, we have 32,000 employees. We've been handling them. And these employees are spread across multiple factories. Clearly, we have a strong HR system in place to handle all these employees. We are considered one of the better-quality employers and with the systems and processes to manage all of these. So I don't see that as a big problem. Okay. Thank you. That's it from my side. Thank you. Thank you. The next question is from the line of Ashish from Invesco Investment Advisors. Please go ahead. Yeah. Thank you for the opportunity, again. So on a longer-term basis, I mean, beyond the near-term headwinds that the macro is present, how do you see the overall I mean, the journey of this company, given the fact that before you came on board, there was a period which was really painful, and growth was all lost, basically, and some competitors like maybe Shahi, which is still 3x of our size, maybe. So is there a potential to reach to those levels, and do you see that journey unfolding for Gokaldas that way, maybe 3, 4, 5 years down the line? Sure. Just a correction. Shahi probably is 4x our size. So they are. Yeah. It would be now. Yeah. Yes. They have done well for themselves, and I really admire that company. See, there is a huge opportunity. I mean, Shahi just has shown the way, right? They have grown, and that clearly means that there is scope for a well-performing company to grow. So there is enough latent demand. At the end of the day, India last year exported $16 billion out of $500 billion of apparel trade, which is nothing. So there is enough opportunity out there which the country can capture, and it will be best captured by larger players who have got the ability to invest in quality, invest in sustainability, invest in compliance management, and all of that. So bigger players like us will definitely see disproportionate growth opportunity for ourselves. And there is a demonstrated capability by Shahi that Indian players can grow. I'm sure there is a lot of opportunity here, and we will also capitalize on it. So is your customer set, I mean, same, similar, and how do they recognize you versus Shahi in terms of the qualitative parameters that you might want when you are on that journey to maybe be 3x from there? I mean, is it similar? They view us very favorably. They view us as one of the strong suppliers, high-quality suppliers, and a very strong competitor to Shahi in that sense. And I think if I were to ask the brands, they would like to see more of people like us, players like us, meaning both Shahi and ourselves. So there is room for many more such players to exist in the country, and they would welcome it because then they can source more from India. And as far as to answer qualitatively to your question, they view us as good as anybody in the country, and they even compare us with international players. So we even come very favorably with respect to players in other countries like Bangladesh, Vietnam, China, Cambodia, and all that. Okay. So to ask bluntly, as investors, maybe from a longer-term horizon of maybe 3, 4 years, we should be expecting that kind of a journey from Gokaldas if things were to go fine overall? I mean, that's the endeavor of the management to go that way, maybe create some recurrent sales? See, if the opportunity is there, why not, right? And somebody has to do it. And I'm sure the more people do it, the better because there's room for anyone to do it. And I'm hoping for the good of the country and good of the textile industry. There'll be lots of players who will participate in that opportunity. Great. Sure. Thank you so much for your time. Thank you. Thank you. The next question is from the line of Mohit Khanna from Banyan Capital Advisors. Please go ahead. Okay. Thank you for taking up my follow-up question. You had mentioned in the call right now that you have bid for some products which is difficult for your competitors to manufacture. I think that was specifically for Old Navy or maybe other customers as well. Could you just elaborate what are the competitive advantages that you have as compared to your competitors here, and what would be a strategy to consolidate both market share and the wallet share for your own service? See, it's about outerwear where the company has a strong pedigree there, capability of producing complicated outerwear. These are cold-weather garments which are usually produced in huge quantities in Vietnam, China, and to an extent in Bangladesh, but not to a great extent. So we do have the capability. We import fabrics, etc., for this, but we do have the peak capability for some of those. Even our design capability stands us in good stead. Some of the smaller players may or may not be able to invest as much in design engagement with our customers whereas we could. So some of these differentiators do help us in securing certain types of orders which others can't. Great. And so that would be your strategy for the growth and to become for just like Shahi? No. So growth will come from multiple segments. This will be a strategy to really try to see how much we can protect our market. Fair enough. So this is not a scalable product mix or product view. Don't get me wrong. It is scalable, right? But that's not the only segment we can grow in. We will grow in various segments as well. It has to be a balance between growth in outerwear and growth in the other segments as well. Now, outerwear is not a year-round product. So it's more like a cooler climate product. So we have to factor in all of these when we plan our product strategy. Fair enough. Thank you so much. Yep. Thank you. The next question is from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead. Thanks for the follow-up. Now, when I just look at the slide, it talks about U.S. apparel imports and India's apparel exports. I mean, over CY 2018, 2019, until now, it's all flattish in terms of India exports, in fact, India apparel exports, and U.S. has probably gone up a bit. So is the opportunity really China plus one, or is it consolidation largely playing out where we have gained shares in other Indian players? Or is it that for your particular segment, you are witnessing more of China or other country plus one? No. So if you look at India's share in U.S. imports this year, right, YTD, August for this calendar year, 2022, we are 6% versus 5.1%. That's our share of imports. Last year, in 2021, it was 5.1%. This year, it is 6%. So almost 1% up. Now, where are we getting that 1% incremental market share? China has lost about 2% in the last one year. So we have picked up some slack from there. Bangladesh is more or less flattish, very marginal growth. So India is the one which is picking up share. So there is an opportunity for India to pick up more share. And 1 or 2 percentage point share is huge. So it is going in the right direction in my viewpoint. And if FTA comes, there's an opportunity to pick up share in Europe as well. There is considerable opportunity the way I see it. Actually, I was comparing to CY 2019 and 2018, the absolute revenues exports is flat. It's four, four, five. That's almost 13, which is similar right now. So I'm not comparing to last year. I'm just looking at the entire chart. I'm just looking at it over 3 years. So I'm just wondering whether there is a consolidation happening from an Indian supply standpoint as well for the larger players. Yeah. So that's another point at play where some degree of consolidation will also happen. See, there are two, three things at play, right? In the last 3, 4 years, especially just before COVID started, there has been a move by the Americans to reduce their reliance on China. And it started with Trump, continues with the current Biden administration. Strategically, things are going more and more in that direction. So there is that move, which is what we are seeing in the most recent times, 2021, 2022, etc. The other thing is, within the country itself, there is a degree of concentration of orders amongst the bigger suppliers. So in a way, if our country's output is $16 billion, the bigger players are the ones who may be delivering a bulk of the growth as opposed to all other players. There may be a bit of a stagnancy among the others. That also helps us. Sure. Sure. And lastly, what is the peak revenues you can do from your current capacity and based on the current prices for a full year? I think what we delivered in Q1 would be our peak revenue based on current capacity. I think. The best is 90, right? Incremental capacities which are coming on board, right? I mean, those will give additional revenue. INR 2,400 crore, roughly, I mean, you're saying is what you can do? I'm sorry. Say that again. 2,400 crores annually is what you can do from your current capacity. That is correct. Okay. Got it. Thank you. All the best. Thank you. Thank you. The next, ladies and gentlemen, we'll be taking the last question. That is from the line of Cheragh Sidhwa from ICICI Securities. Please go ahead. Yeah. Yeah. Thank you so much for the opportunity. So this is the clarification on the incremental revenue part. So the INR 500 crore which you mentioned, so correct me if I'm wrong, INR 230 crore would be from your two units installed in Karnataka and one in Tamil Nadu. That will contribute around INR 230 crore. And then the MP1 would contribute around INR 160 crore. So INR 390 crore from there and INR 100 crore close to from the existing capacity. Is that the correct understanding? Fair enough. So your voice was not very, very clear to me. I mentioned there's between the budget unit and the fabric processing unit, that is the revenue. From the last units which have come up in Karnataka and Tamil Nadu, which has already come up last year, those revenues, in a way, we have captured separately. Yeah. Okay. Okay. And so the, say, around INR 80 crore towards the. We did drop the, excuse me, sir. There's a lot of disturbance on the line, Cherag. Yeah. Is it better now, sir? Much better. Yes. Excuse me, sir. Yeah. Yeah. So the knitting capacity, which is close to around, say, INR 80 to 90 crores, which we are planning to invest, that is purely for the commissioning of fabric processing, or it also includes some of the downstream garmenting units which will be utilized to produce the garments? Or that'll be separate from this INR 80 to 90 crores? That will be separate. That'll be separate. It's purely the fabric processing unit. Yeah. Okay. Okay, sir. Thank you, sir. You're welcome. Thank you, ladies and gentlemen. That is the last question. I now hand the conference over to the management for the closing comments. Thank you very much for supporting Gokaldas Exports. We are committed to seek growth within the constraints that we have of the macroeconomic environment. We are working hard, working with our customers, working on improving our operational excellence. That's a journey which continues. We peg ourselves with some of the best players so that we are able to compete with some of the best to deliver to our customers. We will continue to seek growth even in this hard macroeconomic environment. We are reasonably confident of a strong tailwind in the years ahead when the dust settles on the current macroeconomic situation where the opportunity for India is strong given our cost structures, given the government support, and FTAs that are coming up. I'm confident that the prospects for the industry are strong. We are focused on execution as always, and we will keep delivering to the best of our abilities. Thank you. Thank you, ladies and gentlemen. On behalf of Gokaldas Exports Limited, that concludes this conference call. We thank you for joining us. Even now, disconnect your lines. Thank you.