Welcome to Gokaldas Exports Limited Q2 FY 2024 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be no 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Binay Sarda from EY. Thank you, and over to you, sir. Thank you, Lizanne. Good evening 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'll 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 Annamalai, 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. Sivaramakrishnan. Over to you, sir. Thank you, Binay. Good afternoon, everyone. Happy to have you at our earnings call for the second quarter of FY 2024. Retail sales has been resilient and maintained gains year- to- date 2023. Brands have been able to sell their products at full price, reducing the need for discounts, which has contributed to growth primarily in terms of price rather than volume. However, this has not translated into a higher demand for apparel manufacturers. U.S. apparel imports for the year- to- date fell by 23%, while E.U. fell by 13%. Major brands are consciously liquidating excess inventory holdings and controlling their purchases. During the quarter, our performance remained subdued, which was in line with the market conditions. This is a period when we manufacture for the holiday season. Weak retail demand in autumn/winter 2022, due to high inflation, high interest rates, and a mild winter, contributed to excess inventory impacting optics for this period. Our revenue for the quarter came in lower by 11.7% due to lower demand. In this quarter, we incurred certain one-time expenses of INR 5.2 crores, of which INR 1.6 crores was for acquisition-led expense and INR 3.6 crore was for the startup of our MP plant. As you know, when we start up a factory, we have to ramp up our manpower and put a lot of people through training, and there's a lot of startup expenses that we incur, which will probably continue for a quarter more, quarter or two more. On the acquisition-led expense as well, there may be some additional bookings of acquisition-led expense in the next quarter, too. This INR 5.2 crores of one-time expense impacted our operating margin by 1%, adjusting for which our EBITDA margin in Q2 FY 2024 stands at 12% compared to 12.5% in Q2 FY 2023. We also ramped up our labor force in Q2 in preparation for third quarter business volume, resulting in an increase in wage cost by about INR 5 crores. Further, our operating margin was impacted by an increase in statutory wages for factory employees. We continue to offset some of the cost increases through superior operational performance. In the first half of the year, we generated INR 113 crores in cash from operations and covered our capital expenditure of INR 70 crores. We plan to incur another INR 75 crore of capital expenditure in the second half of the year to continue to build up our capacity as we plan for future growth. Our new manufacturing unit in Madhya Pradesh is on track, and we expect production to increase in the coming quarters. The fabric processing unit in Tamil Nadu is in advanced stages of completion as well. We are making good progress with our acquisition of Atraco. We are awaiting regulatory approvals from different jurisdictions and anticipate the process to be completed by end of Q3 FY 2024. We are expecting the momentum to pick up in the second half of the year, particularly with Q3 production for spring 2024, as brands have more or less destocked their inventory and are, and are increasing their order placements. This is also a period of increased sourcing from India. We anticipate sequential growth to trend up in the next two quarters. We believe that the strategic moves that we are taking, will allow us to continue to grow the business going forward. Excuse me. We continue to closely monitor potential macroeconomic situations and take measures focusing on customer relationships and service excellence. We are confident of the medium to long-term prospects of the company. I thank you for listening and would be happy to address questions that you may have. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jatin Chawla from RTL Investments. Please go ahead. Yeah, hi. Thanks for the opportunity. The first question is, when I look at, you know, our export performance, in and comparing it with overall, India's export performance, it seems we are largely in line. I would have expected that, you know- Sorry to interrupt, Mr. Chawla. Sir, can you use the handset mode while speaking and not the speaker phone? Is this better? Much better, sir. Thank you. Please proceed. Yeah. So, my question was, if you... When I compare Gokaldas Exports and India overall exports, apparel exports, it seems the performance is largely in line. I would have expected that in this kind of weak scenario, the stronger, larger players would probably do better. I just wanted to understand why that's not panning out. Okay, good question. So there are several reasons for it. One of the reasons is that, you know, the primary reason is that we are a very outerwear-focused company, and we, in the second quarter, we do a lot of, you know, a lot of products which are meant for holiday season, for cold weather purposes. That's a core product for us. Last winter was a very mild winter, and coupled with a very high degree of inventory stocking on the brand side, resulted in the brands placing very low orders for outerwear products for this coming winter, that is winter of 2023, holiday season 2023. So this resulted in our Q2 volumes being more impacted, as we don't do as much fashion wear, and other, you know, lightweight products or commodity products. So we had to switch to many other product types for this Q2 to offset this peculiar situation of higher inventory stocking of the product types that we tend to specialize in. So that's one of the reasons for our, you know, decline in growth, which came certainly in line with India's destocking in India's exports. Number two, we are U.S. heavy, and as you're aware that U.S. imports have fallen much more than European imports, so that also impacted us a bit more in Q2. Number three was, you know, if you look at our last year Q2, we had a very strong performance, much, much higher than the rest of the industry. So there is also a base effect, which resulted in us coming more or less in line with the, with the industry, you know, decline. So if you adjust for all of this, actually we have performed, well. But, you know, that said, you know, this, you know, if you seek an explanation, this is, this is what I have. Understood. Understood. But, so clearly, I understand the product type dependency. Overall, you would think that in the market, the larger players would still be, still be doing better than the smaller players, and, and once this anomaly kind of adjusts, we should expect to do better? Always. Always. Absolutely. Got it. Got it. And given that how small, you know, India is as a part of the overall global pie, is it a little bit surprising that Indian exports are not doing better than... I understand that overall conditions are tougher and India is doing slightly better, but would you, would you have expected India to do slightly better than what you've done in the last 12 months? So, you know, again, Q1 and Q2 is not India's strength. Gokaldas is different. We do a lot of synthetics and outerwear and all of that. But typically, India plays to its strength in the second, third and fourth quarters when, you know, more and more spring and summer wear comes into play if they use cotton and viscose-based fabrics. So, typically, you know, you will see a little bit of a surge in the third and fourth quarter for India as such. And in a situation where the brands are buying a lot less, you know, then it, it's a question of relative impact. You know, globally, all the regions have seen considerable slowdown. So when I talk to operators in Bangladesh, Vietnam, China, they've all seen a much higher degree of slowdown. So in such a situation, it's hard for anybody to, you know, outperform. The fact that India has dropped only 12% is a good sign, I would say. Hmm. Would you expect these market share gains for India then to accelerate a little bit once the overall market picks up, given that, you know, then, the guy who's sourcing would not be cutting volumes from somebody and giving it, but rather incremental volumes would be given to him? It should. It should. Some degree of, you know, I mean, the bounce back will benefit, you know, at least the stronger players from India for sure. And, you know, we will have to build upon it, going forward. Okay. And just one last question. You said you expect the- Mr. Chawla, may we request that you return to the question queue? There are participants waiting for their turn. Sure, sure. No worries. Thank you. The next question is from the line of Gunjan Kabra from Niveshaay. Please go ahead. Thank you so much, sir, for the opportunity. Sir, wanted to understand that, you know, home textiles in the U.S. has, you know, showing the sign of pickup, at least some companies are showing the sign of pickup in their numbers. So do you think that same is, the inventory has decreased now for the apparel segment also? And how do you see this for the next Q3 and Q4 and going forward for Gokaldas Exports? So, I think the inventory, you know, issues going forward is a lot lower because many of the brands have managed to de-stock well. And, you know, it is also evidenced by the fact that our order book is pretty good for the third and the fourth quarter. So, you know, we are seeing traction coming back. You know, if you see the U.S. retail market, that has been reasonably resilient, and I hope that it stays resilient through 2024. So, that depends on a lot of macroeconomic factors. But as far as the brand is concerned, all the buyers are concerned and their inventory issues are concerned, I think we have seen some, you know, de-stocking that more or less happened, so it will help us in growth going forward. Okay. Okay. Sir, I also wanted to understand your view, like, in short term and long term. Like, you know, initially, like, one and a half year back, at least there was, like, a tailwind in the sector where, you know, India was gaining market share and because of the China ban and China Plus One. So right now, the because of the slowdown in the U.S. and, the Europe and everything, so we have acquired Atraco also, and we are in expansionary phase also. So I wanted to understand what's your, you know, vision for short term and, you know, what are the factors that can, maybe hinder growth, or, you know, cycle in short term and maybe the long term vision for Gokaldas in, say, next two to three years, four years? What kind of a growth or what kind of a perspective do you see with these two acquisitions going forward? So I don't see too many short-term influences barring, you know, macroeconomic factors, and that's anybody's guess. So you can also judge on how that is going to pan out. If you look at the U.S. interest rates have been kept high, and they may see some impact on consumer sentiment going forward. So far, the U.S. market has bucked all the trends, and consumer demand has been reasonably resilient in that market. We'll have to see how that pans out going forward. There are elections in several jurisdictions: U.S., Mexico, U.K., India, so on and so forth. So let us see how all of that pans out. But by and large, I think, you know, global demand doesn't have such wild oscillations. So my sense is that, you know, the excess of inventory, which happened when the supply chains tightened up and then eased out, all of that is more or less wearing off. You know, so we're back to catering to the usual, you know, subtle demand growth that will happen going forward. So some degree of normalcy will return to the market. Now, in such a scenario, stronger players will have the ability to now win more market share and continue to grow. So going forward, there will be a bit of a steadying of the volatile fluctuations, is what I guess. You know, again, everything caveated to some major geopolitical crisis, right? And I feel that China Plus One will continue to play out. You know, it's already playing out on the cotton sector, but, you know, it will, it will, you know, slowly start happening in the other synthetics as well. It may take a few years, but that also will move as India's cost structures are far superior, and we are exploring newer, lower cost locations. We are also looking at a possible FTA with U.K., and if that happens, that will be a great benefit for India. If E.U. FTA comes, which will take some time, that also will be a major shot in the arm for Indian manufacturers. So I think that for a good, solid manufacturer who can compete and hold themselves at a global level, the opportunity is very strong. And that's the reason why we are investing in capacity. We are making sure that the capacities that we are investing in are low cost. We're investing in relationships with new customers, so there's several discussions that are happening with customers. So I feel confident that, you know, the next two to three years, the prospects, you know, should be good for Gokaldas. Our Atraco acquisition has also, you know, will also come into play, most likely from fourth quarter of the current financial year. And the order book for that is also pretty. That entity is also pretty good going forward. So I'm taking, you know, comfort from all of these trends and saying that, you know, we should be on a good growth path going forward, subject to no major macroeconomic crisis. Okay. Okay. Okay, sir, I'll get back into queue. Thank you. Thank you so much, and good luck. Thank you. The next question is from the line of Anuj Kumar from Spark Asia Impact Managers Private Limited. Please go ahead. Good afternoon, sir. I have two questions. My first question is on the export incentive part, where the RoSCTL, I think the, the extension is till March 2024. What is your take on that? Will there be any further extension on that? And if there is not any extension, then what would be the impact? Because considering the fact that we have put in a lot of money, what would be the margin and revenue impact, for that? And second question, can you also throw some ballpark growth for second half? Will the subdued, first half be compensated, by second half performance, both on revenue and margin front? Are you seeing that type of a growth? Okay, so coming to RoSCTL, your first question. At the moment, RoSCTL is applicable till FY 2024, that is March 31, 2024. There are, you know, Government of India is aware, and there have been discussions going on for continued extension of RoSCTL. We will have to wait for directions from the government, you know, on RoSCTL. Since it's an industry-wide situation, the impact will be uniform for all the industry, and we will have to play it accordingly. We will also have to see, you know, how much of it we can price it into the customers. Eventually, it'll all get priced in, as far as the customers are concerned, since it is not impacting one player, in, you know, negatively. There are also several other things going on globally. For instance, even in Bangladesh, there is expected to be a sharp wage increase by end of this year. So, you know, all of these do impact regional competitiveness, and I guess we will have to take it on our side. Our best hope is that the RoSCTL gets extended beyond FY 2024. All efforts are being made by the industry to secure this. So we will have to wait and watch, but we are somewhat, you know, we feel that the government may listen to us, listen to the industry favorably, given that this industry also employs a lot of people, and it is important to preserve the competitive economics of this industry. So there is a likelihood that this may get extended. As far as your second question is concerned, regarding the prognosis for the second half, our endeavor is for us to recover the revenue growth in the second half and try to come to at least last year's revenue level this year. So if you look at our last year, we had a strong H1, and after that, you know, when the world went into a tailspin, thanks to high inventory, et cetera, we started dropping our revenues to about INR 525 crore level from Q3 onwards. I think we will see a reversal of the trend in this year, and Q, Q3 and Q4, we will, we will see an upward growth, such that, by and large, we will try to cover up the, the cover up and get back to the revenue levels of last year. So I, I anticipate us to get closer to INR 2,200-odd crore, in the, current financial year. And on top of it, there will be Atraco contributing to incremental revenue in the fourth quarter. So, so overall, we will have a growth, YoY, you know, in, for, for Gokaldas. Does that answer your question? Yes, sir. Yes, sir. So one more question, sir. So one more question on this, I'm sorry. Go ahead. Yeah. Sir, on this second half, I think it is more of cotton-based products, which... Can we see margin expansion as well? Is my assumption right on that? Yes, I think we, our endeavor is to work towards the margin of 12%-12.5% EBITDA margin and, yeah, for the year. Yes. Okay, sir. Thank you, sir. Thank you so much. You're welcome. Thank you. The next question is on the line of Vikas from Equirus Securities. Please go ahead. Yes, sir. Hi, good evening, sir. Thank you for the opportunity. So my first question was with respect to our employee cost. Of course, you mentioned that we did increase our labor to prepare for the 3Q. But can you, like, estimate at the INR 180 crores per quarter would be a sustainable run rate, or it could be somewhere even an inch higher going ahead in next quarters? No, I think that INR 180 crores-190 crores will be the rate at which labor costs will trend in the quarter side. Okay. Okay. Secondly, sir, would you like to throw some light on how was Atraco's performance in the quarter? Sir, so, you know, we have not concluded the acquisition of Atraco. So Atraco still remains a separate entity, and we anticipate that with regulatory approvals coming in sometime in the near future, we should be able to conclude the acquisition by end of this current quarter, that is, the Q3. So as of now, the company is tracking to its performance and, you know, it's more or less tracking to last year's performance level despite market headwinds. So, you know, but we are still not in control of the assets since we have not yet got the regulatory approvals. Understood. Understood. All right, sir, thank you so much. I will come back to the question later. Yes, indeed. Thank you. Thank you. The next question is on the line of VP Rajesh from Banyan Capital Advisors. Please go ahead. Yeah, hi. Thank you for the opportunity. First question is, so regarding the U.S. FTA, or sorry, U.K. FTA, what's the timing on that? Has it been pushed out, and what's your sense as to when that will come through? Rajesh, I wish I knew that. And, you know, we are all eagerly awaiting for U.K. FTA to happen. Obviously, you know, FTA is just one, FTA for textile is just one of the agenda in the India-U.K. trade relations. So it's Government of India and the U.K. government are working on it. We are hoping that it should happen sometime soon. We are eagerly awaiting it, but it's hard to put a timeline on it. I guess a lot of those discussions have already happened, and that's what I'm given to understand. But as far as the timing is concerned, you know, it's anybody's guess. Government of India has its own set of priorities, and there are a lot of discussions going on between the two countries. Discussions are at a fairly advanced and concluding stages, is what I understand. Okay. Similarly, for Kenya's renewal for its AGOA, what's the timeline on that? When do you think that will complete? For Kenya. You're talking of U.S. FTA? Well, the U.S. deal that they have for the Atraco business. Ah, okay, okay. I got it. For the U.S. So, AGOA is valid till December 2025. So, that discussion will come up only in the, you know, 2025. So there is some time for it. Last time it was, you know, extended from 2015 to 2025. The expectation, which I hear from, Kenya and other markets, are that it will get extended by another 10 years. So, so far it has been going in line. Kenya is also working on an FTA with the U.S., because they are... You know, geopolitically, Kenya is very closely aligned with the U.S. So, there is, regardless of AGOA, I think, you know, Kenya is expected to enjoy, preferential access to the U.S. market. But there is a lot of time before, you know, we can talk about AGOA extension. Okay. Okay, understood. And then on the MP plant, if you can talk about when it will get to 100% capacity and how the ramp up will look like in the coming financial year? I think to reach 100% capacity utilization, we are talking of almost like Q2 of next year. You know, they, they will continue to ramp up. Our endeavor will be to ramp it up as soon as possible. You know, it all is a function of how fast we can get the people trained and deployed on the floor, and they reach their peak productivity levels. The, it's not just about putting the manpower on the, on, you know, in the floors or into the production floor, but also getting their productivity up, and that also takes another six months. So I anticipate that, you know, we are talking about somewhere like next Q2, by which time, end of Q2, by which time we will have the productivity levels and the full manpower complement to be playing out. Got it. All right. Thank you, and all the best. Thank you. Thank you. The next question is from the line of Varun Gajaria from Omkara Capital. Please go ahead. Hi, sir, and thank you for the opportunity. Hello, am I audible? Yes, we are. Thank you. Yeah, sorry. So I just had a question on this, on FY 2024. So, earlier today, I think in one of the interviews, you mentioned that we are going to see 10%-12% growth, YoY in FY 2024. Am I getting that wrong? If our revenues are going to be flat, then how will that work out? You're talking of FY 2024, right? Yeah, yeah. Yeah, that is, you know, the expectation, as I mentioned a little while earlier, our endeavor is to come as close to last year's revenue based on our current performance, which is about INR 2,200+ crore. And then, we, we expect that Atraco should contribute incremental revenue in the fourth quarter. So that will give us, you know, an incremental revenue in the fourth quarter, too. So overall, you know, we can expect about a 10% kind of revenue growth in 2024 over 2023. FY 2024- So that will be on consolidated basis, at least? Yes, yes. Yes, of course. Okay. Okay, that's it from my end. Thank you. You're welcome. Thank you. The next question is from the line of Vikas from Equirus. Please go ahead. Yes, sir. Thank you for the follow-up. Sir, what are the volumes and the ASPs for the quarter? We have done INR 7.77 million, and the ASP per piece is around INR 610. For the quarter? For the quarter. Okay. Right. Right. Right. Okay. Okay. And going ahead, since in H2, we generally do cotton-based products, so this ASP generally drops for the H2 quarter, right? For H2 of the year. That is correct. So as I had mentioned earlier in my, you know, the outerwear business was a bit slow because of the weather-related issues and excess inventory from last year. So, you know, we have produced a lot more non-outerwear products in Q2, which otherwise would have been a outerwear-heavy season for us. So all of that contributed to slightly lower ASP in the quarter. Sir, if I just wanted to confirm 2Q of 2023, our units sales volume was 6.7 million pieces with an ASP of INR 850. Is that correct? Q2, Q2 of previous year. Correct. You're right. Okay, sir. Thank you so much. Thank you. The next question is from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead. Thank you for the opportunity. My first question is just on the kind of engagements you're having with clients. I mean, now that the U.S. inventory correction is behind, I mean, what is the level of new client engagement? How is that picking up quarter- on- quarter? And how is your conversation with some of the existing clients as they're looking to diversify their supply chains? Are they saying in as many words to you that, you know, "Why don't you just go ahead and set up capacity?" So some softer discussions around the same. So, Singhal, the discussions with existing clients has been going strong, and we have actually been engaging with them on, you know, starting new product lines or product types, expanding relationships with other sub-brands. You know, many of these retailers have several brands that they carry, and we may be supplying to two to three brands. So, you know, we can add incremental businesses. So all of those discussions are going on based on our track record, our relationships, and the fact that they tend to see that the inventory levels are now coming back to some degree of normalcy going forward. So all of that is going on. So it's encouraging. I'm picking up encouraging signals as I see going forward. The only caveat that I have is, you know, I don't know how the stubbornly high interest rates will pan out going forward in the U.S. from a retail demand perspective, because retail demand, despite everything, has kept on growing, albeit at a lower rate, but it's still positive for the calendar year 2023 till date. So I, you know, I'm, I'm—I hope that the retail demand stays going forward. But, you know, the dialogue with the brands have always been encouraging. On top of it, if FTA and all happens, I think there will be further additional growth from Europe. That will be a positive for us. Incrementally, you know, our customers are talking about expanding their relationships with us, so we seem to be, you know, drawing comfort from all of that. Understood. And the second question is, on the gross margin front, I mean, you're clearly taking a call of, you know, working only on slightly higher margin profile, you know, at the, you know, at the cost of revenue growth. Now, as growth is coming back, how is the pricing environment now? Do you have to sacrifice some bit of margins to get that growth, or are you seeing good margin, I mean, at a gross margin level also continuing? No. There is a tight pricing regime going on. As long as the buys are less than, you know, less than the past, there will always be a pricing pressure. So, you know, if demand is less than supply, we will always have this issue. So buyers have, you know, choices. There are players in other global markets as well, who are willing to compromise on their margins and bid. So while we try to hold on to our margins to the best extent possible, it's an uphill battle until, you know, there is a degree of normalcy from a demand perspective. So as the demand climbs up, some of these pressures will yield, or, you know, will reduce. But I don't anticipate that happening anytime soon. We will see how FY 2025 plays out. I'm hoping that sometime during that period, we should see some degree of pricing power come back. But in the meanwhile, we do not, you know, drop prices and chase revenues. That's not in our DNA. So we will try to hold on to our margins to the extent possible. Got it. Great. Thank you, and all the best. Thank you. Thank you. The next question is from the line of Anurag Agarwal from Agarwal Analytical Investments. Please go ahead. Hi, sir. Thank you for the opportunity. Am I audible? You are. Sir, I noticed that in the, in our presentation, we were focused towards Europe and U.S. for our export-related business. I just wanted to understand, in future, do we also aim to target other geographies like, probably Canada, Australia, or MENA region, probably? See, globally, U.S., Europe, and China are the top markets from an apparel demand perspective. A lot of China's demand is fulfilled by China-based players, so China produces for China. So that really leaves U.S. and Europe for players like us from a demand catering perspective. We have been U.S.-centric in our approach, so 80%... 75%-80% of what we produce goes to the U.S. market. Europe is much smaller in our portfolio. We intend to increase our exposure to Europe as we go forward to balance the revenue mix and in anticipation of an FTA with U.K. As far as Australia, MENA, and others are concerned, they are much smaller markets, and if it suits us, we will go for those markets. But at the moment, you know, the overheads of a relationship and, you know, to cultivate those markets are much higher to, to, you know, warrant efforts in that region. Got it. So my question was related, was in this particular case, was due to this, due to the factor that we are seeing some kind of a- ... economic risk out there in the U.S., since, you know, recently I also read that credit card delinquencies have increased to 60%, so this could have a potential impact on us, like, in the meantime, in the coming time. So that's why I thought if our company was trying to diversify the geography base. The only issue is that, you know, the other markets are so much smaller. If you look at population of Australia, you know, it's a tiny fraction of United States population, you know? So the problem with all of these markets that you mentioned are way too small. So we have to make sure that we secure ourselves with the larger markets and make sure that we work with the right set of customers so that we minimize our impact. Got it. Thank you, sir. Sure. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Rehan from Equitree Capital. Please go ahead. Hi, sir. Thank you for the opportunity. As an earlier participant asked about RoSCTL, I think I missed on the same. So what kind of margin impact do you expect if it doesn't get carried on by the government? I'm sorry, I couldn't understand your question. Your voice came a bit muffled. As an earlier participant asked about RoSCTL, and you mentioned- Right. - that it will be till, it's currently till the 31st of March, 2024. Right. Assuming the government doesn't carry forward that, what kind of margin impact do you seem to face in the industry? If you can shed some light on the same. Oh, so it's a bit difficult to estimate at this moment. You know, we are hoping that it should come, you know, it should get extended. But in the event it doesn't happen, you know, it is not that we will take a 3.5%-4%, 3.5% or whatever we are getting as RoSCTL, that level of hit. Maybe we will have to take a hit at 50% of that level, till we try to recover that back, going forward. So the recovery of that will happen by pushing back on pricing and all of that. So it'll take about two-four quarters before we recover it all back. But in the meanwhile, we may have to take about half of that as a hit, I presume. So basically not some concrete level of margin impact we can see? No. So, so, so RoSCTL amounts to about 3.5% of the export turnover, which is bulk of our turnover, right? So, so that's the 3.5% EBITDA margin sitting there. But my sense is that it's a transparent thing. The brands also know that RoSCTL is available to all the suppliers, and to that extent, it gets factored in the pricing. So for whatever reason, RoSCTL goes away, there is a possibility of pushing that back into the pricing when we do our calculations going forward. So our endeavor would be to claw back most of it, but I'm presuming that in the interim, for a short period, we may have to eat half of it and till we fully claw back all of it. Okay, thank you so much. One more question would be on the U.K. FTA. If you can even share some light on the volume you expect that could India generate because of the U.K. FTA versus the global competitors we have. Any, like, 10%, 15% you see as a ballpark figure? So I anticipate it to be about a billion-dollar opportunity. You know, it's, again, anybody's guess, but this is my assessment. If you look at Bangladesh, they export almost $4 billion to U.K., and China exports about $5 billion to U.K. But once we get a level playing field with Bangladesh, and India exports to U.K. about $1 billion or something like that. So, you know, a portion of it, say at least $3 billion out of $4 billion, which Bangladesh exports, if we get $500 million, and China exports about $5 billion, and I'm presuming that at least $2 billion out of that will be cotton-based. And there we will be 12% cheaper than China because of duty-free access. Another $500 million coming out of it. Conservatively, we can talk of about a billion-dollar opportunity. It can be even more. All depends on how well-positioned Indian suppliers are to take advantage of the FTA. Economics will drive it, and economic rationale is very compelling. So I feel even $1 billion is conservative approach, a conservative estimate. Thank you so much, sir. You've been very kind. Thank you. The next question is on the line of Roshit Shah, an individual investor. Please go ahead. Hello. Hi, am I audible? Hello? Sir, you are on mute. Go ahead. Well, speaking. Okay. Sure. So, so, I broadly have two questions. So first one was, the challenges that were highlighted, majorly seem external, from inflation, brands desocking, and U.S. and Euro, regions-wise having economic, challenges and so on. So I just wanted to ask, like, is there anything specific that, we see, which could be related to Gokaldas, either from execution perspective or anything that is, company specific to us that we are, working on? You know, I'm not sure I fully got your question, but if you're asking if there are any challenges that you see company specific to Gokaldas- Yes. Yes, correct. You know, I don't see anything directly or immediately impacting Gokaldas specifically, you know, from a challenge perspective. You know, we have a fairly stable set of operations, a stable set of customers. I don't see any risk from that standpoint. It's just that we have a little higher presence in the south of India, where costs are high and labor costs, you know, slowly will keep inching up. So over a period of time, we will have to diversify our manufacturing operations to access other lower cost labor pool. So it's only to that extent. The good news is that, you know, the labor costs are only increasing in China, in Vietnam, and even in Bangladesh, going forward. From that perspective, you know, while there are certain challenges of labor availability and labor costs in south of India, I don't see any other big challenge that are confronting us at the moment. Sure. Sure, sir. So, the second question is related to, so the brands right now have gotten majority of their benefits due to price increase versus volume as a contribution. So from what I understand, that means that the brands are increasing their prices. So is there any scope for us also to be looking at increasing the average selling prices that we sell to the brands? I wish we could do that. I don't think that is feasible because, you know, this is all based on demand and supply, and most of the brands are buying far less than you know what supply ecosystem is. So at the moment, there is, you know, in the market, there is a bit of price pressure on account of demand-supply considerations. So at the moment, I don't foresee us being able to push up our selling prices. Understood. Understood, sir. Thank you. That is fine. Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Vikas from Equirus Securities. Please go ahead. Yes, sir. Thank you for the follow-up. Sir, in one of the comments you mentioned about that Bangladesh is also expected to take wage hike. Can you elaborate on this point? What are you hearing, and what would be the extent of wage hike that they could take? So it's all, you know, See, the issue is Bangladesh has seen a very high degree of inflation, and that's because their currency has dropped sharply, and most of the consumable products that Bangladesh consumes is all imported into Bangladesh. So they have seen cost of living go up, and there is an election coming up in Bangladesh, too. So there is a bit of a pressure to offset some of that through wage hikes. The unions are negotiating with the government to reset the minimum wages. My sense is that it may be even be as high as 35%-40% wage increase in that country. The last wage hike which happened in Bangladesh, I guess, in 2018 or early 2019. So it's been a while since the wages have gone up, and inflation has eaten into real income. So it will be high, pretty high, 35%-40% at the least, I suspect. Sure. Sure. So my second question is with respect to the one, one-off expenses that you mentioned. Can you broadly quantify how much it could be going ahead in? So my sense is in third quarter, we will have about INR 8 crores of one-off expense. Largely it will be because of the payments to these lawyers and the accountants, all for the due, and the bankers for all the due diligence and acquisition of Atraco. And the smaller component of that will be for CapEx, the Bhopal Acharpura startup cost. I think that it would conclude by Q3, but we will have approximately INR 8 crores worth of one-off costs in Q3, and I don't anticipate this continuing in Q4. Okay. Right. Right. If any question gets delayed and, you know, some of the bookings get spread out, then this INR 8 crore will get split between Q3 and Q4. So it depends on timing of closure of the acquisition. As on date, you are not expecting any delays in the progress, right? No, we are not expecting any delays, but it's all procedural. So, you know, all the regulatory approvals, there are a lot of paperwork required and submissions required. So we're doing all of those, and it is going as per schedule. Right. And, sir, about our MP plant, of course, we have commenced the operations in the phase one. When do we expect the phase two of the plant or any broad guidelines of that to commence or to- Yeah. So we've already released plant drawings for phase two, and we will soon commence construction. So my expectation is that phase two will start production sometime in FY 2025, in the later half of FY 2025. Right. Right. This Tamil Nadu plant? I believe that will also happen in phases, or it will like in one go, we are doing it by the end of this year? It is a fabric mill, so it will happen in one go. There was a slight delay in the construction part of it, as we had to change the configuration a bit and all of that for technical reasons. So we are anticipating that, you know, instead of end of Q3, we may have to start that in early Q4 this year. Okay. Okay. And the ramp up of that will happen over a period of one year? That is an estimate that you said. That will be about a year, year and a half. Yes, it will happen. Sure, sir. Sure. Okay, sir, thank you so much. Thank you. The next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead. Hello. Thank you for the opportunity. Just wanted to understand what could be the potential revenue for the MP plant, phase one and phase two? So, when it fully ramps up, we expect each phase to be about INR 170 crores-INR 175 crores. Okay. Okay. And, sir, you mentioned that there are wage hikes will be in China, Vietnam, Bangladesh, but at the same time, you are also looking at setting up a tying up with some facility in Bangladesh. Could you highlight what are your plans now, given the increasing cost structure in this economy? So we have not invested in Bangladesh as yet. You know, we have identified some assets, but we have not gone ahead. We will look at all the cost elements and then take a final call on investments. I still believe that Bangladesh will not lose its potential as a great garmenting destination, because it continues to enjoy duty-free access to Europe. It will have abundance of labor and the ability to quickly ramp up. So there will be the advantages which that location enjoys cannot be taken away from it. Also, keep in mind that Bangladeshi Taka has considerably declined vis-a-vis U.S. dollar. You know, it's fallen much more than INR. So you know, their cost competitiveness will continue to remain going forward. So we will take a call. It's only the wage increase data will come in a month or so. So, you know, accordingly we'll do. But we are still committed to Bangladesh, subject to, you know, the cost factors remaining reasonably good even after the wage hike. Okay, understood. And, sir, which other geographies are you looking at, or at this point in time, just focus on Atraco and, India expansion brand? Correct. At the moment, it's only Atraco and expansion further in India. Okay. Thank you. Thank you so much. You're welcome. Thank you. The next question is from the line of Nikhil Agarwal from VT Capital. Please go ahead. Good evening, sir, and thank you for the opportunity. Just wanted to understand, where do we procure our raw materials from, and what has been the price trend of the raw materials of late? So, we buy, you know, we buy our fabric from various mills. Mm-hmm. So, you know, we buy from large mills like Arvind Limited and so on and so forth. So a lot of the mills are also dictated to by the brand. So they... Some of them are nominated fabric supply sources. Depending on you know, the product type we make, so for outerwear, we even import fabrics from Far East. Okay. So, the fabric sources, the raw material sources are all different for different products. From a cost standpoint, compared to last year, there has been a slight reduction in the raw material costs. But at the end of the day, all of these are passed through and effectively the customers takes away the costs or gives in if the costs go up. Okay. So, if your raw material prices increase after you've agreed on an order with a customer, you can easily pass that on to the client? That is correct. Okay. Okay, great. And so, if you could highlight, like, who are our major clients, like across globally? We work with a lot of customers. You know, at this point, you know, we have customers like Gap, we have customers like Columbia, we have customers like adidas, Puma, you know, Walmart. All these are our customers that we work with. Okay. And so we are mostly into cotton, products, right? Or are we into nylon and other man-made fibers as well? When we do outerwear, we work with polyester, nylon, and all those synthetic fibers, too. Yeah, and what would be the mix? Mix, as in? Like, like what percentage of cotton- Historically, we have worked with about 40% of our output as outerwear. If you look at pure synthetics, the synthetics contribution to our fabrics would be about 25%-30%. Okay. And sir, do we plan to take this increase? Because given that there are many brands which are pledging to get into completely polyester or, like, move away from cotton completely. So are we planning to increase this going forward? It all depends on the fabric availability in India. So the synthetic ecosystem is not fully evolved in our country, so it will, you know, if... And no brand moves away from one fiber to another... There'll be demand for all of these fibers. Typically, cotton and viscose demand comes to India. And you know, polyester and nylon, and all these products are usually made out of the Far East. So that's how historically it has played. We are an exception. We do, you know, synthetic products, too, but by buying the fabric from Far East. So it all depends on the product, customer, and the type of business that we go after. Thank you. The next question is from the line of Bijal Shah from RTL Investments. Please go ahead. Yeah, thanks for the opportunity, and apologies for my voice. My question is, the, the trade in apparel is almost like $5.5 billion. However, I have not come across any company which has revenue of even $5 billion. So the question is: Is there some natural limit to which an apparel manufacturer can grow? Or probably there are some other models which can be experimented and probably, $5 billion also kind of revenue is possible in long term. So yeah, since it's manpower intensive, since it has got a very low capital investment, especially in apparel, you will find that the industry has a tendency to fragment. So you know, when you reach $1 billion, $2 billion, et cetera, you will find that you know, there will not be... There will be other players who are coming up, making the investments, competing on cost, et cetera. So for example, Shenzhou, which is a large player, is about $3 billion-$3.5 billion in revenue and almost $10 billion in market cap. So they're big ones. They have fabric, and they're very technically savvy and competent players. But yes, you are right. You haven't come across... You don't see a $5 billion player simply because industry will fragment at that stage, at that level. Now, can somebody consolidate it? Perhaps. So we will have to see how that evolves. Okay. The second one question is on, I mean, you answered that some of the other market outside US are small, but if I see some of the Taiwanese players are really doing good business in Japan. So do you, I mean, beyond U.S. and maybe let's say if U.K. FTA happens, isn't there any market or isn't there any customer who really we can overcome only? So, you know, we look at any engagement at scale. So if we get a customer, a large customer in some other geography who has the scale, then we would like to engage. So we are not averse to any market. Japanese market has a very different set of protocols and, you know, requirements to satisfy. And, you know, we have served the Japanese market in the past, and we continue to engage with potential customers in all geographies, including Japan. So it all depends on the opportunity. We will, you know, if an opportunity makes financial sense to us, we will go ahead with that. Thank you. The next question is from the line of Harish Mittal from ICICI Securities. Please go ahead. Thank you, sir. Good evening. I have one small question. I just wanted to know what would be our annual garmenting capacity in FY 2024 and 2025 from 36 million pieces in FY 2023? Thank you. In capacity in pieces or what? What are you suggesting? What are you asking? In pieces, in pieces. It's 30 million. In capacity in pieces, it's 30 million, considering our product mix at this point of time. So that is INR 30 million as of FY 2023, right? Correct. In FY 2024? It is, it doesn't... I mean, in- In FY 2024. FY 2024 also remains the same, except for another 5% you can add for the new capacity which has come up in Bhopal. Okay. Okay. Thank you. Thank you. The next question is from the line of Anuj Kumar from Spark Asia Impact Managers Private Limited. Please go ahead. Thanks again for the opportunity. My question is on the PM MITRA part, like, how beneficial are we as a player, like a pure play garment exporter, when you compare it with a player who is present across the value chain? So what sort of benefits, like, we get when you compare it with a player who's already there in across the value chain? So, PM MITRA parks are, you know, very large parks and situated in remote regions because of the requirement for a very large land bank. These parks are about 1,000 acres in size, and require water availability and all of that. Largely, it is meant for fabric processing and some of those, related areas. Garment manufacturing requires access to people or availability of people. So if we go and put up a factory in one of those PM MITRA parks, then we will have to also house people in dormitories, because the areas where the parks are may not have access to a lot of people. So, at this moment, from a garment industry standpoint, I think we will continue to expand in regions wherever people are available at low cost and in abundance, and not necessarily go after PM MITRA unless there are some compelling advantages. Having said that, you know, PM MITRA parks also needs to be infrastructurally developed. It'll take a couple of years before the infrastructure in those parks are fully developed. So the land has been acquired, but, you know, the land has to be developed. Internal roads have to be put in. Power, water infrastructure has to be brought in. Once those things come, we will also evaluate, you know, setting up units in PM MITRA if we still have access to people. Does that clarify? Yes, sir. Thank you, sir. Thank you for the input. 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 so much. Yeah, we at Gokaldas are always focused on ensuring execution excellence, and we are working hard towards combating any of the market-related challenges. We continue to look at global events and what impacts retail purchases from suppliers like us. We would work towards staying competitive. We are working towards improving our product portfolio so that we always stay ahead of the supplier base, and always should be able to grow at a much faster, faster pace than the rest of the industry. We will focus on this. We will focus on ramping up the newer capacities that will come up, and we are razor-sharp focused on securing our margins and protecting it. As usual, we will continue to work towards strong growth. Our acquisition of Atraco, which once it comes into place, will also require us to integrate and grow. We're confident that we should be able to do it. We have done a lot of background work already in anticipation of the approvals that we will get, and we are confident that we should be able to integrate that very comfortably into our operations, so that that will also yield growth going forward into the future. Thank you so much for you know, asking the questions and supporting Gokaldas Exports. Thank you, members of the management team. Ladies and gentlemen, on behalf of Gokaldas Exports Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.