...Welcome to Gokaldas Exports Limited, Q1 FY25 E arnings 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 the 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 Ernst & Young. Thank you, and over to you, sir. Thank you, Steve. Good morning to all the participants on this call. Before we proceed to the call, let me remind you that the discussion will 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 results, 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 if 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 Ganapathy, Vice Chairman and Managing Director, and Mr. Kumar, 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 will now hand over the call to Mr. Siva. Over to you, sir. Thank you, Binay. Good morning, everyone. Happy to have you at our earnings call for the first quarter of FY25. This was the first quarter where the full results of our newly acquired entities were included. In the first quarter, the consolidated revenue grew by 80% YOY to INR 940 crores. Revenue, excluding the acquired entities, grew by 11.2% year-on-year, indicating a recovery in demand from the customers. During this period, India's exports grew by 4.2%, implying a market share gain for the company. While the revenue growth has been strong, we experienced a series of foreseeable but unavoidable headwinds. The U.S. retail market remained resilient in the first half of 2024. During this period, retail sales in the U.S. continued to grow YOY by over 3%. Most of the growth has been price-led, while volume has been flat. Retailers have optimized their inventory holding levels with early signs of recovery as the decline in imports subsided for the U.S., E.U., and U.K. in recent months. Retailers are still cautious as they align their inventories to a volatile market in the near future. We continue to anticipate the industry demand to be sluggish for H1 FY 2024, with momentum picking up subsequently. We witnessed several challenges, starting from a disruption of production, leading to delays in shipment, huge ramp-up of employees in anticipation of volume growth, slower ramp-up of our new unit, and continuing air freight costs at Atraco, the recently acquired entity in Africa. Some of these impacts will be offset in the quarters ahead. The business in the company, excluding acquisition, that is the standalone entity of Gokaldas Exports, was severely impacted in April and May this year. There was a huge shortfall in manpower availability, and this resulted in production rescheduling, overtime work, delayed shipments, order cancellation, and air freight to compensate the customers. The impact of this on EBITDA was to the extent of INR 12.6 crores. Some of it was on account of air freight, some of it was on account of, you know, lost production, as well as, overtime charges. Atraco also had a continuing impact from Q4 of FY 2024, resulting in a non-recurring air freight cost of INR 8.6 crores. The company is seeing strong traction, traction for business volume in the coming quarters and expects the capacity across all acquired and expanded apparel units to be fully utilized for the year ahead. Our new manufacturing unit in Madhya Pradesh is ramping up to full capacity and will reach optimal levels by Q3 FY 2025. The fabric processing unit in Tamil Nadu will start commercial production sometime soon, in this quarter, in Q2 FY25. Results of trial production is encouraging, and we are hopeful of this unit ramping up by Q4 FY25. We are making good progress towards integrating the operations of our newly acquired entities to secure better operating leverage. Our strategic investment in BTPL, a fabric processing unit, allows us to derive utmost benefit through vertical integration into critical raw materials, adding an edge in terms of speed, quality, and cost. After completing all the acquisitions, the company is currently at a net cash of INR 58 crore as of June 30, 2024. With several investments underway, there has been an impact on the ROCE, as many of the investments are yet to yield their full payoff. The standalone business, excluding acquisitions and new business, is operating at about 25% ROCE. It is the endeavor of the company to strengthen the ROCE of the consolidated company over the next two years. To prepare for the next phase of growth, the company has strengthened its management talent at multiple levels. Our performance endorses the belief in our ability to sustain continued operating performance gains in a sluggish macroeconomic environment. A quick analysis of our revenue indicators indicate that we continue to gain market share by building on our execution strength. The company is hopeful of achieving strong improvement in the quarters ahead, particularly in the second half of the current year and continuing into the next financial year. I thank you for listening and would be happy to address any questions that you may have. ...Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ayush Dandia, from Dandia Trading. Please go ahead. Hi, sir. Sir, I wanted to ask that given the recent developments in Bangladesh, do we expect any business- Just a second. Hello from the management- Hello. Yeah. Can you hear me? Yeah, I can hear you. Okay. Yes. Yes, Mr. Ayush, please go ahead. Yeah. So given the recent developments in Bangladesh, do we expect any business to come to India, and, can we capitalize on that opportunity? Or is that the... Is it that Bangladesh competitive edge is, a lot given their lower export duty, sorry, lower export duty in developed countries? Can we capitalize on that? Hello? Hello. Yeah, my question- The answer is yes. However, it's a long-term structural adjustment. If you look at the problems in Bangladesh, this has been brewing for quite some time, and it reached a flashpoint a week ago. So we have, you know, we have been anticipating this and have been also shying away from creating capacities in Bangladesh, worrying about the you know, safety and security and the business environment there. Having said all of this, the cost economics as well as duty-free access to Europe, makes Bangladesh a continuing attractive region. The garment industry in Bangladesh is a significant industry, and the government will do everything in their power to make sure that the garment industry functions well. I have a lot of you know, contacts in Bangladesh, and we have checked with them. Most of the factories have come back into operation, but they did suffer over the last seven to 10 days. And you know, the whole country is not out of the woods yet. So given all of this, most of the brands will try to not put too many eggs in the Bangladesh basket, so to speak, and would look at diversification, as long as you know, it doesn't increase their costs too much. I think this trend had started almost a year, year and a half back. Probably it will accelerate going forward. As far as Gokaldas is concerned, our order book is pretty much full for the quarters ahead, that we may not stand to benefit too much immediately, as we don't have any more capacity to accept orders within our system. Having said that, you know, a directional shift to more sourcing from India will definitely happen, and that augurs well for us from a capacity creation standpoint. So we are open-minded about it. We are also looking at adding capacity in low-cost regions. As you are aware, we have a factory in operation in Madhya Pradesh, and through our Matrix acquisition, we have a factory in operation in Ranchi, in Jharkhand. Both of these are low-cost locations, and it is our endeavor to expand in these areas. In fact, you know, both areas can probably compete well with Bangladesh as well. So, to give you a long answer to your question, I think the long-term prospects are, you know, was good, and it has become slightly better. India can take some of the, some of the incremental growth if it comes our way. Stronger players will always stand to benefit more, as the volumes in Bangladesh are high, volumes in China are high, and stronger players will be in a much better position to leverage the benefits coming out of this. All right, sir, that's a great answer. Thank you. Thank you. The next question is from the line of Aashish Upganlawar from InvesQ PMS. Please go ahead. Yes, sir, a couple of questions. One is, would like to hear, understand what are you hearing from your, customers, given, the market is again, hearing a lot of noises on how the U.S. economy is shaping up and inflation and stuff. So is the scenario all good? That's one thing, and you highlighted in your presentation regarding the freight rate issues. Sorry to interrupt, sir. Ashish, the management line- Yeah. has been disconnected. Okay. Please wait while we reconnect them back. Okay? Sure. Ladies and gentlemen, the management line has been reconnected back with us. Please go ahead. Sorry, Ashish, I think the line dropped, so you may have to ask the question again. Yes, no problem, sir. Sir, what I was trying to understand is, there are again kind of noises of maybe recession or maybe unemployment rising in the U.S. and stuff. So what are you kind of anticipating or hearing from the customers?... And secondly, the freight cost increase that you've also highlighted in your presentation, is the curve still looking steep upwards, or is it flattening or going down as such? These two things I wanted to understand. Okay. So to answer your first question, you know, most of the brands are mentally prepared for some sort of a slow market uptake. So I don't see us having too much of a problem unless the recession is very sharp and deep and all of that. So none of us can be prepared for all the economic possibilities that may arise in the future. But as far as Gokaldas is concerned, we have diversified our customer base very, very significantly, that unless there is a secular global trend of recession and all retailers are significantly impacted, I don't foresee a big problem hitting us. When I look at our own order book, well into Q3 and early Q4, it seems to be pretty strong for us, and we are working at full capacity utilization. Having said that, we are always open to any potential risk in the horizon, and we will take appropriate actions as and when we see some of those coming up. For now, all my discussions with my customers, especially when I look at fast fashion customers or even outerwear customers, they seem to be operating at fairly low inventories and are indicating a robust order placement season going forward. We are also diversifying into Europe as a precautionary measure and have started you know, pulling more business from that region. In fact, two of our European customers are expanding sharply as we speak. So, you know, we are reasonably diversified, well poised to handle any demand fluctuations, barring some major economic meltdown which you know, affects the entire market secularly. So that's as far as your first question is concerned. I'm happy to elaborate if you want any more clarity on the first question. Regarding your logistics question, so, you know, logistics costs went up in recent times, particularly because there was a lot of logistics between China and the U.S. in anticipation of a duty increase. So there was a shortfall of containers, shortfall of shipping, and logistics costs in general rose up. I think that will settle down as we go forward. Most of the logistics costs are borne by our customers, so we sell FOB, we don't sell CIF. So in our case, we don't pay for logistics, except for incoming logistics for fabrics that we import. To that extent, we have had some increase in costs, but they are all passed through for us, so we have been able to push it back to the customers. So I don't see logistics impacting us, but industry as a whole is, you know, which is the retailers, are paying a higher price for logistics. Okay. So on in the slides which is given in the presentation, I could understand that there are certain one-off items in the current quarters, which you have shown adjusted EBITDA. So, how is the integration going on, and should we see normalization to maybe 10%-11% margins maybe, going into maybe Q3 type of scenario? Is that more reasonable, and are there any teething issues or something which is glaring in the integration overall? If you could highlight that, and so are we smoothly going to see Gokaldas integrating, or are there any other enhancements as such? Sure. So, so let me give you a detailed answer. When we acquired the Atraco entity, you know, we had some worker unrest in the early part of acquisition. We had bought the assets on a, you know, on an asset transfer basis, so when the employees got re-badged to us, there were some demands for incremental wages, et cetera. Anyways, those resulted in production disruptions, which we have now come out of. So the result, consequent air freighting, which happened because of a massive delay in production and consequently air shipments impacted us, and that impact continued in Q1 of FY25. I don't foresee that happening in Q2 or from Q2 onwards. You know, as far as all other aspects of integration is concerned, it is going very well. In fact, we have integrated the finance function, we have integrated the sourcing function. We are working on with both Atraco and Matrix, and we are also working on integrating you know, operational best practices. And last but not the least, we are working on marketing integration as well. So every aspect is being worked on. The integration, in my mind, is going ahead of schedule, not behind schedule. Whatever problems that we've had consequent to some strong decisions that we took so that we secure long-term future of the company and not cave into some unreasonable demand, will pay off in the quarters ahead. As far as India is concerned, we had a disruption in April and May when we lost a lot of productive manpower on account of you know, the elections in India, et cetera, which resulted in you know, people getting paid well for participating in campaigns and rallies and all of that. So we lost a lot of production capacity during that period of time. This was an unusually high impact that we faced at that point in time. We have since recovered, but we did pay huge penalties on account of that lost production. In fact, just in GE, the cost of overtime, plus air freight, plus loss of production itself in the quarter came to about INR 12 crore. So it was a massive hit you know, as a one-time hit. But I guess most of it will be behind us, and when I look at the quarters ahead with both Atraco and Matrix kicking in strongly from the second half, I am very confident that, you know, our margin will go to double digits and not just, you know, 10%, but, you know, even higher from the second half onward. I can literally see it because the order books are all full, the production is reaching that rhythm and things are falling in place very strongly. Okay. So you used to give some guidance on what we are targeting in terms of sales, if everything is normal, and also some guidance on the margins. Are we looking at, as you said, 10% kind of a normalized margin, or will it be higher than that? See, historically, we- Maybe, FY 2026 would be a better year to give some guidance. Historically, we don't give guidance. But, you know, in as a general term, you know, if we talk of FY26, I'm very confident that, you know, the margins will come back up very, very strongly. In fact, I see that coming up in H2 itself. But in FY26, we should start seeing overall margins go to the region that you indicated. Okay. I'll come back with more questions. Thank you. Thank you. The next question is from the line of Pulkit Singhal from Dalmus Capital Management. Please go ahead. Hi, thank you for the opportunity. The first question was the kind of arrangement we have with Bombay Rayon. Can you elaborate as to the amount of funds we are paying and what kind of financials one can expect from it? Because looking at the past history, it doesn't seem that great. So if you could just elaborate a bit on that. Okay. So the strategic rationale for, for, for that investment was to make sure that, you know, as we grow, and we've grown considerably, and, and as we start talking at strategic level to our customers, most of them are seeking a stronger relationship than the either to, you know, you send us, you send me the garments that I need. So, so you know, we are working with them on reducing lead times, we are working with them on much stronger partnerships, multi, geographic delivery, et cetera. And for that, I think, you know, one important component that we felt missing in our, our portfolio was the access to fabrics at a short lead time, and also access to a lot of fabric development. In fact, on the garment side, we have started engaging with many customers on a lot of co-creations. So, we're doing a lot of design and development for our customers, and now seeing, you know, you know, having fabric development will be the next, you know, next step in that, in that direction. So, you know, we felt the need, given our size and scale, given the customer requirements, and given the strength of the engagement that we are having with the customers. So Bombay Rayon is a unit which has got a very large capacity. It's one of the finest in terms of quality of machines that it has, most of them European machines of a very high quality, and it's got a generally good reputation as far as its production quality. It itself went into difficult times because of its financial challenges and management challenges. We thought that after doing enough due diligence, that, you know, that is something which is rectifiable. The machines are of good, good quality, and if we handhold it by making investments and supporting it, we should be able to get what we want out of that. So with that in mind, we entered into an agreement with the company to invest up to INR 350 crore. Our intention is to only invest what is really required for its capital expenditure requirement, for some working capital, et cetera, et cetera. And that investment has gone through an OCD structure. So the OCD itself carries, you know, an interest coupon of about 20%, and we will have the ability to work closely with the unit. The intention is, if all things go well and we feel comfortable, we will initiate a merger sometime in the next financial year, culminating into a proper merger by FY27. So the effective merger, you know, through an NCLT process may take a year, so it will happen sometime two years from now, say June, July, August 2026. So that's the process if all goes well, and if we intend going down that path of, you know, having a full-blown acquisition or, you know, or merger of that entity with ours. So the strategic rationale is strong. We also feel confident that, you know, we ourselves can buy a lot of fabric, given our huge fabric consumption between all our units, from BRFL. So, you know, that we should be able to at least secure like 15%-25% of BRFL's production through demand generated by ourselves. So, you know, there are a lot of compelling strategic reasons. You know, of course, it depends on how soon we can get the unit back on track. It would involve you know, getting the machinery up and running to full capacity, building up an order book, you know, strengthening the management, et cetera. It's all work in progress as we continue to handhold and work with the management team there. I feel confident, you know, in this relationship being you know, allowing us to punch way above our weight in the market. And when I have talked to most of our large customers, they have endorsed it fully. You know, they have been very supportive of this. So that gives me an, you know, added confidence that we are on right track. In case of this acquisition, how much is the peak investment for us in terms of to be able to acquire? What is the broad range, and what is the peak turnover that this entity can do, if everything was to be externally sold and not to go to us? So just to get a sense of how much we're paying and what we are getting. Are you saying what is the peak revenue from this asset, if we acquire? Is that the question? Yes. That is one, and how much are we paying for that? I mean, overall, if we were to acquire. So this is all speculative as we speak, because we don't know whether we will acquire them. We have invested as in an OCD, you know, in, in them, and, this allows us to work closely with them and also, you know, place orders on them, you know, to secure our supplies. Having said that, if we do acquire them, the acquisition price is about INR 580 odd crores, which we had mentioned in the filing at that point in time, about INR 585 crores. In addition to that, we, we had indicated that we will ourselves through OCD, invest about, up to INR 350 crores, but I don't anticipate it, going all the way to that level. It will be somewhere in between, you know, anywhere between, you know, anywhere up to INR 200-INR 250 crore, maybe even less, if we can, if we can tightly, optimally, if that, that unit can manage itself. So that's the kind of investment we are looking at. You know, we, the company itself has a debt, a debt of, currently about, hundred crores, hundred and fifty crores. So you know, that's the, that's the nature of, of that entity. If and when we acquire, we will have, you know, all these investments going in, which means, say, INR 588 crore, INR 585 crore, say INR 600 crore, plus a debt of INR 150 crore, INR 750 crore, and then we ourselves would have invested through OCD an, an additional debt of about, say, INR 200 crore. I'm just giving you a very, very macro math. These numbers can change by INR 50-100 crores there. So, you know, that itself makes it 750+ 200, 950 crores, say ballpark INR 1,000 crores. That will be the enterprise value of the entity if and when we acquire it, or merge with it two years from now. So this gives an optionality for us to go down that path and have a fairly large fabric capacity in our portfolio. The revenue itself, at its peak, could be about, you know, INR 1,800 crores, if all goes well and it works at full capacity. It should work at an EBITDA margin of, say, you know, the industry levels, which is about 12%, for the fabric companies. Maybe given the specialty fabrics that it produces, it should even probably do better than that. But, you know, that's the kind of expectation that we have. Understood. This next question is just on the Bangladesh situation. They just seem too big to fail in the overall garment sourcing piece globally, right? But at the same time, I'm just wondering whether customers are already talking to you about having to, you know, diversify a bit, and how sustainable is that? Is it possible for us to, for instance, at this point, secure longer-term contracts with some customers rather than some knee-jerk orders for just one or two quarters and then going back to Bangladesh? So, you know, customers are very, very smart, and they have been sensing this for almost a year, year and a half. In fact, many of the customers have talked to us almost a year back, saying that, you know, "We want to diversify away from Bangladesh." The customers who are, let's say, heavily weighted towards Bangladesh, had come to us and talked about incremental capacity here. So all of that encouraged us to set up new capacities. And I think that, you know, customers will diversify away. It is. You know, I don't foresee any short-term knee-jerk reactions. First of all, for short-term movements, you need capacities in Bangladesh to be shut for a longer time. That's not the case. They have mostly opened up. Secondly, we should have capacity in the short term, and I don't think we look at business in the short term either. So if you ask me, medium to long term, I think people would have found that their hypothesis that Bangladesh is risky is getting more and more confirmed, and hence they would try to incrementally allocate more growth to other regions. So I think in the longer run, it is good for us. In the short run, to expect, you know, any major knee-jerk reactions probably is super ambitious. You know, always somebody who is, especially in fast fashion, who has got a major delivery problem, will automatically ask us for some support, and we will extend that from time to time. But, you know, I, I'm more keen on the long-term movement, and I, I believe that in the long term with, you know, so much going on in Bangladesh, Sri Lanka, et cetera, there is a little more, you know, comfort in sourcing out of India. If we are able to, you know, develop lower cost locations in India, which is the endeavor that we are, we have embarked on, I think that will, that will accelerate, and support this trend. Can the reverse happen if the Bangladeshi currency, given that situation, were to depreciate by a sudden 15%-20%? In fact, it will just become even more attractive, so can the reverse trend actually happen? You know, it will make sense to be present there. I think that's a very theoretical thing. And, you know, when I talk to customers, nobody is going in there just because there is going to be a massive currency arbitrage that is available to them, because there are also risks ahead. I have talked to one large customer, a fairly large customer, with whom we still don't work, and they are knocking on the doors. They want us to start, but we don't have the capacity to see if, you know, they can move some things out of Bangladesh to India. So I don't see the people taking such, you know, very, very short-term view. Secondly, I am also not so sure that Bangladesh can afford to weaken their currency that much, and I'm not an economist. But keep in mind, Bangladesh imports most of their goods, and a lot of consumer, consumable goods and consumer, like, FMCG goods, et cetera, go from India. So if the currency depreciates, their cost of living, which is already high in Taka terms, will just shoot through the roof, creating more unrest in that economy. One of the biggest challenges that Bangladesh faces is the restless population is impacted by high inflation. So if they depreciate their currency sharply, there could be even bigger problem. I'm not so sure that, you know, that's what the doctor has ordered for that economy, but then, you know, that's for an economist to answer. Got it. Thank you, and all the best. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer questions from all participants in the conference room, please limit your questions to two per participant. And if you have a follow-up question, please fall back in the question queue for further questions. The next question is from the line of Jignesh Kamani from Nippon India Mutual Fund. Please go ahead. Yeah. Hi, team. Just from the Bombay Rayon, so if you think about, as you mentioned, we, you mentioned that, we, if we decide to acquire, we have to- Sorry to interrupt, Jignesh. Your voice is very low. Could you please use your handset? Yeah. Now audible? Yes, loud and clear. Yeah. Just on the Bombay Rayon, you mentioned that we have to acquire it if we want to, through NCLT. So in that case, NCLT has a decide power to decide, you can say, whom they want to sell, and in that case, we have to bid it again, or there's a possibility that it may be another bidder instead of us. And if yes, then what will happen to our investment of INR 200 crore, which we made? And in case we don't want to acquire it, then what is the recourse or you can say of INR 200 crore investment offer of OCD, which we are planning to make right now? Okay, good question. Just to clarify, this is not an asset under NCLT. So this unit is not part of BRFL. This is called BRFL Textiles Private Limited, which is outside of NCLT. When we talk of NCLT, it's just the merger process, which will be passed through NCLT, because any merger in India goes through an NCLT-driven process for concluding the merger. So we are only talking about that. The principal shareholders in this case, in this entity, are JM Financial plus a whole clutch of various other investors, who total about, you know, who total 100% of the company. And we have a sharehold... You know, we have an agreement with all of them, so that in case we decide to go ahead, we, you know, they will sell the shares at such and such price, which we had indicated. So the merger will go through an NCLT route for, you know, consummating the merger, but it's not an NCLT process, where NCLT is calling in the bidders and investors and all of that. I hope that's clarified. As far as your second part of the question, which is in the event we don't like this asset, now, we have done enormous amount of due diligence, checked with our customers, seen what we, what kind of fabrics that we are placing orders on, what is the future trend, et cetera, et cetera, and done all the due diligence before entering into this arrangement. In the rarest of rare event, we don't want to go ahead, you know, we will have to, you know, we will have to deal, deal with that, with that process. We will, we will probably, you know, stay invested, you know, with the OCD structures and continue to get, you know, dividend, et cetera. But we will, we will, we will deal with that situation as, as, as appropriate at that point in time. We have a feeling that there is a high likelihood that we may, we may take a call on going ahead if all goes well, but then that, that is something I will reserve for, for a year from now. Understood. And a follow-up question on this. As you mentioned, close to around eight hundred crore kind of revenue they do it. So what will be our fabric requirement out of this INR 800 crore? And second thing, are we planning to appoint any board member, or you can say as of now, or that will take a call only once you can say we decide to go ahead with the merger? It is not 800, it is 1800. Sorry. 180, 1,800. As far as, you know, if we take a call, then obviously, you know, the unit gets into a merger with the parent company, with the, with Gokaldas. So then there is no question of, you know, a new board, et cetera, et cetera. It will just merge into us. At that point in time, we may decide, you know, if we want to staff the board with our people or whatever, but we have not taken those calls. Out of this INR 1,800 crore, what is our capital need as of now? So, so let me give you in terms of meters of production, right? So for example, the units at full capacity, and today it is by no means operating at full capacity because several machines are not in a state of production. We need to put in CapEx to restore them back to full capacity. But its full capacity is about 4 lakh meters a day, which translates to about 1 crore meters a month. Our own fabric consumption in Gokaldas is 55 lakh meters a month. If I add Atraco to it, it will add to another 15-20 lakh meters a month, so that is about 75 lakh meters a month, whereas its capacity is 1 crore. Now, not all of what we buy will be made, can be made by BRFL, because we buy a wide variety of fabrics, including synthetics, et cetera, some of which are imported. But that's why I said I am very confident that at its peak we can at least be, you know, we can at least meet 25% of the 1 crore meters per month demand. Maybe more. Our endeavors will be to do as much as we, we possibly can. But that itself gives a huge amount of security to in terms of demand for that entity. Understood. Thanks a lot. Welcome. Thank you. The next question is from the line of Monish Ghodke from HDFC Mutual Fund. Please go ahead. Thank you, sir, for the opportunity. So out of our total capacity of 87 million pieces, what is the split between Gokaldas, Atraco and Matrix? And could you also share average realization per piece for these three entities, as well as average utilization levels? At Gokaldas, it is about 30 million pieces, and Atraco can produce about another 35 million pieces. Gokaldas is 40 million pieces, including the new investment, whatever we made. 35, I mean, 35 million pieces is for Atraco, and another 1 million, I mean, 10 million pieces can come from Matrix. Okay. What are the utilization levels currently? Currently, yeah, I can give you the number of pieces, for you to get some understanding. Sure. Sure. Gokaldas has done 6.6 million pieces at an average realization of INR 708. Okay. 8.78 million pieces in Atraco at INR 285. Matrix, we have done about 1.7 million pieces. It's about 618 is average realization. Total, we have done 17 million pieces for the quarter. Average price is INR 510. Okay. This is, again, the pieces is, you know, quite a misnomer because again, depending upon the product mix, the number of pieces will come down. That's what also will come down- Go up, depending on the- Depending upon the valuation. Sir, could you also share, you know, in these pieces, what is the mix of, let's say, co-creation versus customer-driven designs? It varies from customer to customer. For, you know, somebody, you know, certain customers, our co-creation is almost going up to 60%, and on an average across all customers, we are operating at about 15%-17%. Okay. Okay. And so these realizations also include our duty advantages, right? Duty Drawback, which we get? This is our net realization at our, at ex-factory level. Okay. Typically, what% of, you know, let's say our realization is 100, what% do we get as a duty drawback or incentives? Just to clarify the realization, what we said for government, they set a target, which it does not include all the incentives and other stuff. No, no, I'm saying when I'm seeing EBITDA margin, it would be including, you know, incentives, right? Correct. Typically, you know, what% of our sales are our incentives? Oh, what percent? So we have Duty Drawback, which amounts to about 1.5% or 1.3%, somewhere in that, in that ballpark. And RoSCTL, which is the refund of state and central levy, which work between 3%-3.5% level. Again, depending on the government, product type, et cetera. And this is available for whatever our sales from India. For our overseas entities, it is not applicable. Got it. Yeah. Yeah. Okay, sir. Thank you. Keep in mind that the brands also know these are available, so, you know, all these get factored into the pricing. Okay. Okay. Yes. Thank you, sir. You're welcome. Thank you. The next question is from the line of Bijal Shah from RTL Investments. Please go ahead. Yeah, hi, thanks for the opportunity. Thanks a lot for explaining Bombay Rayon, but I'm still not able to understand strategic rationale as well as financial rationale for this. So you can elaborate on couple of points. Number one, so you are saying that eventually whenever everything is in the best performance level... at the best, best performance level, you will be taking maybe 25 or maybe 30% of total output of Bombay Rayon. So just to understand that, what is the reason for 30% of your requirement, you want to buy something which is like three to four extra size, and which will put you in a position where you have to sell under 75% of the output to outside world. So, and that is very different from your existing business, unless investors are investing in you because of China plus one story, not that 70% of fabric you go and sell in the market. So that is one thing which I'm unable to understand. And within that last call, you talked about the guardrails for acquisition, that you will not be looking at companies which are not making profit. We will be looking at companies which are operationally amazingly run. So how do you reconcile that with your potential acquisition, in which you made it clear that in the rarest of the rare occasion, this acquisition will not go through? So how do you reconcile that with your previous commentary? The second question is that even if I look at the numbers, at INR 1,800 crores, and you get 12% margin on that, so maybe around, some around INR 210 crores of EBITDA, and that would translate into roughly 21% pre-tax ROC. So in terms of return profile also, and this is pre-tax, and there will be tax on that, so and, and of course, interest depreciation. So in terms of return profile also, it looks not really that great. So how do you think that financially it would make more sense for Gokaldas to invest in it? Okay, so there are several questions. Let me try to, you know, answer all of them, and if I miss something, please remind me, and I will address that. The first part is, you know, you indicated that we are 75% of it will have to be sold outside. Now, what I said was that's the worst case. I had indicated to you that we ourselves buy 55 million, and Atraco will add another 15-20 million. So that itself will make it about 75 million meters out of, say, 1 crore meters that the company produces. Over a period of time, this 25% like that is the worst case, not the best case. So the worst case is we cater to 25% of the demand, 15%-25%, initially starting 15, ramping it up to 25, and, and our endeavor will be to buy as much in-house. Why will I buy outside? And if I start buying in-house, my margins will go up, right? Even though the revenues get, may get knocked off in consolidation, the margins will go up. But the key point here is that I, I, in our garment business, will continue to grow. So this is our current situation. Fabric unit capacity is what it is, and if the garment unit continues to grow at 15, 20% year-on-year, the fabric demand will also go up in proportion. So if you, on an incremental go-forward basis, we will continue to, you know, take on more and more from that unit. This is number one. Number two, we can orient that unit to produce more and more garments for our requirements. That's a possibility which will also help us to respond faster to customers. So one of the things that's going on in the market is, you know, how do you reduce the lead time of delivery? And if I have to do that, then I need to have fabrics coming in at a faster pace. I need to be able to work with customers on orders which hitherto... You know, let's assume that somebody is making something out of Bangladesh, and their fabric lead time is very, very long. I can combat it with saying that, "Look, I can turn things around in three weeks shorter, but you have to work at the price I dictate." These are new possibilities which will open up for us. Keep in mind that as we approach larger and larger size, and, you know, as we approach a billion-dollar kind of revenue, we will need to be a little more vertically integrated to take command and control over our destiny, our own raw material sources, so that we are not denied raw materials, or we struggle with raw material product development. You know, fabric is an important component of a garment. So if there is a garment development that we do, fabric development is an integral portion of it. And that's the reason why we are not saying we want to go into spinning and weaving and all of that, because that, on that end, we believe it's all commodity. But we want to be in fabric processing, because that also is made to order, not made to stock, and we will be working with the customer. Being a major garment producer, we are very close to our customers. We know exactly what they are seeking and what is it that they are looking for, which will allow us to steer the fabric company to be responsive to the customers, as opposed to a standalone fabric company. So we see a lot of strategic advantages, a lot of advantages that a garment company is running a fabric unit as opposed to a fabric company standing alone on its own. So our DNA will be garment first. So that's the strategic rationale we've clarified for you. As far as your next question, what was that again? I'm sorry. You had said, what is the price? Why have we pre-paid such, this kind of a price or something to that effect? See, you had outlined guardrail, that you will not go and acquire a company which is- Yeah, I thought I'd come to that last, but you know, since you brought it up, so the reason- That if I look at ROCE on INR 1,000 crore on a, in EBITDA, if I work out EBITDA, it will be around INR 210 crore on the numbers you selected. Correct. That is the best case, and your capital investment will be INR 1,000 crore. So it is like translating into kind of 21% on a pre-tax basis, pre-depreciation, pre-interest. So, that is much lower than the return profile which you have for your company. It will bring down, return overall, and, your total capital employed is right now INR 1,600 crore, INR 1,000 crore will be going into this, so it will be a very substantial portion. So how do you think about the return from this investment? Let me explain that, right? So some of it has to be also taken in the right spirit. So if we look at the amount that we will pay, if we go down the acquisition path, the amount of the payout that we said, which is shared under INR 600 crore, is to be paid two years from now, not now. There's a time value of money for that. And if I apply some reasonable interest rate and, you know, look at that 600 in today's value, it will be probably 500 or even less. So that's something for you to keep in mind, that there is, you know, the actual investment has to be considered appropriately. Also, this company has accumulated losses to the tune of INR 400 crore. So that also brings, you know, in the event we merge finally, and go ahead with the transaction, we may stand to gain from, you know, accumulated losses in that entity, which will help Gokaldas. So there are other mitigating factors as well, which, you know, I'm sure you can do the math and understand that, you know, the final effective capital employed will be very different, given some of the extra benefits that come with it. But, you know, it's not just about ROCE. See, what happens is, I can be a very high ROCE and small and not grow. If I have to balance growth with ROCE, then, you know, I need to compromise on ROCE at the initial phase and then catch up on ROCE. You know, I cannot just grow fast by holding on to my ROCE. So if I want to grow at 15%-20%, and, and remember, I mean, look at the revenue this year, right? Through the acquisitions, we have grown even faster. So if I, if I want to grow and have a dominant presence in the industry, I may have to compromise on ROCE, but it is definitely not for the long term. We are extremely conscious of margins, and we are extremely conscious of ROCE. That's why all the internal discussions are, you know, how do we get it back? How do we get our margins back? How do we leverage our position so that we are able to recover some of these? And it will happen in the next several quarters. You know, a lot of things are happening well for India as well, even, you know, the geopolitical situation. The fact that, you know, we are a little more vertically integrated means we are attracting customers which were hitherto not really working with us. Our entry into low-cost geography is also being supported by some of these fabric investments. All of this will support the growth, and we have to now improve profitability by, you know, which will help us in ROCE improvement. Okay, got it. And the last, I mean- So let me come to that part, which is, you know, we are very clear that we will only acquire companies which are profitable. We don't want to acquire companies which are loss-making. That's the reason why we invested in BTPL and not go into an acquisition upfront. We could have done that as well, but we did not want to do that because that's against our philosophy. So if we feel that this company can turn around financially in a year, it's then when we do what we do. Otherwise, you know, we would, I would be, you know, not so keen. And again, based on the diligence that we have done, we feel reasonably confident that we can turn this around. You know, especially given that we know the business, we are a big consumer ourselves, and we know the quality of the asset that exists there. So given all of this, I believe that we can turn this around in a year, and that's the endeavor. And that's the reason why this acquisition, if it goes through, will happen in 2026 and not 2024, because by then it should be well, you know, way, way profitable from you know, from the current situation where it's bleeding or loss-making. Got it. Got it. Thanks a lot. And, just if it is possible, I'm not sure, but if it is possible, if you can, share their, revenue or some details on their performance in upcoming quarter, it will be really helpful. Yeah. We will see how much we can share and keep you posted. But, you know, that's a separate entity where we just have mere investment. So I'm not sure of, you know, how much we can talk about that, but let me see. Thank you. Thank you. I'll look into that. Thanks. Thank you. The next question is from the line of Vivan Mathreja from PH Finance Limited. Please go ahead. Thank you very much for giving me the opportunity to speak. I have just one quick question. So, recently, last week, there was a report that came in, the Times of India about the textile industry and foreign companies investing in Tirupur and using the suppliers from Tirupur. The top companies include Primark, Gap, and many more. And also, there are quite a lot of government incentives towards Tirupur in terms of developing infrastructure and giving companies loans at lower interest rate. And also simultaneously, countries like the U.S. and majority of the European countries are de-investing from China and plan on investing in India, specifically with respect to the textile industry. I would like to know the benefit that a company like Gokaldas would get through this incredible opportunity of investing in Tirupur and taking advantage of this? Thank you. So there's nothing specific for Tirupur. It's all for India, and there are certain low-cost regions in India, especially if you look at states like Madhya Pradesh, Jharkhand, Orissa, et cetera, which are giving special incentives to set up more capacities in their area to create jobs. If you look at the labor force in India, most of them, if you look at Tirupur, if you look at Bangalore, if you look at NCR, which are all major garment manufacturing clusters in India, the labor force is all coming from outside. We even in Bangalore struggle for labor force. And more, you know, a lot of incremental labor force is coming from the eastern part of India and northern part of India.... So you know, that is where the industry will gravitate towards. Even Tirupur has got a large labor force coming from east and north of India, rather than from the local region. So as far as incentives are concerned, you know, the government incentives are there. For MSMEs, there are extra incentives, so regardless of where you are, you get your investment. Whatever else you said about, you know, units, companies from, you know, who are sourcing from China are looking to India, we've sourced a large order, you know, which were either to being destined in that region. We have, you know, we, we keep getting that, and we keep doing that all the time. So, you know, that's a secular trend which will come towards India, no doubt about it. But I'm not sure if there is anything very specific about Tirupur. We ourselves are not in Tirupur, and we find that, going into northern India or those regions makes more sense. The only unit that we have, which is a knit fabric unit, which is in a place called Perundurai, Erode district, which is near Tirupur, but that's a fabric processing unit that we have, which is our own greenfield fabric processing for knit fabric. And that's, that's closer to that region, but, you know, we're not really dependent on Tirupur, or we don't intend, going further there. Great. Thank you very much, sir. Thank you. Next question is from the line of Vikas Jain from Equirus. Please go ahead. Yes, hi there. Thank you for the opportunity. So my first question is with respect to the Tamil Nadu facility. Sir, what are the plans with respect to, are you planning to use the fabric internally only, or, the plan remains the same there, you will sell it out initially to other units and then, add garmenting units aside and then possibly, book it? So what, what's your comment as to what is the view for the output that comes from this Tamil Nadu facility? Got it. So, as you know, we probably will need about 50% of that output, at least in the near term, we will consume in-house. Because, you know, we have both in Gokaldas and in Matrix. Matrix is 100% knit, and Gokaldas also does some amount of knit. We have enough- Sorry to interrupt, sir. Uh- We have lost the management line. Please wait for a moment while we reconnect them back. Thank you. Yes. Ladies and gentlemen, thank you for patiently holding. The management line has been connected back with us. Hey, Vikas, and everybody, you know, sincere apologies. I don't know what is happening today. This is the first time that we've had some call drops like this. Apologies for that. Coming back to answering the question, we know the capacity there is approximately 400 tons a month, and I think, you know, more than half of it we can consume internally. We are working towards that. We are getting all the buyer approvals for that factory's output to be confirmed. All of that is work in progress. And we're very confident because all the initial trials have gone off very, very well. We are currently, you know, doing trial productions and, you know, we'll be starting job work and all of that soon. All the indications are it's going well, and you know, let's assume that by end of this year, we should have a substantial part of that output being consumed internally, and then as we grow, we will start consuming even more. But rest of it anyway, you know, we will sell in the market because we can't. You know, capacities come in step curves, and as we continue to grow, setting up more and more knit business. In fact, there's a lot of requirement or requests from customers to expand our knit business. And we are not as well largely exposed in that area. But with this fabric unit, we may be able to accelerate that as well. So you know, it's a step in the right direction. Assumption or the intention will be to try to consume as much, in-house. All right. All right, all right. Secondly, with respect to our MP facility, can you give some comments with respect to how is the ramp-up? You did mention the utilization rate, but the ramp-up expected, when do we expect the full ramp-up of phase I and the commencement of, or the investments in phase II of that facility? Good question. So, MP did take some time. We, in fact, started MP last June, so it's been a little over a year. We started production with domestic customers just to set the factory, the lines, the quality, the standards and compliances, et cetera. We have now had two international customers already place orders on MP such that, you know, the full capacity will be taken up by these two international customers. Both of them will ramp to full capacity by Q3, which is another two months, one and a half months from now. So, the orders are there. We are working on, you know, ramping up, ramping them up to full, full capacity levels. So, you know, the current unit is fully, fully booked, which is Unit 1. And I, you know, we have already done the work for the Unit 2, so all the planning is ready. Post-monsoon, we will start construction. So vendors are being finalized and all of that. We will be starting construction of Unit 2, which is in the same campus, you know, in an adjacent land. So, so that will start. We're confident that with this, these two customers and some more in the pipeline, we should be able to quickly fill up Unit 2 as well. The time taken to ramp up Unit 2 will be a lot less because the ecosystem is already set. So we have entire, you know, compliances which have, which we have got. When I say compliance, it's not just social compliance or environmental compliance, even technical quality compliances, quality approvals, all of those have been secured in place. Now it's only a question of, you know, training the manpower and ramping. And with this, first, you know, experience of the first unit, the second unit should go through on a pretty straight-line, quick basis. So, construction will commence post-monsoon. We are hoping that the construction will take anywhere up to nine months. Post that, we will start ramping that unit as well. So, overall, you know, MP unit took a little longer, but I think, you know, when I look at the cost structures, when I look at the availability of manpower, and when I look at, how it has worked so far, I'm very confident that we have found the right location where manpower availability is, still good and costs are moderate or low, relative to where we are. So, you know, that's the commentary for MP. Right. Right, sir. And just, if you could comment on the capacity-wise, Unit 1 and Unit 2, what is the installed capacity? So each at a peak revenue will be INR 175, INR 175 crores annually. Right. This last question. Mr. Vikas, could you please fall back on the question, please, for further questions? Yes. Thank you. The next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead. Thank you for the opportunity, sir. So my question is related to... You mentioned that there was a price-led growth in U.S. So do you foresee any gross margin benefits on account of that for the full year? I'm sorry, what growth in the US? Price-led growth. No, no. Price, so price-led growth is for retail. So retail consumers, when I said that 3% of U.S., you know, in CY 2024 versus the same period, CY 2023, U.S. retail sales, apparel sales has grown by 3%. I am saying the volumes stagnated, all the 3% was price-led. That is retail as far as that is concerned. As far as the orders that we are getting, there is a huge amount of price pressure because unlike the rest of the industry, you know, if you look at U.S. imports, it is still -6% for CY. And so this is true for U.K. and Europe as well. So the larger industry is not out of the woods yet, and there is a demand-supply mismatch. We are seeing strong demand ourselves, and that's, that's helping us to, you know, fill up our incremental capacity as well. But the pricing power has not really come back. I anticipate that coming, you know, sometime starting next year. So for now, the pricing remains, sharp as usual because there are, there are other suppliers in the rest of the world who are willing to operate at, at sharp prices as well because of demand-supply mismatch. Sir, thank you for that. Sir, related to Bangladesh issue, so, which country do you think gets to benefit more? Is it India or the countries like Vietnam or others would benefit more if the diversification of supplies when happens? So first is, you know, we should not bank too much on things moving out of Bangladesh. Bangladesh has enormous resilience, and they will find a way out because this is too critical an industry for that country for them to let go. So, you know, we should look at it more as a secular long-term trend, where businesses will try to diversify away from a risky hotspot area. Now, having said this, where will they go to? A high likelihood is India. You know, I don't know whether Pakistan still falls in that bracket where, you know, capacities can go there, because that's another country which is low cost and goes duty-free into Europe and all of that. I think, like, the larger opportunity for moving export sourcing out of, you know, should come to India rather than a Vietnam or China. Those regions have really maxed out their potential. There is no more scope to grow there. Okay, sir. Thank you. Thank you for your answers. And sir, and based on the volume and realization trends, so could you just mention the numbers again? We have done 17 million pieces at an average of INR 510 at the consolidated level. At Gokaldas, it is 6.6 million pieces, INR 781. At Atraco, it's 8.78 million pieces at the rate of INR 285. Matrix is at 1.68 million pieces, INR 618. This is for Q1? Just for Q1. Okay. Thank you. Yeah. Thank you for that. All the other questions have been answered. Thank you. Thank you. The next question is from the line of Cheragh Sidhwa from Bajaj Finserv. Please go ahead. ... Thank you so much for the opportunity. Sir, just one thing, can you say about- Sorry to interrupt, sir. Your voice is very low. Could you use a handset? Is it better now? Yes, sir, better. Yeah. Thank you, sir, for the opportunity. Just one question in this, the second half, when we say that our order book is pretty much at full capacity utilization, do we mean across all the three divisions, that is, Gokaldas standalone, Atraco, and Matrix? Yes. Okay. Okay, and what would be at the current gross block, what would be the peak quarterly run rate? So this quarter, we did close to around INR 940-odd crores. So it is fair to assume close to around quarterly run rate in second half should be close to around, say, INR 1,000-INR 1,100 crores? Yeah, I think we should, we should be topping up INR 1,000. Topping up thousand. Okay, okay. We are already at near full capacity. Okay, so for the full year, one could expect close to around INR 3,900 crore-INR 4,000 crore kind of top line, given the current order book status? You can do the math, yes. Okay, okay. And so for the next financial year then, given that we are already at optimum levels, apart from the MP phase II, which would yield another INR 175 crore odd kind of incremental revenue, what would be the other key triggers for the revenue growth for, say, FY26 on the base of FY25? We will continuously look to debottleneck our current facility, number one. Second, we will look at, you know, increasing productivity, and productivity itself should give us a few percentage points in capacity, on the existing base. Third, we are looking at a incremental expansion in Ranchi, in Jharkhand, because that's again, a low-cost region, so that's work in progress, and we will take a decision sometime soon. But, you know, we are now more and more inclined to go into these areas. Third, we are looking at some incremental expansion in Africa as well, in Mombasa, where we have the ability to expand capacity, yeah, you know, fair amount of capacity there. So, you know, we will be triggering all of these sometime during the second half of this year, which will help us some in the next year. Plus, as I had mentioned earlier, that, you know, we will also be starting work on Bhopal unit two, which will probably start contributing from, you know, from the later part of next financial year. Sure, sir. Sure, sir. Got it, got it. Thank you so much. Thank you. The next question is from the line of Mithun Aswath. Please go ahead. Hello? Go ahead, we can hear you. Sorry to interrupt, sir. The current participant has been disconnected. We will move on to the next question. It's from the line of Bijal Shah from RTL Investments. Please go ahead. Yeah, thanks for the opportunity again. So my question is, you, you were saying that order book is full, but, you are very categorical in guiding in second half, things will improve. So is it that in Q2, second quarter also, there are some issues which will persist? No, so in the second half, I don't see from a capacity standpoint, you know, usually it's a weak quarter for the industry per se, in the second half, because we usually, you know, ramp down on fall, winter, and ramp up on spring, so that this shift in seasons happen in second half. So usually second half, in the second quarter, so usually there is a bit of a gap. And, you know, while Gokaldas itself doesn't have an issue, this second quarter gap is a little more pronounced in Atraco and Matrix. But I, you know, I don't see that as much of a problem, because the transition is. You know, we have kind of worked a lot to offset that, the way we did it in Gokaldas a few years ago. And I don't see this as a problem from next year onwards. But that's why I think I'm saying from Q3 onwards, we will be, you know, powering away with full capacity utilization. In Q2, for a very brief short period, there may be that seasonal change. The other part is, from a margin perspective also, as we enter spring, summer, we should be able to pick up some steam. Because a lot of these businesses that we have, even in Q2, which is for fall, winter, because of exceptionally warm winters over the last several years, we've had an excess inventory. We've had a situation where we had to go and get this business at somewhat sharper prices than otherwise. So all of that will also wear off in the second quarter. But you know, by and large, revenue trajectory will be maintained. You know, capacity utilizations are near full, full in Gokaldas and near full in others as we speak, but all of them are ramping up to full utilization in the months ahead. Okay, got it. Thanks a lot. Thank you. Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to the management for their closing comments. Thank you. So, yeah, we are very conscious from a financial standpoint about running the business. We are also conscious that, you know, the growth imperative is very important, and we need to handle both growth as well as margins, and sometimes one leads to compromising the other. But we have now, in the last one and half years, despite extreme headwinds from business, you know, challenges, global volatility, and all of that, we have focused on growth. Uh, we also took the opportunity to acquire some entity, and which we are in the process of stabilizing. We are confident that some of those strategic decisions will pay off in the quarters and the year ahead. You know, we feel confident that all the decisions that we took are decisions in the right direction, and a lot of work is going on to make sure that the company, you know, company's strength will fully come out in the years ahead. We are very well poised in that sense. We are also having a strong relationship with most of the customers, and, you know, that's evident in the way we are seeing our order and evident in the way we are working with customers or, you know, whether it is on co-creation, whether it is in fabric development, in garment development, et cetera. So, I feel that, you know, directionally we are on the right track. I'm hoping that the demand supply at an industry level will become, you know, more or less even as we go forward. But there are enough volatility, particularly in the Western world, is still not completely out of their economic situation. And, you know, if there are some soft economic challenges or, you know, softness in demand, you know, there could be some volatility, but, you know, we have worked hard to make sure that we are reasonably insulated from it. We are also very well safeguarded against any of those challenges, which is why, you know, some of this vertical integration moves as well, which strengthens our offering considerably. So strategic calls, I believe, are all in the right direction. Executions are falling in place, and that will help us improve our margins, sharpen our margins as we go forward. Hopefully, demand supply at an industry level will also help us in that. Thank you. We remain quite confident about our future, and we are working hard to make sure that we will deliver stronger results going forward. On behalf of Gokaldas Exports Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.