Q2 24/25

Nov 8, 2024

Summary

H1 income rose 12% YoY, while PAT declined and EBITDA margin held near 16% amid supply-chain delays and investment costs. U.S. acquisitions and premium brands are expected to support growth from FY26; FY25 volume and margin guidance is 110–115 million meters and 15%–16%.

Ladies and gentlemen, good day and welcome to Q2 and H1 FY 2025 earnings conference call of Indo Count Industries Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. K. R. Lalpuria, Executive Director and CEO of Indo Count Industries Limited. Thank you, and over to you, Mr. Lalpuria. Thank you. Good afternoon and a very warm welcome to all of you joining us for Indo Count Industries Limited's Q2 and H1 FY 2025 earnings call. I am joined by our CFO, Mr. Muralidharan, and our investor relations advisor. We hope you had the chance to review the financial results and investor presentation available on the stock exchanges and our company website. Also, I would like to greet everybody, Eid Mubarak. Let me first take you through the industry dynamics that are going on currently. The U.S. retail market has shown a positive shift, with retail sales picking up in September after a slower pace in the previous months. While the sector has faced some challenges due to ongoing supply chain and logistic issues, we remain encouraged by the resilience of the market, especially and particularly with the holiday season approaching. Notably, imports of bed linen from India to the U.S. continue to rise, signaling sustained demand from retailers and omni-channel platforms despite these temporary obstacles. Looking to India, the government's continued focus on enhancing international trade and the Indian economy is positioning the country for a long-term growth in the textile sector. Free trade agreements with key markets such as Australia and the UAE, along with the growing China Plus One sourcing strategy, are strengthening India's appeal as a major manufacturing hub. With the ongoing new cotton crop season, we expect stable domestic cotton prices, which will support our operations and help manage input costs effectively. Overall, we are optimistic about the demand of our products, and these favorable industry trends create a solid foundation for Indo Count as we continue executing our growth strategies. Beginning of Version 2.0 for Indo Count: positioning for future growth. I am pleased to share that Indo Count is embarking on a transformative phase of Version 2.0 in our journey. This new phase marks the next chapter in our evolution, focused on our strategic foundation and positioning the company for sustainable long-term growth. We are building on our leadership position by investing in a diversified product portfolio, targeting premium and branded segments, and enhancing our omni-channel capabilities. The emphasis of this phase is on scaling up in high-potential segments such as utility, fashion, and institutional, all of which are expected to drive growth in the coming years. By making this targeted investment, Indo Count aims to accelerate its revenue growth while expanding its market share presence in premium product categories. We expect the contribution from this brand to add almost US$100 million to our top line annually over the next three years, solidifying our position in the premium segment, and this will create further opportunities for more value generation. Strategic acquisition: building the foundation for long-term growth. We are also significantly expanding our footprint in the utility bedding segment. This is demonstrated by our recent acquisition of Fluvitex Inc., U.S., and Modern Home Textiles, both key players in the U.S. quilt and pillow market. These acquisitions establish our manufacturing footprint in the U.S. to 13 million pillows and 1.5 million quilts, with a combined annual revenue potential of US$85 million at full capacity. These acquisitions not only strengthen our presence across critical U.S. regions, including the Midwest and West Coast, they also expand our customer base, thus overlapping the existing clientele of our existing businesses. This positions us to capture new growth opportunities and further enhance our return on investment. Our vision is to continue building this business, whether through organic or inorganic expansion, as we see substantial growth potential in the U.S. utility bedding market. CapEx and investments for growth. In line with our growth strategy, we are continuing to invest in our business. The CapEx budget for FY 2025 was originally set at INR 150 crore. However, due to the additional strategic acquisitions and investments, we have revised Sir, your voice is breaking. Okay. We have revised this budget by 25% to INR 413 crores. This will be funded through internal accruals and debt equally. The solar energy projects and zero liquid discharge system will be taken up for implementation in FY 2026. Awards and recognition. I am pleased to share that Indo Count has recently been honored with several prestigious awards recognizing our commitment to excellence and sustainability. Vastra Ratna Award, Global Achiever. Mr. Anil Kumar Jain, our Executive Chairman, was conferred this esteemed award for his outstanding contribution to the Indian cotton textile sector at the TEXPROCIL 70th Jubilee Celebration in October 2024. This award was presented by His Excellency, the Governor of Maharashtra. Home Excellence Award. In September 2024, we were recognized for demonstrating excellence in expanding our business as well as our ongoing investment in sustainability and corporate social responsibility by HFPA, New York, U.S.A., the apex association for home textiles in the U.S. This award was given to our Executive Chairman, Mr. Anil Kumar Jain, and Mr. Mohit Jain, our Vice Chairman. CSR Appreciation Award. In July 2024, Indo Count received this honor from the India CSR One Decade Celebration in recognition of our decade-long commitment to impactful CSR initiatives. Best Wastewater Treatment Initiative Award and Best Environment Friendly Initiative Award. At the Global CSR and ESG Awards in June 2024, we were recognized for our industry-leading efforts in environmental sustainability and wastewater management. Financial performance impact of strategic investment. Volumes. Sales volume for Q2 FY 2025 stood at 27.8 million meters and H1 FY 2025 stood at 53.1 million meters. Total income. In Q2 FY 2025, our total income stood at INR 1,045 crores. For H1 FY 2025, our total income rose by 12% to INR 1,995 crores, up from INR 1,780 crores in H1 FY 2024. The sales volume and revenue drop on year-over-year basis on account of supply chain issues. This is also the reason why the inventories have increased in the last six months. As the supply chain situation normalizes over the next couple of quarters, we expect better uptick and normalization of inventory levels. EBITDA. Our EBITDA for Q2 FY 2025 is INR 166 crores with an EBITDA margin of 15.92%. Similarly, EBITDA for H1 FY 2025 stood at INR 320 crores with a margin of 16.03%. On account of upfront costs and additional expenses related to human resources, brand promotion, and creation of necessary infrastructure for new utility bedding business, there has been an impact of 150 basis points on our overall EBITDA. PAT. Our PAT is INR 82 crores for Q2 FY 2025 against INR 114 crores in Q2 FY 2024. Similar PAT for H1 FY 2025 stood at INR 165 crores compared to INR 288 crores in H1 FY 2024. EPS. Our EPS for Q2 FY 2025 is INR 4.12, and H1 FY 2025, it is INR 8.05. As of September 30, 2024, our net debt stood at INR 1,045 crores, with a net debt to equity ratio of 0.48x. The debt levels have increased due to funding secured for recent acquisitions, in addition to funding the higher working capital requirement of the business. We expect to see the working capital days normalize by the year-end. Now, I open the floor for the question and answer. 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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jatin Damania from Swan Investment. Please go ahead. Good afternoon, sir, and thank you for the opportunity. Yeah. Just want to understand now, as you alluded in your opening remarks, that our volume declined because of supply chain issues and which resulted into increase in the overall inventory. Can you quantify in terms of the million meters how much inventory has been increased? Is there any deferment of the order or the shipment to the next quarter? Look, that is the whole reason you see is because of the additional shipments which were supposed to happen and the inventory levels coming down, which you can observe in our inventory levels from the increased levels on the P&L. You can very well see that these inventory levels which have increased for deferment due to the supply chain issue, will get liquidated in the coming quarters. Yeah, but sir, can you be able to quantify in terms of the million meters, I mean the shipment which got delayed in terms of the million meters? No. There were two of the additional traffic and which were supposed to happen, which could not happen due to supply chain issue. It was close to around 2.5 million meters. 2.5. So 27.8 could have been almost around 50 million meters. Sorry, come again. 27.8 million meters that the volume we did, which will be at 30 million meters because 2.5 million meters has been deferred in the month of October. Correct. Right. Secondly, now if you look, sir, we have given a guidance of 110 million to 115 million meters in our last call. Now, if you look at the first half volume, to achieve our lower end of the guidance, we normally will be requiring 20% volume growth in the second half. If you look at our last two years' numbers, third quarter is generally a weak quarter despite the holiday season. So how much confident are we in terms of achieving the guidance? See, as I mentioned earlier too, we are on track, as we progress, we should be able to better guide you. I think we are on track at the moment for the guidance, which may result into achieving the lower end of the guidance. Okay. In terms of the margin, I mean, you have already lowered your guidance to 15%-16%. For the second half or for the next year, how shall one really look at the other expenses? Because your brand acquisition will probably add $185 million in next three years. Going ahead, how shall one look at the overall other expenses and the employee base for the company? You see, these are some additional expenditure which we are investing into towards human resources and infrastructure and other things, which will continue because we have acquired two companies, and we would like to also build the branded segment. This will continue at the same pace, and that is why we have given a revised margin guidance of 15% to 16%. Because we were impacted in this current H1 to the extent of 150 basis points. This will continue and that prompted us to give you the revised margin guidance. This investment will start paying off in the next couple of quarters. As we grow our business, which we have acquired and the branded business which we are promoting, there will be an uptick on the margin side as well. We will be able to better provide you by the year-end, a margin guidance for the next year. Sure, sir. That is all from my side. I will come back in the queue again. Thanks, and all the best. Thanks. Thank you very much. The next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead. Yeah. Good afternoon, sir. Thank you for the opportunity. Yeah. Sir, my question is related to the acquisitions. Mr. Kawale, may I request you to please speak loudly because your voice is coming out as muffled. Yes. Is it clear now? Yeah. Much better. Yeah. Okay. Sir, what kind of margins can we expect from the new acquisitions? Again, if you could just explain what kind of capital requirements would be there for the new acquisitions since the facilities are based out of U.S. Would it be a leaner capital? Again, one more question is, what was the basis of the valuation for the acquisition? If you could explain that would be really helpful. Thank you. As far as first question is concerned, the margins are similar to what we are earning today. It will be in the range of, say, around 16% for the acquisitions as well. As we sweat the asset, we should be able to draw in better results as we move forward and add more value to the overall operation as well as the product range. This answers your first question. The second question, the valuation has been done with respect to both its assets and the business and the customer base. It is taken on the basis of how much business which we are adding on, what is the current EBITDA level as well as what is the customer base. It is a combined call. That you can see as a goodwill in our balance sheet also. Okay, sir. Thank you for that. Sir, would these new facilities be used for the Wamsutta brand? To some extent, yes. In the future, as we are studying the Wamsutta brand with a longer term strategy, we have given this to an agency to see that how the brand recall value will help us promote this brand to the retailers. One of the parts would be to promote this pillow into Wamsutta brand in the future as well. Sir, I think you said that US$100 million annually can be expected from the private brands. Is it fair to assume that the rest of the revenue you can generate from your existing brands or you will be continuing to acquire new brands and any more acquisitions in terms of facility or anything planned in the near future? Is management still looking for the new acquisitions? As far as the branded business, we are clear this will be an additional revenue in the next 3 years to the extent of US$100 million over and above the core business we are having. That answers your first question. As far as acquisitions, we as a company are a growing company, and we look for opportunity and that we acquire these 2 businesses because the utility business was up for grabs and that's why we invested into it. We look forward that when we need to invest into the business, which makes proper sense and proper capital allocation with a proper rate of return on investment, we will look appropriate call as and when the proposals comes to the company. We are in the growing mode. Okay, sir. Is it possible to quantify the pillow and quilt capacity at the Indian facility currently? The pillow and quilt facility at what we have acquired, we have stated that 13 million pillows together can be produced in the U.S. and 1.5 million quilt can be produced additionally to the pillows. This we have already defined, and we have also defined that the peak revenue from both this facility would be around $85 million. As we will sweat this asset because there are opportunities available in the utility bedding business. Sir, I asked about the Indian facility. Is it possible to quantify the capacity at a current facility in India? How many pillow cases or quilts do we produce right now? We are already producing for our sheet sets, these pillows in India. There is no problem producing in India as well. We have the desired capabilities and capacity to produce as much pillow as we can in the Indian capacity. Okay, sir. I will come back in the queue. There are two pillows for every sheet set which we supply. We are already producing pillow and supplying, so we can always add that. I hope I answered you. Yes. Thank you. Thank you very much, sir. I will come back in the queue. Thank you for your answers. Yes. Thank you very much. Before we take the next question, we would like to remind participants that you may press star and 1 to ask a question. The next question is from the line of Surya Narayan Nayak from Sunidhi Securities. Please go ahead. Hello. Mr. Surya, your voice is breaking. Okay. Mr. Surya, your voice is breaking. We request you to use your handset mode. Okay. Hello. Mr. Surya, we are unable to hear your question. Since there is no response, we will take the next question, which is from the line of Gunjan Kabra from Niveshaay. Please go ahead. Hi, Lalit Puriya ji. Thank you so much for the opportunity. Right. Sir, I had two questions. Firstly, sir, what is the thought process behind acquiring manufacturing facility in the U.S.? Because the cost of production in India would be much lesser in terms of home textiles than in the U.S. Earlier you acquired some brands that was very thought process behind acquiring the manufacturing facility in terms of Modern Home or Fluvitex. Second, wanted to understand. Okay, if you can answer this one first. Yeah. Please, can you hold your handset a little distant? Yeah. Thank you for the question. A good question. See, the utility bedding business in particular, the pillows are light in weight, and they are fluffier and full of fiber, and they occupy a large volume in a container. So the logistic cost, if you supply from India, will be much, much higher per unit cost. Whereas if we produce in the U.S. to the retailer's distribution center, it will be less. And the duty factor and the logistic cost will get compensated by the additional labor cost. Plus, this is a business of distribution, and that is the reason, say, in the U.S., whichever utility is scattered around the major areas like the East, West, the central part, the South, and the Midwest. So they put on plants over there in order to distribute the goods effectively to the customer. The retailers also would not like to carry that on shelf for a longer period. They cannot wait for a gestation period of 45 days for goods getting shipped from here. The logistics costs are prohibitive. That is the reason they are filled in there and distributed. That is the way the business is being carried out there. The current utility business is in the hands of the private equity, and the private equity is focusing upon their financials rather than on the business strategy. This particular section of the business is up for grabs, and that is the reason, because India can supply the shelf and fill it there, it is a large opportunity for us to capture. That is the reason we and in the peer group also, people are seeing this as an opportunity and investing. Secondly, the manufacturing in the U.S. is also helping into addressing the geopolitical issues because there is so much volatility into supplying products, filled products over there. That is the reason we have invested into the U.S. manufacturing base to supply these POs. The customer also at the end prefer into buying from factories who are closer in the U.S., who are onshore in the U.S. That is the way the business is transacted. Okay. Got it. So you are saying that the margins will continue to remain the same. It is not that because of the high labor cost there, it will get offset by the logistics cost and it will not impact a lot in terms of margin package. Yes, of course. Because you see, it is like the margin will continue to be similar to what we earn today. Our expectation is how we can add more value through the branded approach to see that how we can further strengthen our margin both operationally as well as through our marketing techniques. Okay. Also wanted to understand, what's the revenue that these companies are doing right now and what capacity utilization are they operating at right now, and in how much time we will be able to ramp it up in terms of when Indo Count takes it over? As far as Fluvitex is concerned, it is operating at 50% capacity. Okay. As far as Modern Home is concerned, because it started this year only, it is operating at 35% capacity. This we should be able to ramp up to 75% in FY 2026. Okay. Got it. Okay. Thank you so much. All the best. Thank you very much. The next question is from the line of Deepesh Agarwal from UTI AMC. Please go ahead. Yeah. Good afternoon, sir. Good afternoon. My first question is, if I look at the additional cost which is coming into the branded business acquisition, that seems to be INR 15 crores per quarter since last two quarters, which takes up the total amount to roughly INR 60 crores of annual cost increase. How much of this would be an upfront cost and how much of this would be a recurring cost? As I mentioned, you see the inventory levels which has gone up. Those are the additional costs which we are incurring through interest on the working capital and the additional cost which we have maintained. The recurring cost will be more or less similar to what we are investing into the expenses which we are incurring, except for some logistic cost which might be reduced. Okay. No, my question is with respect to branded business, we will be making some investments, right? There could be some upfront cost and some would be the recurring cost as you spend on the marketing every year or the employee cost. So if you can tell us what is the quantum of upfront cost which would be non-recurring? See, the manpower and the logistic cost and the brand promotional expenses will continue. Now we cannot quantify because the brand promotion will depend upon how and which customer we promote the brand. The manpower, of course, will continue. Okay, sure. Sir, the other thing is, if I look at inventory, the jump seems to be quite sharp. If I look at on a year-over-year basis versus last year, September quarter, that is up almost 50% plus, and even versus March quarter, 25%. Even if I account for 2.1 million shipments delay, that does not reconcile the increase such a sharp amount. Can you help us understand what happened more on the inventory side? See, there are two things happening on the inventory front. One is the transit time is increasing to the U.S. because of the Red Sea issue. Second is the availability of the containers at the right moment. Third is because of the volatility and geopolitical uncertainty, we are also trying to prepone some of the shipments which we are doing to the customer in order to secure their supply chain. So there is an investment into the inventory onto various accounts. Plus, we have been carrying the cotton till the season end. The season has just started, and we also import a lot of cotton, which are branded. So all this adds up to, you see the inventory levels and plus the increased activity. Because the volume and the value, the revenues are going up because of the increased activity also, there is additional working capital and additional inventory level to be carried upon. So those are the investments which we are doing, and as I mentioned, once they get normalized, we will come back to the normalized level as what we had projected at the beginning of the year. Sure. So basically, we account for our sales only when they reach to the customer warehouses, and the transit period is sitting in our inventory. Is that understanding correct? Yes, to some extent. Whatever we deliver through the U.S. company and you see when we are like the Incoterms. Okay. The DDP and the shipment we do on those terms when they get delivered, the sales are being booked. Okay, understood. Effectively, higher inventory also means possibly in second half you could earn higher sales. Yeah, to some extent, yes. But whatever inventory which I mentioned in my opening remarks are going to get liquidated because of the additional transit goods as well as some goods which were in the process of shipping out. Once they happen, the inventory levels will normalize. Understood. And sir, lastly, if you can share the existing revenue and EBITDA numbers for Fluvitex and Modern Home Textiles. I understand you are guiding US$85 million incrementally, but what is the existing number they are doing? See, Fluvitex as a company is doing close to 25 million with an EBITDA level of 16%. Okay. Modern Home Textiles has just started this year, so it is getting up to speed, and as I mentioned earlier, it is operating at 35% capacity utilization. As we move ahead and with our product portfolio and with our kind of management and plus supplying them the shell to certain extent, we should be able to ramp up both the capacity utilization as well as some margin accretion. Sure. Okay. Thank you and all the best. Thanks. Thank you very much. The next question is from the line of Surya Nayak from Sunidhi Securities. Please go ahead. Mr. Surya, your line has been unmuted. Please proceed with your questions. Okay. Mr. Surya, your line has been unmuted. Please proceed with your questions. Yeah. Since there is no response, we will move on to the next participant. The next question is from the line of Palish Kavle from Nuvama Wealth. Please go ahead. Sir, thank you for the opportunity again. Sir, your average realizations have kind of bounced back and have remained stable for last three, four quarters. Can we expect like 5% CAGR for next two to three years, given the cotton prices remain stable? Is it a fair assumption to make? We are working always towards improving our margins because it should come through operational means, it should come through our brand promotion, it should come through higher scale of businesses which we are attempting on the fashion bedding and other product categories. It is fair to assume that it should improve from here. But a dramatic improvement has still to be seen from whatever you see volatility and other uncertainties we see around as India is also progressing in economy. There is inflation, and the interest cost which we were getting interest subvention 2% has been withdrawn by the government from July onwards. That is why the interest cost has gone up. The labor cost is moving up. You see there are a lot of balances which we need to do while we stay competitive and we try to earn a better margin. Our endeavor always would be to see how we add value to our entire product mix and see how we sell to better customers and how we can optimize our cost moving forward. Those are the endeavors which we are always attempting to do, and that is what you would also see that we have been able to maintain our margin to 16%, in spite of additional expenses which we have incurred into various accounts, which were one-off. I would only say that you see whatever investments which we are currently doing into every activity will start paying off, say, in FY 2026, 2027. We are quite optimistic about moving ahead in order to both grow our revenues as well as our margins. Thank you for that, sir. Sir, you mentioned that you can get to 75% utilization for a newly acquired capacity in FY 2026. Even if I take a conservative number, is it possible that you will reach INR 350 crore-INR 400 crore additional revenue from these entities next year, apart from what you are doing in India? Yes, that is what it means. You have answered my question. Yeah. Thank you. Thank you for your response, sir. That is it from my side. All the best. Thank you. Thank you, Nilesh. Thank you very much. The next question is from the line of Prerna Chandrawan from Elara Capital. Please go ahead. Thank you for the opportunity, sir. Thank you. Just wanted to understand how this acquisition fits. Can you speak a bit louder, Prerna? Yeah. Am I audible now? Yeah. Sir, just wanted to understand, with these acquisitions and pillowcases that you are doing now, is it only for U.S. market or it will be used for other markets as well? You mentioned about the cost advantage that is there by setting up facility over there. At the same time, how will the logistics work in terms of fabric procurement or whether it will be procured from India, your units, or it will be procured from nearby destinations? You mean to say the supply chain, like the shells or No, not the shells. Both the shell as well as the fillings. Yeah. So you see, there are options available to us. So whichever is economical, mostly we will try to see how we can support the supply chain from our shell. So the endeavor would be that. But if there are certain special fabrics which are much more competitive, like say synthetic or blends, where other countries are also very competitive. So we will treat this as a separate profit center because this acquisition has been done through our Indo Count Global, our U.S. subsidiary. So we are treating that as a separate profit center, and we will see to it that wherever there is competitiveness, apart from cotton, where India is competitive, we will outsource that from either nearby countries or from the same country, because this fiber is also available in the U.S. and from other countries as well. So that answers your question. But our endeavor would be to utilize our capacity initially if it works out on the price level. And these acquisitions, suddenly, you and your peers both have started doing this pillow acquisition. Is anything specific happening in pillow which we should know, or is it just coincidence? No, you see, it is a coincidence. Basically, these companies were doing well, and as we have been growing our business in fashion, utility, institutional, which I have been mentioning every quarter and every year. We have been focusing on to see how we develop these three segments particularly, which are correlated to the bedding segment. We are a focused player, and when it comes to, say, pillow, it is part of the bed linen segment. Once we were investing and growing the utility fashion and the institutional business where pillow forms a part, it just so happened that we went ahead with this acquisition in order to grab this opportunity, and the customers were also not overlapping. As a business decision, we have taken this, and as I mentioned earlier, the utility bedding business, because of the logistic issues and because of the and the China Plus One issue is there, where China was dominating, we saw this opportunity and we went ahead and did this acquisition. That much I can say. Now we will focus upon this category because we are a focus company on the bed linen side. Definitely pillow form part of this overall category and we will focus upon it to see how we can scale it up. Okay. And sir, the cost structure in the businesses are increasing now with respect to logistics cost, like freight or container cost or maybe also Indian cotton prices are expensive to international cotton price because of import duty and government interference. How are the margins of the core business apart from whatever investments we are doing that is impacting our business for future growth, but how are the core margins behaving now and are looking for future? See, that is what I mentioned, Prerna, in my earlier answer. You see, there are challenges, of course, on the margin front because as the Indian economy is growing and the inflation in India is growing, there are challenges we being in manufacturing here. We are incurring costs, but our entire endeavor of the company is to see that how we move into the value addition segment. Now, the value addition segment when we say are the fashion, utility, institutional business which we have been saying upon all these four, five years where we have strategically moved into from our core business of sheet, which we have also demonstrated in our investor deck that we are entering into a target market of $11 billion which China was dominating. So you see, there is a big opportunity out there in order to scale up our business in those activities where there is a better target market instead of moving into a smaller target market area in other product categories. So definitely, we see that we need to balance out through value addition means, through better customer, better product mix, and see how we can operationally excel into producing more competitively as we move ahead. So this is the balance which we have been doing on as a company and we are investing into automation, into technology, into our talented people, team, et cetera, and see that how we can market effectively in the marketplace while still keeping our margins intact and grow from there. So this is what we are attempting to do. Okay. Understood, sir. And last question, sir. This Indian capacities, given the current scenario, and new businesses, when do we see full utilizations coming in? See, we have already started this journey when people ask us about our GHCL acquisition. If that does not have happened, you would not be answering this question today. Yeah. It has worked out well for us. The capacity which we have drawn is world-class to the extent of 153 million meters. We already have given a guidance, and we see that looking at the trend and looking at the business wherein we are working in the future, we are confident that by FY 2027, we should be able to utilize the capacity till March 2027. Okay. That helps us, sir. All the best then. Thank you. Thank you, sir. Thank you, Prerna Chandrawan, for the question. Thank you very much. The next question is from the line of Dipen Shah, who is an individual investor. Please go ahead. Yeah. Thank you very much for the opportunity. I had a couple of macro questions. You mentioned in the opening remarks that the situation in the export market is improving. If you could just give us some more insights into whether the destocking is completely over and when do we expect the restocking to start, especially with relating to the season which comes after the festive season, that is after the Christmas. Would you have some more visibility into how the first half of the next calendar is panning out for you? That is the first question. The second question is, there were some news reports, though unconfirmed, that the Red Sea issue is getting solved over the last two to three days. Would you have some insights on that, maybe some ground realities if you could help us on that? Thank you so much. Second question I was not able to pick up, Dipen Shah. Yeah. There were some unconfirmed rumors that the Houthis have declared a ceasefire and the situation in the Red Sea could improve from here on. Is that something which you are also seeing? Because that is another important part of our cost, which has impacted us over the past few quarters. To answer your second question, we haven't heard about that as a confirmed report yet from both end companies as well as informed resources at our end. But if you have that information, you can share with us. Okay. But I would here submit that the freight costs in general have toned down a little bit, but still the supply chain transit time is still there due to the Red Sea issue, which has impacted everybody's working capital to the extent of almost 25 days more. Okay. If it was that. As far as the demand is concerned, as I mentioned in my opening remarks, there are positive steps taken up by the U.S. in form of reduction in the interest rate, which has put in a positive tone in the overall market, and which has helped companies to regain their confidence that the federal government is inclined to take positive steps to make the business happen. Now we have the elections also over, so we will see to it that these are behind us and proper policy formulation which are forward-looking should help the business to improve from here. Because once the administration starts working in the form of improving the economy, which they would, this is what our belief is, it definitely will improve the overall situation and environment of the market. Our inventory levels, it would have been further up. To answer your question, the demand is improving. I can only say that if the Red Sea improves, it will be a big relief for all of us as exporters. It should be helping us in the positive direction. Definitely the cost will come down and the overall requirement of the situation would improve, providing us more opportunities to export to different countries and to different markets. Sure. Right, sir. Got it. Thank you so much and all the very best to you. Thank you, Deepinder. Thank you very much. The next question is from the line of Simranjeet Bhatia from Almondz Financial. Please go ahead. Yeah. Thank you for giving the opportunity. Sir, I have three set of questions. Can you guide us when we are going to see the peak level of total debt in the company in upcoming years? Because currently gross debt is close to around INR 1,400 crores, so when are we going to see the peak level of debt? Second, can you give some guidance when we can fully absorb the expenses which we have incurred for the acquisition in upcoming quarters? Third, as you know, we are hearing a lot of things on the U.S. economy with Mr. Trump elected as their president, that the way we are going to go for the tax cuts and the government borrowing, which is a bond clean price, and there is some deportation of the people from the U.S. So as per the reports, this will lead to increase in the inflation in the U.S. economy. Are you seeing that in 2025? Will the increase in inflation in the U.S. economy will impact your business to some extent? These are the three questions. I will answer you the third question which you asked. It will be appropriate to mention here that let Mr. Trump take offices by end of January 2025, then he will start formulating the policies. I can only say that with the current president, India enjoys a good relationship and there is a positive outlook which we hear in the entire media that India has got a better relationship and which India always enjoyed with the U.S., whichever government was there. But this will be better off. That is what people anticipate, and we also anticipate the same. As far as duty is concerned, I already answered that once he takes offices, we will be better off into saying that how the policies will be worked out towards addressing the overall economy. But I think futuristic, he is a forward-looking president, strong in economical order, and should definitely help the businesses to grow. That is what his agenda which he has spelled out during his elections campaign. So this is your answer to the third question. As far as the expenses are concerned, we have already mentioned that these are initial expenses wherein we are trying to promote our brands which we have acquired and which we have license for. Our attempt is to see how we can sell our product mix into the branded segment, wherein we have elevated to the premium and branded segment regarding the positioning of these brands in the marketplace. So once we start getting results, which we would from FY 2026 onwards, we have already indicated that our branded sales would start coming in from Q4 onwards to certain extent, and it will ramp up in the FY 2026. Plus the assets where we have invested in, we had hired human resources to handle the U.S. manufacturing and the marketing as well, wherein this revenue is also from the acquisition will start coming in FY 2026, which I already mentioned, which will be to the extent of 75% of our capacity utilization. This will also help him to pull in certain expenses, so the expenses will start reducing. By say FY 2027, it will be coming into full absorption. As far as the expenses are concerned, I have answered your second question. The first question is about the overall debt. As I mentioned in my earlier statement also, the inventory level has moved up, so the working capital has moved up because of increased activity and because of certain spillover due to the supply chain issue. I have also mentioned that this will normalize towards the end of the year to certain extent. Certain investment into working capital will still remain. If you can very well observe that there are so many uncertainties and volatility in the world. Just now, certain question was there about Red Sea, the Houthis agreement happened, and then this container issue is there, the freight issues are there, the transit time issues are there. So we are addressing as we move ahead, all these activities in the normal business course. Once they normalize to a certain extent, which we all hope so, it will help us into reducing our overall debt. As I mentioned earlier too, we are a growing company. As I mentioned, we are walking through the Version 2.0 of Indo Count, where there is a transformation happening that we are entering into new product categories, new businesses and new manufacturing setup. This all will help us into drawing further revenue in FY 2026 and 2027. As we indicated in FY 2024 that we will double the revenue, we still are on track towards that. I can only say to that once we start drawing in revenues through our assets and the sweating of this asset will help us not only reducing the expenses and the debt, but the overall situation and improving our margin profile. Done, sir. Thank you for answering in that way. Thank you, sir. Thank you, and all the best to the Indo Count team. Thank you, sir. Thank you. Thank you very much. The next question is from the line of Surya Narayan Nayak from Sunidhi Securities. Please go ahead. Hello. Hello. Yeah. Hello, sir. Am I audible? Yeah, now you are audible. Loud and clear. Okay, sir. Most of the questions have been answered. Only one question is that, how the branded segments of these estimates of around 20 million-22 million meters of sheets that you are planning to add off or ramp off in next three years, if you can throw some light on that. What we have mentioned, Mr. Narayan, is that we will be able to draw in revenues to the extent of USD 100 million in the next 3 years. This will start from, say this Q4 of this year, FY 2025 and will ramp up in FY 2026 and 2027. The question of utilizing our capacity is concerned, as we had earlier also conveyed, that these are across product categories in the brand which we are promoting. It is not only bedsheets, but bed linen are a part of this overall metric. We are also supplying in the brands like bath, curtains, windows, rugs and other accessories. It will be to see how much we utilize our capacity from here in India. Once we ramp up this sale in FY 2026, we will be better off to tell you how much capacity utilization will be through our branded sale. We will be better off then, Mr. Narayan, to tell you that. But our endeavor, as I mentioned to the earlier questioner also, will be to see that how we utilize our capacity from the branded sale over here in India. Wherever there is a cotton outlay, we should be able to do that because India is competitive in cotton. Wherever there is synthetic material, India is 38% expensive to China. This is where I am coming from. My understanding is that at around the current price level, we will be getting a volume of around 20 million-22 million meters. Just now, if we can assume some percentage of maybe 10, 30, 60 ratio. That kind of possible for next 3 years? Because another point is that now current utilization is around hovering around 73%. We could be heading towards a 70% utilization this year. Because brands could be asking for different set of patterns and designs. Will it affect the overall utilization anyway? It will definitely. As I mentioned, wherever there is a cotton and wherever our products which will be consumed by the brand, definitely it will add on to capacity utilization, but we cannot mention in million meters as of now because this will ramp up later. Okay. And sir, given your CapEx program of around INR 413 crores, you have migrated some of the ZLD and solar projects to FY 2026. So what could be the debt levels we can think of to repay because some of the debts related to the acquisition has come. Are you thinking of repaying any debts on the long-term side? Yes, of course. Because as we draw in internal accruals, definitely our endeavor will be to reduce our overall debt. Because the interest rate have normalized now to almost like 7.5%. It is costing us due to withdrawal of the Interest Equalisation Scheme by the government. The company would always see to it that how from an internal accrual, it can invest into growth wherever there are opportunities and also at the same time manage the inventory and the working capital efficiently. Third is to reduce the debt. Okay. And sir, in the working capital side, I agree that to some extent, due to supply chain issues, the inventory level has spiked maybe around 15 to 17 days, and overall it is around 27 days across business, across working capital. What can you see that now due to the crisis getting resolved near term as the media reports are suggesting, are to pan out then for FY 2025 and 2026, the rest of the part of the FY 2025 and FY 2026? You see, there are two issues here. One is the increased activity on the overall business. That is increasing our inventory level on an absolute term. Number one. Number two, because of the volatility and the supply chain issues you see, it is adding on to goods. The process also of supplying through our U.S. offices will also increase the transit time, and that is the reason it is hurting on the number of working capital days in the overall inventory level. Because we can only book sales when it is delivered over there in the U.S. That itself has increased by almost 20 days. What we anticipate in the future going forward is, if the logistic issues normalizing, we definitely will be able to reduce, as I mentioned earlier, and normalize the inventory level by the end of the year. Okay. And sir, regarding the certain expenses that have come in as legal expense and other things. You, in opening remarks, you said some expenses will be still built in. As an exceptional item, how much we can attribute to the initial expenses of the acquisition? It will be hard to say because you see, those are not very large and substantial. But the overall expenses towards human resources, towards the infrastructure creation of the brand, like the showrooms, et cetera, then investing into initial pre-operative expenses to acquire the assets. All these are summed up together, and that's why you see we reported that immediately, and I answered that question also, that apart from logistics, the other will be recurring too in the nature, like the human resources and brand promotional expenses. Because our endeavor is to promote the brand and to promote the new acquisition which we have done, their product mix. It will continue to a certain extent, but the good thing is that once the revenue stream starts, we will be able to absorb these expenses. Okay. And sir- Because the revenue has not started, it is straightaway eating up our EBITDA. Yes. Right. Regarding the peak revenue of the acquired assets, roughly around INR 700-INR 800 crores of revenue that is onshore. So how much differential in the logistic cost from Indian operations going there and vis-à-vis the onshore operations supplying to the U.S. market? That is a difficult question to answer because you see there are many kinds of pillows and quilts which are offered into different weight structure. So we cannot calculate that what would be the freight difference if we supply INR 700 and INR 800 crores from here. It will be quite substantial because if you see that in a container, you can just tuck 2,500 kilos and it costs you almost like $6,000. So how you justify that? You cannot sustain that. So you see, we need to re-look at the overall business model which is being pursued by the existing player out there, where this is a game for distribution and manufacturing in the U.S., and this is the preference by the customers that they need the manufacturing closer up to their distribution base. That is what we have to venture into and that is what we did. So it should be looked from that angle. Regarding CapEx, sir, regarding the acquisitions drives that have been made since last couple of quarters. So shall we mean that it is at the moment at pause mode or still something is brewing? I mean, that is from my conception. No, you see, we are studying the utility bedding business overall because now we have acquired two facilities, which is one on the Midwest and the second is on the West Coast. So we are seeing how it will pan out, and as a company, you see the board will take appropriate call that if the opportunities arise, we will go into both organic and inorganic means of investing into the business. Because the business opportunity is there and that we need to capitalize properly. Okay, sir. Just last question is that now what will be threshold utilization level of Indian operation you see before you plan to set up or let's expand the brownfield operations maybe in Bhilad? I already mentioned that by March 2027, we are anticipating to utilize our current capacity and the board will take appropriate call. Once we have completed FY 2026, there will be visibility of what expansion we should do and where. No, threshold utilization level, I am asking. It should be in the range of around 145 million. In textiles, you cannot reach 153, so it should be in the range of, say, 144, 145 should be considered in my view, depending upon, again, the product mix. 90% or 95% of the capacity utilization. Once it reaches, the board will take appropriate steps. Sir, the yarn side, do you see any softening going forward? Because when we see certain other countries like Turkey and Vietnam, some kind of slowdown happening. Do you think that those things will be favorable for us going forward? I already mentioned that India is considered as a manufacturing hub now. Both post-COVID and post all these logistic and geopolitical issues. We all mention about China Plus One, which is happening. We can all realize through the OTEXA data that their market share has reduced dramatically in various products. Plus, the overall environment to deal with Chinese supply chain is getting more and more difficult. Which is favoring countries which are producing textiles. In my previous call also, I mentioned that there are five major countries producing textiles, China, India, Pakistan, Bangladesh, Vietnam. Bangladesh, Vietnam are labor arbitrage. Pakistan has got a saturated supply of textiles, and they do not have more investment coming and modernization coming into textile because of their economical condition. China, everybody is speaking about their market share is pretty large. The only market share which will fall into the lap of countries are like India, because India has got a complete value chain to support the supply chain. Securing the supply chain in the future is becoming much and much important to the retailers because they do not want to lose out on their shelf the material so that they lose the customer at the end. India promises them the supply chain as well as India has performed in the past in home textile by grabbing the market share to the extent of 60% in sheets and 45% in towels. This proves that our competitiveness is intact and going forward, India is investing into textiles more and more with the government support, which should help us to ramp up our competitiveness more and grab more market share from the other countries. Definitely it is a positive thing. Okay, sir. Thank you, sir. Thank you. Thank you very much. Due to time constraints, this was the last question. I would now like to hand the conference over to the management for closing comments. Thank you. I would like to reiterate that Indo Count is positioned in its next phase of growth Version 2.0. Our strategic investment in utility bedding and premium brands are driving our expansion. While these investments are temporarily impacting our margin, we are confident they will create a more diversified and robust business over time. We continue to focus on generating strong shareholder value through our ongoing investment and efforts to improve operational efficiencies, sustainability and market share. Thank you. Thank you very much. On behalf of Indo Count Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.