Q4 23/24

May 28, 2024

Summary

FY24 delivered record revenue and EBITDA, with volume growth and improved annual margins. The next phase centers on scaling brands and value-added products, while targeting INR 6,000 crore revenue by FY27 and managing freight, inflation, and launch costs.

Ladies and gentlemen, good day and welcome to Q4 FY 2024 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, sir. Thank you. Good afternoon, and a very warm welcome to all of you to the Indo Count Industries Q4 and FY 2024 earnings call. I have with me Mr. Muralidharan, our CFO and strategic growth advisor, our investor relations advisor. Happy to connect with you all once again to discuss the Q4 and FY 2024 performance. Let me start with the industry and business scenario during Q4 and FY 2024. The momentum of the previous nine months continues, and I am happy to share that we concluded FY 2024 with record performance. Our strategic focus on market penetration has driven sustained double-digit revenue growth for this financial year. I am pleased to inform that in FY 2024, we have achieved our highest ever quarterly and yearly revenue of INR 1,093 crores and INR 3,601 crores respectively. Additionally, we have recorded our highest ever annual EBITDA in FY 2024, amounting to INR 603 crores. Our net worth has now crossed the INR 2,000 crore mark. It is worth noting that this year we have delivered on our volume and margin as per guidance. Now let me talk about the market scenario. Retail sales in the U.S. market have remained resilient and almost returned to pre-COVID levels despite higher inflation and borrowing costs, driven principally by consumer spending and the growing influence of e-commerce. Looking ahead, we anticipate sustained demand on account of easing inflation and likely interest rate cuts solidifying our leadership position in the global home textile bed linen market. We continue to strengthen our product offerings and deepen customer relationships, prioritizing long-term brand health. This strategic focus ensures we remain well-positioned for the ongoing growth. On the domestic front, India aims to boost textile exports to $600 billion and expand the domestic market to $1.8 trillion by 2047, focusing on quality, sustainability, and global leadership. The home textiles market is strong, driven by global demand from the hospitality and residential sectors. While India leads in home textiles, there is room to increase our global market share. By leveraging the China+1 strategy, India can add another $10 billion in exports, potentially raising our global market share. Additionally, free trade agreements with the U.K. and EU will further boost our competitive edge. The Indian home textile industry stands at a crossroads of innovation and growth. By capitalizing on international and domestic opportunities and embracing sustainable practices, we can unlock significant potential in this dynamic market. Now, our company's performance highlights. We achieved 18% revenue growth in FY 2024 and successfully met our volume and margin guidance. Coming to our Q4 performance, EBITDA margin of 15% was on account of one-time promotional activities which increased the other expenses and therefore impacted EBITDA margin by around 2%. This is one of scenario in this particular quarter. We expect the benefits of this to play in the coming quarters and are confident to maintain the EBITDA in our guided band of 16%-18%. We improved return ratios ROE and ROCE while maintaining our debt-to-equity ratio in spite of this tremendous growth. Our disciplined hedge policy for raw materials enabled us to remain competitive. The inventory built up towards year-end is aligned to service expected higher business activity in FY 2025. Now the strategic growth and brand expansion. We are embarking on the next growth phase, major focused on amplifying the contribution of branded products to our revenue. With the acquisition of the iconic Wamsutta brand, a stalwart in the American market for over a century, and the expansion of our licensed brand portfolio with Fieldcrest and Waverly, we are strategically positioned to derive higher contribution. The potential of the Wamsutta brand to add revenues over the next three, four years is substantial. With half of this anticipated from the bed linen segment and the remainder from complementary home products like rugs, towels, curtains, windows, et cetera. Our steadfast commitment to branded D2C and B2C channels is yielding promising results, steadily increasing our market footprint. Moreover, our licensed brands opens door to a diverse customer base. Fieldcrest caters to the dynamic young population, while Waverly appeals to those seeking stylish home decor, particularly in the emerging American market. This expanded reach across the U.S. and Canada market promises to bolster our margins and profitability. Besides, our facilities will manufacture this product for the end market, thereby increasing our utilization level along with getting benefits from operating leverage. We strongly believe this strategic moves position us well for sustained growth. Now let me talk to you about our ESG initiatives. Indo Count Industries Limited achieved a significant milestone with the inauguration of our 9.3 megawatt solar power generation unit in Gujarat. This strategic move underscores ICIL's unwavering commitment to green energy usage. With over 90% of the Bhilad unit operations now powered by renewable resources and to sustainable and responsible business practices. By embracing solar energy, we are not only significantly reducing our carbon footprint, but also optimizing energy costs, showcasing our proactive approach to environmental stewardship. Moreover, I am delighted to share that our company's total renewable energy capacity has now reached an impressive 21.5 megawatts. This initiative, combined with our recognition in Walmart's Project Gigaton, unequivocally reflects our steadfast dedication to fostering a greener future. On awards and recognition, I am delighted to share some remarkable achievements by Indo Count Industries Limited. We have been honored with three prestigious national-level awards from the CITI-Birla Economic & Textile Research Foundation for the year 2023-2024. This award recognize our excellence in best practices in social responsibility and green practices, innovative material management, and as the runner-up for best sustainable retail practices. Additionally, Indo Count has been bestowed with Export Shield Gold Trophy for the highest export performance in bed linen for an impressive five consecutive years. This accolades serve as a testament to ICIL's steadfast dedication to sustainability, innovation, and excellence. We take immense pride in being recognized for our efforts and remain fully committed to driving positive change in the textile industry. Now let me share with our consolidated financial performance. Volume. Sales volume for Q4 FY 2024 stood at 28.7 million meters versus 20.4 million meters in Q4 FY 2023, a growth of 31%. Sales volume for FY 2024 stood at 96.8 million meters versus 74.7 million meters in FY 2023, growth of 30%. Total income. INR 1,093 crores in Q4 FY 2024 versus INR 810 crores in Q4 FY 2023, a growth of 35%. Total income, INR 3,601 crore in FY 2024 versus INR 3,043 crore in FY 2023, growth of 18% on a year-over-year basis. EBITDA. EBITDA for Q4 FY 2024 stood at INR 166 crores versus INR 147 crores in Q4 FY 2023, growth of 13% on a year-over-year basis. EBITDA for FY 2024 stood at INR 603 crores versus INR 486 crores in FY 2023, growth of 24%. EBITDA margin for FY 2024 stood at 16.7% versus 16% in FY 2023, growth of 78 basis points. PAT, INR 92 crores in Q4 FY 2024 versus INR 95 crores in Q4 FY 2023. PAT, INR 338 crores in FY 2024 versus 277 crores in FY 2023, a growth of 22% on a year-over-year basis. EPS is INR 4.64 in Q4 FY 2024. EPS is INR 17.06 in FY 2024. Net debt to equity is 0.32x as on March 31, 2024, against 0.33x for the previous year. For financial year 2024, ROE is 16.2% and ROCE is 18.8%. The inventory for year ended March 31 stood at INR 1,143 crores. This should be looked at from the perspective of the increased guidance. The Board of Directors has recommended a higher dividend of INR 2.20 per equity share of INR 2, that is 110%, subject to the approval of shareholders at ensuing AGM. The dividend payout stood at 12.89% and has been kept stable in order to use the cash for increased investment in business, especially the recent acquisition and inventory buildup. With this, 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 touchtone phone. 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. Our first question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead. Sir, thank you for the opportunity and congratulations on the very good set of results. Sir, our first question is on the realizations. Now that the cotton prices have stabilized and contribution of the utility bed linen is increasing in our total product mix, how do you see realizations moving forward in next 2 years? So definitely, Palash, our focus is on the value-added product, and as we keep on mentioning that our focus is to how through brand acquisition, through licensed brands, and through fashion utility institutional bed linen, which we started 5 years before. So we are focusing on the value addition and definitely through operational leverage as well as selling better goods, we intend to improve our margin going forward. Sir, my next question is on share of India in bedspreads. If I look at the data, the market share of Pakistan has increased a lot and our market share, like Indian market share was 21% last year and is 21.3% in January to March. What is the reason behind this? Pakistan is gaining a lot of market share, and we are at stable levels. See, this is due to because this consumes MMF and in India, MMF is expensive by almost 25%, where China is cheaper. India has so far not focused on the filled product. Even if you look at the various drawback structure where the duty will get refunded, we are not refunded on the synthetic part, so hence it becomes not competitive. Secondly, the freight also plays an important role onto shipping filled product, which is more voluminous than weight orientated. I think slowly as India rationalizes the synthetic prices, we will see an uptick here. Secondly, most importantly, we all players have focused on the sheet side of the business and have not built the back end to service this product category. Recently, like last year, we invested almost INR 60 crores on building a world-class fashion bed linen unit. So that goes like without saying that now we are well-positioned into servicing this product both front end and back end. With the brands in our kitty, definitely it will help us to inch forward in this particular category. I think there will be improvement in the coming years as how we see the China+1 happening on the sheet side, which is very apparent. Slowly it will trickle down to these categories also. Okay, sir. Thank you for that. Sir, thank you for giving the revenue contribution from business segment. Sir, if you could give any sense of how the margins are for branded businesses and fashion and utility or unique e-commerce business, that would be really great. Even in home textile domestic market. We should look at holistically. I have predefined earlier that now we are working on almost seven verticals, apart from the sheet, which is a commodity. We are working on fashion, utility, institutional, e-commerce, licensed brand and brand business, as well as domestic. Every business is in itself a business to us, and we are formulating strategies in order to grow each of this business to world-class. Thereby, when you see how India is well-positioned and India as a country also doing well in the domestic front, we see big opportunities in all these segments. Definitely, going forward, our focus will be how we can elevate to the next level through all these different categories of businesses which we are currently doing. We have a good audience to customer worldwide. We export to more than 50-plus countries, and we have performed well for all these years in the eyes of the customer. Definitely, whatever B2B which we were doing earlier will now transform to B2C and D2C, and that will definitely provide us an edge because we will be able to service omni-channel and a 360 degrees product range into not only the bedding area, but we are also moving up with the brands to other categories of products. Definitely, with all this mix, we will have a better edge going forward, and it will make better margins going forward. Thank you, sir, for your answer. That is it from my side. Thank you. Ladies and gentlemen, a reminder to all the participants. In order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to two per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Surya Narayan Naik from Sunidhi Securities. Please go ahead. Am I audible, sir? Yes, yes, please go ahead. Yeah. Thank you for giving me opportunity, and congratulations for good set of numbers and desired times. A couple of questions. One is that our value-added segments have improved from 46% to 51% year-over-year. So where do we see, because the recent acquisition of the brands and tie-ups, what are the kind of traction we are going to see for next 2-3 years? So can it go up to 25% or so? Sure. Branded business. Branded, the acquisition of Wamsutta particularly will be launching in this first week of 2025. That we will launch in this September. So we will see some traction happening in the fourth quarter, and slowly we will build up this brand. Also these licensed brands like Fieldcrest and Waverly also, they will become active in 2025. That is FY 2026. So once we start activating them across the board to different product categories and different set of customers, we see that the traction building in the coming year. So going forward, say from FY 2026, if we start with, say, 5%, go up to 10%, and then maybe probably our endeavor is to go up to 15% of our revenue in branded business. But looking at the trend, the consumer exposes the elevation of premium to branded segment, we have to wait and watch how these trends move forward. So definitely, we have set good plans to see that this becomes quite successful in our overall portfolio of revenue. And slowly we will endeavor it to reach to almost 10% plus. That's where we are currently targeting. Incrementally, you have recently given to media a notion that you are eyeing for $100 million in next 2-3 years. That amounts to roughly 23 million meters for the branded segment as well as the Wamsutta and for the brands around 50 million meters. If we put together, our utilizations rates will be improving. What is the plan ahead and going forward, whether we would be looking forward to maybe capacity expansions of maybe 2026 or so? First of all, you see, we did mention that this brand, we believe that we will reach $100 million in the next 3-4 years, which is correct. But you need to consider, you see, out of this $100 million, around $50 million-$60 million will be bed linen and the rest would be like towel, rugs and other sort of categories which we will outsource. Definitely you need to consider that in this overall $100 million, the utilization for bed linen will be not 23 million what you calculate, but it would be close to around 10 million to 12 million because it is high value as well as it is part of the overall revenues. This is what will be the outcome. And once we reach the optimum level of our capacity utilization, definitely post this, the board will take appropriate call and see that how we can expand the capacity further because we already have, in GHCL acquisition, a land over there which is additional, where we can expand our next line of processing. We do have infrastructure, we have already invested into the core CapEx and we have the capacity also which is flexible and scalable. Definitely all this will provide us the necessary inputs to grow our brand sales going forward. And that's why we are quite confident that in the next 3-4 years we should be able to build a branded business of almost $100 million. Is it safe to assume that 85% utilization will be triggering for creating or let's say looking for the next CapEx? That should be considered in, say, post like FY 2027, I think, probably. But if we are lucky and if we are more successful, then definitely it will come forward in 2026. We are a debt-free company. We have financial resources to go in for any kind of expansion in the future. The plans which we are making, as I mentioned in the seven verticals, we are expanding each one of them. So we will be ready if there is any need towards expansion, we will definitely think of and we will report come back to you as and when the capacity utilization improves. Sir, for these additional branded segments, what would be the realizations higher than the normal commodity range? Can it be around 15%-20% higher? See, normally it is like what you just now mentioned, it is around 15%-20% higher than the normal range because there are expenses to be considered and the brand as an equity you need to differentiate and the product is also more rich. It has rich inputs rather than the commodity. So definitely this should be the ballpark in the premium and the branded segment. With 15% increment in the realization, we would be seeing a realization of EBITDA margin improving from 17% to around 25%? 17% to 25% in that particular category. Current margin is around 17%. In those categories of branded segments, can we expect a higher EBITDA margins? Yes, of course. We cannot define that because you see in branded segment also there is a product mix change and which segment you are servicing that needs to be considered. But definitely about 20% plus you should always consider for branded segment revenue. What will be the broad range of EBITDA margin from lowest to highest? 20-24 should be considered. Okay. Thank you, sir. I will come back to you. Yeah. Thank you. The next question is from the line of Jatin Damania from Swan Investments. Please go ahead. Good afternoon, sir. Thank you for the opportunity. Sir, just wanted to understand, in your initial remarks you indicated that the last quarter EBITDA was impacted by incremental spend on the promotional expenses. Then later you indicated that Wamsutta brand launching or the traction will start from September onwards. Does that mean that for initial six months or nine months of this financial year our promotional expense will continue to remain at the higher level? See, certainly we have to draw up the infrastructure and the back end as well as the front end. There will be expenses but this all will get absorbed by the realization margin which we get on branded business. That will be an investment which we will do in the coming quarter. But definitely we will plan in such a way that we get those realized with our extended margins. Yeah, but that extended margin will start coming out from the Q4 onwards largely on the branding front. Yeah. Once we start delivering the goods definitely the margin will get visible. But the question which you raised is that will there be additional promotional expenses during the first three quarters? The answer is yes, to certain extent, but we have to look from a medium and long-term point of view for any brand promotion, which we cannot expect like in the first quarter when you acquire some brand and from the very next month or in the next quarter you start getting results. It has to be planned for seasons and the seasons are all six months apart and then you have to draw in the necessary customer base to make it much more successful as per the trends prevailing in that market at that point of time. That is how we should look at it. This is a very strong brand, a national brand. It does not need any introduction. Definitely, apart from adding new customers and opening new doors to us and with the existing customers even, we look at enhanced businesses, and that's the reason we acquired this brand and invested into it. With whatever the expenses which will happen, we will draw a proper brand strategy, to see that how we can recover those expenses and absorb it in our futuristic sales. So that is fair to assume then the guidance that we have given, 110 to 115 million meter, it is excluding the contribution from Wamsutta? To some extent, yes. You are right. Okay. Anything that can come in Q4 on Wamsutta will be additional to the numbers or the guidance that we have given with a better margin. That is why we have kept a band, as well as a band for both volume and margin guidance. Okay. So second thing, previously during our last interaction in the call, you had indicated that we are looking at covering our revenue from INR 3,000 crore to INR 6,000 crore in next three years. Last year we were INR 3,000 crore, this year we closed at around INR 3,500 crore. Are we still maintaining that guidance of INR 6,000 crore by 2026 or probably we could see some delay in that number as well? We are seeing that happening in FY 2027 because the situation has also to improve. See, there are still geopolitical reasons for business disruptions, the Red Sea, the war, the various inputs which are increasing in India. The Indian inflation is almost more than 6%. We need also to look for all these moving pieces and consider. But definitely our endeavor is to see that we do this revenue growth to doubling it by, say, 2026, but by FY 2027, we should safely take it. Sure, sir. And sir, last question on this Wamsutta. In the previous participant answer, you indicated that $50 million will be attributed to a bedsheet and remaining $50 million will be outsourced. As any given point of time as a company, are we thinking to venture into other home textile business other than the bedsheets so that whatever the outsourced item that you are taking, we can supply it through in-house only? Yes. See, definitely we keep our doors open to all opportunities, and we are a manufacturing setup. We are quite experienced in this business of manufacturing for the last almost more than three decades in textile. So whenever there is an opportunity of adding on any product category which makes sense to our business, which provides synergy, which provides margin to us, and which has a good payback, the company will definitely have the philosophy to invest into it. And we are slowly building on this branded business as we see a great opportunity out there in premium and branded segment as the luxury and FCN business, what we read from the various reports of McKinsey, BCG and various other consultants are coming in showing that there is an increase on the luxury side of the business. And that's what we would like to tap going forward. And once it develops into a good revenue, definitely we can always add on a backend just like how we add on different product categories. So we are open to all this investment, and our company is also having AA- rated credit rating. So as far as raising finances concerned, we are well off. We can always raise finances for new CapEx for any product category to add. Sir, thank you for the detailed answer. And last question on your brand expansion also or probably the licensed tie-up that you are doing with this Iconix International. So can you explain what is this tie-up for? So this Iconix International owns the Fieldcrest and Waverly brand, and Iconix is a very well-established licensed brand and brand house. And it is very well known. So it provides us opportunity to tap other brands from the same company. Once you perform with Fieldcrest and Waverly, then definitely they will think that we can handle the brands well, and that opens doors for their other brands which they own. So it is a beginning of a good relationship with this company. Secondly, Fieldcrest and Waverly are also 100 years old, and by acquiring Wamsutta and licensing Waverly and Fieldcrest, we have addressed the demographics of the brand because Wamsutta has a 45-years age and above brand recall value. Waverly has got 94% feminine recall value, and it is more print and stylish driven, as well as Fieldcrest is addressing more to younger generation, 25 years and above. So that completes our brand strategy to address all section of the consumer. And since we have the entire product range onto the bed linen side, which formulates 50% of home textile, we should be able to address the complete demographic by this brand licensing and acquisition. And we are not stopping here. Whenever we see a brand opportunity now, since we are recognized in the market to handle brands, there will be opportunities for us that licensing companies will come forward and offer us this brand at a good, reasonable contractual value. So this is what the opportunity is. And by doing this branded segment, what we have been alluding so far is about elevating us to the premium and branded segment because we were catering to the mid to high segment. This brings in another level of acquiring the segment or positioning of the brand in those segments to increase both our revenue and margin profile. Sir, like you indicated for Wamsutta, a $100 million in next 3 to 4 years. Fieldcrest and Waverly will be how big in terms of the revenue contribution for next 3 to 4 years? I didn't get your question, please. Sir, like Wamsutta, you indicated it's a $100 million opportunity, right? Yeah. With this licensing tie-up of Fieldcrest and Waverly, how big that opportunity would be? There will be additional revenue. What we mentioned is $100 million branded business. This includes Wamsutta, Fieldcrest, and it can go further up because we acquired Wamsutta first, so we planned $100 million. Now since Fieldcrest and these are also licensed, Waverly, and we will tap more revenues from this. That is what I mentioned in my earlier. $100 million is inclusive of all the brands. In my earlier answer, I had mentioned about that we are planning to see that how we can grow our market share from, say, 5% to 10% to 15% of entire revenue. Thank you, Lalbhaiji. That is all from my side. I hope I answered your question. Yes, sir. Thank you. Thank you. Ladies and gentlemen, a reminder to all the participants, please restrict your questions to two per participant. The next question is from the line of Hemang Godharia from Annual Share and Stockbroking Private Limited. Please go ahead. Good afternoon, sir. Congratulations on the great set of volume growth. Thank you. Sir, my question on the Red Sea crisis, has that impacted the freight cost for us in a big manner? Because I heard the freight cost has increased by twice of pre basically Red Sea crisis. So what is your stance on that? First of all, our sales to the U.S. is more than 70%, so we sell FOB basis. Okay. You are right that the freight cost has gone up, so it is a new one. We have been discussing with the customers to see how we can absorb that. There is not much of an impact onto our expenses to a certain extent. But definitely this is one of the, what you can say, a troublesome area that Red Sea is still continuing. We are waiting and watching and seeing that how it gets resolved. But it is for everybody. Right. It is universal. Everybody is impacted through that. Being universal, we are able to address it much better. Secondly, one more important thing, VSC is not impacted as such with this because it goes with Cape of Good Hope where only you are increasing your working capital by 15 days. That is the other submission from my side. And sir, on the solar power, we are setting up 8 megawatt incremental and plus around 8 megawatt we set up last year also. So what kind of saving we are expecting because of the use of solar power than the normal grid power basically? First of all, we need to look at from a compliance standpoint how the world is moving towards green. People, customer base in developed nations, they are trying to become much more serious about requirements of sustainable means. So they want green energy to run the plant. That is why from a compliance standpoint, our company is getting ready being a global company. So number one is that reason. Secondly, there is optimization of cost as well because you see the power cost in India is going up. As the consumption is going up, you see the power cost is also going up, the transmission cost is going up, the generation cost is going up. So we need to offset that. Whatever that optimization happens will bring in definitely some saving, and we will become competitive. So we do not cry over the rates, power rates all the time. The company is trying to become self-sufficient into its own generation of green energy for the future. So slowly it is taking steps towards becoming that self-reliant. Maharashtra, where we are located, do not have a sound solar policy because they allow only 1 megawatt on 1 meter. So recently they increased in their textile policy to 4 megawatts, but still the notification is not out according to which we can invest into it. So once that is out, we will further increase that 1 megawatt to 4 megawatts in our plant at Kolhapur. So that is how we are shaping our renewable energy initiatives. Right. The zero liquid discharge effluent water treatment plant of INR 50 crore, that is at Gujarat unit, right? Yeah, at Bhilad plant. Because you see, as I mentioned on the compliance side now, everybody is focusing on zero liquid discharge, so we need to upgrade our unit. So we are investing into it so that there is a lesser fresh water intake. Secondly, you are discharging no effluent, because in Bhilad plant, we have a free discharge. So we have to see that in the future, we build this zero liquid discharge, so we save ourselves on any eventuality. Okay. And sir, last question on the Wamsutta brand, that outsourcing part, what we discussed earlier with one of the participants. So like, towels and other part of the home textile market. So do that thing can dilute our margins going forward because traditionally we are getting 18%-20% margin in licensed brand. So is that Why it could dilute? Why you should think like that? Okay. Towels are also sold in branded segment at a higher price. Right. You have so many people selling in brands, you see their margin, they are higher. Right. We are focusing on the branded segment and drawing in product in that branded segment. We are not saying that we are going to put up a towel plant to sell commodity. Right. Fair enough, sir. Congratulations, and once again, all the best for the future. Thanks. Thank you very much. Thank you. Our next question is from the line of Simranjeet from Almondz Financial Services Limited. Please go ahead. Thank you for giving me the opportunity. Sir, I have three set of questions. First question is, how you see the demand trend in the U.S., as you know, inflation is still high there. Second, what is the timeline to bring down your consolidated debt? Third, if the U.K. FTA happens, let's say somewhere down the line, how it will benefit to the Indo Count? Can you tell me the second question again? Sir, what is the timeline to bring down the consolidated debt on the books, or to reduce- The third question. Sir, third question is, for the U.K. FTA, which is still pending, if that comes into play, how will it benefit the Indo Count? Sure. First of all, as I mentioned in my speech also, what we observe is that the inventory levels with the retailers are normalized. Okay. They are getting impacted only due to the inflationary measures, so that discretionary product is not brought to the extent what it used to be pre-COVID level. We still have to wait for some time for the market enthusiasm to return. The inventory pipeline is dry. Having said that, we mentioned that the demand is stable and it continues. Only the pain point is the inflation which through monetary policy, U.S. government is addressing it. That we will see post-June also if there is an interest cut that will definitely help the economy. Sorry to interrupt sir, but your voice is The cost of the attention. The demand is like, I can only say in one word, FY 2025 is better than FY 2024. That is number one. Number two, the debt. The philosophy of the company has been always to plow back our profit into the business for both growth and debt reduction. That will continue. Whenever we see an opportunity where we do not have cash to invest into growth, we will reduce our debt. Our endeavor is to become a debt-free company. That goes without saying. But whatever working capital which we need, we have to deploy that, whether it is supply chain, whether it is any compliances for solar energy or anything. We need to do that. Definitely our philosophy is to reduce the debt and say in the next two to three years, you will see there will be further reduction in the debt as we draw in more operating cash. The third is about the U.K. FTA. What we hear is that the primary discussion has already completed, and there is no difference between the two governments to declare the FTA, but they are taking their own time to declare it. We feel that this will be cherry on the cake. Whether it is FTA or non-FTA, we are not concerned to that extent. We are drawing in good business in the U.K. market. We have an office in Manchester, U.K., where we have started distribution also. We are slowly inching towards more market share. Whether there is FTA or non-FTA, we are not to that extent impacted. But yes, definitely when the FTA happens, there will be a good development that we will come to level playing field with Pakistan and Bangladesh who enjoys duty-free access. Just like how UAE and Australia, the business is inching up, this will provide us an opportunity to explore and exploit the market more. Got it. Thank you, sir. Thank you and all the best. Thank you. All the best. Thank you. Thank you. The next question is from the line of Sonal Khati from Agility Advisors. Please go ahead. Hello. Hello. Am I audible? Yeah. Please go ahead. Congratulations on good set of numbers. Could you help me in understanding the valuations at which Wamsutta brand was acquired, as it was acquired for approximate INR 85 crores on a generated revenue of INR 4,000 crores. In one of the interviews, you gave guidance that this brand will add to top line of INR 800 crores in next 2-3 years and no debt has been acquired. As it is a premium brand having legacy of 178 years, how did we end up at the valuations of INR 85 crores? Definitely, good question. This was a great opportunity for us to acquire because there are very few companies which have the kind of supply chain which we have, the kind of product range which we have, the kind of innovation, and the front end and back end setup we have. Beyond Inc, we took over the assets of Bed Bath & Beyond at, say, $23 million, which included this IP of Wamsutta as well. They were a customer to us, and we were selling them product range. They were convinced that the kind of product range which we have and the kind of marketing strategies which we have evolved over a period of time provided them the necessary confidence that we will do justify in promoting the brand across the globe, not only to the U.S. and the Canadian market. We discussed about this opportunity, and we were able to convince them to buy out this brand from them at INR 85 crores. That is the first thing I would like to submit. Secondly, Bed Bath & Beyond, the retailer used to have this brand in their kitty. For the last 10 years, since 2012 to 2022, this brand did almost more than $5 billion at sales with the specialty stores like that, particularly in home textiles, which was across categories. It was not only bed linen, but it was towels, rugs, windows, and all sort of accessories, et cetera. They did a very good business in Wamsutta brand till they liquidated. That was around $5 billion, and the peak they had achieved in a particular year was $800 million. The average was around 500 million every year. This gives an opportunity for us that with a legacy of 178 years, where the brand recall value in the U.S. is more than 75%, and plus it is a specialty and departmental stores which gets us elevated to the premium and branded segment. We thought that this opportunity was good, and we acquired this brand from a long term and both medium term standpoint. We are selling like fashion bedding, utility bedding, institutional bedding, and e-commerce, where we can leverage the strength of this brand to promote it in each channel of distribution. That is the objective. We also scale up both our product profile, our positioning, our margin profile, our capacity utilization, and having a complete pursued better value in the marketplace, not only in the USA but across the globe. This was the entire objective and this was the value, and this is what we intended to have the sales which we have mentioned, that we are confident with the kind of product base and the customer base which we have. We should be able to have at least built up $100 million revenue in the next three to four years. Okay, sir. How do we plan to penetrate in Indian markets, like increase our share? Definitely, it is a good question. We are looking very positive about the Indian market. We have established and we are reaching towards better distribution as well as better exposure to the mass commerce stores. This particularly brand will give us a leverage to position it onto the premium segment over here. We see that India is a growing market where the middle class is aspiring to use better end products, and the luxury segment is also growing in India. This gives us a competitive edge to promote this product in the Indian market as well, where we are bullish on. Could you give a guidance, like what market share we expect? To return to the question queue for follow-up questions as there are- Not at the moment. Guidance for what? Like we already gave a guidance of $100 million we will do in the next three, four years. For Indo Count only. What market share do we target in Indian market? For our fashion utility segment and all that. Currently, we do have 2.5% share in the Indian market. So what target do we keep to expand it? Any target for that? Definitely, we are planning around 6%-7% of our revenues going forward because we have various strategies under our sleeves to see that how we can expand our market share in the Indian market. As you know, you see Indian market is not organized yet, and the unorganized sector is slowly getting into the organized segment. We have to see that how we strategize to see that we speak about market share in India, which is coming forth, because it is still fragmented. Okay. Thank you. Thank you. Thank you. Before we take our next question, just a reminder to all the participants, please restrict your questions to two per participant. Our next question is from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead. Good afternoon, K. R. Sridhar. Congratulations on a very good set of numbers and achieving the target and for the guidance that you have provided. Referring to your opening comments where you said that almost 200 basis points of margin losses on account of promotional activity, could you help mention what this is? Because all the brands you have acquired will be launched much later in the year. When you acquire a particular customer or when you acquire a particular promotional business, you have to see that how you can penetrate the market with that share. So we jointly decided that we will promote that into marketing, the product or the promotion in a proper way, and that is why we have to support the customer. Okay. And sir, on a strategic basis, you are hoping that by, say, March 2027, fiscal 2027, your Indo Count will be at INR 6,000 crores. So that should unlock a high amount of operating leverage if you go from currently roughly about two-thirds the capacity utilization to 80%-85%, plus the contribution from brands. But the question I have is that as a strategy, do you think you would want to keep the margin stable at 16%-18% and reinvest the additional margins into brand building, into distribution, into new product development? And therefore the margin profile as financials are presented will be more stable or do you think there is room for upside because the amount that needs to be invested in brands necessarily is going to be paid for by the brands themselves? So definitely, you see, we all work towards more value addition at each step in each business product category as well as channel of distribution. We always look for opportunities where we can make extra margin. So our endeavor is to see that how we can develop our margin profile going forward, and that is the basis of the entire strategy to acquire the brand and work out the licensed brands so that whatever commodity which we produce or whatever product which we produce currently, we can scale up to the premium and the branded segment. And definitely, once we utilize our capacity, there will be definitely operational leverage. But at the same time, as I mentioned, you see that we are in a country which is growing at a 7% GDP plus. So definitely the input costs are also challenging. And as what we see the various disruptions, we have to be geared up. It is a two-edged sword, which we need to balance it out. But to answer your question, definitely our endeavor is to see how we reach better margins going forward with both operating leverage as well as product elevation. Okay. And sir, does the brand-led strategy need more working capital fundamentally? Not exactly, but there would be some expenses which will be associated with it, whether it is talent acquisition, whether it is distribution, whether it is marketing expenses, selling expenses. So those will be associated, but as I mentioned in my earlier answer, we will have a proper brand strategy to see that these expenses get absorbed in the process and we make a higher margin. Because this will add on to the cost of the sale, and definitely we will keep aside a positive margin or an elevated margin to make on the brand itself. Because the retailer also when they position a brand, if they scale up their margin to see that how they can make a better margin on the product rather than a non-branded product. So definitely, you see there will be expenses but it will be getting absorbed in the process. No, no, I was asking about working capital. Do you need more working capital for brands versus commodity end? Not exactly. To a certain extent you will need, but not completely like you can differentiate between a normal business and a branded business. You need to keep some working capital for it when you launch a particular collection, but that will be all planned on the need-to-order basis rather than on a need-to-stock basis. Okay. Thank you, sir, and all the best. I will catch up with you another time. Thank you. Sure. Thank you. The next question is from the line of Dhaval Shah from AlfAccurate Advisors. Please go ahead. Yeah, thanks for the opportunity, sir. My question is on the gross margins. Given that the cotton prices has been declined, plus the value-added mix has also been improved during this quarter. Why the gross margins are down on quarter-on-quarter basis? Because if I understand correctly, I think Q2 and Q4 are more seasonally good quarters in terms of the branded business, right? See, we should not look at the gross margin per se. The reason being, we should look at what EBITDA margin we get. We keep that intact because the gross margin have many variants. Like say, the Forex, the cotton prices, the sale price, the product mix, the various other, like raw material which we input or the dyes chemical, the packing material. There are so many moving averages when you reach out to a particular gross margin in the business. But definitely our endeavor is to protect our complete EBITDA margin, which we have already indicated 16%-18%. That varies to a certain extent. You should look from an annual perspective, you should look at our results, and you should not look at every quarter because there are changes in seasons, changes in promotions, changes into events, different events like Christmas, New Year, Mother's Day, Father's Day, Valentine's Day. All these are at different levels you promote the goods and the retailer also promote it accordingly. You should look from our EBITDA level, and secondly, you should look at our volume growth. That's where the focus should be, and you should look on an annual basis. That's my request. And for meter wise, I think if I look at the realization per meter, I think we reached to roughly INR 380 during this quarter. And EBITDA per meter is approximately INR 58 a meter, right? Versus INR 60, INR 61 last year on a blended basis. I wanted to understand more, what is the EBITDA per meter and the realization per meter differentiation between the branded and the non-branded business, and how this per meter numbers can be improved maybe 2, 3 years down the line. This INR 58 a meter can move up to INR 70 a meter EBITDA? We do not calculate actually that way by dividing the revenue with straightaway the meters. Of course, at the end of the year, we do calculate in that way, but there are so many changes in textiles, if you know the category. That there are thread count, there are finer count, there are coarser count, there is cotton, there is differentiation in packaging, in dyes chemical. You supply a white sheet or a dye sheet. There are so many variables happening and the market responds to the trends and the consumer experience in a very different way. It is not like per meter realization. But still to answer your question, when we look at a different product category, say fashion bedding or say branded business or say branded business on the e-commerce, definitely you will find that the realization per meter will definitely improve. At the end of the year, we see that the EBITDA level, as I mentioned, should improve from 16%-18% to 18%-20%, and then 20%-22%. That is what the endeavor is. That is what we are all working for. So the entire focus should be kept on those numbers like the EBITDA numbers. Between the quarters, there are a lot of changes happening. So that is what I requested in my earlier answer also, that you should look at our company from, that is why we provide the volume guidance and the margin guidance to see that we focus on this and we achieve those numbers. Got it, sir. Okay. Thank you. Thank you. Thank you. Ladies and gentlemen, due to time constraint, we will take this as our last question. Our last question is from the line of Suryanarayan Naik from Sunidhi Securities. Please go ahead. Thank you, sir. Just understanding the cotton price scenario and the margin going ahead. Currently, we saw quarter-on-quarter beat of around 8%. Let's say we see the cotton price could be a bit base rate and there is little downside. Suppose from here onwards cotton prices improve, will it give any mileage towards the high realization focus? See, cotton prices, you see India is pretty strong into cultivation and producing cotton. That's the reason you see the cotton prices are more or less stable around the INR 60,000 to INR 62,000 mark. Going forward also as the indication is that the monsoons will be good, we expect that the cotton prices should stay in the similar band. Definitely, you see once the raw material prices are stable, you can plan your business better. Definitely, with the kind of cost structure which we have put in and strategize value addition, definitely we will try to see that how we can improve our gross margin going forward. That is the whole endeavor, and definitely the cotton raw material prices always helps us into planning much better the marketing strategy. Definitely once that happens, it gives us a competitive edge where to sell and how much to sell and what to sell. Definitely that will improve our overall business performance. Okay. Another question is that, sir, will it be safe to assume that in case the complementary products of the bath segment were to come at a lower margin, then we would do justice not selling so much towards whatever is required of this particular brand, because it may impact our overall margin. So what should be our strategy for that? Because in the bath segment, I see the lower margin compared to sheets. I did mention that we are not going overboard to sell a product. We are formulating a strategy to sell that in brand alone. Okay. We will protect that margin. Okay. Thank you. We are not going overboard to sell towels like other manufacturers. We are saying that we will sell this product as an additional complementary product in the brand itself. Non-brand, we are not focusing currently. Lastly, sir, in the current brand equation, whatever we are doing, our U.S. block is around 75%. Will it further improve or will diversification happen wherein the U.K. and E.U. get more share? Our overall big two long-term strategy is to see that we have a 60/40% ratio, 60% in U.S. and 40% in non-U.S. Once the FTAs come into play, definitely that will improve the non-U.S. percentage. By virtue of an organized market, by virtue of a larger market than other developed markets, and doing well economically too, it provides us an opportunity to sell into U.S. in a better planned way. That helps our back end capacities also to be planned accordingly to get the operational leverage because of the size of the business they offer. All these factors prompt us to sell or let us focus on the U.S. market rather than the other market, because the other markets, like in E.U. and other places, are fragmented and the order sizes are small, which do not match to our expectation of getting much more operational leverage. Definitely that push and pull always will be there between U.S. and non-U.S. markets. As a company, our endeavor is to see that going forward, we develop the non-U.S. market also to the extent of 40% and keep the U.S. 60%. At least for 2027, we can expect that the 75% contribution from the U.S. to go up maybe to closer to 80%. No, we cannot assume like that because the Wamsutta brand is a global brand. We will spread it in such a way like in India, elsewhere, as well as the U.S. also like in Canada, Mexico. This will be equally split between U.S. and non-U.S. market. Hello? Ladies and gentlemen, that was the last question for today. I would now like to hand the call to the management for closing comments. Thank you. In closing, I am delighted to share that our contribution through branded D2C and B2C channel is steadily on the rise. Our persistent efforts to expand our portfolio's reach in end markets are now well supported by the addition of Wamsutta, Waverly, and Fieldcrest. This strategic move not only reflects our commitment to growth, but also positions us for even greater success in the future. With this addition, we are poised to capture new markets, increase our market share, and further solidify our position as a leader in the industry. Thank you for your continued support as we embark on this exciting journey of growth. Thank you. Thank you. On behalf of Indo Count Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.