Q3 23/24

Jan 30, 2024

Summary

Q3 volume rose 33% YoY and 9M EBITDA and PAT grew 29% and 35%, respectively. FY24 volume guidance was reaffirmed at 90–100 million meters, while value-added products, overseas markets and debt reduction remain key priorities.

Ladies and gentlemen, good day and welcome to the Q3 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 a 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 very much. Good afternoon and a very warm welcome to all of you to the Indo Count Industries Q3 and nine months FY 2024 earnings call. I have with me Mr. Murlidharan, our CFO and Strategic Growth Advisors, our IR advisors. Happy to connect with you all once again to discuss the Q3 and nine months FY 2024 performance. Let me first highlight the industry and the business scenario. The calendar year 2023 exhibited resilience, concluding the year with an above normal holiday season. Going forward, we anticipate gradual improvement in consumer sentiment, thereby showcasing the adaptability and strength of the U.S. and other economies. Of late, the global logistic issues have posed challenges which needs to be monitored closely. Overall, inflation along with geopolitical crisis and conflicts have been the biggest challenges in international trade and commerce. In this backdrop, we at Indo Count have fared well and improved our position. Domestic industry scenario. Indian textile industry has witnessed a steady momentum fueled by strategic initiatives and a commitment to innovation. Domestic cotton prices have aligned favorably compared to international rates, positioning Indian companies for increased competitiveness. The home textile industry in India is at a pivotal moment, embracing opportunities both globally and domestically. There is a large opportunity in the global home textile industry for India, and we believe the domestic industry is ready from capacity and capability perspective to capitalize on this. Coming to our recent performance and updates. In the Q3 FY 2024, we achieved a 33% year-on-year growth in volume. Accordingly, for nine-month FY 2024, we reported volume of 68.2 million meters, a growth of 26%. It is pertinent to note here that there were bunching up of orders which led to increase in inventory during this quarter. We are reaffirming our volume guidance of 90 to 100 million meters for FY 2024 and believe we would be able to achieve the midpoint of the guidance. This is considering the near-term challenges caused by shipping delays and assuming no further deterioration of the geopolitical situation and shipping situation. Our confidence stems from the healthy order book position and better retailer confidence and the feedback. As a strategy, we have been penetrating across markets, keeping the tepid consumer sentiment into account, and this, we believe, has yielded desired goals. The softening cotton prices, along with product mix aligning to customer sentiment, have made us competitive. Our objective is to sustain the growth trend in medium to long term for optimum utilization of our capacities. Additional ESG measures in the form of investment into solar would continue, which would not only reduce energy cost, but also help boost circularity. I would like to quickly talk about our recent announcements. As all capital expenditures are now aligned and synergy creation is complete, our focus has shifted towards a proactive approach, incorporating sustainability and strategic IT measures for process improvement. With a diverse product portfolio spanning multiple geographies, we have adeptly navigated challenges and sustained consistent growth. Our commitment to reinventing and enhancing business operations through digital technologies reflects in our collaboration with Accenture. This partnership aims to standardize, optimize, and re-engineer key business processes, including manufacturing, supply chain, logistics, and procurement. We aim to better serve our customers and stakeholders by fostering a culture of agility and innovation, making this initiative a significant step in that direction. This development positions us to elevate customer service and amplify the value-added aspect of our business. The seamless implementation and integration of the facilities boosts our competitiveness and efficiency to meet the growing demand. With India's promising economic growth and the rising disposable income and aspirations of the middle class, there is expected increased demand for branded home textile products, creating significant opportunities for local brands to prosper. Now let me talk to you about our ESG initiatives. I am delighted to share that Indo Count has debuted in the DJSI, which stands for Dow Jones Sustainability Index 2022, securing a decent score of 42. We consider it as a significant milestone, highlighting our strong commitment to ESG. We eagerly anticipate the continued journey of sustainability, where every step is a stride toward a better and a more responsible future. On awards and recognition, I am thrilled to share that Indo Count Industries Limited has been honored with the prestigious BW Sustainable World Awards 2023 for India's most water-efficient organization. This accolade recognizes our commitment to improving water utilization efficiency and our dedicated approach to wastewater management, including recycling, recovery, and reuse of industrial effluents. This recognition underscores our dedication to sustainable practices, and we are proud to be acknowledged as a water-efficient organization. Now let me share with you our consolidated financial performance. Sales volume for Q3 FY 2024 stood at 19.5 million meters versus 14.7 million meters in Q3 FY 2023, a growth of 33% on a YOY basis. Sales volume for nine months stood at 68.2 million meters versus 54.3 million meters, a growth of 26% on a YOY basis. Total income, INR 727 crores in Q3 FY 2024 versus INR 662 crores in Q3 FY 2023, a growth of 10% on a YOY basis. Total income, INR 2,507 crores in nine months versus INR 2,233 crores in nine months FY 2023, growth of 12% on a YOY basis. EBITDA for Q3 FY 2024 stood at INR 118 crores versus INR 78 crores in Q3 FY 2023, a growth of 51% on a YOY basis. EBITDA margin for Q3 FY 2024 stood at 16.2% versus 11.8% in Q3 FY 2023, growth of 442 bps. EBITDA margin for nine months FY 2024 stood at INR 437 crores versus INR 339 crores in nine months FY 2023, a growth of 29%. EBITDA margin for nine months FY 2024 stood at 17.4% versus 15.2% in nine months FY 2023, growth of 227 bps. PAT, INR 58 crores in Q3 FY 2024 versus INR 38 crores in Q3 FY 2023, growth of 54% on a YOY basis. PAT of INR 246 crores in nine months FY 2024 versus INR 182 crores in nine months FY 2023, growth of 35% on a YOY basis. EPS is INR 2.93 in Q3 FY 2024, and EPS for nine months FY 2024 is INR 12.42. I would leave the floor open for the question and answers. 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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Jatin Damania from Swan Investment Managers. Please go ahead. Good afternoon, sir, and thank you for the opportunity. Yeah. Sir, in your opening remarks, you indicated that the global logistics has posed a challenge. Just wanted to understand what was the volume lost during the quarter because of this global logistics, because if you look sequentially, there is almost 30% decline in the overall volume growth. Can you help us understanding that number? See, as I mentioned earlier to you that maximum sales of ours are on FOB basis. This loss is on terms of bunching of orders, which we need to ship in the current quarter and which has already happened as well. The loss was not tremendous to us as far as volume is concerned. It only got carried forward to a certain extent because of the bunching of orders, not because of the Red Sea, because the Red Sea impacts the U.K. and the EU much more than the U.S.A. The U.S.A. is more cost centric and the frequency of the ship rather than the availability of containers. We need to watch very closely, and we need to see that how we tide over this issue going forward. Yes, sir. In terms of bunching of the order that you said or the inventories, which you have shipped in the current quarter, what you mean in terms of the quantity from the last quarter to this quarter, which was for the month of January? See, it always gets carried off to a certain extent because of the GIT, because when we ship to our U.S. company, then it is accounted for in sales when the sales really happens at the other end. This time in this quarter, particularly, we have a rollout wherein we have bunching of orders so that it gets carried forward and we need to ship at one time. Which has happened. That is the normal course of businesses many of the times. I cannot give you a definitive number that the quarter has been impacted due to the volume. But we are sure about maintaining our guidance, mid last guidance of the number that you have given. I have already reaffirmed that we should be somewhere in the midpoint of our guidance achievement according to the order book position. Nevertheless, the logistic issue is there. It should not deter it further. But you see, as far as what we observe is that it is much more cost centric than the availability of the containers. So we feel confident that we should be able to maintain both the guidance and we should be somewhere around the midpoint of the guidance achievement. Okay. And sir, secondly, you also said that your capital allocation program is mostly done. So just wanted to understand that our fashion has already started production. So in terms of the overall revenue contribution, have you seen any improvement compared to the last year? Oh, definitely. As what we have been able to achieve on the volume side, definitely the capacity utilization has improved, and which will be around, say, 64%-65% for the full year, according to whatever guidance which we have reaffirmed to you. So the revenues also will correspondingly increase, but not to the similar extent because the cotton prices have corrected, and we have to pass on the price difference to a certain extent. Also the product mix due to the consumer sentiment is also impacted. So we have to adjust according to the consumer sentiment and keep our offerings accordingly. So all these equations will decide upon the revenue going forward. Okay. But sir, our target of reaching 30% in fashion utility and institution of the overall revenue, are we intact on that number or we may see a delay on that number? No, we are on target on achieving those value-added sales numbers, which we have already formulated the strategy 4, 5 years back. We have also invested into a world-class facility for fashion bedding, which is under production. So we are quite confident that going forward, we should be able to achieve 30% of our revenues from the value-added segment as what we had indicated earlier. Okay. And sir, last question from my side. I want to understand that since we are focusing on the newer geographies, if you can highlight the contribution of revenue from the non-U.S. markets. See, our entire efforts are to see that how we spread our business to more countries other than the U.S. And we have been quite successful into getting a good visibility on the U.K., Europe, in Australia, and UAE. We are trying to further see that how we can make a sales mix of geographies of 60% in the U.S. and 40% in non-U.S. markets from the 70-30 ratio as of now. So we are working on that. We are engaging the customers and as the FTAs are being signed between Australia and UAE, there is definitely an uptick in the demand from these countries. We expect once the FTAs get signed with GCC and U.K. also, there will be an uptick into Indian exports. So definitely we are working on this, and we are quite successful into adding up new customers from new areas. So that improves our confidence that we should be able to build this ratio going forward. Sure, sir. Thank you, sir, and all the best. Thank you. Thank you. Our next question is from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead. Good afternoon, Raj Puri. Congratulations on a very strong- Sorry to interrupt, sir. I request you to use your handset, sir. Your audio is not very clear. I do not know what I can do because I am working with earphones, with headphones only. Raj Puri, can you hear me? Yes. Go ahead, please. A little louder. Yes. What I was asking was, first is, congratulations on a very strong volume performance during the quarter. I have two questions. One is that, obviously, you said that cotton prices have fed through to realizations, and the sales mix has also changed because of customer preferences. But is there a product mix change because of seasonality? You might have sold a lot of top of the bed or quilts in the previous quarter. Is there a seasonality impact as well during the quarter? Definitely there are seasonal impact in our business according to spring, summer, and fall, winter. These are two big seasons where we deliver a lot of goods, definitely. According to the seasons also there are some changes, but as we had earlier indicated that we are working on the value addition segment, like the fashion, utility, institutional bedding, and the branded business, plus the domestic business, another vertical where we are strongly working. All this will help us to increase the product mix to a richer base going forwards, both midterm to long term. That's what we are aiming for. In the current scenario, because of the gradual demand which is picking up, we need to adjust according to the consumer sentiment. That to a certain extent where the product mix gets a little bit diverted. That's the only thing. But as we have more market share, as we have more customer base, as we have more product channel base, I think this is like going forward, we can strongly believe that the value addition will provide us a much better realization as well as a margin. The realization trend that we've seen in Q3, that will continue for Q4 and Q1 next year as well? As you mentioned, and you also mentioned about the seasonality of the product when we sell. The spring, summer, and the fall, winter are two big seasons wherein Q2 and Q4 get impacted with more value-added sales. That is how the market responds. Definitely it will improve to a certain extent, and definitely going forward, as I mentioned, in FY 2025, we have already started working on how when the market normalizes, we get a better realization and better value-added mix. Okay. And sir, on your announcement of the major initiative with Accenture, how much is the CapEx that will be involved in this IT upgrade? What is the gross debt and net debt as of December 31? Those are the last two questions. Yes. As far as the CapEx on the Accenture side is concerned, it is almost close to 3 million, which we would be investing into it to reprocess, to re-engineering our business processes, so that we provide all our employees with better decision-making tools, and also cater to the overall digital challenges going forward. As far as the gross and net debt is concerned, we will come back to you, say, by the fourth quarter call. That will be giving you a true picture because currently the cotton season is on, and we are investing into our supply chain, so it will not project a true image. But at the end of the day, our entire endeavor, apart from allocating money for dividend and term loan payment, is how we can reduce our overall debt. Okay, fine. Thank you, sir, and all the best. Thank you. Thank you. Our next question is from the line of Archit Joshi from B&K Securities. Please go ahead. Hi. Good afternoon, sir. Thanks for the opportunity. Sir, can you comment a bit on how we have fared in the value-added segment, especially in utility bedding or institutional bedding and fashion bedding? How is the global competitive landscape for these three segments, especially the imports that are coming into U.S. from China? On these three accounts specifically, if you can give some information. Thank you. See, as we had been mentioning about these particular categories which were dominated by China is still strong there. That is the reason we are expecting that they should contribute to Indian market share going forward, and that is visible from the OTEXA data. As far as the opportunity is concerned, it is quite good in all three segments. Our company is working since last three, four years into establishing a name in these three areas specifically. We have been quite successful, as we have reported in end of FY 2023, a business of 19% in these three segments. Our entire endeavor is to see that how we can take this forward to almost 30% on our increased revenue going forward. This is visible, and we will come back to you with the numbers in our Q4 con call, because that will give you a correct picture. Because in my earlier answer, I had mentioned that there are two big seasons in the U.S., the fall/winter and the spring/summer. The spring/summer gets delivered in Q4, and the fall/winter gets delivered more in Q2. So you will have a correct picture for you in our Q4 con call. There, we will give you the number, how we have traveled in FY 2024 on these three product categories. Sure, sir. Just one follow-up on the same thing. While you are kind enough to give out that data by the end of the fourth quarter, could we also have some segmentation done around the U.S. imports of cotton sheets, divided into these four categories, the basic sheets and the other three value-added sheets? I think in the presentation you have already given some broad level data wherein we can definitely see that China has lost quite a bit of market share to India and Pakistan. But I think this is more on a broad-based cotton sheet terminology. If you can have also some segmentation around it, that would be very helpful. See, the overall home textile retail sales in the U.S. is gone up from $32 billion to $34 billion, first of all. In which around $16 billion is bedding and linen. In this $16 billion, $5 billion is the sheet market, and $11 billion is the other three categories market. In this other three category market, India is having a share of just 15%, where China is having around 50%. India is having just 15%. Right. We as a company have increased our target market by $11 billion in the last three, four years. Right. Therefore, we have established both the back end and the front end in order to capture a market share in this market. That is why we are quite upbeat about it on the value addition front. As you know, sheet is a commodity, whereas fashion bedding, utility bedding is more service-oriented, and institutional bedding is more service-oriented, where you add value to get a return on your overall value which you deliver. So that is where the catch is, and that is why it looks quite promising going forward. We are working towards it as a company. We have recently established and invested around INR 60 crores in a fashion bedding unit, which is world-class. We have shown this unit to our top customers, and they are showing a lot of confidence to see that they should reduce their overall sourcing out of China and shift some of the categories to India. So that is a positive sign, and that is where we are looking at much more value addition going forward in these three particular categories. I hope it is clear. Sure, sir. No problem. Thank you. Thank you. Our next question is from the line of Vikram Suryavanshi from PhillipCapital. Please go ahead, sir. Good afternoon, sir. Wanted to understand your views on margin front. This quarter particularly, we have seen change in the composition to gross margin and other expenditure. How does the margin expectation look like going forward? See, Vikram, you need to look at the nine months because there are seasonal changes and there are product mix changes and also the consumer sentiment, as I explained, we need to adjust accordingly to the marketplaces due to the inflationary measures. All this together, you should look upon what we have achieved in the nine months and what the margin guidance which we have given between 16%-18% for the full year. That explains our margin. That's what I wanted to convey. Okay. If Red Sea issue continues, will that impact at least our Europe sales, whatever we do, or how are the feedback coming from that side? See, as I mentioned earlier, of course, there are logistic issues and the frequency of the ship is impacted, the cost is impacted, the overall transit time is impacted. If it was a good season, I would say a booming business, then there would have been problem that you could not have delivered the material for the growth side. But since the consumer demand itself is above normal and it is still trending along, the issue is still on the cost side and not on the availability of container side. We need to monitor this closely as we move ahead. So far, the impact on us is not that high because of our lesser exposure onto the European and the U.K. market. I would say that we are watching the situation closely, keeping our fingers crossed, and see that because it is a global issue, it should get resolved in the next 3 months or 4 months. That is where we stand. Got it. Just last point to add, because the similar situation on a much bigger scale we saw during COVID, and there was a huge inventory built up by companies so that there should not be disturbance. Is there any possibility that we may get a demand because to build in inventory just to create a buffer in uncertain time? I do not think so at the moment. This is just the inventory has increased during this quarter due to the bunching up of orders and the rollout. That is what I already explained. Understood. We do not think because the cotton season has reached out on the raw material side. The overall availability of container is not impacted so far. The shipments are just taking 12 to 15 days more for the frequency of the ship to come back, and that is it. As of now, it is not a big concern. Going forward, it is uncertain, so we need to monitor it closely. That much only I can say. But no investment into supply chain has to be done similar to COVID, that much I can say. But as a strategy, of course, when you look at the various disruptions, we as a company have done investment into supply chain so that during the critical time, we are standing behind the customer and ensure that the supply chain is continuing, and that's where the whole strategy lies rather than building on just like in COVID, what we did earlier. Understood, sir. Thank you very much. Thank you. Thank you. The next question is from the line of Nirav Savai from Abakkus. Please go ahead. Thanks for the opportunity, sir. Most of my questions are answered. Just wanted to know our CapEx plan for the next couple of years, 2025 and 2026. As I mentioned, we are investing into renewable energy so that our cost gets reduced as well as we comply with the circularity and sustainability. That is one area where the company is investing. Otherwise, there is the essential where we are investing on the business processes, and then the normal CapEx is around INR 50 crores to INR 60 crores. That's what we are aiming to continue with going forward. All put together for 2025, would it be safe to assume it would be around INR 60 crores, INR 70 crores or maybe more than that? Including the solar and the routine CapEx, maybe INR 100 crores. Okay. Beyond that, any further expansion plans which we have laid out till now or will evaluate as and when things progress? No. Nothing as of plan. That is right. Sir, any other category beyond bedsheets which we aim to also get into? I mean, bedsheets, obviously, we have such a large presence there is a large capacity already in place. So any new product which is complementing our existing products to the same customers? Are we looking at anything like that? See, as I mentioned earlier in my answer, Nirav, already we have gone ahead with a plan to have a target market of $11 billion. The other categories in home textiles are all around $2 billion-$2.5 billion. So I should be better off into targeting this $11 billion rather than a $2 billion category, which I have already mentioned. Plus, you see the FTAs are around the corner, which will increase our overall competitiveness where we are missing our market share. So like in U.K., Europe, we have around 5%-10% market share, which is negligible as compared to Pakistan and Bangladesh, who are having 35% and 25%. So there are large tracks of economies where we can really do a good business. Let me also reiterate that countries like Russia, like Latin America, like South Africa, like even China to certain extent, post 3, 4 years, they will be net importers. There are large tracks of market which are available. As far as our business is concerned, we have just so far had the low-hanging fruit in the U.S. Why we should bother about this? The bed linen itself is a 50% category in the overall home textile market. Right. I think the 70/30 ratio which you are saying U.S., non-U.S., can come down to potentially 60/40 now. Any timelines? Would it be next 2 to 3 years or something which you're looking at? Absolutely. We have already given a guidance that we would like to double our revenue in the next 3, 4 years. Okay. The higher growth we expect from the non-U.S. markets, which is U.S., which is a large part of our overall revenues. And U.S. is also growing at 2%. The overall textile trade is growing at 2%. All right. Our industry is growing at 7%-9%, and we are growing at 10%-12%, ahead of the industry. Right. Lastly, sir, on this fashion bedding side, our production has already started and the plant is there in place. So what can be the potential revenue from the existing capacity which we have? Or is it booked completely right now for fashion bedding? We would like almost to double our existing revenues going forward. We are at 19% on the current revenue, so when I say 30% on the increased revenue, we are almost going to add that much of revenue in the next three, four years in this business. That is the plan, and we are reaching towards it. Our customers have shown a lot of confidence once we have built up this facility. You need to be having a back end completely and ensure them the security of the supply chain rather than just placing an order. You have to show that capacity to them that you can deliver to the larger customer. So far, we have been catering only to the smaller customers, but now we can go to the larger customer and give them assurance and show them the capability to deliver large quantities as well. Right. It is again a two, three year kind of a horizon where we target this 19 going 30. Yes. Which is combination of all the three, fashion bedding, institutional, and also the B2C part, right? Utility. Utility. Yes. Got it. That's it from my side. Thank you. Thank you. Thank you. Our next question is from the line of Surya Narayan from Sunidhi Securities. Please go ahead. Yeah. Thank you, sir, for giving me opportunity. One question is that May I request you to use your handset, sir? Your voice is muffled, sir. Pardon me. Yes, sir. Please go ahead. Okay. Thank you for your opportunity. A couple questions. One is that, you had just said that you plan to double the revenue in next 3 years, 3 to 4 years. The current capacity is around 150 million. What would be the peak capacity when I believe there will be some batch losses or something could be there, and maybe attaining 153 million meters could be difficult. If that is the case, then what is the peak capacity we can attain? Number two is that, Europe has been also a bigger market. What kind of share currently we are having on our revenue share, and whether Europe situation is improving or not? That is two questions. First one is that we can achieve as close to 90%-92% of the overall capacity, depending upon the product mix. That is the answer to your first question. As far as Europe is concerned, we are currently along with U.K. and Europe because they were together, say around 15% of our business on the revenue side. Okay. As far as the market in Europe is concerned, as we mentioned that gradually it is improving because they had gone through this geopolitical situation in a big way because the countries were all involved into the discussions of cutting across supply chains, et cetera. These countries are reviving the demand, and there is a demand revival which is seen. Going forward, we expect things to improve because the consumer sentiment is also improving. That's what when we look at the order position from the customer base out of Europe is concerned. When we were actually getting good revenue from the Europe side, compared to the Europe and America, which was the most fashion conscious market? I believe Europe could be. I just require your confirmation. USA is much more organized and structured, and Europe is still fragmented with so many countries so that the cultural diversity is there. The product base is still diverse and fragmented. That's the reason in Europe too there are regional retailers which are successful. For example, Carrefour is there, JYSK is there, and M&S is there, Continent is there, Metro is there. If you look at these retailers, they haven't been able to garner that much success like a Walmart of the world because the cultural diversity is there in Europe. But having said that, the value addition which they demand is on similar levels to what the U.S. is. We see that since we are also very committed on the sustainability side of the businesses, recycling and circularity product and organic products are finding much more acceptance in this market. When we work upon those value additions, we definitely anticipate better margins. Therefore, we see a good uptick in our margin when we have this FTA and we are able to explore all the customer base who are getting service out of the duty-free Pakistans and Bangladesh of the world. Definitely these markets are quite promising as far as the value addition is concerned. Going forward, since we are targeting this market with our entire product mix, they are also looking at the China Plus One strategy as well as looking at India's entire value chain and raw material commitment. I think those are the favorable advantageous situation which India has. Definitely there will be an uptick into their sourcing from India and that will help all of us in the industry to grow. Okay. Sir, you said that now 90%-92% will be the optimum. If that is the case, then we are getting a volume data of around 140 million meters. Currently we could be hitting FY 2024 with 96 million meters, what I believe, though you have a little bit higher in the, let's say, 100 million meters on the target. Are you expecting, if I say the current value growth is not that high, are you expecting value growth also to propel the doubling of the turnover? How is it? No, absolutely. The value and both the volume growth will be there. But as I mentioned, we should first of all look at the full year and secondly, the consumer sentiment also we need to take into consideration. Right. We have to see that how we garner more market share and when the market normalizes, then we will get the necessary advantage and through a richer product mix we will be able to grow the value also. We are quite confident because we have the fundamentals set right both at the front end and the back end. Definitely that advantage we will get because when we start with a customer we start with not a value addition program, but with a mediocre, middle order, you can say a program. Then we elevate towards the value addition slowly and that's how we approach the whole subject and the strategy. I think going forward this will help us drive both value and the volume as they will feel quite confident in us to wherein we specialize on the bed linen side of the home textile business. We are specializing in this category, not generalizing. That also favor which we get from them because then they can expect good service out of us. Sir, your Q4 is nearly similar to Q2. If that is the case then we could be hitting around 28 million meters for Q4 and that could be 96 million meters against your upper end of 100 million meters as target. What kind of volume you are figuring out for FY 2025 and FY 2026? See, we should be having more visibility in March so we will be able to give you better numbers for FY 2025 in our fourth quarter call. As far as this FY 2024 is concerned, I have already mentioned in my speech that we should be able to achieve midpoint of our guidance very well because of the order book positions which we have and so far whatever which we have shipped out stands as on date. Where you see the cotton prices moving from here, are you seeing as we progress towards the summer the cotton prices will increase a bit? Well, definitely when the season is on, the arrivals are large and that brings about the averaging out of prices. It is close to MSP today because of maybe the lower demand overseas for raw cotton and that's the reason you see the Indian prices are lower than the American cotton prices and it should remain in similar range going forward. As we speak, definitely if the demand improves, the prices tend to move up, but we have to watch the situation and take our own strategy forward of covering the necessary cotton during the season so that we secure our supply chain and that's what we are doing as of now. Okay. Thank you, sir. Thank you. Thank you. Our next question is from the line of Yash Sonthalia from Bouillon Capital. Please go ahead. If I see our volumes for nine months, and if I compare it with FY 2022, which is comparatively a good base in comparison to FY 2023, we have not grown very well. Hello? Hello? Hello? Mr. Yash, we are unable to hear you. Hello, am I audible? Yes. Can you repeat, Mr. Yash, because I was not able to hear you. Am I audible now? Yeah. Our nine-month volume of FY 2024, if I compare it with FY 2024, the reason for lower growth or degrowth is this. Sorry to interrupt, Mr. Yash, but your audio is not clear. May we request you rejoin the queue, please? Sure. Our next question is from the line of Palash Kawade from Nuvama Wealth. Please go ahead. Thank you, sir, for the opportunity. Am I audible? Yeah. Yeah. Okay. My first question was, how are the inventory levels right now? Are they at pre-COVID normalized levels? Yeah. I already answered that there is nothing like a pre-COVID and post-COVID level. The inventories are there due to the bunching of orders. There is a rollout, which we need to deliver in this quarter, and which will happen. Okay. Do you anticipate any more buildup because of these supply chain disruptions? Not at this moment. Okay. My last question was, any update on FTAs? FTA with U.K. What we heard yesterday is that they need to finish this before March. A lot of meetings have taken place between the two delegations, two countries, and we hope that it gets ended soon. That is what we keep on tracking, and that is what the status is. Let us keep our fingers crossed and see that it happens before March, because there have been a lot of deliberations and a lot of things have not clarified so far, I would say. There may be a couple of hitches here and there, which I think will be sorted out before the elections, what we feel. Okay, sir. Thank you. That is it from my side. Yeah. Thank you. Our next question is from the line of Prerna Jhunjhunwala from Elara Capital. Please go ahead. Thank you for the opportunity. Congratulations on good volume growth that you reported this quarter. Just wanted to understand on the margins, I do not know if I have missed the comment, margin of 14.6% excluding other income is a bit lower than your annual guidance. Was there any one-off or any product mix change that has happened this quarter? No, the other income represents also the Forex gain to a certain extent, Prerna. As an exporter, we need to, under Ind AS, show it as other income. Otherwise, you see, the Forex is an integral part of our business. Whatever hedging or realization which we do is a business income, because that we already consider in our pricing. I think you should consider it not as a purely other income, but part of our revenues. If you do that, then you will get the correct picture. Okay. Apart from that, there is no one-off cost or product mix change also in this quarter that we should have a note of? No, I don't think so. It is purely as I mentioned, there are two large quarters and two normal quarters as far as our business is concerned. One is Q1 and Q3 are normal, and when we deliver Q2, it is for fall and winter, and Q4 is spring and summer. So definitely some product mix gets changed over this cycle. But definitely as a strategy, the overall product mix doesn't get changed because the company has positioned between mid to high segments. As I mentioned continuously and consistently, that we are targeting value-added businesses going forward, just like in fashion bedding, utility, institution, e-commerce brand, license brand, B2C business, domestic business brand. So all these areas we are working on continuously to see how we have a richer product mix going forward, and the customers are accepting it. Because of the China Plus One also, who are dominating this currently, there is a shift of their market share to us, to India as a whole. So we feel confident that going forward, we should be able to increase the ratio of these businesses, and therefore our value-added business will grow, which will also help us in improving our margins. Okay. Understood. Sir, any comment on the GHCL integration? What is the status now, and where do we stand with respect to customer level integration as well? No, the GHCL integration has happened on time, as you can clearly observe that if we are at midpoint of our guidance, then we did need a capacity of this kind for our further growth. So it has justified our acquisition, number one. Number two, the integration has been seamless, and we have reported earlier too that the integration has happened seamlessly and it is working in our favor. As you can see from our margin profile, we have been able to elevate the margin profile of the customers whom we were catering to by providing them an end-to-end solution. Going forward also, we'll work upon it to see that how we can leverage their customer base to a better margin profile further. I think the overall integration is very good, and going forward also with our business reprocessing, et cetera, digitization, where we are focusing, we will see to it that we further utilize this asset more judiciously. Thank you so much, sir. And all the best. Thank you. Thank you. Our next question is from the line of Simran Bhatia from Almondz Financial Services Limited. Please go ahead. Yeah. Thank you, sir, for giving me the opportunity. I have two questions. I was going through one of the slides that your net debt has bring down from INR 900 crore in FY 2022 to INR 589 crore in FY 2023. Can you give at least next 2 to 3 years of debt reduction guidance of where we are seeing the Indo Count going forward? Secondly, what will be your asset turnover ratio, fixed asset turnover ratio in the upcoming year, just to have idea, in FY 2025 and FY 2026? As far as the debt reduction, I have already answered that we have completed our CapEx plans by investing around INR 1,100 crore in the last 2 years into streaming into fashion bedding, into this acquisition, which we took for further capacity additions, which was needed for our further growth. Those have acted all in our favor. Going forward, our entire endeavor and as a philosophy of the company also is to remain debt-free. Our entire endeavor, apart from allocating our profits for dividend and for the normal CapEx, it will go towards reducing our debt. But whatever is required for our growth, compliances for our business, the working capital will be designed accordingly. Because whenever there are challenges, we need to invest into supply chain and to see that we really deliver to our customer the necessary product and the service level. Definitely, that will be considered towards how we reorganize or organize our working capital going forward. But our definitely aim will be to reduce our overall debt situation. Our long-term debt is getting naturally reduced, which we have in current. The working capital also, sometimes it is a little bit seasonal because we buy cotton in the seasons and we utilize it. Whenever the realization is there from this inventory is being used to further reduce the debt. This will be the overall strategy. In the next 3, 4 years, we would like to become a debt-free company. That's what I can Great, sir. And secondly, on the asset turnover also, we are working upon. As I mentioned, we look at the consumer sentiment, we look at the market share, we look at our capacity utilization, and there are various facts which we need to consider due to all these inflationary measures and geopolitical situation, and to see that how we turn around our assets very well. That's what we have done during this year as well, if you can see our overall nine months growth of 26% volume. So definitely our endeavor is to have a better asset turnover going forward. Great, sir. Great. Thank you, sir. And all the best. Thank you, sir. Thank you. Thank you. Our next question is from the line of Pawan Kumar from Shade Capital. Please go ahead. Thank you, sir, for the opportunity. Am I audible? Yes. Please. Sir, can you give some color on your domestic business? What is your aspiration in the domestic business? Definitely, the domestic business is looking upwards. We have worked upon in the last three years on building the team, building the distribution, different points of sale, the product categories, the mix, and we have been quite successful with it. In FY 2023, we have informed that we are at 2.5% of the revenue, and in the next three to four years, we would like to set a target of 7% to 8% of our increased revenue to come from the domestic brand. We are working upon it. As India grows into a 5 trillion to 7 trillion economy, definitely the middle class is aspiring for better end goods. This will provide definitely an opportunity for us to see that how we grow this business amicably. This is what we are focusing upon, and we are quite sure that it should do well going forward. And sir, are you focused on value-added segment or all the segments in the domestic front? Absolutely. Because we have been in the commodity sheets business for quite a long time, and that's why we have chartered a roadmap that we should go in for much more value addition, because now we have the proper experience, expertise, and the reach globally to all the customers and all the countries. We are exporting to 54 countries, so we have got a good reach, and that's why we are leveraging all this to see that how we can explore new ideas, innovation, to see how we can add value to our business. We have different verticals where we are working upon. Definitely, you will see that in the coming year, we are quite confident to see that our overall value-added business ratio will go up. And last question. What about e-commerce and the other digital channels? What sort of revenue you are targeting there for say, coming years? They are also doing extremely well. We reported 10% of our revenue coming from e-commerce, and that is also growing. We'll come up with the percentage in our Q4 call. Definitely, the overall e-commerce business globally is also increasing, reaching up. So this is a good channel for distribution, and definitely the company is all geared up to see how it can capitalize that moving forward. Thank you, sir. These are my questions. Thank you. Thanks. Thank you. Thank you. Ladies and gentlemen, due to time constraint, the last question is from the line of Surya Narayan from Sunidhi Securities. Please go ahead. Yes, a couple of questions, follow-up questions. One is that now you have two licensed brand tires. One is your Diam and another is your Jasper brand. Here, what kind of royalty arrangements or anything is there or is it on some other basis? Sir, it is a normal royalty which we pay for a licensed brand, which is usually there. There is nothing very big commitment from our side because, you see, they are interested into exploring how they can promote their brand effectively, and they found a good partnership with us. Because of our complete product portfolio, which we had assured them to deliver, that is where the whole confidence level is. These brands are doing it well, and they should do extremely well in the future. The reason being, we have been able to establish the proper product portfolio and also have displayed this at the exhibition as well as the market week in the U.S., and we had a good response. I can only say that we will be reaching towards better numbers in the future for both the brands. Diam, we have launched in FY 2024, and we have a good traction of it going forward, and we had a good response to our launch. I can only say at this moment that both the brands will do well going forward. Okay. Sir, the last question is that in order to stay asset-light, we are adopting a lot of models in the upstream segment, wherein we have captive yarn and we outsource yarns, and we also manage to do some job work from outsiders for the yarns. Or let's say even we buy also greige. If you can throw some light on that, what are the compositions of each segment at the moment? Or let's say in future, what will be the constituents of captive versus outsource to job work and work greige? I can only say to you that our overall internal captive consumption is around 25%, and the rest we outsource. Depending upon how the raw material, the yarn situation, the greige situation, and the other inputs behave. According to the demand and supply, we outsource. Since we are almost a debt-free company and we have AA rating, we are good paymasters too, and we are one of the largest source of this product categories in India. Definitely, we have a good vendor base and good relationship with them. So we are quite sure to secure our supply chain with them periodically. And definitely, we get an advantage because we are long-term players, and we assure them a good business. I can only say that this is working in our favor because there are a lot of changes happening on the raw material side, as you can observe that at times people are going in for recycled material, for circularity material, for organic products, for various other inputs. So we have to be very flexible into how we secure our supply chain, and that has worked in our favor during COVID level also, where you could see that we have been able to protect our gross margin in spite of the spike in the cotton prices and the availability of cotton. So definitely, the entire model is workable, and we have shown consistent performance and growth with this model. And we are quite sure that going forward also, the way we are set up strategically, we have been able to do well, and we will do well. What is the Egyptian cotton quantity of volume in our total raw material stream? That we cannot define because you see the market depends upon demand and supply, the consumer sentiment, the consumer taste, experience, various factors. We cannot define the- No. I mean, for FY 2023, what was the case, and till date how it has turned out. That is my point. No, that we can provide you offline, gentleman. We cannot do this online. Okay, sir. Thank you, sir. Thank you. Thank you. That is the last question for today. I would now like to hand the conference over to Mr. K. R. Lalpuria for closing comments. We are confident of our strategic initiatives, which will lead us to a promising future, setting a benchmark in value creation and corporate citizenship. We eagerly embrace opportunities and challenges, unwavering in our commitment to a sustainable and prosperous future for Indo Count and all our stakeholders. Thank you very much. Thank you. On behalf of Indo Count Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.