Welcome to Gokaldas Exports Limited's Q4 and FY 2024 earnings conference call. As a reminder, all participants' line will be in 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Binay Sarda from EY LLP. Thank you, and over to you, sir.
Thank you, Sejal. Good morning to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. It must be viewed in conjunction with our business risks that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements.
Please note that we have mailed the results and the presentation, and the same are available on the company's website. If you have not received the same, you can write to us, and we'll be happy to send the same over to you. To take us through the results and answer your questions today, we have the top management of Gokaldas Exports Limited, represented by Mr. Sivaramakrishnan Ganapathi , Vice Chairman and Managing Director, and Mr. Sathyamurthy, Chief Financial Officer. We'll start the call with a brief overview of the quarter gone past and then conduct Q&A session. With that said, I'll now hand over the call to Mr. Siva. Over to you, sir.
Thank you so much. Good morning, everyone. Happy to have you at our earnings call for the financial year FY 2024. In the financial year, the consolidated revenue of the company grew by 6.8% to INR 2,409 crore as against INR 2,247 crore in the previous year. In Q4 FY 2024, the company delivered a consolidated revenue of INR 818 crore against INR 560 crore in the previous year. However, if you look at growth excluding acquired entities, the revenue in Q4 grew by 13.9% year-on-year to INR 604 crore. The company delivered an EBITDA margin of 11.8% for the year as the newly acquired entities pulled down the margin. The company continued to deliver exceptional performance in the existing business and is working towards continuous performance improvement of the acquired entities.
For most part of FY 2024, the retail industry continued to be in an inventory overstock position, resulting in brands reducing their apparel purchases by 20% in the U.S., 19% in the E.U., and 28% in the U.K. The inventory destocking cycle is now coming to an end, with many fashion brands showing reduced inventory, improved financial performance, and a renewed appetite to buy. In such a challenging environment such as last year, your company's like-for-like revenue dropped by 2.3% YoY compared to a 10% drop in Indian exports in the same period, indicating the resilience of the company in face of adversity. Sensing an opportunity to further consolidate its position in the apparel industry, the company completed the acquisition of Atraco and Matrix, enabling the addition of new product offerings such as high-volume knitwear, access to low-cost locations, along with clear access to mutually exclusive new customers.
The company invested INR 934 crore for the purpose of these acquisitions. After the acquisition of these two companies through a combination of debt and equity, the company had a net debt of INR 336 crore as of March 31, 2024. Subsequently, the company raised equity capital of INR 600 crore through qualified institutional placements in April 2024, which has helped the company to turn net cash positive. On the cost front, the company faced several headwinds, including an increase in statutory minimum wages, ramping up employees in anticipation of volume growth in the second half of the year, startup costs at a new unit, and one-off expenses related to the two acquisitions. Further, the step-up in demand from major buying regions last year led to price pressures impacting margins. The company generated cash from operations to the extent of INR 266 crore.
The company continues to seek further integration of the acquired entities over the next four to six quarters. We see strong demand traction for the existing entity, while the newly acquired entities will require handholding for about two to three quarters to ramp up the demand from existing levels. This will help improve operating margins of those entities. The newly acquired entities expand the product categories, add low-cost manufacturing locations, give access to new markets, and bring new customer relations. Effort has been initiated to leverage all these advantages. To prepare for the next phase of growth, the company has added talent to its management bandwidth and at multiple levels. The long-term prospects for the industry remain intact, with a continuing shift of global sourcing away from China, supplier consolidation towards efficient and well-capitalized players, and supply-side instabilities in several countries.
Favorable currency, PLI, and FTAs with key markets should drive the company forward toward a strong future. Our company, Gokaldas Exports, is one of India's largest apparel makers, exporting to over 50 countries. We employ about 50,000 people, a large proportion of whom are women. This is a sector that employs over a crore of people , has the potential to industrialize small towns, creates more jobs per unit investment compared to any other industry, and has a high share of revenue that's both as wages. In short, a highly desirable industry for social employment. We at Gokaldas remain focused on strong operating performance and will continue to deliver with all the capabilities that we have. I thank you for listening, and I would be happy to address any questions that you have.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Romil Jain from Electrum PMS. Please go ahead.
Yeah, hello. Thanks for the opportunity. Can you hear me, sir?
Yes, we can hear you.
Yeah. Sir, first question is on the margin side. I think when we acquired the entities, the presentation showed that they are decent in terms of margins, more than 10% odd. In this quarter, we have seen some impact, right? I think if I just subtract the consolidated from the like-to-like that we have given, I think we are at 3%-3.5% margins. You mentioned about some one-off costs and also, can you just explain, if you exclude these costs, what can be the normalized margins that we can expect with the efficiencies where we can reach maybe in two quarters or so in three quarters or so?
As far as the acquired entities go, we have two of them, Atraco and Matrix. I think in normalized operations, Atraco should be over 10%, 10.5% EBITDA margin. And Matrix should be at about 11% odd EBITDA margin on an ongoing basis. What we had, and this will happen in a few quarters, and beyond which, our endeavor would be to take their EBITDA margins to Gokaldas's levels, which itself, in my opinion, will at least take four to six quarters before we can get to that level. In the fourth quarter of last year, when we acquired Atraco sometime in January, we had taken over Kenya's operations on an asset purchase basis.
This resulted in us having to terminate all the employees, the workers, and then ask them to rejoin the Gokaldas entity, which was the new asset that we put in place on the same terms and conditions. Unfortunately, in the process, there were unions which came into play sensing an opportunity to demand a higher pay from the new entity because there was a process involved of termination and rejoining, which resulted in some sort of industrial action by the employees. And we had lost some bit of production in the transition. We also had to deal with the rebadging changeover of employees, which resulted in quite a bit of lost production. We almost lost two to three weeks of production. And to make up for that, we had to incur overtime.
We had to incur some air freighting of goods, etc., which impacted profitability in that quarter, which might mean some of the residual airlifting may have to happen in Q1 as well. But since then, the production has stabilized. The rhythm in the operations has come back, more or less. So we went through that change, but we thought it was a desirable one rather than cave in at this point in time to industrial action. And that is the reason why we had a little bit of setback in terms of margins with Atraco. This is, I would say, an initial teething trouble. Most of it is behind us already.
And in the quarters ahead, that should take care of itself. As far as Matrix is concerned, what we have is only 19 days of overlap in that quarter. So the margins which come from there are hardly significant. It was very, very insignificant. Going forward, as I said, we anticipate an EBITDA margin from these two entities at the level of about 10.5%-11-odd percent on an ongoing basis. And our endeavor, as I said earlier, would be to take it up to GE levels of EBITDA margins in a year, year and a half, more likely in a year and a half.
Okay. Okay. Got it, sir. And what would be the utilization [audio distortion]
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Sorry. 39 billion pieces. We have current capacity for totals, where we can see this capacity going up by FY 2026.
See, we don't give projections for the years ahead, and it would be unfair for me to go out and claim a certain number. Our endeavor would be to grow as fast as possible. We generally tend to focus on a 15-odd percent YoY growth every year. Of course, there will be periods when we will take advantage, take the opportunity to grow even faster. That is the trend that we will maintain over the next several years. Having said that, for this year, you talked about Atraco and Matrix. I think we should see at least them trying to do their revenues that they did last year or more. We will ensure that we will focus on delivering those. Atraco last year did about $90-odd million.
We are hoping that we should be able to do that, and if not, even better if the trends are happening to be seen. Similarly, Matrix, which did about INR 450 crore-INR 500-odd crore, our aim will be to try to see if those numbers are met or if not, even better if. So effort will be going on in that direction. Gokaldas itself, as an erstwhile entity, will continue to grow aggressively because we have a well-developed platform and a strong customer traction. So we should see strong growth in the base business as well. Overall, I would think that our growth trajectory is more or less in the region which I mentioned. We will continue to focus on avenues where we can extract more growth as and when possible.
The new capacity additions that we have had will always support us in this direction in terms of being able to deliver the revenues. As far as capacity in number of pieces are concerned, it depends on the product mix. Over the last year, we have seen a little drop in outerwear business as a proportion of overall business. There, the number of pieces are low, but the revenue per piece is high. The reason is that, A, there was an inventory overhang, particularly in outerwear, and B, exceptionally mild winters in the west resulted in an exceptionally high outerwear inventory. It took a little longer to clear the inventory overhang in that product category, resulting in lower demand. Then we pivoted more to regular products where number of pieces went up.
So if you look at this financial year, our number of pieces shipped went up pretty significantly. And this will keep shifting depending on the market conditions. So when FY 2024, we shipped about 29 million pieces. And my hope is in FY 2025, even if the product mix changes to a little more outerwear, I believe we should still be able to do this or even better in terms of number of pieces shifted, which gives you a sense on where we are heading as far as revenues concerned.
Right. So my next question is on the demand environment and how if that is improving, can we see any improvement in the realization? I can understand about the mix, but overall, on the realization front, if demand improves from the current level, can we expect some kind of improvement in the realization as well?
So if the demand improves, realization will improve. And that is the logical way of looking at it. Last year, we were hit considerably from a demand perspective. Global demand or imports by key regions fell by almost 20%. And when you have a 20% reduction in demand, you can see the mayhem that it creates in the supply chain. It was almost as if COVID hit us again. During COVID, the demand fell by over 25%. So we faced a 20% hit. So we weathered that storm fairly well despite global headwinds. So obviously, it had an impact on the margins because if all the supply chain was impacted and demand falls, clearly, brands or buyers get an opportunity to get some price saving by getting people to compete with one another.
As the situation improves going forward and the demand is coming back, the pricing power will come back. But my sense is the pricing power will take some more time before it reaches because the full demand situation has not been restored. Even in Q4, there was lower imports compared to the Q4 of previous year. So it will change. It will slowly turn. But I suspect over the next three to four quarters, the full power of pricing will not return back. We could see that in FY 2026 more than in FY 2025.
Thank you, sir. Thanks for the understanding and all the best for your quarter.
Yeah. Having said all of this, from a margin perspective, right, while there will be pricing pressure, there will be cost pressure, like last year, we had wage cost go up almost by 9% in FY 2024 over FY 2023 because minimum wages went up, DA went up, etc. We tend to overcome that with better and better productivity through automation and higher efficiencies in performance itself. So productivity per employee going up, more automation helping in us delivering more garments per machine kind of effort. So that effort will continue to offset some of the margin pressures that we see. This endeavor will continue, and we continue to look for opportunities to improve our operating performance.
Yes, sir. The integration will also maybe in next four to five quarters, once integration of both the acquisition happens, I think that should also help you to add to your efficiencies and margins, maybe in FY 2026.
100%. 100%. In fact, integration efforts are fully on, and there's a lot of work that is going on. Keep in mind that Atraco was acquired only in January, and Matrix was acquired in the late, almost end of March, so the end of that quarter. So it's only a few months since we have acquired now, and integration efforts are fully on. We are seeing a lot of green shoots in that effort. So far, the integration is going very well as planned, and we are slightly ahead of the plan so far. But then these are very, very early days, so I wouldn't read too much into it. As I said earlier, four to six quarters, we should have most of the integration plus margin improvement efforts underway, and we should start seeing strong benefits flowing from there.
Thank you, sir. Thank you. All the best for your quarters ahead. Thank you.
Thank you. The next question is from the line of Anush Kumar from Spark Asia Impact Managers. Please go ahead.
Good morning, sir. So my first question is on the employee cost. Can you give an outlook on that? And also, in Kenya, the rebadging of employee, is that done with that quarter alone, or it will continue for the next quarter? And also on the increase in wage in Bangalore, Karnataka. So how long it will persist, and what is the outlook for FY 2025 on employee cost, one? Question number two, can you give this is a bookkeeping question on revenue. What is the revenue of Atraco for Q4, which is with respect to Atraco's calendar first quarter of the calendar year? And the margin? Okay. As far as the employee cost question is concerned, the issue of employee rebadging, etc., is over as far as Atraco is concerned.
So there is no more employee cost-related problem which will come in the quarters ahead. Having said that, the lost production in Q4 will have a continuing impact in Q1 as well as we're still behind schedule as far as the deliveries are concerned to customers. Having lost production, we can't overcome overnight. So it takes time for the production to normalize. So because we're still catching up on delivery, the factories are chockablock with orders, and we have to clear the backlog. So there will be some air freight-related costs, etc., because of delayed delivery, which is a flow-through from Q4 into Q1. So there will be some amount of financial impact, but normal, and that should get cleared out in Q2. So that's as far as the rebadging and the early acquisition-related issues as far as Atraco is concerned.
As far as the employee costs are concerned, in India, this year, we have had a 5% growth in employee cost, 4.5% or 5% growth in employee cost because of DA increases, which we had to absorb. The immediate impact will be, of course, rising costs overall. Employee costs are almost 25%. I mean, labor cost is almost 25% of revenue. If labor cost increases by 5%, it impacts margins by 1.25%. We then start working towards offsetting it by further productivity gains. So that effort will be on, and it should start percolating in the quarters ahead. So we are working on it. But immediately from April, we saw 5% growth in employee costs, particularly in Karnataka. But this was also seen in other states where we operate, namely Madhya Pradesh, namely Andhra Pradesh, and Tamil Nadu as well.
All these states, prior to elections, have some of these states have also gone ahead and increased the minimum wages. So all of that, we are absorbing as we speak. But by and large, we still hope that we should be able to offset that through productivity improvements as the year progresses. In terms of very specific employee costs and trends, I would defer to Sathya. Sathya, you want to add some more color there?
Yeah. See, I mean, I would urge you to really look at the employee costs. It completely depends upon the product mix what we operate. It varies. And as you see, it's a mix. When we present it, we request to look at it both material costs and employee costs together. Subject to the product mix, the ratio, the percentage will vary between the material costs and the labor costs depending upon the labor component of the product category what we operate. So during the last year, when you compare FY 2024 and FY 2023 for Gokaldas on a standalone basis, the employee cost is slightly more compared to last year. It is also the factor of the product mix change.
When you have outerwear and casualwear, more of the casualwear, the labor component is more, and that also has contributed to that. But overall, when you look at it, both material cost and labor cost, we are in the range of 79%-80%, and that's the range as far as Gokaldas is concerned. So for the last year, for the product mix, we were around 32%. But in the previous year, it used to be around 28%. It varies. But for the correction, whatever, 9% labor cost increase what Mr. Siva talked about. Otherwise, it is also dependent on the product mix. Compared to that, if you look at Atraco, Atraco's employee cost is in the range of 25%-26% of the revenue, and Matrix is around 28% if it meets the.
It is for the quarters, sir?
It is a trend what I'm talking about. As far as Atraco is concerned, it's for the quarter. For Matrix, it is based on the last year number I'm talking about. Because.
Have you budgeted this number? What would be the proportion of revenue which would come from Atraco and Matrix once the full consolidation happens for FY 2025?
Okay. First, we were asked about the Atraco. For the last quarter, Atraco's revenue number, last year, Atraco, last quarter, Atraco, we achieved a revenue of INR 201 crore. At the operating EBITDA level, we did almost 5.7%. That is before the one-time cost adjustments what we referred. So at operating level, we have got 5.7%. Okay?
Yes. Sir, also on the for FY 2025, what would be the revenue mix which would come from Atraco and Matrix? If you could bifurcate that and tell, it would be helpful, the budgeted numbers.
In Atraco, the product mix, current mix, we do not really see any change because largely, the product mix of Atraco is 75% is coming from the bottom wear, and 14% is from sportswear, and about 11% only casual wear. That's the product mix what they do. And we do not foresee much as far as the mix change is concerned for the current year. Similarly, for Matrix.
Matrix?
Yeah. Matrix is doing 80% casualwear and 14% outerwear. So given that mix, only for H2, if there is any change, slightly it will change. But we tend to really operate at the total material and labor cost component together. We tend to really see that we will be able to operate at the same level as we see in the last year.
Sir, can you give an outlook on cotton now that 1/3 of our business will be on knit, sir? What is the cotton outlook for FY 2025, cotton price outlook for FY 2025?
See, we really are not very dependent on cotton prices. We buy fabric. Fabric is our raw material. By the time cotton prices get impacted, cotton gets converted into fabric. Cotton's component in fabric is low. We tend to have fabric prices pass through. We tend to price our contracts. Unlike any other company where we have which are vertically integrated, we don't have a huge dependence on cotton volatility. Of course, when cotton prices go up significantly, which happened about two years ago, where cotton prices almost at one point reached about INR 1 lakh a candy, doubling from INR 50,000, the impact on fabric pricing at that point was 10%-15% only. For us, it is not a major cost component in that sense. We tend to, as far as possible, pass it back to the customers. We are not exposed to volatility of basic raw material pricing.
Sir, one last question. Can you throw some guidance on revenue for FY 2025 considering the fact that there will be full consolidation of Matrix and Atraco? Thank you, sir.
As I said, we don't give revenue projections. You have fairly good amount of data from whatever information that we have provided. And as I continue to maintain, we will seek growth as well in our business. On an overall basis, we try to grow at a minimum of 15%. So based on that, it's easy to project. I don't want to give out a number at this moment because there's a lot of moving parts, and our endeavor will be to even better some of these numbers. So please bear with us.
Thank you, sir. Thank you so much.
Thank you. The next question is from the line of Gautam Trivedi from Nepean Capital LLP. Please go ahead.
Yeah. Hi. The question I have is with respect to this China + 1. I was in the States just two weeks ago, and I went to a Costco, for example. I saw products being made in garments I'm talking about in various countries from Nicaragua to Mexico, China, of course, and Guatemala, and some even in Thailand. So I'm trying to figure out how successful is this China + 1 strategy from India and how much are we benefiting from them?
Okay. Great question. Thank you, China + 1 is playing out more and more. I spent a lot of time with customers in the last 15-20 days. Across the board, everyone is under pressure to shift their supply chains away from China. When I say shift the supply chain away from China, even there is a pressure on Vietnam because Vietnam, which also produces a lot of garments and most of the Vietnamese garment players are China-based companies, their supply chain, in turn, is linked to China. Their raw material, which is fabric, prints, etc., come from China. Many of the brands have a stated intent of reducing their dependence on China because of geopolitical pressures that are being exerted on U.S. companies.
Regardless of which party is in power, the dynamics are such that the effort to peel away from China continues, which really augurs well for us. In fact, we are seeing fairly strong traction coming from brands seeking incremental growth over the next three to five years. Remember, moving supply chains is not an easy task for any brand or anybody as it takes years for all of the capacities to come up. Even if we want to add capacity, there is a certain timeline to put a new factory, etc., etc., get the raw material capacity up, and so on and so forth. So all those will take about three to five years to pan out. But the directional thrust is so that most of them would like to buy more from India. Now, there is also a component of season.
So if you go in the winter, you will see a lot more products coming in from China, Vietnam, and those areas because winter products are more synthetic-dominated, and India does not have an adequate synthetic fabric ecosystem. But if you go in spring and summer, you will find products in the market which are a lot more India-dominated because the fabrics are cotton viscose and those kinds of fabrics. So it depends on when you went shopping in some of those markets that you will see Indian products or non-Indian products. Having said all of that, overall, in every season, you will find that made in India will increase going forward. Last year was exceptional as most brands had excess inventory overhang, so they were also sending goods from previous years. This should change as we see as we move forward.
We ourselves, from all the brands, and not talking of one single brand, all the brands are seeing an upward pressure in demand. So there is a lot of positivity going on. And many of this is not because they're selling more garments than they sold in the previous year. It's just that they want to buy more from India as compared to the previous year.
Understood. That's good news. Did I hear you right earlier on the call saying that the overall demand last year was down 20% year-on-year? Is that right?
Yes. So overall demand from the U.S. was down 20% in FY 2024. And that is the 12-month up to March 2024. Overall imports, U.S. imports of garments was down 20%. If you look at E.U., it was 19% down, and U.K. was 28% down. So this is all because in the year before, they went and went on a binge, stacking up products. They also had we had supply chain problems, shipping-related constraints, etc. So a lot of inventory got stuck in the high seas, which all finally, when it got cleared, landed up with the retailers in their DC. And they got stuck with excess inventory, which they were clearing last year.
Okay. Okay. Thank you so much.
Thank you. The next question is from the line of Shoumik Ganguly from Aditya Birla. Please go ahead.
Hello. Hello.
Yes, sir. You're on.
Hi. Yes.
Hi, Ganguly. We can hear you.
Yes. At Atraco and Matrix, EBITDA projection, could you please give us?
I had indicated earlier that the long-term projection I mean, the medium-term projection is about 10.5%-11%. Long-term, we would like them to come closer to GE's own EBITDA margins, which will take at least two years.
Okay. Okay, sir. Are there any expansions happening in the future, coming years?
Expansion in the company?
Yes. Expansion in Atraco or Matrix?
So if I have to split it across the three, in the GE standalone itself, there will be expansions. So our current unit in Madhya Pradesh is ramping up. And I can see, based on the order flow, etc., we should ramp up through the year. And we may also look at adding additional units in some low-cost regions within India. So we will have factory expansions coming up in India. In Atraco, it may come most likely towards the end of this year when we will probably start looking at further expansions of capacity in Atraco, but not right away. It is actually nine months away from now. Matrix will also take some time. All of these more likely will happen towards the end of FY 2025 and early FY 2026.
Okay. Thank you, sir. That's it.
Thank you. The next question is.
And sorry, before we continue, our aim is also to make sure that the operational improvements, profitability, all of that is always high on our agenda. So get all of that done and then push through more expansion so that even the expansion becomes much more profitable. So current focus is to get the margins up. If I have to prioritize one over the other, I will prioritize that.
Thank you. The next question is from the line of Palash Kawale from Nuvama Wealth. Please go ahead.
Thank you for the opportunity, sir. Sir, my question is on working capital. There's a significant increase in debtor and creditor as compared to last year. Even if I look at inventory, there's an increase. How do you see debtor, inventory, and creditor days panning out for FY 2025 and FY 2026?
Sathya, you want to talk about it?
Yeah. Yeah. Yeah. Yeah. I have to split it into the three entities. As far as GEX is concerned, we are back to the working capital cycle is at 70 days. So as far as the details is, the details is currently 36 days. It again depends upon the fact pattern what we follow with our customers. Most of them were due closer to the second fortnight of March, and they are all subsequently collected. But otherwise, the receivables stands at 36 days. Our target is around 30-35 days. We are well within the target. For the working capital cycle for Gokaldas, our inventory is at 61 days, receivables at 36 days, and payables at 24 days. We are there with the 70 days. While we tend to operate between 70-75 days, we are back to 70 days. That is normal.
We believe that is the same level will continue. As far as Atraco, the working capital number of days is a little higher because they have to import all the raw materials, stock it well in advance in Kenya and Ethiopia, and then execute the order. It is in the range of they used to do around 100 days. As of 31st March, we are at 91 days is what the inventory days we operate. Our intention is to operate around that level. If not, we would like to improve it a little further. That we are working on. There in Atraco, the inventory days is 80 days is inventory, and 30 days is the receivables. Payables is around 30 days. So we operate around 90 days there in Atraco.
Matrix, again, is again a similar model of India, but at least there is a little efficiency over there on inventory because they have back-to-back operation with the fabric materials processing house. So they operate with a lower inventory. However, the receivables is a little higher. So their inventory is about 50 days, receivables also 50 days, and payables also around the 25 days. They are operating at 75 days. So there are focuses to really work on receivables. We will be focusing and trying to really work and bring it down. Inventory, number of days also may go up, but there also we target to operate between 70-75 days. That's our target for the current year.
Thank you, sir, for the detailed answer. Sir, my next question is on Atraco volume. So could you give the volume for Atraco for Q4?
Atraco, again, they've done one second. They've done 7.9 million. 7.9 million is a sale, what they've done. There, the realization is lower. So that's the reason you see such a high volume. While Gokaldas also, we have done similar volume, but I have almost the volume in terms of turnover is three times the turnover because of the higher realization. So they are at 7.9 million . They have done 7.9 million as output. So it's sales they made during the last quarter.
Sir, if you could give a realization number for Gokaldas and Atraco as well for Q4, it would be great.
Gokaldas is INR 677 crore, which is INR 29 million crore for the full year last year. As far as Atraco is concerned, we did INR 7.9 million crore at INR 254. Matrix is very negligible because it's only for 19 days. So we did around 215,000 pieces. That's about INR 540.
Yes, sir. That's it from my side. Thank you for your answers, sir.
Thank you. The next question is from the line of Chirag Jain from Yogya Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. My question was more on the U.S. side. We have seen that the U.S. market is growing at low single digits in the current scenario for the past two to three years. So what is the key driver would be for us except for China + 1? Because China + 1 has seen Bangladesh and Vietnam gaining more share on back of lower duties and higher subsidies. So what's the main differentiator that would be for us to grow in U.S. with the clients? So that was when the question was.
Okay. So there are a few parts to it, right? I mean, when U.S. itself had an inventory overhang, so did most of the major Western countries. So coming out of that, the base effect itself should propel incremental volumes going forward. People, when they drop buying because they have excess inventory, if you look at the end-user market or retail sales last year, it was up 3% last financial year. So if retail sales continues in value terms, that is, if retail sales continues to be reasonably good, people, once they clear their inventory, they'll come back to buy more. So having many brands having cleared most of their inventory, they come back to buy. So that effect we are seeing already. And as we go forward, and when I'm talking of a three to five-year kind of time frame, the move is to source more from India.
So many of the regions, if you look at Vietnam, the costs of Vietnam have actually gone through the roof, and there is a saturation that the region has reached. Vietnam also depends very highly on China's supply chain. So there is a move to move away from Vietnam because it's very expensive. And if you look at Bangladesh, there also, the costs have gone up. Starting late December, early January, the minimum wages in Bangladesh have gone up by 50% over the previous year. Bangladesh had not changed it for several years, and they came under political pressure to yield to the workers. Also, Bangladesh is facing extremely high inflation given their balance of payment issues. And hence, they had to go increase the workers' wages. So Bangladesh's costs are also coming closer and closer to India.
In fact, if you look at many players, they are actually actively looking at diversifying away as well. So there are opportunities coming India's way. And there are opportunities because, A, India is at least in cottons and viscoses, self-sufficient in fabric. So on fast fashion, we seem to do very well. Spring-summer, we do very well. Most of the brands are also now, after having burnt their finger with excess inventory, are seeking faster and faster response from their supply chain. So they're placing orders closer to base rather than plan long-term ahead. Given all of that, those having fabrics will be in a stronger position. And India, again, scores well, particularly on cotton-based fabrics. And we are seeing that traction too. So my sense is that in the next three to five years, you will find a lot more growth in our region. And that is given.
People like Walmart have taken a strategic call to source a lot more from India, and they have made announcements to that effect. This usually will get followed up by many others who will look up to some companies, take the lead in making announcements. We will see a lot more India traction if the fabric ecosystem keeps pace with the business requirements and we have a fairly strong geopolitical situation favoring India. I think we will see the positive impact in the next two, three, four years. It will be seen every year going forward in terms of demand pull.
Okay. Fair enough. Second question was on the 15% guidance you gave. So I was trying to understand how much would be the volume growth and how much would be the price growth? So could you give some color on that?
It's always difficult to peg. It will still be largely volume growth. Price growths don't happen at such staggering pace. So in my opinion, pricing being where it is, I don't believe that at least for next one year, we will see some
Ladies and gentlemen, we have lost the management connection. Please stay connected while we reconnect them. Ladies and gentlemen, we have the management connection back on call.
Hello?
Yes, sir. We are able to hear you.
Okay. My apologies. I'm dialing in internationally. I'm not in India, and calls generally get cut off after one hour. So I think it's a setting in the international dialing. So my apologies for that. I'm back on track. Yeah.
So, sir, last question before I get back into the queue. What is the capacity utilization for the Gokaldas standalone entity?
Standalone entity, as we speak, in the current state, we are at 100%. In fact, we are from a delivery standpoint, we are chockablock with orders. We're not able to take any more. We are at 100%. We are trying to add more people, add more capacity to cater to our requirements. That is as of as we speak.
Okay. Fair enough. Understood. Thanks for that was informative. I will get back into the queue.
Thank you. The next question is from the line of Vikas Jain from Equirus Securitie s. Please go ahead.
Yes, sir. Sir, continuing from the last question itself, the MP, would you break that up into what is the utilization between your MP facility and, if at all, Tamil Nadu facility also? What is the stage there?
So, MP facility is a greenfield new facility. It will take time to ramp up. The capacity there is about 1,100 machines. We have ramped it up to about 500-odd machines. So it's about 50% of the manpower is already in. And starting this month, we will again we had put a halt on ramping up manpower till the productivity comes to our desired level, and then again, restart the manpower growth. So I think we are in that phase. My sense is that we will go to full complement of capacity utilization by early Q2 or mid-Q2.
And then for the productivity to reach the full capacity level because currently, the productivity levels are low as most of the manpower are fairly new, and they need time before they reach suitable high productivity levels. So that we will see closer to end of this financial year. So that's how MP is tracking. It's, as of now, tracking well in terms of its growth and productivity improvement. In terms of quality, etc., they are delivering very well. So we feel that by the end of this year, we should have MP reach its full capacity utilization levels.
Sure. Sure. With respect to the Tamil Nadu facility, what is the stage right now at there?
So, Tamil Nadu is a fabric unit. Trial productions are going on. The early signs of trial production is very encouraging. It's high quality from a fabric standpoint. We are continuing to ramp up the production and doing some more trials. By this quarter, all the trials will be completed, and commercial production should start early next quarter from the Tamil Nadu unit. We are also simultaneously aligning demand for those units, both internal and external. So that work is also going on. It is also we had slowed it down looking at the overall demand traction from the Western markets. Now that traction is coming back, we are going back aggressively and ramping it up.
Got it. Got it. Sir, on similar lines, I mean, since we have Matrix also with us, so is there any thoughts where the Tamil Nadu fabric production will be utilizing the Matrix? And if that is the case, then how much that would be?
Certainly, that is the endeavor. And at least, I think eventually, half or more of Tamil Nadu's production can just be consumed by Matrix itself. So there is a lot of work going on in that direction. When I say trials, we are also doing trials there. And we are confident that a significant quantum of that production can be consumed in-house between Gokaldas and Matrix, more so by Matrix.
Can you quantify the statistics that you have outlined of around INR 100 crore? Can you broadly give which areas this will be spread at for FY 2025?
Are you talking of CapEx? CapEx outlook?
Yes. For FY 2025, the INR 100 crores that you mentioned, this would be spent at?
Yes. Oh, okay. So. Go ahead, Satya.
For the Bhopal new unit and for the Bhopal unit, we allocated around INR 40 crore. For the normal CapEx, what Mr. Siva talked about, where we will be investing and improving the efficiency parameters, which is the profitability improvement CapExes are the key focus areas, we allocate almost INR 50 crore during the year, INR 25 crore for the existing units, and about INR 10 crore in Matrix and INR 15 crore for Atraco. So that's about INR 50 crore that will be the focus. INR 10 crore is a residual amount which will be invested now for the fabric processing unit. That is another INR 10 crore. So the balance INR 40 crore will be invested for the new capacity additions in Bhopal or any other new locations, which we are making this financial year. So that adds up to INR 100 crore.
Thank you. The next question is from the line of Jatin Chawla from RTL Investments. Please go ahead.
Yeah. Hi. Good afternoon. Thanks for the opportunity. So on this Tamil Nadu fabric unit, this will largely show up as incremental margins for us given that eventually, more than half of it will be consumed internally?
That is correct.
Okay. Got it. And when I'm kind of tying in your comments on the U.S. market, given that retails were up 3% and still we had a 20% decline in sourcing this year, if retails were to be up similar to 3%, would you expect sourcing to be up 20% or the previous year, FY 2023, had some higher base because of all the disruptions that we had in that year? And hence, we should not expect that kind of an improvement on overall U.S. sourcing?
No, we should not expect that kind of improvement in U.S. sourcing simply because brands have also started to learn to live with lower inventory than they normally carry. So their inventory-to-sales ratio, they are also tuning it down till they see a strong demand environment set in place. As you can see, most brands are nervous about high interest rates. And the good news is that many of them are now factoring in the Fed's aim to reduce interest rates by the end of this year and early next year. So they are anticipating certain rate cuts, which will spur further demand. When those happen, they will also take encouragement from there. Keep in mind that clothing is consumed by all strata of society. And the lower strata of society, which are in high number, are very sensitive to interest rates.
So as the interest rates come down, there will be a significant uptick in garment consumption. And once that happens, the demand will start coming back, which will offset that 20% drop. Until then, I think that there will be a little muted buying. Definitely, the base effect will kick in, which means having bought 20% less, they have to buy more. So that growth will happen. But will the growth be 20%? Answer is no. It will be more like 10% or thereabouts as everybody is cautious till they see long-term traction in interest rates and hence demand outlook.
In that 10%, you would expect India to do better and within the Indian Gokaldas to do better?
That goes without saying. Absolutely.
Understood. Understood. Thanks, Mr. Siva , so much.
Thank you. The next question is from the line of Siddharth Purohit from InvesQ Investment Advisors Private Limited. Please go ahead. Mr. Siddharth, may I request you to please unmute your line and speak, please?
Yeah. Hi, sir. So just one clarification. The 15% growth that we are expecting is even on the individually, the acquired companies also can grow by 15%. That is the assumption, or?
Yeah. So, as I said, in the first year, we may not just push growth there. Our endeavor would be to push growth there from FY 2026 onwards. In the first year, the effort will be to reach full capacity utilization, margin improvement, and impeccable delivery. There's no point in simply ramping up and driving growth. Having said all of this, if we start seeing traction in terms of operational improvements, we may start driving it sooner. So we may start driving it in FY 2025 itself. So all options are open, but I would rather count on that kind of growth in the next year over FY 2026 over FY 2025 in both entities. And the base entity or the current Gokaldas entity will continue to grow in the meanwhile.
Okay. Sir, one more clarification. Is there any customer overlap between the acquired companies and existing one that we are already supplying to?
There's only one customer overlap in all seriousness. And that customer, we are doing very well on both sides between Atraco and Gokaldas. As far as Atraco and Gokaldas and Matrix or Atraco and Matrix are concerned, there are no customer overlap. In fact, there is an endeavor to start looking at cross-selling. So we are trying to talk to our customers and seeing if some of the production can be shifted to those entities and vice versa. So those discussions are also on. But as far as customer overlap is concerned, there's only one.
Got it, sir. Okay. Thank you. Thank you, sir.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
So thank you so much for listening to us. We believe that there is a lot of growth coming the garment industry way. There is a considerable amount of capacity growth that we need to look at both within Gokaldas on an immediate basis and in a short-term, near-term basis in Matrix as well as Atraco. The demand traction is strong. We are seeing considerable demand favoring us, particularly Gokaldas, in the quarters ahead. We hope that the India story will be strong going forward. The effort on margin improvement is high on our agenda, and we are continuing to work on it. While Gokaldas standalone, we feel a lot more confident about pushing back on cost increase through productivity improvements, etc. On the other one, we have got a fairly strong grip on the levers to improve the margins further from where they are.
The operating improvement efforts will happen over the next several quarters to improve their margins as well. So overall, we feel confident that revenue growth story is very strongly intact, and margin improvements will happen as we go forward. And if the demand environment improves, there could be a little easing of pricing pressure, which will also help us going forward. So that's how we see the macro environment as we speak. Thank you so much for understanding us, and we continue to work towards a better and better performance going forward.
On behalf of Gokaldas Exports Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.