GHCL Textiles Limited — Q4 FY25 earnings call

Jatin, if you remember, if you look at our long-term numbers, you will find that we have been achieving this around 15%, 16% EBITDA margin on a longer-term basis. This is primarily because of the market conditions the margins are down. And plus, this vertical integration will also help us to improve. We are very confident that you will start seeing these benefit maybe hopefully -- because, we right now, we can't commit on the kind of volatility we have in the market, you know because of geopolitical, because of US tariff this thing, but once things become normal, definitely, we believe that this 17%, 18%, we will be able to deliver on that.

Analyst questioned the feasibility and timeline of achieving the stated 17-20% EBITDA margin, which is almost double the current level, and management provided context on market conditions and vertical integration benefits.

Asked by Jatin from Svan Investments

This has started Jatin initially, and because of this 90 days pause period by the US. Now there's a little bit of -- the people are wanting to wait that, okay, let's wait these 90 days because after 90 days what will happen because by the time they give the order now. This delivery will happen only after 90 days, okay? So therefore, they want to be a little bit being more clear on this 90-day period.

Analyst inquired about the immediate impact of US tariffs on order inflow, and management explained the current pause in order conversion due to a 90-day waiting period for policy clarity.

Asked by Jatin from Svan Investments

See, at this point of a time, we don't have any plan to go for garmenting. First, we want to establish. You know that past experience of our home textile. So we want to be first establish ourselves as a ready-to-cut fabric to be supplied to the garment manufacturer because that's itself will be a big value creation. And once we stabilize on that, surely we will be looking at on the garmenting side.

Analyst asked about strategic expansion into garmenting, and management clarified their phased approach, prioritizing ready-to-cut fabric before considering garmenting.

Asked by Resham Jain from DSP Asset Managers

Listen, you are right on that. We have taken a very conscious call that what we see the cotton outlook as per our understanding is going to be stable. And because of that, we don't see at this point of a time, the large inventory to be kept in our to godown. Second, as you rightly said, CCI has a large chunk of inventory from where we can get quality cotton also. So therefore, quality as well as the availability will not be an issue.

Analyst questioned the company's lower cotton inventory compared to previous years, and management explained their strategy based on stable cotton prices and CCI's significant stock.

Asked by Resham Jain from DSP Asset Managers

Okay. The cotton spread at this point of time is around INR119... I think Ritesh, the spreads are likely to be similar in nature. And because as I said, it will take some time, a lot of inquiry, a lot of activities are being seen. But conversion to the order, this 90-day issue, all is getting kind of a settle down. Once it settles down, the things should improve.

Analyst sought clarity on current market conditions, specifically cotton yarn spreads and the expectation for Q1 margins, with management indicating stability but awaiting resolution of external factors.

Asked by Raman KV from Sequent Investments

Saket, we are looking at all those possibilities. I would not say that we are not looking at the possibilities. But we are very careful of which kind of assets like suppose we get some garmenting business, probably we may look at it. So those kind of -- but spinning, unless there is a well-managed or the large size, we would not like to go for any investment into the spinning side. A lot of possibilities we are seeing, but we'll be very careful of investment.

Analyst asked about potential M&A activity given available stressed assets, and management outlined their cautious and selective approach, focusing on strategic fit and scale.

Asked by Saket Kapoor

Approximately around INR600 crores of the overall peak debt once we complete our entire process. My debt equity ratio will still be 0.35 and overall, my top line will be roughly around INR1,700 crores, approximately around, and you can calculate the asset turnover.

Analyst sought clarification on the company's peak debt levels and its impact on asset turnover, providing key metrics for financial leverage and efficiency.

Asked by Saket Kapoor

Yes. This will be second half of the fiscal year because this investment will start kind of in June onwards. I mean July onwards, we will start getting the benefit of this investment. And the second, you said what are the drivers. One is, like I said, the investment into the 3 areas, your knitting and weaving and the processing part of it. So these are the 3 driving area. And obviously, we are also we have looked at in the later part of the year, we are looking at some spindle also, which can happen primarily either the new unit. And this we are talking about after 2, 3 years of this new spindle age.

Analyst questioned the drivers behind the ambitious revenue doubling target and the expected performance skew in FY26, with management detailing investment areas and timelines.

Asked by Hemant