Gokaldas Exports Limited — Q1 FY26 earnings call

Call held 6 Aug 2025

Management summary

Gokaldas Exports reported a strong Q1 FY26 with PAT up 53% to INR 41 crores and EBITDA margin expanding to 12.1%. While core business grew 20% YoY, overall income growth was moderate at 4% due to tariff-led uncertainties and customer discounts. The company is navigating these challenges through cost optimization, productivity gains, and strategic investments in vertical integration (BTPL) and geographical diversification, particularly in Europe and Africa, while pausing further capex decisions pending tariff clarity.

Highlights

  • PAT grew 53% to INR 41 crores for the quarter, supported by productivity gains and cost management efforts.

  • Operating margin improved by 3.3% on a YoY basis, and EBITDA margin stood at 12.1% compared to 8.8% for the same quarter last year.

  • Total income, excluding acquired entities, reported a 20% YoY growth, significantly outperforming the Indian apparel export growth of 9%.

  • The U.S. retail market remained resilient, with sales growing 5%, and U.K. retail sales grew 6% in H1 2025.

  • The share of European business in Q1 FY26 increased to over 13% from a 9% average in FY25, indicating successful diversification efforts.

Concerns

  • Total income growth was moderate at 4% due to tariff-led uncertainties and customer discounts related to tariffs, which impacted margins.

  • Recently revised reciprocal tariffs imposed by the U.S. on India are expected to pose a challenge in the second half of this financial year.

  • The tariff burden in H1 could extend to H2, estimated at 2% to 2.5% of revenue, making it difficult for the supply chain to absorb.

  • BTPL (fabric processing unit) is currently operating at 40% to 50% capacity utilization, with full utilization not expected until early next financial year.

  • Uncertainty regarding the extension of the AGOA Act for African operations, which expires in September 2025.

Key financials

2 periods

Headline

  • PAT
    ₹41 Cr
    YoY +53%
  • EBITDA Margin
    12.1%
  • EBITDA Margin (prior year)
    8.8%
  • Total Income Growth
    4%
  • Total Income Growth (ex-acquired entities)
    20%
  • Acquired Entities Revenue
    ₹282 Cr
  • Acquired Entities EBITDA
    11%
  • Customer Claims/Discounts
    ₹15 Cr
  • Average Realization (last quarter)
    ₹510

Q1 FY26

  • Average Realization
    ₹692

What they filed

Q1 FY27: revenue up 17.9%, net profit up 43.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue632 625 655 638 688 +9%672 +8%695 +6%752 +18%
EBITDA59 65 69 62 66 +12%56 −14%96 +39%92 +48%
Net profit53 49 53 48 53 +0%39 −20%63 +19%69 +44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex Capex disclosed
    • Adding 3 new factories in India (Bhopal, Kolar Goldfield, Ranchi)
    • Expanding Africa operations by adding 500 machines
    So we are adding capacity in India, where we are bringing up 3 factories. They will all come up in third quarter, one in Bhopal, where we are adding the second factory. The first factory is fully utilized, and we are seeking incremental capacity by adding one more unit in the same campus there. We are adding one more factory in Karnataka in a place called Kolar Goldfield. And there's yet another knit factory, a small one, which is coming up, which will be starting in Ranchi. So these are capacities that we have talked about previously as well, and they have been work in progress and would come on stream somewhere during the third quarter of this financial year. We are also expanding in Africa by adding another 500 machines in one of our existing facilities where there is a scope for further expansion. We are seeing the business traction for that starting Q3 in Africa. So we've commenced that expansion process, which will get concluded by Q2.
  • Debt Net ₹0 Cr
    So far, we have funded all these acquisitions through equity, and we are keeping net debt at 0.
  • M&A BTPL Acquisition · Pending regulatory · Consideration ₹[object Object] (mixed)

    Strengthens vertical integration into fabric requirements, enabling faster, higher quality and cost-efficient deliveries, and potential margin improvement.

    Intention to acquire balance of the company. Equity payment of INR 70 crores already paid, remaining INR 490 crores to be paid. Total acquisition cost revised to INR 552 crores (from earlier INR 588 crores). Funding through equity to current shareholders, not further debt. At full capacity, BTPL revenue anticipated at INR 1,800 crores with EBITDA in excess of INR 200 crores.

    Now if we go ahead with this transaction, our intention is to acquire the balance of the company. Our equity, we may have to pay cash to the extent of about INR70 crores to buy. And I think we have paid that already. And the rest, we intend paying about INR490 crores. So it's coming well within the INR588 crores that we had announced earlier. Our intention is not to fund it through further debt raising. We have the finances available to manage it. And largely, it will be acquired by offering equity to the current shareholders rather than pay them in cash. So that's the intention. We want to not raise our debt levels from where we are and would like to conserve cash for the business. Earlier, we had projected INR588 crores. It's coming down to about INR552 crores. At full capacity, we anticipate the revenue to be of the order of INR1,800 crores with an EBITDA in excess of INR200 crores coming from that unit.
  • M&A Bombay Rayon Acquisition · Pending regulatory

    Part of combined group strategy to achieve higher ROCE.

    Expected to add INR 800-900 crores revenue in FY27, and INR 1,500-1,800 crores in FY28, with EBITDA of 12% or north of 12%.

    For FY '26, we anticipate nothing. If we go with the plan of acquisition, then it will materialize only in FY '27 and most likely somewhere in Q2 FY '27, if things happen. So we may have a revenue of about INR800 crores, INR900 crores in FY '27. Everything depends on how the NCLT process go, if we decide to do the acquisition and all of that. And FY '28, as I said, we will be anywhere between 1,500 to 1,800 tops. EBITDA should be of the order of 12% or north of 12%.
  • Liquidity Liquidity disclosed Company intends to conserve cash during volatile geopolitical times and avoid raising debt.
    We are in geopolitically volatile times. And we need to conserve cash during such period. If it were a steady-state environment that we are in, where we have absolute clarity on the economic environment over the next 5 years, what you say makes absolute sense.

Guidance & targets

Profitability

  • BTPL EBITDA Margin Profitability · peak operations · Medium confidence 13-14%
    The way I see the fabric unit at its peak of operations, we should be far in excess of 12% EBITDA margin when we operate. And I think we should be probably 13% to 14% there.

    — Siva Ganapathi

  • BTPL EBITDA (full capacity) Profitability · full capacity · High confidence in excess of INR 200 crores
    At full capacity, we anticipate the revenue to be of the order of INR1,800 crores with an EBITDA in excess of INR200 crores coming from that unit.

    — Siva Ganapathi

  • Combined Group ROCE Profitability · FY28 · Medium confidence 16-17%
    But if you look at the combined group ROCE for ourselves, say, in 2 years, say, FY '28 we should be closer to 16%, 17% by that period.

    — Siva Ganapathi

  • Bombay Rayon EBITDA Profitability · FY27 · Medium confidence 12% or north of 12%
    EBITDA should be of the order of 12% or north of 12%. For the purpose of this discussion, we could assume 12%

    — Siva Ganapathi

Capacity Utilization

  • BTPL Capacity Utilization Capacity Utilization · October 2025 · High confidence 60-65%
    I anticipate it going to about 60% to 65% utilization by October of this year.

    — Siva Ganapathi

  • BTPL Capacity Utilization Capacity Utilization · early next financial year · High confidence 90%
    And then eventually, I think by early next financial year, we would be closer to 90% capacity utilization.

    — Siva Ganapathi

Revenue

  • BTPL Revenue (full capacity) Revenue · full capacity · High confidence INR 1,800 crores
    At full capacity, we anticipate the revenue to be of the order of INR1,800 crores with an EBITDA in excess of INR200 crores coming from that unit.

    — Siva Ganapathi

  • New Indian Capacity Revenue Revenue · per annum · High confidence INR 400 crores
    So, the revenue generation capacity of the Indian expansion will be to the tune of INR400 crores per annum.

    — Siva Ganapathi

  • New African Capacity Revenue Revenue · per annum · High confidence INR 100 crores
    And the African expansion would be to the tune of about INR100 crores per annum.

    — Siva Ganapathi

  • Total New Capacity Revenue Revenue · per annum · High confidence INR 500 crores
    So that's about INR500 crores. So, this is the expansion, which is already underway, that's the revenue that can come by.

    — Siva Ganapathi

  • Productivity Increase (existing factories) Revenue · YoY · High confidence 3-4%
    We also have usually a 3% to 4% productivity increase Y-o-Y on all our existing factories, thanks to automation, improved process, et cetera.

    — Siva Ganapathi

  • Bombay Rayon Revenue Revenue · FY27 · Medium confidence INR 800-900 crores
    So we may have a revenue of about INR800 crores, INR900 crores in FY '27.

    — Siva Ganapathi

  • Bombay Rayon Revenue Revenue · FY28 · Medium confidence INR 1,500-1,800 crores
    And FY '28, as I said, we will be anywhere between 1,500 to 1,800 tops

    — Siva Ganapathi

Other

  • Investment Incentives Other · next 4-5 years · High confidence INR 4 crores a year
    Going forward, we should secure this for another 4 years or another 5 years at the rate of about INR4 crores a year.

    — Siva Ganapathi

Margin

  • Tariff Burden on Revenue Margin · H2 FY26 · Medium confidence 2-2.5%
    But my sense is that the burden that got placed on us in H1 could probably extend itself to H2 as well, which is about 2% to 2.5% of our revenue.

    — Siva Ganapathi

Market Share

  • European Business Share Market Share · FY27 · Medium confidence 20s, mid-20s

    From 13.4% today

    FY '27, I would like it to be in the 20s, if we can. We can't dial up that fast. So, it has to be a progressive effort. We are at about 13%. We should see that growing. I would say in the 20s, mid-20s will be a great position in FY '27.

    — Siva Ganapathi

What to watch in Q2 FY26

Clarity on US tariffs and H2 FY26 impact

next quarter
Current Uncertain, 2-2.5% revenue impact expected in H2
Target Clearer picture on tariff rates and their absorption by the market

Why it matters

Tariffs are a major headwind impacting margins and business volumes, and clarity is essential for future strategy.

A clarity on the tariff imposed on India over the next few months will allow this churn to settle. In the meanwhile, a higher tariff from August across all regions would impact business volumes in the short run.

Risks & concerns

  • Tariff-led uncertainties and reciprocal tariffs from US

    high

    Revised reciprocal tariffs from the U.S. are expected to challenge H2 FY26, impacting business volumes and potentially leading to inflationary pressures. Customer discounts related to tariffs already impacted Q1 margins.

    Management acknowledged

  • Geopolitical volatility impacting capital allocation

    high

    The company is conserving cash and pausing further capex decisions due to volatile geopolitical situations and policy uncertainties, to avoid making mistakes in investment choices.

    Management acknowledged

  • Uncertainty regarding AGOA Act extension

    medium

    The AGOA Act, crucial for African operations, expires in September 2025, and its extension is uncertain, though the company is planning assuming it will go away.

    Management acknowledged

  • Competition from China despite tariffs

    medium

    Despite a 30% duty, China remains a formidable competitor due to its scale, government support, and ability to absorb tariffs, making a 5% tariff advantage for India less impactful.

    Management acknowledged

  • Lack of synthetic fabric ecosystem in India

    medium

    India's historical focus on cotton and lack of a robust synthetic ecosystem is a handicap compared to China and Vietnam, which have strong synthetic fabric supply chains.

    Management acknowledged

  • Unclear Country of Origin (COO) rules and transshipment

    medium

    Rules regarding transshipment and COO are unclear, especially concerning goods from China routed through countries like Vietnam, which could lead to heavy tariffs.

    Management acknowledged

Q&A highlights

8 direct
BTPL performance, funding, and revised acquisition cost Direct
As far as BTPL performance is concerned, it has been steadily improving its performance over the quarters. Since our acquisition, we have seen a substantial progress as far as BTPL's quality of goods produced, its internal processes as well as its profitability. So we've seen the business team there deliver a fairly strong performance, which actually encouraged us to consider going forward with starting an acquisition or initiating an amalgamation process. So that's where we stand at the moment. We will be taking that decision really very soon.

Clarifies the positive performance of BTPL post-acquisition and the company's intention to fully acquire it, along with the revised, lower acquisition cost and funding strategy.

Asked by Jignesh Kamani

Rationale for BTPL acquisition and its impact on return ratios Direct
See, once we grow to a certain size, having fabric allows us to further enhance the growth of our apparel business vertical integration allows us faster turnaround, allows us access to business which otherwise or either to we were not been able to take it, improve our downstream margins as well as we have a vertical play. So there are certain advantages on the business side to having a fabric unit.

Explains the strategic benefits of BTPL for vertical integration, faster turnaround, and margin improvement, justifying the acquisition despite initial concerns about return ratios.

Asked by Monish Ghodke

BTPL current and future utilization, and financial contribution Direct
So currently, we are operating between 40% and 50% of its capacity utilization. Its capacity is 400,000 meters a day. And currently, we are operating at about 1.8 lakh to 2 lakh meters a day capacity utilization. This is a somewhat of a lean season for the fabric mills. I anticipate it going to about 60% to 65% utilization by October of this year. And then eventually, I think by early next financial year, we would be closer to 90% capacity utilization.

Provides specific numbers for BTPL's current and projected capacity utilization and its expected revenue and EBITDA contribution at full capacity, which is crucial for modeling.

Asked by Raman

Impact of tariffs on margins vs. revenues and customer claims Direct
The customer claims during the quarter, we had about INR15 crores is the total claim and we have taken a hit during the quarter. That is adjusted against the revenue because it's a drop in the realization. that is also one of the reasons why the revenue has come down by almost INR15 crores.

Clarifies that the tariff impact is affecting both margins and revenues, with a specific INR 15 crores hit from customer claims, explaining the revenue moderation.

Asked by Sundar

Outlook on Africa business (AGOA) and UK/EU opportunities Direct
If you look at Africa, the AGOA Act expires in September 2025. Usually, they extend it by 10 years, but this year so far, the administration has put a hold on Agoa increase... That said, we are working on an assumption that AGOA will go away. If it comes in, it will be a bonus. And we will only get to know sometime in the month of September as to what will happen to AGOA. Notwithstanding that, Kenya and Ethiopia have a lower tariff vis-a-vis other countries.

Addresses the uncertainty around AGOA and the company's strategy to leverage Africa's inherent tariff advantages and expand in Europe/UK for diversification.

Asked by Kaustubh Pawaskar

Capital allocation strategy and reluctance to take on debt Direct
I'd like to differ with you on this, Pulkit. We are in geopolitically volatile times. And we need to conserve cash during such period. If it were a steady-state environment that we are in, where we have absolute clarity on the economic environment over the next 5 years, what you say makes absolute sense. But in an environment where there is policy announcements, which are all over the map, global situations which are way beyond our control, we would rather conserve cash.

Explains the company's conservative capital allocation strategy, prioritizing cash conservation over debt-funded growth due to current geopolitical and economic uncertainties.

Asked by Pulkit Singhal

India's attractiveness and competitiveness against other countries post tariffs Direct
I don't see India's attractiveness going down, if you ask me. Short term, there could be various scenarios playing out. Long term, our attractiveness is not changing. We have the labour. We have the capacity. We have the fabrics. We have the infrastructure, the ports, et cetera, to continue to serve and $16 billion worth of exports cannot be yanked off and taken elsewhere.

Reassures that India remains attractive long-term despite short-term tariff challenges, citing inherent strengths and the large export volume that cannot be easily shifted.

Asked by Yash Tanna

Competitiveness against Bangladesh and Vietnam, and raw material sourcing Direct
So, from a cost standpoint, Bangladesh retailers do enjoy a cost of labour advantage. Against our $200, they are at $150... So, they do enjoy a 4% cost advantage over India or a 4% incremental EBITDA, which a Bangladesh retailer can get over India. Does that help? With respect to Vietnam, it's a little more complicated because Vietnam cost of labour is much higher. It's close to $300, $320.

Provides a detailed breakdown of cost advantages and disadvantages against key competitors like Bangladesh and Vietnam, highlighting India's strengths and weaknesses in the global textile market.

Asked by Gunjan Kabra

3 min read 7 chapters

Detailed narrative

Q1 FY26 Performance Overview

Gokaldas Exports delivered a strong Q1 FY26 with PAT growing 53% to INR 41 crores. The operating margin improved by 3.3% YoY, leading to an EBITDA margin of 12.1%, up from 8.8% in the same quarter last year. This performance was driven by productivity gains and cost management efforts. However, total income growth was moderate at 4% due to tariff-led uncertainties, though income excluding acquired entities grew 20% YoY.

Tariff Impact and Market Dynamics

The company faced challenges from recently revised reciprocal tariffs imposed by the U.S. on India, which are expected to impact H2 FY26. Customer discounts related to tariffs resulted in a INR 15 crores hit to revenue in Q1. Management anticipates the tariff burden of 2-2.5% of revenue could extend into H2. Despite this, the U.S. retail market showed resilience with 5% growth, and apparel imports into the US, EU, and UK increased by 7-12%.

Capacity Expansion and Utilization

Gokaldas Exports is expanding capacity with three new factories in India (Bhopal, Kolar Goldfield, Ranchi) expected to be operational in Q3 FY26, adding INR 400 crores per annum in revenue capacity. In Africa, 500 new machines are being added to an existing facility, to be concluded by Q2 FY26, contributing INR 100 crores per annum. BTPL, the fabric processing unit, is currently at 40-50% utilization but is targeted to reach 60-65% by October 2025 and 90% by early next financial year, with a potential revenue of INR 1,800 crores and EBITDA over INR 200 crores at full capacity.

BTPL Acquisition and Vertical Integration

The company intends to fully acquire BTPL, with INR 70 crores already paid and INR 490 crores remaining, bringing the total acquisition cost to INR 552 crores. This acquisition is strategic for vertical integration, enabling faster turnaround, higher quality, and cost-efficient deliveries, which is expected to improve margins. The full acquisition is planned to be funded by offering equity to current shareholders, avoiding further debt.

Geographical Diversification (Africa, Europe)

Gokaldas Exports is actively diversifying its geographical presence. The share of European business increased to over 13% in Q1 FY26 from a 9% average in FY25, with a target to reach mid-20s by FY27. African operations are being strengthened through efficiency improvements and capacity additions, leveraging lower tariffs compared to other Asian countries, despite uncertainty around the AGOA Act extension.

Capital Allocation Strategy

The company maintains a conservative capital allocation strategy, prioritizing cash conservation due to geopolitical volatility and policy uncertainties. While net debt is currently zero, management is hesitant to take on additional debt. The focus is on organic growth through existing and planned capacity expansions, with a long-term ROCE target of 16-17% by FY28 for the combined group, including Bombay Rayon.

Competitiveness and Future Outlook

India remains an attractive long-term destination for apparel exports due to its labor, capacity, and infrastructure, despite short-term tariff challenges. The company acknowledges cost advantages for Bangladesh (4% EBITDA advantage) but notes their infrastructure bottlenecks. Vietnam faces higher labor costs but benefits from a strong synthetic fabric ecosystem, often sourcing from China. Gokaldas Exports aims to navigate these competitive dynamics by focusing on cost optimization and productivity.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Textiles earnings calls