Gokaldas Exports Limited — Q3 FY25 earnings call

Call held 10 Feb 2025

Management summary

Gokaldas Exports delivered strong Q3 FY25 results, surpassing the ₹1,000 crores revenue mark with robust YoY growth in income, EBITDA, and PAT. The company is aggressively expanding its production capacity across multiple locations and is well-positioned to capitalize on global supply chain realignments and recovering demand. While initial ramp-up costs for new facilities temporarily impacted margins, management is focused on operational efficiencies and aims for continued margin improvement.

Highlights

  • Total income crossed the ₹1,000 crores milestone for the first time this quarter, growing 79% YoY and 6% sequentially.

  • Consolidated EBITDA increased by 66% YoY and PAT by 65% YoY, indicating a healthy performance.

  • The company has a strong order book and is undertaking significant capacity expansions in Madhya Pradesh, Karnataka, and Ranchi, expected to add over ₹300 crores in incremental revenue.

  • US retail apparel sales remained consistent with 3% growth in calendar 2024, and apparel imports in US/EU are picking up due to lower inventory levels.

  • Gokaldas Exports is benefiting from the global shift in sourcing away from China, Vietnam, and Bangladesh, leveraging its cost advantage and specialization in outerwear.

Concerns

  • Overall margin was slightly lower due to cost buildup in the Madhya Pradesh unit during its rapid ramp-up phase, including training costs for approximately 1,200 new people.

  • Incremental capacities tend to depress earnings initially, and it takes time for them to normalize and contribute positively to margins.

  • Atraco's margins are still a work in progress, with management aiming for 10% EBITDA margin in the next year, up from the current 7%.

Key financials

3 periods

Headline

  • Total Income
    ₹1,000 Cr
    YoY +79% QoQ +6%
  • Total Income (excl. acquired entities)
    —
    YoY +19%
  • Consolidated EBITDA Growth
    66%
    YoY +66%
  • PAT Growth
    65%
    YoY +65%

9M FY24

  • Volume
    20.808 Mn

9M FY25

  • Volume
    50.395 Mn

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.

Segment breakdown

  • Atraco
    7% EBITDA Margin
  • Matrix
    14% EBITDA Margin
  • Gokaldas (Outerwear)
    30% Share of Revenue (9M basis)
  • Matrix/Atraco (Outerwear)
    — Share of Revenue

Capital allocation

high confidence
  • Capex Capex disclosed
    • New facility in Madhya Pradesh (1,100 machines)
    • Additional unit in Karnataka (750 machines)
    • Incremental unit in Ranchi (leased premises, 400 machine equivalent)
    • Atraco 500 machine expansion ₹35 Cr
    The first one is a new facility in Madhya Pradesh. This will increase the capacity by about 1,100 machines and is under construction. The second one is an additional unit in Karnataka, which will add about 750 machines, which is also under construction. The third incremental unit is expected in Ranchi leased premises. All these units are expected to commence operations at different points in FY '26. (Page 4) So, as we speak, the 500 machine expansion has been initiated and we have spent about INR35 crores in Indian rupees for that. (Page 12)
  • M&A BTPL (fabric unit) Acquisition · Integrated

    Strategic acquisition to secure raw materials, improve lead time, and enhance negotiating position with brands.

    Invested INR175 crores through OCD. Unit reached 40-45% capacity utilization. Losses have started coming down. Full acquisition expected to cost INR588 crores.

    So, till this quarter that is quarter ending December, we have invested INR110 crores in - BTPL and subsequently we have invested another INR65 crores. So, it amounts to about INR175 crores of investment till date. The unit from nearly no orders has reached to about 40% to 45% capacity utilization currently. (Page 11) Apart from the INR175 crores, I think it will be about we had earlier on indicated about INR 588 crores to acquire 100% of the asset. (Page 12)

Guidance & targets

Margin

  • Consolidated EBITDA Margin Improvement Margin · next year and a half · High confidence 1%
    So keeping all of this in mind, we are still aiming for 1% improvement in EBITDA margin going forward at a consol level in the year and a half ahead.

    — S. Ganapathi

  • MP Unit Standalone Margin Margin · after Phase 2 stabilizes · High confidence 2.5% to 3% over Gokaldas standalone
    My assessment is at least 2.5% to 3% over the Gokaldas standalone achievement.

    — S. Ganapathi

  • BTPL Standalone EBITDA Margin Margin · going forward (if merged in FY27) · Medium confidence 12%, 13%, 14%
    So if I look at it as a stand-alone basis, the EBITDA of this unit should be about 12%, 13%, 14% going forward.

    — S. Ganapathi

  • Consolidated EBITDA Margin (expanded capacities) Margin · High confidence around 12%
    And that's great. And consolidated margins should be around 12 odd percent on expanded capacities? That is correct.

    — S. Ganapathi

Revenue

  • Incremental Revenue from New Capacities (MP, Karnataka, Ranchi) Revenue · High confidence ₹300-odd crores
    So overall, I would say it's about INR300-odd crores.

    — S. Ganapathi

  • BTPL Peak Revenue (Standalone) Revenue · Medium confidence ₹1,500+ crores
    So the impact of BTPL, if I look at it on a stand-alone basis, its peak revenue could be about INR1,500-plus crores.

    — S. Ganapathi

  • Knit Fabric Unit Annual Revenue Revenue · annually · High confidence ₹150-200 crores
    And its revenue will be annually about INR150 crores to INR200 crores.

    — S. Ganapathi

  • Long-term Revenue Growth Rate Revenue · 2-3 years time frame · High confidence 10-15%
    I think it's a very decent assumption. I would say that top end of that range will be a more reasonable decent assumption.

    — S. Ganapathi

  • $1 Billion Revenue Vision Revenue · 3-4 years · Medium confidence $1 billion
    So I think that vision at the end of the day --that vision is quite attainable.

    — S. Ganapathi

Acquisition

  • BTPL Total Acquisition Cost Acquisition · High confidence ₹588 crores
    Apart from the INR175 crores, I think it will be about we had earlier on indicated about INR 588 crores to acquire 100% of the asset.

    — S. Ganapathi

What to watch in Q4 FY25

MP Unit Margin Stabilization

Q1 FY26 onwards (Phase 1 stabilization), Phase 2 impact later
Current Cost buildup, lower productivity impacting Q3 margins
Target Stabilization, 2.5-3% over Gokaldas standalone margin

Why it matters

Crucial for improving overall profitability as the MP unit is a significant new capacity.

That's correct because while Phase 1 will stabilize starting Q1 onwards, I think Phase 2 will start having that impact. (Page 10)

Risks & concerns

  • Cost buildup and lower productivity in new units

    medium

    Rapid ramp-up of MP unit, including training ~1,200 new people, led to higher costs and lower initial productivity, impacting Q3 margins.

    Management acknowledged

  • Initial margin depression from new capacities

    medium

    New capacities tend to depress earnings and margins in the initial phase until they normalize and reach optimal productivity.

    Management acknowledged

  • Geopolitical tensions and trade sanctions impacting Vietnam

    medium

    Vietnam's high dependence on China for fabric makes it vulnerable to geopolitical tensions and potential trade sanctions, leading brands to diversify sourcing.

    Management acknowledged

  • Kenyan shilling appreciation impacting Atraco margins

    low

    The appreciation of the Kenyan shilling has impacted Atraco's margins, which are being combated through operational improvements and price increases.

    Management acknowledged

  • Political instability in Bangladesh

    low

    Political instability in Bangladesh is causing some retailers to diversify away, creating opportunities for India.

    Management acknowledged

Q&A highlights

7 direct
Trade shift from China, Vietnam, Bangladesh to India Direct
So brands take a cautious approach and start diversifying. So these are some of the trends we very early days and we may see some movement going forward to other regions just so that there is a reasonable amount of diversification there.

Explains the macro tailwinds benefiting India and Gokaldas Exports due to geopolitical shifts, cost advantages, and instability in competing regions.

Asked by Manish Ostwal

Outlook on raw material prices and impact on margins Direct
So if there is a price increase or price decrease, we tend to pass it back through to our customers. Of course, if there is a price decrease, then it allows us some incremental growth and maybe an ability to incrementally improve our margins, which we try to secure.

Clarifies the company's strategy for managing raw material price volatility and its impact on profitability, indicating a pass-through mechanism.

Asked by Manish Ostwal

Volume growth for 9 months FY25 compared to 9 months FY24 Direct
9M last year is 20.808 million and 9M this year is 50.395 million.

Provides a key quantitative metric for the company's volume performance over the nine-month period, showing significant growth.

Asked by Manish Ostwal

Macro demand recovery (US/EU destocking, summer season pickup) and FY26 outlook Direct
From second half of calendar '24, we are seeing U.S. imports growing. Now the reason for that is that most of the brands have reached a reasonable level of inventory destocking. ... So this is also helping us from a business growth standpoint apart from the fact that we are seeing some business movement from the Far East as well as Bangladesh to India.

Confirms the recovery in demand from key export markets due to inventory normalization and highlights the additional benefit from supply chain shifts.

Asked by Depen Shah

Geographical diversification and new markets post acquisitions Direct
See, we have enough opportunities to expand in other territories. So we are focusing a little more into Europe, though I would still say that the U.S. market is far more resilient and robust than the European market.

Outlines the company's market expansion strategy, emphasizing continued focus on the US while exploring growth in Europe.

Asked by Depen Shah

Strategy for growth in polyester segment given India's cotton dominance Direct
And the fact that we have operations in Africa where we enjoy a duty-free access to U.S. and duties in synthetic being extraordinarily high in the U.S. we tend to have a little dominant product mix in favor of polyester.

Explains the company's competitive advantage and strategy for the polyester segment, leveraging African operations and specialized product mix.

Asked by Bhavya Gandhi

Total capacity in pieces post MP, Karnataka, Ranchi expansion Partial
We really do not measure our capacity in pieces because it's very product type dependent. So Ranchi, we are expanding for knits, in Madhya Pradesh and Karnataka we are expanding for wovens. ... But let me give you revenue-wise because at the end of the day, that's probably what you're trying to look for. The incremental capacity in MP should net in about INR175 crores when it is fully ramped up. ... So overall, I would say it's about INR300-odd crores.

While not providing capacity in pieces, management quantifies the revenue potential of the new expansions, which is a more relevant metric for investors.

Asked by Bhavya Gandhi

Current status and timeline for BTPL investment and potential merger Direct
So, till this quarter that is quarter ending December, we have invested INR110 crores in - BTPL and subsequently we have invested another INR65 crores. ... I think they at the moment, the thought process is to initiate this sometime in the month of June 2025 and go through an NCLT process for merger and hopefully that will take another 9 months or 12 months depending on how long that process takes.

Provides a detailed update on the progress of a key strategic acquisition and outlines the future timeline for its full integration and merger.

Asked by Sundar

2 min read 6 chapters

Detailed narrative

Strong Q3 FY25 Financial Performance

Gokaldas Exports reported a robust Q3 FY25, achieving a total income milestone of over ₹1,000 crores. This represents a significant 79% year-on-year growth and 6% sequential growth. The company's consolidated EBITDA increased by 66% and PAT by 65% year-on-year, with EBITDA margin improving sequentially. Even excluding acquired entities, total income grew by 19% YoY, underscoring the underlying strength of the core business.

Strategic Capacity Expansion Underway

The company is actively expanding its production capacity with new facilities under construction in Madhya Pradesh (adding 1,100 machines) and Karnataka (adding 750 machines). Additionally, an incremental unit in Ranchi (leased premises) will add 400 machine equivalents. These expansions are projected to commence operations at various points in FY26 and are expected to contribute approximately ₹300 crores in incremental revenue, with the MP unit alone contributing ₹175 crores.

Benefiting from Global Supply Chain Shifts and Demand Recovery

Gokaldas Exports is capitalizing on the ongoing global shift in sourcing away from China, Vietnam, and Bangladesh, driven by geopolitical tensions and cost advantages in India. The US retail apparel market showed consistent 3% growth in calendar 2024, and apparel imports in both the US and EU have gained momentum since H2 CY24 due to retailers destocking and reaching optimal inventory levels. This demand recovery, coupled with supply chain diversification, provides a strong tailwind for the company.

Margin Management and Raw Material Outlook

While overall margins were slightly impacted by initial cost buildup in the rapidly ramped-up Madhya Pradesh unit (including training costs for ~1,200 new employees), management aims for a 1% improvement in consolidated EBITDA margin over the next 1.5 years. Raw material prices, particularly cotton, are experiencing a slight downward pressure and are expected to remain range-bound. The company operates on a pass-through model for raw material costs, allowing it to maintain margins and potentially gain incremental growth from price decreases.

BTPL Acquisition and Integration Progress

Gokaldas Exports has invested ₹175 crores in BTPL, a strategic fabric unit, which is currently operating at 40-45% capacity utilization. Integration efforts are focused on improving production quality and productivity, with the knit fabric unit expected to reach full capacity utilization by Q2 FY26. The company plans to initiate the NCLT process for a full merger of BTPL, valued at ₹588 crores, around June 2025, with the process expected to take 9-12 months.

Polyester Segment and Market Diversification

Despite India's dominance in cotton, Gokaldas Exports is seeing traction in the polyester segment, particularly for outerwear and sportswear, leveraging its technical capabilities and cost-efficient production. The company benefits from duty-free access to the US market through its African operations for synthetic products. Geographically, while the US remains the dominant export market (over 75%), the company is also focusing on expanding its presence in Europe and has increased its share in the UK.

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