Gokaldas Exports

Gokaldas Exports reported a total income of INR 998 crores in Q3 FY26, maintaining a flat year-on-year performance. EBITDA for the quarter stood at INR 96 crores, reflecting an 18% decline year-on-year. This decline was primarily attributed to the significant impact of the steep 50% U.S. tariff on India, with the company absorbing a net burden of INR 40.2 crores, which was shared with customers. Management noted that, adjusting for this tariff burden, the company's EBITDA would have shown a growth of 17%.

In response to the challenging tariff environment, Gokaldas Exports implemented several mitigation strategies. These included strengthening relationships with U.S. customers and offering discounts to partially offset the tariffs, as well as streamlining operations in India and Africa to reduce unit costs. The company is actively pursuing business growth from Europe, aiming to increase its share of total revenues to 20-25%, and has successfully onboarded a new EU customer expected to contribute within the next 1-2 months. This strategy aims to rebalance revenue streams between the U.S. and Europe.

Africa's business faced headwinds in Q3 FY26, with the EBITDA margin at 1.5%, primarily due to the expiry of AGOA and earlier supply chain disruptions, including port congestion in Mombasa which has since been resolved. However, management expressed confidence that the Africa region has bottomed out, with performance expected to improve from Q4 FY26 onwards. This optimism is driven by Africa regaining its tariff advantage over Asian competitors and the 'reasonable possibility' of AGOA extension, which is anticipated to be clarified in February 2026 and would provide a 'massive tailwind' for the region.

The company has planned INR 105 crores for new capacity additions in FY26, including the second phase of a unit in Bhopal, a new unit in Karnataka, and expansion in Kenya with new machinery, all expected to be commercial by Q1 FY27. While existing physical capacity in India could generate an additional INR 500 crores in revenue, full ramp-up and staffing are being cautiously managed due to ongoing tariff uncertainties. The acquisition of BRFL is progressing, with INR 175 crores invested in OCD and a 19% equity stake acquired for INR 72 crores, with the remaining stake expected to be purchased in Q2 FY27 pending regulatory approvals.

Looking ahead, Gokaldas Exports anticipates long-term India EBITDA margins to settle at 12-13% and Africa margins at 10-11% once tariff issues are resolved. Management noted a cautious outlook for U.S. demand in 2026, expecting muted growth due to potential inflation and retailers' ongoing inventory destocking. The upcoming India-EU FTA, once operational, is expected to open significant market access, placing Indian exporters on par with competitors like Bangladesh and Vietnam, and accelerating sourcing from India.