Gokaldas Exports Limited — Q4 FY25 earnings call

Call held 22 May 2025

Management summary

Gokaldas Exports reported strong FY25 performance with consolidated revenue up 63% and EBITDA up 49%, driven by acquisitions and organic growth. Q4 FY25 also showed robust income and margins. However, the company anticipates near-term challenges in H1 FY26 due to US tariff uncertainties and global demand softness, which may impact margins. Strategic diversification into European markets and ongoing capacity expansions are expected to support long-term growth.

Highlights

  • Consolidated total income for FY25 grew 63% YoY to INR3,915 crores, driven by acquired entities.

  • Excluding acquired entities, the company's total income registered a healthy 19% YoY growth in FY25.

  • EBITDA for FY25 increased 49% to INR424 crores.

  • Q4 FY25 delivered a total income of INR1,035 crores and an EBITDA margin of 13.7%.

  • European business is expanding, now in the double-digit realm, with increased engagement with UK-based customers for future FTA benefits.

Concerns

  • Near-term challenge due to higher US tariffs (10% on apparel from China, 30% revised) potentially dampening demand and raising retail prices.

  • Tariff uncertainty is causing business uncertainty, leading to cautious order placement and potential delays in H1 FY26.

  • Potential margin pressure in H1 FY26 as suppliers may need to absorb a portion of the increased tariff costs.

  • An 'extraordinarily high' depreciation of INR42 crores in Q4 FY25 due to Ind AS capitalization of African lease assets, which is an aberration.

Key financials

4 periods

Q4 FY25

  • Total Income
    ₹1,035 Cr
  • EBITDA Margin
    13.7%
  • ETR
    33%
  • Depreciation
    ₹42 Cr
  • Gross Margins
    50%

FY25

  • Consolidated Total Income
    ₹3,915 Cr
    YoY +63%
  • EBITDA
    ₹424 Cr
    YoY +49%
  • ETR
    27%

FY25, excl. acquired

  • Indian Exports Growth
    —
    YoY +19%

FY25, overall

  • Indian Exports Growth
    —
    YoY +10%

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

Share of Volume
136.68 million units Total
  • Total (FY25) 68.34 million units 50.0%
  • Gokaldas Standalone (FY25) 33.22 million units 24.3%
  • Atraco (FY25) 27.68 million units 20.3%
  • Matrix (FY25) 7.44 million units 5.4%

Capital allocation

medium confidence
  • Capex Capex disclosed
    • 3 new factories in Madhya Pradesh, Karnataka, and Jharkhand
    • Expansion of Atraco (500 machines)
    • Strategic investment in BTPL (fabric processing unit)
    Siva Ganapathi: "The already committed capex itself will add substantial capacities to us in the middle of this financial year. And we are well geared to effectively utilize those additional capacities that are coming our way."
  • M&A Atraco and Matrix Designs Acquisition · Integrated

    Diversification of business and wider exposure to different markets.

    Integration has progressed well, with most legacy headwinds now behind us.

    Siva Ganapathi: "The integration of Atraco and Matrix Designs has progressed well. Most legacy headwinds associated with the acquisitions are now behind us."
  • M&A BTPL Strategic investment · Ongoing

    Strengthens vertical integration into critical raw materials, enabling faster, higher quality and cost-efficient delivery.

    Progressing very well, capacity utilization crossing 50% from 15-20% previously.

    Siva Ganapathi: "Our strategic investment in BTPL, a fabric processing unit, which strengthens vertical integration into critical raw materials, enabling faster, higher quality and cost-efficient delivery is also progressing very well."

Guidance & targets

Revenue

  • Consolidated Revenue Growth Revenue · FY26 · Medium confidence 15%
    Siva Ganapathi: "But from a growth perspective, we are still at a consol level targeting at about 15%, and we will continue on that trajectory."

    — Siva Ganapathi

  • Incremental Revenue from 3 New Units Revenue · Annually · High confidence INR325-350 crores
    Siva Ganapathi: "So the 3 new units incrementally will contribute to about INR325 crores to INR350 crores incrementally -- and so if you look at the current Q4, we were at about INR1,035 crores, right? That was the revenue. So that's the revenue potential of the company. These 3 new entities will contribute incrementally by this level -- this amount. This is annual."

    — Siva Ganapathi

Capacity

  • New Factories Commissioning Capacity · Q3 FY26 · High confidence 3 units (MP, Karnataka, Jharkhand)
    Siva Ganapathi: "So the Indian capacities, which are this unit in Madhya Pradesh as well as the units in Karnataka and Jharkhand, they are all timed to come on stream in Q3 of this financial year, that is FY '26."

    — Siva Ganapathi

  • Atraco Expansion Play Out Capacity · FY26 · High confidence 500 machines
    Siva Ganapathi: "As far as Atraco is concerned, the expansion of 500 machines is done, and that expansion will start playing out in this financial year in the coming financial year. That is FY '26."

    — Siva Ganapathi

Margin

  • Short-term Margin Impact Margin · short run for a few quarters (H1 FY26) · Medium confidence few percentage points (2% or a little higher)
    Siva Ganapathi: "So instead of growing margins, we may have a few percentage points impact on the margins in the short run for a few quarters before this settles out." and "So it will be a few percentage points. I would say about 2% or maybe a little higher than that, but not much more than that."

    — Siva Ganapathi

EBITDA Margin

  • Africa Operations EBITDA Margin Improvement EBITDA Margin · Medium confidence 2% to 3%
    Siva Ganapathi: "I think we may have a good amount of leverage from the Africa side where we may see 2% to 3% improvement in EBITDA margins there."

    — Siva Ganapathi

Tax Rate

  • Go-forward Depreciation (African units) Tax Rate · per quarter · High confidence INR2.5 crores
    Siva Ganapathi: "I think the go-forward impact of the Ind AS of our African units would be about INR2.5 crores a quarter."

    — Siva Ganapathi

  • Realistic Depreciation Levels Tax Rate · High confidence INR32.5 crores
    Siva Ganapathi: "So the realistic depreciation levels would be about INR32.5 crores or thereabouts."

    — Siva Ganapathi

Business Opportunity

  • UK FTA Export Potential Business Opportunity · Medium confidence $1 billion
    Siva Ganapathi: "This FTA has the potential to increase India's exports to UK by an additional $1 billion." and "The UK FTA was the first one in that direction, which, in my opinion, will bring incremental business of $1 billion as and when the UK FTA takes effect."

    — Siva Ganapathi

What to watch in Q1 FY26

Clarity on US tariffs and their impact

next quarter / H2 FY26
Current Uncertainty regarding 10% tariff post-July 9th
Target Clear policy on US tariffs and their effect on demand/margins

Why it matters

Tariff clarity is crucial for order placement, pricing, and margin stability, directly impacting H2 FY26 performance.

Siva Ganapathi: "But this is yet to be played out, and we will have to see how all of this pans out."

Risks & concerns

  • Higher US tariffs on apparel imports

    high

    New 10% tariff (paused for 90 days) and revised 30% tariff on China may raise retail prices, dampen demand, and impact supplier margins in H2 CY25.

    Management acknowledged

  • Business uncertainty due to tariff clarity

    high

    Lack of clarity on tariffs post-90-day pause (July 9) makes customers reluctant to build inventory, impacting short-term order placement and potentially slowing Q2 FY26 order book.

    Management acknowledged

  • Margin pressure in H1 FY26

    high

    Suppliers may have to absorb a portion of the 10% tariff costs, leading to margin pressure in Q1 and Q2 FY26, though expected to be short-term.

    Management acknowledged

  • Softness of global demand

    medium

    General softness of demand across the globe, particularly in the US, contributes to business slowdown.

    Management acknowledged

  • AGOA expiry for African exports

    medium

    African Growth Opportunities Act (AGOA) expires in September '25, potentially removing duty-free access to the US for Kenya, though order flow remains stable for now.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
UK market opportunity and EU expansion strategy Direct
Siva Ganapathi: "At the moment, strategically, we have taken a call to expand our business with UK and not just UK, but even with European customers, just so that there is a little bit of a diversification... our European business is now moving into the double-digit realm, and we'll continue to increase our European business.

Highlights the company's strategic shift towards market diversification beyond the US, particularly into Europe and the UK, to mitigate tariff-related uncertainties and leverage future FTAs.

Asked by Aashish from InvesQ PMS

Impact of tariffs on H1 FY26 margins and order book Direct
Siva Ganapathi: "So all of that means that there may be some degree of margin pressure in the early days... In the short term, there will be a pain in H1.

Confirms management's expectation of short-term margin pressure and order book slowness in H1 FY26 due to tariff uncertainties and the need for suppliers to absorb some costs.

Asked by Aashish from InvesQ PMS

Promoter share pledge Evasive
Siva Ganapathi: "I don't have any comments to make on the behalf of any shareholders.

Analyst raised a red flag about promoter share pledge, but management declined to comment, leaving the concern unaddressed.

Asked by Aashish from InvesQ PMS

Tax rate going forward, impact of Atraco and 80JJAA benefit Partial
Sathyamurthy: "Atraco, the tax-free profitability contribution did not happen effectively this year. And that's why you are not seeing any impact on the tax rate... as the new units start contributing, Atraco business starts contributing the profitability, we should be able to see the real impact on the overall tax efficiency.

Clarifies why the expected tax benefits from Atraco and 80JJAA were not fully realized in FY25, indicating potential for improved tax efficiency in future years as new units contribute.

Asked by Vishal Mehta from IIFL Securities

Reclassification of lease liabilities and its impact on depreciation Direct
Siva Ganapathi: "So what happened was in the current financial year, the assets in Africa, they are leased assets... in Q4, when we were consolidating all the results, we had to capitalize all the lease assets and then start depreciating... So all the depreciation for the year was taken in Q4of this year. That's why you see an extraordinarily high depreciation number forQ4.

Explains the one-time spike in depreciation in Q4 FY25 due to an accounting change for African lease assets, providing clarity on an unusual financial item.

Asked by Palash Kawale from Nuvama Wealth

Impact of China tariffs on US imports and shift to other countries Direct
Siva Ganapathi: "So what happens is when there's such a high tariff in China, the immediate port of call for them would be Vietnam... Having said all of that, we are seeing a good amount of business, which has come in the last 2 months from China... we are seeing that traction for sure.

Addresses the competitive landscape post-China tariffs, noting a shift towards Vietnam and India, and confirms that Gokaldas is seeing increased business traction from customers diversifying away from China.

Asked by Bhavin Chheda from Enam Holdings

AGOA expiry in September '25 and its impact on African operations Direct
Siva Ganapathi: "even let's assume that AGOA benefit goes away and we are currently basing new business transactions on that assumption, we are not seeing any let up in the order flow or business flow, which means brands are still comfortable sourcing from that region and are not toning down their business volumes there.

Provides management's perspective on the potential expiry of AGOA, indicating that despite the uncertainty, order flows from Africa remain stable as brands are still comfortable sourcing from the region.

Asked by Roshan from B&K Securities

Scale-up of non-cotton segment and progress of BTPL Direct
Siva Ganapathi: "So basing the business on shipping raw materials from other regions increases the lead time and increases the cost for us. So while we're still competitive, if such raw materials were available locally, our competitive ability would have orour competitive advantage would be much, much higher." and "Today, we are well crossing 50% [BTPL capacity utilization].

Highlights the challenges and opportunities in the non-cotton segment due to lack of local raw material ecosystem and provides an update on the successful ramp-up of BTPL's capacity utilization.

Asked by Niraj Mansingka from White Pine Investment Management Private Limited

3 min read 7 chapters

Detailed narrative

Q4 FY25 and Full Year FY25 Performance Overview

Gokaldas Exports reported a consolidated total income of INR3,915 crores for FY25, marking a significant 63% year-on-year growth, primarily driven by the contributions from acquired entities Atraco and Matrix Designs. Excluding these acquisitions, the company achieved a healthy 19% year-on-year growth in its Indian exports, outperforming the overall Indian export market growth of 10% during the same period. For Q4 FY25, the company delivered a total income of INR1,035 crores with an EBITDA margin of 13.7%, demonstrating improved performance across all business units.

Impact of US Tariffs and Global Demand Softness

The company faces near-term challenges due to new US tariffs, including a 10% tariff (paused for 90 days) and a revised 30% tariff on Chinese apparel, which could dampen demand and raise retail prices. This tariff uncertainty is leading to cautious order placement from customers, impacting the order book for Q2 FY26. Management anticipates potential margin pressure of a 'few percentage points' (around 2% or slightly higher) in H1 FY26 as suppliers may need to absorb some of these increased costs, compounded by a general softness in global demand.

Strategic Market Diversification and FTA Opportunities

To mitigate tariff-related uncertainties and broaden market exposure, Gokaldas Exports is actively diversifying its business. The company's European business is now moving into the double-digit realm, with increased engagement with UK-based customers in preparation for the India-UK FTA. This FTA is projected to increase India's exports to the UK by an additional $1 billion. Ongoing trade talks with the US and EU are also seen as future opportunities, with apparel being a high-priority sector due to its labor-intensive nature.

Capacity Expansion and Integration Progress

Gokaldas Exports is expanding its manufacturing capacity with three new factories in Madhya Pradesh, Karnataka, and Jharkhand, all slated to come on stream in Q3 FY26. These new units are expected to incrementally contribute INR325-350 crores annually to the company's revenue. Additionally, the expansion of Atraco with 500 new machines is complete and will contribute in FY26. The integration of Atraco and Matrix Designs has progressed well, with most legacy headwinds now behind the company, and the strategic investment in the BTPL fabric processing unit is also progressing well, with capacity utilization now crossing 50%.

Taxation and Depreciation Adjustments

The company's effective tax rate (ETR) for FY25 stood at 27%, with Q4 FY25 ETR at 33%. The standalone tax rate for Gokaldas was 25%. The expected tax-free profitability contribution from Atraco did not fully materialize in FY25. An 'extraordinarily high' depreciation of INR42 crores was recorded in Q4 FY25 due to the capitalization of African lease assets under Ind AS, which is an aberration. The realistic go-forward depreciation for African units is estimated at INR2.5 crores per quarter, bringing total realistic depreciation to about INR32.5 crores.

Raw Material Sourcing and Non-Cotton Segment

While Gokaldas primarily focuses on cotton-based exports (75% of business), it also produces non-cotton garments, often sourcing fabric from the Far East (Vietnam, Taiwan, Korea, China). The lack of a robust local fabric ecosystem for synthetics in India increases lead times and costs, though the company remains competitive. Management notes that the global apparel trade is dominated by polyester (60%) and other man-made fibers (67-70%), presenting a significant opportunity for India to develop its synthetic textile capabilities.

AGOA Expiry and African Operations

The African Growth Opportunities Act (AGOA), which allows Kenya to export duty-free to the US, is set to expire in September 2025. Post-expiry, goods will face normal tariffs (10% reciprocal tariff plus underlying ad valorem duty). Despite this, Gokaldas is booking orders beyond September, indicating that brands are still comfortable sourcing from the region. Management believes the US administration may view the tariff regime for Africa more favorably due to Africa's trade deficit with the US.

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