Detailed Narrative
Q3 FY25 Performance Overview and Outlook
Himatsingka Seide's operating performance for Q3 FY25 was largely range-bound, experiencing some margin corrections in total income as anticipated. Capacity utilization remained at 99% for Spinning, 60% for Sheeting, and 68% for Terry Towel. Management expects growth to resume more significantly from Q1 FY26, following a period of range-bound movements.
Strategic Debt Reduction and QIP Closure
The company successfully closed a INR400 crore Qualified Institutional Placement (QIP) during Q3 FY25. This led to a significant de-leveraging of the balance sheet, with net debt reducing by approximately INR325 crores during the quarter. As of December 31, 2024, net debt stood at INR2,350 crores, down from INR2,680 crores at the end of September 2024. The company aims to further reduce net debt to INR1,500-1,600 crores over the next 18-24 months.
Green Energy Expansion and Cost Optimization
Himatsingka Seide has substantially enhanced its green energy portfolio, increasing capacity from approximately 4.2 megawatts to 28.7 megawatts. This expansion is a key initiative for optimizing energy costs and achieving sustainability goals. Management anticipates cost savings of approximately INR3 per kilowatt hour from FY26 onwards, applied to roughly 20% of the company's total power requirement.
Capacity Enhancement and Debottlenecking Initiatives
To address product mix changes and enhance utilization, the company is undertaking debottlenecking efforts in its Terry Towel operations. The goal is to increase Terry Towel capacity from 25,000 tons per annum to 40,000 tons per annum, with completion expected within the next 12 to 16 months. The associated capex for these initiatives is part of the ordinary annual budget of INR60-80 crores.
Growth Strategy in India and Market Diversification
Himatsingka Seide is actively focusing on broad-basing its market presence, particularly in India, EMEA, and APAC regions, while North America remains the largest market. The India business has shown significant growth, from sub INR25 crore in FY24 to approximately INR100 crore in FY25, and is targeted to reach INR1,000 crores within the next 5 years. The company projects an EBITDA profile of around 15% for its India business, which is already largely at breakeven.
EBITDA Margin Outlook and Forex Impact
The company's overall EBITDA margin profile is expected to remain in the 18-22% range. While Q3 FY25 saw some margin corrections, partly due to outsourcing and other income movements (including a forex gain of INR27-28 crores), management considers these movements to be range-bound. They noted that while forex gains are mathematically correct, their practical benefits tend to erode over time due to various market factors.