Himatsingka Seide Limited — Q3 FY25 earnings call

Call held 13 Feb 2025

Management summary

Himatsingka Seide reported a range-bound Q3 FY25 with some margin corrections, but highlighted significant progress in strategic initiatives. The company successfully completed a INR400 crore QIP, reducing net debt by INR325 crores to INR2,350 crores. Green energy capacity was substantially expanded, and plans are underway to debottleneck Terry Towel operations to increase capacity. The India business demonstrated strong growth, and management remains optimistic about future growth and capacity utilization improvements from FY26.

Highlights

  • Successfully closed INR400 crore QIP during Q3 FY25, leading to a de-leveraging of the balance sheet by approximately INR325 crores.

  • Net debt reduced to INR2,350 crores as of December 31, 2024, from INR2,680 crores at the end of September.

  • Green energy portfolio significantly enhanced to 28.7 megawatts, up from approximately 4.2 megawatts, expected to optimize energy costs by ~INR3 per kilowatt hour.

  • India business showed strong growth, increasing from sub INR25 crore in FY24 to approximately INR100 crore in FY25, with a target of INR1,000 crore in the next 5 years.

  • Buoyant demand for Terry Towel products and stable demand for Sheeting products noted, with debottlenecking plans to increase Terry Towel capacity from 25,000 to 40,000 tons per annum over 12-16 months.

Concerns

  • Operating performance for the quarter was largely range bound, with some margin corrections in total income, including a ~100 basis points impact on operating margin due to outsourcing.

  • Capacity utilization for Sheeting division remained at 60% and Terry Towel division at 68%, indicating underutilization.

  • Management noted that while forex gains are mathematically correct, in practice, these gains tend to erode away in some form over time.

Key financials

2 periods

Headline

  • Sheeting Capacity Utilization
    60%
  • Terry Towel Capacity Utilization
    68%
  • Spinning Capacity Utilization
    99%
  • Net Debt (Dec 31, 2024)
    ₹2,350 Cr
  • Net Debt (Sep 30, 2024)
    ₹2,680 Cr

Q3 FY25

  • Forex Gain
    ₹27 Cr

What they filed

Q1 FY27: revenue down 5.4%, net profit down 54.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue694 692 657 657 630 −9%611 −12%617 −6%621 −5%
EBITDA139 112 118 121 99 −29%95 −15%50 −58%88 −27%
Net profit22 22 12 11 42 +94%8 −65%1 −88%5 −54%
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 ₹60 Cr
    • Ordinary cost, maintenance, and organic capex, including debottlenecking ₹60 Cr
    As I shared earlier, whatever it is will be part of our ordinary cost, maintenance and organic capex budgets, which are INR60 crores to INR80 crores per annum.
  • Debt Net ₹2,350 Cr
    • Repayment De-levered balance sheet by approximately INR325 crores during the quarter, following INR400 crore QIP. ₹324 Cr
    In addition, as we shared last time, we closed successfully closed our INR400 crore QIP during Q3 FY '25 and consequently de-levered our balance sheet by approximately INR325 crores during the quarter.
  • Liquidity Liquidity disclosed Successfully closed INR400 crore QIP during Q3 FY25.
    In addition, as we shared last time, we closed successfully closed our INR400 crore QIP during Q3 FY '25 and consequently de-levered our balance sheet by approximately INR325 crores during the quarter.

Guidance & targets

Capacity

  • Terry Towel Capacity Capacity · 12-16 months · High confidence 40,000 tons per annum from 25,000 tons per annum

    From 25,000 tons per annum today

    we're also working to look at taking Terry to 40,000 tons per annum from 25,000 tons per annum in due course. ... We are looking at it somewhere in the next 12 to 14 months. 12 to 14, 16 months, somewhere there.

    — Shrikant Himatsingka

Revenue

  • India Revenue Revenue · next 5 years · High confidence INR1,000 crores
    Directionally, we are looking at INR1,000 crores from the nation over the next 5 years is what I've shared with our investors.

    — Shrikant Himatsingka

Profitability

  • India Business EBITDA Profile Profitability · going forward · Medium confidence approximately 15%
    We feel that the EBITDA from India should be in the region of approximately 15% or thereabouts.

    — Shrikant Himatsingka

  • Overall EBITDA Margin Profitability · going forward · High confidence 18-22%
    Rusmik, the EBITDA margin of Himatsingka, the EBITDA profile of the company, as I've shared with stakeholders before, will be between 18% and 22%.

    — Shrikant Himatsingka

Debt

  • Net Debt Debt · next 18-24 months · High confidence INR1,500-1,600 crores
    But over a 2-year time frame, if I look at over the next 18 to 24 months, we should we would like to bring debt down to -- in the region of approximately INR1,500 crores to INR1,600 crores.

    — Shrikant Himatsingka

  • Net Debt Stability Debt · March 2025 · High confidence stable from March
    And I think we are tracking March to be net debt stable, yes, from here.

    — Shrikant Himatsingka

Cost Savings

  • Green Energy Cost Savings Cost Savings · FY26 onwards · High confidence approximately INR3 a kilowatt hour
    Nirav, we think that we should save approximately around INR3 a kilowatt hour.

    — Shrikant Himatsingka

Capacity Utilization

  • Sheeting Capacity Utilization Capacity Utilization · FY26 · Medium confidence movement up

    From 60% today

    I feel that the capacity utilization in our Sheeting division will see movement as we go into FY '26.

    — Shrikant Himatsingka

  • Terry Towel Capacity Utilization Capacity Utilization · FY26 · Medium confidence moving up north

    From 68% today

    as far as the Towel division is concerned, I definitely think it will be moving up north from here going into FY '26.

    — Shrikant Himatsingka

Growth

  • Growth Resumption Growth · FY26 · Medium confidence from Q1 FY26
    I think yes, directionally from '26 is when we'd like to see that unfold. That's right.

    — Shrikant Himatsingka

What to watch in Q4 FY25

Terry Towel Capacity Expansion

next quarter (part of 12-16 months plan)
Current 25,000 tons per annum
Target Progress towards 40,000 tons per annum

Why it matters

This expansion is key to meeting buoyant demand and improving overall capacity utilization and revenue.

we're also working to look at taking Terry to 40,000 tons per annum from 25,000 tons per annum in due course. ... We are looking at it somewhere in the next 12 to 14 months. 12 to 14, 16 months, somewhere there.

Risks & concerns

  • Margin corrections and range-bound operating performance

    medium

    Operating performance was largely range bound, with some margin corrections in total income, partly due to outsourcing and other income movements.

    Management acknowledged

  • Capacity underutilization in Sheeting and Terry Towel divisions

    medium

    Sheeting division utilization was 60% and Terry Towel at 68%, though management expects improvements from FY26.

    Management acknowledged

  • Volatility in revenue due to product mix changes and outsourcing

    low

    Product mix changes have impacted some capacities, leading to temporary outsourcing, which is expected to last 2-3 quarters.

    Management acknowledged

Q&A highlights

7 direct
Capacity Utilization and Revenue Guidance Partial
I feel that the capacity utilization in our Sheeting division will see movement as we go into FY '26. And as far as the Towel division is concerned, I definitely think it will be moving up north from here going into FY '26. ... Himatsingka does not offer any revenue guidances per se.

Analyst sought specific timelines for capacity improvement and revenue targets, but management provided directional guidance for FY26 and reiterated no formal revenue guidance.

Asked by Aaditya Singh

Margin Contraction and Forex Gains Direct
I mean the contraction is really range bound. I would urge you to look at it in tandem with other income. ... there could be some quarters where the other income is a little higher. But it's large it's something -- if you look at 9 months, it was approximately INR15 crores, INR20 crores for the 9-month period and about close to INR40 crores for this so about INR15 crores, INR20 crore movement during the 9-month period.

Analyst questioned the reason for margin contraction, and management clarified it was range-bound, linked to other income movements, and a ~100 bps impact from ordinary costs/outsourcing.

Asked by Riya Mehta

Terry Towel Debottlenecking and Capex Direct
we're working on debottlenecking our capacities because of movements in product mix. ... we're also working to look at taking Terry to 40,000 tons per annum from 25,000 tons per annum in due course. ... will be part of our ordinary cost, maintenance and organic capex budgets, which are INR60 crores to INR80 crores per annum.

Provided specific details on capacity expansion plans for Terry Towel and clarified that associated capex is within existing budgets, not new large-scale projects.

Asked by Prerna Jhunjhunwala

India Business Penetration and Profitability Direct
India was pretty much non-existent for Himatsingka in terms of absolute values. It was very low. Even if I look at early parts of -- if I look at FY '24, India was close to I mean, it was a sub INR25 crore business. FY '25, we saw it grow, as I've shared with stakeholders near the approximately INR100 crore mark... We feel that the EBITDA from India should be in the region of approximately 15% or thereabouts.

Highlighted significant growth in the India market and provided a clear profitability target for this segment, indicating a strategic focus.

Asked by Prerna Jhunjhunwala

Debt Target for FY26 Direct
But over a 2-year time frame, if I look at over the next 18 to 24 months, we should we would like to bring debt down to -- in the region of approximately INR1,500 crores to INR1,600 crores.

Management provided a specific, ambitious net debt reduction target with a clear timeline, reinforcing their focus on balance sheet strengthening.

Asked by Prerna Jhunjhunwala

Growth Resumption Timeline Direct
As I indicated last quarter, we felt that for a couple of quarters, we're going to have some range-bound movements. So I think we should look at that more coming in from '26. ... I think yes, directionally from '26 is when we'd like to see that unfold. That's right.

Clarified the expected timeline for growth resumption, indicating that significant growth is anticipated from Q1 FY26 after a period of range-bound performance.

Asked by Rusmik Oza

Green Energy Cost Savings Direct
Nirav, we think that we should save approximately around INR3 a kilowatt hour. ... So this INR9 will come down to INR3. So at least on 20%, we have about

Quantified the expected cost savings from the expanded green energy portfolio, providing a clear financial benefit for FY26 onwards.

Asked by Nirav Savai

Outsourcing Impact on EBITDA Direct
Yes, of course, because we're not manufacturing it, so it could a little bit of that 100 bps impact that I spoke about was also probably because of this reason. ... Maybe at this point, 2, 3 quarters, nothing more than that.

Addressed the temporary negative impact of outsourcing on EBITDA margins and provided a timeline for when these operations are expected to be brought back in-house.

Asked by Shrikanth

2 min read 6 chapters

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.

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