Indo Count Inds.

Indo Count Industries reported a Total Income of ₹1,045 crores for Q2 FY25. For H1 FY25, total income increased by 12% year-over-year to ₹1,995 crores, up from ₹1,780 crores in H1 FY24. EBITDA for Q2 FY25 was ₹166 crores, with a margin of 15.92%, while H1 FY25 EBITDA stood at ₹320 crores, with a margin of 16.03%. PAT, however, saw a decline, with Q2 FY25 PAT at ₹82 crores (vs ₹114 crores in Q2 FY24) and H1 FY25 PAT at ₹159 crores (vs ₹188 crores in H1 FY24), partly due to upfront investments and supply chain challenges.

The company is entering a 'Version 2.0' phase, focusing on diversified product portfolios and premium segments. Recent acquisitions of Fluvitex Inc., USA, and Modern Home Textiles, key players in the US quilt and pillow market, establish a manufacturing footprint in the US. These acquisitions add a combined annual revenue potential of US$85 million at full capacity, with plans to ramp up utilization to 75% by FY26. The branded business segment is expected to contribute an additional US$100 million to the top line annually over the next three years.

Indo Count has significantly revised its CAPEX estimate for FY25 to ₹413 crores, up from the original ₹165 crores. This increase is primarily driven by the strategic acquisitions and related investments. The revised CAPEX will be funded equally through internal accruals and debt. Additionally, solar energy projects and a zero liquid discharge system are slated for implementation in FY26, aligning with the company's sustainability goals.

The company experienced an increase in inventory levels and working capital due to supply chain issues, including the Red Sea situation and container availability. Approximately 2.5 million meters of shipments were deferred due to these issues, contributing to the inventory buildup. Management expects these inventory levels and working capital days to normalize by the year-end as the supply chain situation improves and deferred orders are liquidated.

EBITDA margins were impacted by 150 basis points in H1 FY25 due to upfront costs associated with human resources, brand promotion, and infrastructure for the new utility bedding business. The company has revised its margin guidance to 15-16% for the next year. Management acknowledged rising labor costs and the withdrawal of a 2% interest subvention by the government, which are increasing operational expenses. Efforts to maintain competitiveness include value addition, automation, and technology investments.

The acquisition of US manufacturing facilities for utility bedding, particularly pillows, is a strategic move to mitigate high logistics costs associated with shipping bulky, light-weight products from India. Producing in the US allows for direct supply to retailer distribution centers, offsetting additional labor costs. This strategy also addresses geopolitical volatility and customer preference for onshore suppliers, positioning Indo Count to capture a larger share of the US utility bedding market.

India is increasingly positioned as a major manufacturing hub in the textile sector, benefiting from the 'China Plus One' sourcing strategy and government support through free trade agreements. The company believes India has a complete value chain to support the supply chain, which is crucial for retailers. Indo Count aims to utilize its Indian capacity, targeting around 144-145 million meters, and expects to fully utilize its 153 million meters capacity by March 2027, leveraging India's competitiveness in cotton-based products.