Indo Count Industries Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Indo Count Industries Limited reported a strong Q3 FY25, with significant revenue and PAT growth driven by strategic investments and recent acquisitions in the US market. The company is expanding its utility bedding and branded business, aiming to double revenues by 2028. While near-term investments are expected to impact margins, management remains optimistic about long-term profitability and market leadership, supported by a robust CAPEX plan and focus on operational efficiencies.

Highlights

  • Total Income (Revenue) for Q3 FY25 grew by 61% YoY to ₹1,168 crores.

  • Profit After Tax (PAT) for Q3 FY25 increased by 30% YoY to ₹75 crores.

  • EBITDA margin for Q3 FY25 was 14.2%, with the 9M FY25 margin at 15.3%.

  • Sales volume for Q3 FY25 reached 27.7 million meters, a 42% YoY growth.

  • Acquisitions contributed approximately ₹100 crores to revenue in Q3 FY25.

  • The company targets doubling its consolidated revenues by 2028.

  • A new greenfield manufacturing facility in North Carolina, USA, involves a $15 million investment and will add 18 million pillows capacity.

  • Full year FY25 sales volume is expected at the lower end of 100-115 million meters guidance.

Concerns

  • Margin impact from US investments

Key financials

  1. Total Income ₹1,168 Cr +61%YoY
  2. PAT ₹75 Cr +29.3%YoY
  3. EBITDA Margin 14.2%
  4. Sales Volume 27.7 million meters +42%YoY
  5. EPS ₹3.81
  6. Gross Debt ₹1,300 Cr

What they filed

Q1 FY27: revenue up 11.7%, net profit up 67.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue991 1,009 865 733 828 −16%779 −23%758 −12%819 +12%
EBITDA150 122 52 88 81 −46%63 −48%67 +29%114 +30%
Net profit83 67 8 40 42 −49%25 −63%37 +363%67 +68%
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.

Guidance & targets

Volume

  • Full year FY25 Sales Volume Volume · FY25 · Medium confidence lower end of 100 million to 115 million meters
    For the full year FY '25, we will be at a lower end of our volume guidance of 100 million to 115 million meters.

    — K. Muralidharan

Profitability

  • Full year FY25 EBITDA Margin Profitability · FY25 · High confidence 15% to 16%
    For the full year, FY '25, we will be at guided EBITDA margin range of 15% to 16%.

    — K. Muralidharan

  • Margin impact from US investments Profitability · till March '26 · High confidence 150 to 200 basis points
    The near term investments in US will impact margins by 150 to 200 basis points till March '26.

    — Mohit Jain

Revenue

  • Additional Revenue from brands and acquisitions Revenue · next three years · High confidence $275 million
    Having invested approximately $72 million in brands and acquisitions, we anticipate an additional revenue of approximately $275 million over the next three years.

    — Mohit Jain

  • Consolidated Revenues Revenue · by 2028 · High confidence double our revenues
    we aspire to double our revenues by 2028, driven by our core business, utility bedding and brands, including our recently added licensed brands.

    — Mohit Jain

  • Revenue from US greenfield facility Revenue · from September 2025 · High confidence from September 2025
    which will start coming up and we should start seeing revenues from September of this year onwards.

    — Mohit Jain

Capacity

  • Total US manufacturing capacity (pillows) Capacity · High confidence 31 million pillows
    With this addition, Indo Count's total US manufacturing capacity will expand to 31 million pillows and 1.5 million quilts annually.

    — Mohit Jain

Capex

  • Greenfield manufacturing facility investment Capex · between now and September 2025 · High confidence $15 million
    Anant, this investment is in our North Carolina facility, I mean, $15 million will happen, let's say, starting now to September of 2025.

    — Mohit Jain

  • Total CAPEX for FY25 Capex · FY25 · High confidence Rs. 463 crores
    Rs. 463 crores to be precise.

    — K. Muralidharan

  • Strategic investment placeholder Capex · Medium confidence $10 million
    So, Prerna, we put that as a placeholder for any other debottlenecking or any other opportunities in these locations that we just invested in, any location might require something going forward as we run these businesses or customer requirements. So, that's why we have kept that as a kitty in there.

    — Mohit Jain

Debt

  • Gross Debt level Debt · Medium confidence remain more or less at the same level
    Yes, so I think the gross debt should remain more or less at the same level. I expect the working capital to come down a little bit. Which we will compensate by the increased investments we will be making in the greenfield. So, overall, I think Rs. 1,300 crores gross should remain.

    — K. Muralidharan

Risks & concerns

  • Margin impact from US investments

    high

    Near-term investments in the US are expected to impact margins by 150 to 200 basis points until March 2026, due to upfront team building and scale-up costs.

    Management acknowledged

  • Elevated freight costs

    medium

    Elevated freight costs had a marginal impact on profitability in Q3 FY25, though strategic measures are being implemented and costs have started to rationalize in Q4.

    Management acknowledged

  • Higher interest costs and increased borrowings

    medium

    Profitability was impacted by higher interest costs due to the absence of interest subvention benefits (discontinued from Q2 FY25) and increased borrowings for business growth and US acquisitions.

    Management acknowledged

  • Cotton price volatility and Rupee depreciation

    medium

    While current cotton prices haven't significantly impacted due to product mix and inventory, domestic prices might offer some benefit from Q1 FY26. Rupee depreciation could be a benefit as hedges execute, but overall competitiveness against other countries is key.

    Analyst acknowledged

Areas of evasion (3)

  • Specific profitability metrics (ROCE) for new US greenfield expansion
  • Exact Q4 revenue contribution from acquisitions
  • Precise FY26 margin guidance details

Q&A highlights

0 direct, 1 evasive
High ROCE from US greenfield expansion Evasive
Sure. Amit, on a call I would like to avoid discussing specific numbers right now, for competitive reasons. There's a lot that goes behind executing a business of this scale. Cannot just look at capital invested to the revenue, otherwise everybody would be in it.

Analyst questioned the seemingly high pre-tax ROCE from the new $15M US greenfield investment, which management avoided discussing with specific numbers, citing competitive reasons.

Asked by Amit Kumar

Margin impact from US investments and future outlook Partial
For next year, as we have mentioned Sandeep, that we will come out with our guidance at the end of Q4, looking at what the business looks like. So, we will be in a better position to say that. So, this year our Q3 results have already factored that into account. And it's on that basis also that we have given the Q4 and the full year guidance.

Analyst sought clarity on whether the 1.5-2% margin hit from US investments was fully factored into current guidance and its future trajectory, with management deferring specific FY26 guidance to Q4 results.

Asked by Sandeep Baid

Sustainability of US expansion and future acquisitions Partial
I think, Surya, Mohit here. I think we have to keep in mind that all these investments have been done in the last six to nine months. You have to give us some breathing room, right. So, I think for now we have announced whatever needed to be done in terms of investments, keeping in mind the top-line growth. Of course, we are always looking at opportunities, so I think we have a very strong balance sheet as we move forward. But we are very, very conservative in our approach, we take very calculated calls.

Analyst questioned if the current spree of US acquisitions and greenfield expansions was complete or if more were planned, to which management indicated a need for 'breathing room' and a conservative approach, implying a near-term pause on major new inorganic growth.

Asked by Surya Narayan Nayak

3 min read 6 chapters

Detailed narrative

Robust Q3 FY25 Performance and 9M Financials

Indo Count Industries Limited delivered a strong Q3 FY25, with total income increasing by 61% year-on-year to ₹1,168 crores, and Profit After Tax (PAT) growing by 30% to ₹75 crores. For the nine months of FY25, total income stood at ₹3,162 crores, a 26% increase from the previous year, while PAT was ₹235 crores. The company reported a Q3 FY25 EBITDA margin of 14.2% and a 9M FY25 EBITDA margin of 15.3%, guiding towards a full-year FY25 EBITDA margin in the 15-16% range.

Strategic US Expansion and Acquisition-Led Growth

The company is actively expanding its US footprint through strategic acquisitions and greenfield projects. Recent acquisitions, including Fluvitex USA, Modern Home Textiles USA, and new licensed brands, contributed approximately ₹100 crores to Q3 revenue. These investments, totaling around $72 million, are projected to generate an additional $275 million in revenue over the next three years. A new greenfield manufacturing facility in North Carolina, USA, with a $15 million investment, will add 18 million pillows to its annual capacity, with revenues expected to commence from September 2025.

Ambitious Revenue Doubling Target and Capacity Boost

Indo Count Industries aims to double its consolidated revenues by 2028, a target driven by its core bedding business, utility bedding, and newly added brands. The expansion in the US will increase the company's total US manufacturing capacity to 31 million pillows and 1.5 million quilts annually. For the full fiscal year 2025, the company anticipates its sales volumes to be at the lower end of its previously guided range of 100-115 million meters.

Near-Term Margin Pressures and Cost Management Initiatives

While strategic investments are vital for long-term growth, they are expected to exert near-term pressure on margins, with an anticipated impact of 150 to 200 basis points until March 2026. This is primarily due to upfront investments in team building for the new US businesses. Additionally, higher interest costs, resulting from the discontinuation of interest subvention benefits from Q2 FY25 and increased borrowings for acquisitions, affected profitability. However, management noted that elevated shipping costs, which impacted Q3, have begun to rationalize in Q4.

Capital Expenditure and Debt Profile

The company's gross debt stood at approximately ₹1,300 crores on a consolidated basis as of Q3 FY25, with net debt being about ₹150 crores lower. Management expects gross debt levels to remain relatively stable, as reductions in working capital are anticipated to offset increased investments in greenfield projects. The total CAPEX for FY25 is estimated at ₹463 crores, encompassing both normal CAPEX and investments in the new US manufacturing facility. A $10 million strategic investment is also allocated as a placeholder for future debottlenecking or other opportunities.

Domestic Market Focus and Global Diversification Strategy

The domestic market, currently contributing approximately 2.5% to overall revenue through brands like Layers and Boutique Living, remains a key focus area for growth. Globally, Indo Count serves 54 countries, with growth in regions such as Australia, Japan, the Middle East, Europe, and the UK mirroring that of the US. While the US market is projected to constitute a larger share of the consolidated business due to new utility bedding and branded ventures, the company continues to expand its core sheeting business in other international markets.

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