Trident Limited

Trident Limited reported a strong financial rebound in Q2 FY21 (July-September 2020), with Net Revenue reaching INR 1174.6 crores. This represents a significant 65% increase on a quarter-on-quarter basis, although it was an 11.4% decline year-on-year compared to INR 1325.6 crores in Q2 FY20. The company achieved an EBITDA of INR 226.9 crores, translating to a healthy 19.3% margin, which improved by 91% quarter-on-quarter. Profit after tax stood at INR 100.2 crores for the quarter.

The Home Textile segment was the primary driver of growth, experiencing a strong demand revival from export markets, fueled by increased preference for hygiene products and the work-from-home trend. This led to record capacity utilizations, with Bed Linen reaching 90% and Bath Linen 61%. The Bed Linen segment alone saw a 48% year-on-year revenue growth. The company also noted increased captive consumption of yarn, reaching 64% of total production in Q2 FY21, up from 49% last year.

Trident made substantial progress in deleveraging its balance sheet, prepaying high-cost term loans amounting to INR 373.2 crores during the half-year. This initiative, along with other measures, reduced the net debt by INR 666 crores, bringing the total net debt down to INR 947.6 crores as of September 30, 2020. Consequently, the Net Debt to Equity ratio improved significantly to 0.3x, and finance costs for Q2 FY21 reduced by 54.6% year-on-year to INR 12.3 crores.

The Paper & Chemicals segment faced challenging circumstances, with revenue declining by 20.6% year-on-year to INR 180.9 crores in Q2 FY21. This was primarily due to growing imports from China, which increased by 14% in the last financial year, leading to pricing pressure and a 20% year-on-year decline in realizations. Despite this, the company managed to sustain volumes year-on-year and is diversifying its product mix by offering kraft paper to cater to diverse uses like packaging, expecting volumes and realizations to improve with the gradual unlocking of the economy.

Exports played a crucial role in Q2 FY21, growing by 10% over Q2 FY20 and contributing 68% to the overall revenue. India's market share in US imports of terry towels rose to 43% in Jan-Aug 2020, and cotton sheets remained at 50%. Trident employs a hedging strategy for export receivables, taking forward covers for 6-12 months. For Terry Towel, hedging is done on a monthly rolling basis at 40-60% of sales replenishment, while for Yarn/Paper, it's on an order-to-order basis, with an average forward hedged rate for FY21 around INR 75.30 per USD.

Management expects demand and capacity utilizations in the Textile Segment to sustain at current levels in upcoming quarters, targeting full-year EBITDA margins of 18-20% on a sustainable basis. While existing capex projects (Yarn Manufacturing and Paper Upgradation) are under review due to the Covid-19 situation, the company is focusing on marketing initiatives like tapping new customers, creating a dedicated online channel team, and utilizing virtual showrooms to drive volume growth. Cotton prices are expected to remain near current levels, supported by increased sowing.