Trident Limited — Q4 FY21 earnings call

Call held 15 May 2021

Management summary

Trident Limited reported a strong Q4 FY21, driven by robust demand in its Home Textile segment, which saw significant revenue growth and high capacity utilization. The company also made substantial progress in debt reduction, lowering net debt by nearly 12% year-on-year. While the Paper segment showed recovery, management expressed caution regarding the potential impact of the Covid-19 second wave on Q1 FY22 momentum. The company outlined an ambitious 'VISION 2025' plan focusing on revenue growth, brand building, and digital transformation.

Highlights

  • Net Revenue for Q4 FY21 stood at INR 1352.6 crores, up 35.63% YoY from INR 997.3 crores in Q4 FY20.

  • EBITDA for the quarter was INR 238.2 crores, translating to a robust 17.6% EBITDA margin.

  • Profit After Tax (PAT) for Q4 FY21 was INR 75.6 crores.

  • Net Debt reduced significantly to INR 1423.2 Crores as of March 31, 2021, down 11.85% YoY from INR 1614.5 Crores.

  • Home Textile segment revenue grew by 45.73% YoY to INR 1131.9 crores, with Bath Linen up 52% and Bed Linen up 109% YoY.

  • Bed Linen capacity utilization reached 92%, and Paper business capacity utilization was 92% in Q4 FY21.

  • Company unveiled 'VISION 2025' targeting INR 25,000 Crore revenue with a 12% bottom line by 2025.

Concerns

  • Impact of Covid-19 Second Wave

Key financials

  1. Net Revenue ₹1,352.6 Cr +35.6%YoY
  2. EBITDA ₹238.2 Cr
  3. EBITDA Margin 17.6%
  4. PAT ₹75.6 Cr
  5. Net Debt ₹1,423.2 Cr -11.8%YoY
  6. Net Debt to Equity Ratio 0.4×

What they filed

Q1 FY27: revenue up 4.8%, net profit up 10.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,709 1,663 1,859 1,700 1,785 +4%1,566 −6%1,630 −12%1,782 +5%
EBITDA225 210 243 290 213 −5%135 −36%229 −6%292 +1%
Net profit83 78 132 139 92 +11%42 −46%102 −23%153 +10%
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.

Segment breakdown

Share of Revenue
₹1,350.3 Cr Total
  • Textile Segment ₹1,131.9 Cr 83.8%
  • Paper & Chemicals Segment ₹218.4 Cr 16.2%

Guidance & targets

Revenue

  • Revenue Revenue · by 2025 · High confidence INR 25,000 Crore
    Achieving Revenue of INR 25,000 Crore by 2025 with 12% bottom line;

    — Management

Profitability

  • Bottom Line Profitability · by 2025 · High confidence 12%
    Achieving Revenue of INR 25,000 Crore by 2025 with 12% bottom line;

    — Management

Brand Building

  • National Brand Status Brand Building · by 2025 · Medium confidence National Brand
    Making Trident a National Brand;

    — Management

Digital Transformation

  • Industry 4.0 Adoption Digital Transformation · by 2025 · Medium confidence Digital Trident
    Digital Trident – By completing the journey of Industry 4.0

    — Management

Dividend

  • Dividend Payout Dividend · FY20-21 · High confidence 53%
    This translates into a dividend payout of 53%.

    — Management

Capex

  • Yarn Project Implementation Capex · ongoing · Medium confidence Single phase near completion

    Previously INR 1140.0 Crores, 3 phases → Single phase near completion

    The company has decided to go ahead with implementation of single phase only which is near completion and will review the capex in due course of time in line with the stragtegic planning to achieve ‘VISION 2025'

    — Management

  • Paper Upgradation Project Capex · later stage · Low confidence Decision at later stage

    Previously INR 222.0 Crores → Decision at later stage

    The company will not go ahead with the paper upgrdation project proposed to be implemented at total cost of INR 222.0 Crores and a decision regarding its implementation will be taken at a later stage when market scenario improves

    — Management

New Business

  • Detergent Powder Capacity New Business · ongoing · High confidence 10 MT/day
    the management has approved the diversification of the business operations under the Chemical Segment for production of 'Detergent Powder' with capacity of 10 MT/day .

    — Management

Realization

  • USD/INR Realization Rate Realization · Q4 FY21 · High confidence INR 74.21 per USD
    Our average negotiated rate for the current quarter has been at INR 74.21 per USD

    — Management

Hedging

  • Forward Hedged Rate Hedging · FY22 · High confidence INR 75.81 per USD
    Average Forward Hedged Rate for FY22 is around INR 75.81 per USD.

    — Management

Risks & concerns

  • Impact of Covid-19 Second Wave

    high

    The grim situation owing to the second wave of Covid-19 may hamper the momentum of last quarter and the situation remains volatile.

    Management acknowledged

  • Non-recognition of RoTDEP benefits

    medium

    Income on account of benefits under the new RoTDEP scheme has not been recognized for Q4 FY21 due to non-availability of confirmed rates.

    Management acknowledged

  • Cotton price volatility

    medium

    Government procurement led to price increases in Q4 FY21, and the US ban on Xinjiang cotton will impact prices, though prices are expected to remain near current levels.

    Management acknowledged

  • Paper business market conditions

    medium

    Paper upgradation project put on hold, with a decision to be taken at a later stage when market scenario improves, indicating current unfavorable conditions.

    Management acknowledged

Q&A highlights

3 direct
Company's 'VISION 2025' strategy Direct
The company has unveiled its 'VISION 2025′ under which 3 BHAG [BIG, HAIRY, AUDACIOUS, GOALS, pronounced as Bee-Hag] have been formulated aimed towards unlocking long-term sustainable value for the shareholders. Achieving Revenue of INR 25,000 Crore by 2025 with 12% bottom line; Making Trident a National Brand; Digital Trident – By completing the journey of Industry 4.0

This question reveals the company's long-term strategic goals and specific financial targets for the next four years, providing a clear roadmap for investors.

Debt reduction efforts and future plans Direct
The company has undertaken several initiatives over the years to reduce its debt commitments... Owing to the above initiatives the net debt levels of the company have reduced to level of INR 1423.2 Crores at end of Mar 2021. While term debt has reduced by INR 749 Crores, the working capital has increased on account of increase in inventory on year end due to cotton season till March month and increase receivables.

This highlights the company's focus on improving its balance sheet by significantly reducing net debt and provides a detailed breakdown of debt components, which is crucial for assessing financial health.

Status of ongoing Capex projects Direct
The yarn project was proposed to implemented at total cost of INR 1140.0 Crores and the implementation was under 3 phases. The company has decided to go ahead with implementation of single phase only which is near completion and will review the capex in due course of time... The company will not go ahead with the paper upgrdation project proposed to be implemented at total cost of INR 222.0 Crores and a decision regarding its implementation will be taken at a later stage when market scenario improves.

This clarifies the company's revised capital expenditure plans, indicating a more cautious approach to expansion given market conditions and a new diversification into the Chemical Segment for Detergent Powder.

2 min read 5 chapters

Detailed narrative

Strong Q4 FY21 Performance Driven by Home Textiles

Trident Limited delivered a robust Q4 FY21, with Net Revenue surging by 35.63% year-on-year to INR 1352.6 crores. The Home Textile segment was a key growth driver, registering a 45.73% YoY revenue increase to INR 1131.9 crores. Within this, Bath Linen revenue grew by 52% and Bed Linen by an impressive 109% YoY. The company maintained a healthy EBITDA margin of 17.6%, with EBITDA at INR 238.2 crores, and reported a Profit After Tax of INR 75.6 crores.

Enhanced Capacity Utilization and Export Contribution

The company achieved high capacity utilization rates in its core segments during Q4 FY21, with Bed Linen at 92% and Bath Linen at 61%. The Paper business also showed strong recovery, reaching 92% capacity utilization, with volumes and realizations improving by 9% and 10% respectively. Exports remained a significant contributor, accounting for 64% of the total revenue for the quarter, underscoring the company's strong international market presence.

Significant Debt Reduction and Financial Strengthening

Trident made substantial progress in deleveraging its balance sheet, reducing Net Debt by 11.85% year-on-year to INR 1423.2 Crores as of March 31, 2021, down from INR 1614.5 Crores in the previous year. Term debt alone decreased by INR 749 Crores. This led to a healthy Net Debt to Equity ratio of 0.4x, reflecting improved financial stability. The company also recommended a final dividend of 36% (INR 0.36 per share) for FY20-21, translating to a 53% dividend payout.

Strategic 'VISION 2025' and Capex Revisions

The company unveiled its 'VISION 2025' with ambitious goals, including achieving INR 25,000 Crore in revenue with a 12% bottom line, becoming a National Brand, and completing its Industry 4.0 journey. In line with this vision, Trident revised its capex plans: the Yarn project (originally INR 1140.0 Crores) will proceed with a single phase nearing completion, while the Paper upgradation project (INR 222.0 Crores) has been put on hold. A new diversification into the Chemical Segment for 'Detergent Powder' with a capacity of 10 MT/day has been approved.

Industry Outlook and Market Dynamics

The Home Textile market is experiencing strong demand, particularly from USA and Europe, driven by hygiene consciousness and work-from-home trends. India's share in US cotton sheets increased to 60% and terry towels to 43% in Jan-Mar 2021. The company noted that global retailers are increasing orders in anticipation of supply chain disruptions due to India's lockdowns. However, the second wave of Covid-19 poses a risk to Q1 FY22 momentum. Cotton prices are expected to remain near current levels, influenced by government procurement and the US ban on Xinjiang cotton.

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