NITINSPINNSEQ4 FY22May 13, 2022

Nitin Spinners Limited

8,960words
130turns
13analyst exchanges
4executives
Management on call
Dinesh Nolkha
PROMOTER & MD, NITIN SPINNERS LIMITED
P. Maheshwari
CFO, NITIN SPINNERS LIMITED
Awanish Chandra
SMIFS LIMITED
Nolkha
Managing Direc
Key numbers — 40 extracted
Rs. 2,692 crore
he continuous investment in the latest technology. We have achieved the highest ever revenue of Rs. 2,692 crores making a growth of about 66% along with highest ever profitability during this year. We have alm
66%
echnology. We have achieved the highest ever revenue of Rs. 2,692 crores making a growth of about 66% along with highest ever profitability during this year. We have almost doubled our exports duri
Rs. 955 crore
production capacity substantially. This expansion shall take place with the total project cost of Rs. 955 crores which will be funded by term loan as well as internal accruals. We aim to capture the benefit
Rs. 769 crore
highlights for the quarter and year ended 31st March, 2022. Revenue for the Q4 FY22 increased to Rs. 769 crores from Rs. 512 crores in Q4 FY21 that is increase of 50% on YOY basis. The full year revenues stoo
Rs. 512 crore
quarter and year ended 31st March, 2022. Revenue for the Q4 FY22 increased to Rs. 769 crores from Rs. 512 crores in Q4 FY21 that is increase of 50% on YOY basis. The full year revenues stood at 2,692 crores as
50%
ue for the Q4 FY22 increased to Rs. 769 crores from Rs. 512 crores in Q4 FY21 that is increase of 50% on YOY basis. The full year revenues stood at 2,692 crores as compared to 1,624 crores in FY21 th
2,692 crore
m Rs. 512 crores in Q4 FY21 that is increase of 50% on YOY basis. The full year revenues stood at 2,692 crores as compared to 1,624 crores in FY21 that is registering a growth of 66% on yearly basis. This ha
1,624 crore
at is increase of 50% on YOY basis. The full year revenues stood at 2,692 crores as compared to 1,624 crores in FY21 that is registering a growth of 66% on yearly basis. This has been our highest ever turn
Rs. 167 crore
to higher raw material price also resulted in higher revenue. EBITDA for the quarter is stood at Rs. 167 crores as compared to Rs. 104 crores in Q4 FY21, that is a growth of 61%. For the whole year EBITDA sto
Rs. 104 crore
also resulted in higher revenue. EBITDA for the quarter is stood at Rs. 167 crores as compared to Rs. 104 crores in Q4 FY21, that is a growth of 61%. For the whole year EBITDA stood at Rs. 652 crores as agains
61%
quarter is stood at Rs. 167 crores as compared to Rs. 104 crores in Q4 FY21, that is a growth of 61%. For the whole year EBITDA stood at Rs. 652 crores as against Rs.257 crores in FY21, that is a gr
Rs. 652 crore
ompared to Rs. 104 crores in Q4 FY21, that is a growth of 61%. For the whole year EBITDA stood at Rs. 652 crores as against Rs.257 crores in FY21, that is a growth of 153%. EBITDA margin for Q4 FY22 is 21.8% a
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Guidance — 20 items
Dinesh Nolkha
opening
“This expansion shall take place with the total project cost of Rs.”
Dinesh Nolkha
opening
“955 crores which will be funded by term loan as well as internal accruals.”
Dinesh Nolkha
opening
“We aim to capture the benefit of growing market opportunity in international as well as domestic market and strengthen company’s position by widening our product portfolio as well.”
Dinesh Nolkha
opening
“These projects will be eligible for the interest subsidy and other benefits under the Rajasthan state investment promotion scheme.”
Dinesh Nolkha
opening
“The expansion project as informed earlier is progressing as per schedule.”
Kaushal
qa
“Though yarn manufacturers in the entire sector, is the pricing power slowly shifting to them because there's not been major capacity additions in the last 3-4 years and from what we understand is that one cannot add more than 2 million spindles going forward for the next 3 to 4 years.”
Kaushal
qa
“This is 900 crores will be funded you said partly by internal accruals and partly by term loan which you mentioned earlier.”
Dinesh Nolkha
qa
“Not FY24, when the project is completed.”
Dinesh Nolkha
qa
“This we'll repay and then we'll add some for working capital and other so total will be Rs.1,200 crores around.”
Dinesh Nolkha
qa
“Yes of course with our expansion going up this should go up to more than 20% levels going forward.”
Risks & concerns — 9 flagged
But this time we could not book so much of orders because of difficult geopolitical situation happening in Ukraine and Russia, due to this order book people were scared to book the very long-term orders.
— Dinesh Nolkha
At this point of time, we are not facing any challenge for utilization of our capacity.
— Dinesh Nolkha
So definitely there is a challenge in terms of passing on the prices internationally.
— Dinesh Nolkha
This is also one of the reasons why there is a slight slowdown by the increase in the yarn prices.
— Dinesh Nolkha
Is the China plus One story is at risk at this point in time?
— Prerna Jhunjhunwala
Nolkha we had seen lot of slowdown in the export of home furnishing, home textiles from India in the cotton side.
— Niraj Mansingka
So, have you seen a slowdown in the consumption of cotton yarn from view of customers trying to export home textiles to the US market?
— Niraj Mansingka
CAGR means today in such times where the prices are going out of roof, it is difficult to put a number.
— Dinesh Nolkha
As far as our company is concerned, we do not foresee any impact of this particular issue happening as such.
— Dinesh Nolkha
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Q&A — 13 exchanges
Q
We have seen cotton prices have shot up very high and the yarn prices have also moved up, there were some articles like yarn prices have also not moved up in line with the increased cotton prices. So currently what kind of spreads are we seeing between yarn and cotton? How have they behaved compared to Q4 and Q1?
Dinesh Nolkha
You're very right. The cotton prices have shot up substantially. The cotton prices are now around Rs. 1 lakh per candy which was at about Rs. 80,000 a candy in February22. Definitely there is a substantial increase and rightly mentioned that cotton yarn prices have not moved in tandem as with the cotton prices have moved. Generally, this increase in prices is more speculative due to shortage of cotton in the country. The yarn prices are moving ahead but not moving to the tune what the raw cotton is moved and practically with the lag effect of about 1.5 to 2 months it is moving ahead. At this p
Q
I just want to understand what was your capacity utilization in 2017-18 and 19 on an average basis, can you help me with that?
Dinesh Nolkha
I will not be having the data of last 2017-18 and 2018-19 actually with us at the moment. Currently the capacity is running at what level? Currently capacities, like our spinning capacity is running at about 96% utilization level for last financial year. I'm talking about last financial year. Our weaving capacity is being utilized at about 95%. Our knitting capacity is being utilized at about 85% and our finished fabric capacity is being utilized at about 83%. How much was knitting? It is about 85%-86%. In the previous question you mentioned that Rs. 25 to 30 per kg price is yet to be passed o
Q
Can you highlight what are the product mix related changes and product mix related improvements which we are bringing in our company in recent times?
Dinesh Nolkha
Basically, in product mix since we have also started to manufacture first of all our own woven fabric. All the fashion related items, with the woven fabric the yarns which are related with it are being produced in house. That is actually helped us in improving our product portfolio. There are various kind of products wherein we have a sustainable fiber being used in this. Also, in our blended yarn segment we have been able to use our sustainable recycled fibers, recycled cotton, organic cotton and different kinds of mix of fibers like viscose, modal all those kinds of mix is being used in our
Q
I just wanted to understand the demand scenario from the domestic market as well as international market expected given changes in the raw material prices scenario and how is the profitability changed between those markets?
Dinesh Nolkha
As you know the raw cotton prices in India are higher than the international prices. So definitely there is a challenge in terms of passing on the prices internationally. It is easier for us to pass on the prices in the domestic market because the domestic market basically is buying the domestic yarns and which is priced at par with the cotton. That is one part of the question so domestic yarn is definitely at the moment better than the international yarn prices. In terms of how this is changing and how this is going to happen, most of the international buyer the changes in their strategies, c
Q
How is the demand situation and export outlook for USA coming out?
Dinesh Nolkha
Basically, we have a limited exposure in the US. We export some yarns and some fabrics there which is very nominal and limited. We are doing about 6% to 7% of our total capacity where the demand is good. We are seeing consistent demand coming in since cotton prices internationally is governed by the US Future the prices also have moved up in tandem in the US. We do not foresee any major issues there till now. And when the capacity increase on the spindle side do you envisage that the capacity growth could exceed the demand? As one of the participants as we have mentioned, not major if you see
Q
I actually missed the part of the CAPEX plan which you have laid out. Can you just repeat that if it's possible?
Dinesh Nolkha
Basically, we have announced the capacity expansion after our last earning call. So that is the tune of about Rs.955 crores. This will be funded by Rs.300 crores of internal accruals and Rs.655 crores of debt. The CAPEX cost is about Rs.860 crores and balance is the margin money for working capital. For this we will be adding capacities in our spinning department, in our weaving and finishing department and knitting department. We'll be increasing our spindleage from 3.32 lakh equivalent spindles to about 4.88 lakh equivalent spindles, increasing our capacity from 75,000 metric tons to about 1
Q
One is on the export market, Mr. Nolkha we had seen lot of slowdown in the export of home furnishing, home textiles from India in the cotton side. Do you see because of the excess inventory pile up? So, have you seen a slowdown in the consumption of cotton yarn from view of customers trying to export home textiles to the US market?
Dinesh Nolkha
Actually, if you see our profile, 72% of our yarn is exports and about 28% is domestic market and we have spread it pretty well in the various domestic with our customers. We are not very much dependent on one particular industry or one particular company as such for sale of our product. We are not seeing any major changes. Yes, if there is some lesser demand from some of the companies and we are able to fulfill it by supplying to other company just that. That is a flexibility which we have in our system. However, as you asked, I don't think there is a reduction in the exports from these downs
Q
Can you tell me the realization for kgs for the yarn and knitted fabrics and realization for meter for the woven fabrics in Q4 FY22 and Q4 FY21?
Dinesh Nolkha
Maheshwari ji can you give the exact numbers please? Yes. In Q4 the average yarn realization was Rs. 400 per kg while this was in Q4 ‘21, Rs.270 per kg in Q4 ‘21. In knitted fabric it was Rs.380 per kg during this quarter and in Q4 ‘21 it was Rs.298 per kg and woven fabric it was Rs.171 per meter during the quarter while it was Rs.133 per meters in Q4 ‘21. Your cotton prices over the last summer they have increased by almost being doubled but your yarn cycle has had not actually doubled. Increased by approximately 50%. Do we see yarn prices increasing further? Like you said that about 5% to 6%
Q
I would like to understand how the cost of power has impacted the industry?
Dinesh Nolkha
Cost of power, basically for us at least this has not impacted at all since last 1-year. It is going to be impacted now once the tariffs is increased by the State Electricity Boards. For us it has remained consistent for last 1-year. In fact, with some renewable power being installed by us, it has come down only for us. However, and we had a coal base power plant which we were using to generate power since we had scrapped that particular plant in last financial year and stopped using the power. So, that has in fact saved us some amount on the power side itself. Was Sri Lanka a major market for
Q
When I go through the P&L what I see is the volume growth has not been aggressive. However, the revenues have been really very aggressive. Just want to understand what could be the volume and the revenue outlook from a 12 to 36 months perspective?
Dinesh Nolkha
As we are saying that volume, we are consistently improving. Our spinning capacity is nearly fully utilized so that will continue to be utilized going forward. But any additional capacity that will come up only from FY24, Q1FY24 and Q2FY24 and we are expecting that in 24 months from now we should be running, we should have increased our capacity by nearly 45% on the yarn side which is our major revenue earner. As far as our woven capacity is concerned; that is now running at about 90% which we are trying to further ramp up. We are trying to increase the capacities there which will be fructifie
Q
I'm trying to understand that as you were saying that while the garment companies pass on this price increase then it will be irreversible. It will be irreversible for the OEM. That is the branded companies which are ultimately selling to the retail customer but for the garment manufacturer they will have to pass on if the cotton and yarn prices decrease, then the OEMs which are the brands they will ask the garment manufacturers to pass it on to them and they will keep the benefit themselves, the branded company. Then how it comes back to us that how are we saying that once these prices go up
Dinesh Nolkha
First of all, would like to comment on your steel industry example. Steel industry has many usages apart from automobile industry. They have maybe eight to ten different kinds of usages. Whereas the textile industry has only one usage that is for the cloth which has been worn or maybe for home textiles, it is related with the same itself, use like personal usages. Our usage for cotton is one single that ultimately it goes to the customer which will use it for their own consumption. That is why it is more let's say directly linked with the apparel price. So that is one part. We cannot compare t
Q
My question is that the garment industry is asking for the export ban of cotton and on 17th May I think they will be having a meeting with Minister of Textile. How do you think the ban will affect specifically your company, Nitin Spinner how it will restructured by a cotton ban if there is a cotton ban on export?
Dinesh Nolkha
The ban is for the raw cotton exports which is being contemplated. I think it is too late because already most of the cotton now our cotton prices in India are more than the international prices. And anyway, not much exports is happening. Only exports which was committed earlier with lower prices is happening at this point of time. I don't foresee any impact happening because of this ban or anything else and rather it will be detrimental overall to the sentiment in the global arena that we are inconsistent with our policies. That is one part. Anyway, it is not happening at all. As far as our c
Q
Congratulation Dinesh sir, Maheshwari ji on continued strong performance. Since we are completely out of time, just one comment. In last 7-8 years we have kind of four times capacity now. Do we foresee the same kind of growth trajectory over next 5-6 years? Next 2- year picture is already you have talked about. What could we expect? We can have the same kind of journey of last 7-8 years in next 4-5 years?
Dinesh Nolkha
Awanish ji, if you look at our history, we have been growing at 18%-19% CAGR in revenue terms not in capacity. I would not like to comment on capacity side. And we expect to continue this journey for foreseeable future of next 4-5 years at least. I hope we could multiply the rate at what you mentioned just now. It will be our endeavor to grow at that level definitely, everybody wants to grow. That is something which we all aspire for and hope it fructifies as good for all of us. Also, I would like to thank everyone for joining in the call and thank you Awanish ji and SMIFS Ltd for hosting this
Speaking time
Dinesh Nolkha
53
Moderator
15
Kaushal
14
Yogansh Jeswani
7
Nikhil Agrawal
7
Prerna Jhunjhunwala
6
Kirti Jain
4
Yash Bajaj
4
Niraj Mansingka
4
Awanish Chandra
3
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Opening remarks
Awanish Chandra
Good evening, everyone. On behalf of SMIFS Limited I welcome you all to Q4FY22 conference call of Nitin Spinner Limited. We are pleased to host the top management of the company. Today we have with us Mr. Dinesh Nolkha – Promoter and Managing Director and Mr. P. Maheshwari – Chief Financial Officer of the company. We will start the call with initial commentaries on results and then we will open the floor for question and answers. I will hand over the call to Mr. Nolkha – Managing Director of the company. Over to you Dinesh sir.
Dinesh Nolkha
Thank you Awanish ji. Good afternoon and a warm welcome to all the participants to the investors meet post our annual financial year results of Nitin Spinners. I hope you all are keeping safe and healthy. I have with me Mr. P. Maheshwari – Chief Financial Officer of Nitin Spinners. I hope all of you must have had a chance to look at our Investor Presentation that is uploaded on company's website as well as stock exchanges. Nitin Spinners is India leading manufacturer of the cotton yarn, blended yarn with fabrics and woven finished fabric. The company’s leadership in cotton and blended yarn and fabric manufacture is driven by delivering international quality standard products with the continuous investment in the latest technology. We have achieved the highest ever revenue of Rs. 2,692 crores making a growth of about 66% along with highest ever profitability during this year. We have almost doubled our exports during the current year as compared to previous year. We are contributing dee
P. Maheshwari
Thank you sir. Good afternoon, everyone. Thank you all for joining the call. I would like to share operational and financial highlights for the quarter and year ended 31st March, 2022. Revenue for the Q4 FY22 increased to Rs. 769 crores from Rs. 512 crores in Q4 FY21 that is increase of 50% on YOY basis. The full year revenues stood at 2,692 crores as compared to 1,624 crores in FY21 that is registering a growth of 66% on yearly basis. This has been our highest ever turnover. Apart from operational efficiency and value-added products increased selling rates due to higher raw material price also resulted in higher revenue. EBITDA for the quarter is stood at Rs. 167 crores as compared to Rs. 104 crores in Q4 FY21, that is a growth of 61%. For the whole year EBITDA stood at Rs. 652 crores as against Rs.257 crores in FY21, that is a growth of 153%. EBITDA margin for Q4 FY22 is 21.8% against Q4 FY21 margin of 20.4%. For full year EBITDA margins stood at 24.2% against last year 15.8%. Good i
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