ICILNSEQ4 FY22June 02, 2022

Indo Count Industries Limited

7,871words
69turns
9analyst exchanges
2executives
Management on call
K.R. Lalpuria
EXECUTIVE DIRECTOR AND
K. Muralidharan
CHIEF FINANCIAL OFFICER - INDO COUNT INDUSTRIES LIMITED
Key numbers — 40 extracted
rs,
re keeping safe and healthy. I have with me Mr. Muralidharan, our CFO, and Strategic Growth Advisors, our Investor Relation Advisors. We are happy to connect with you all once again to discuss the Q
17%
lutions for Indian textiles can be expected. Now on the company’s performance: We have recorded 17% revenue growth in FY22 despite the above challenges and have achieved the volume guidance of 75
75 million
7% revenue growth in FY22 despite the above challenges and have achieved the volume guidance of 75 million meters. We have also achieved the margin on revenue guidance overall. This is despite the logis
10%
ichannel and e- commerce distribution. Our contribution from branded business has increased from 10% in FY21 to 14% in FY22. Fashion, utility, and institutional contribution has increased from 15% i
14%
commerce distribution. Our contribution from branded business has increased from 10% in FY21 to 14% in FY22. Fashion, utility, and institutional contribution has increased from 15% in FY21 to 19% i
15%
m 10% in FY21 to 14% in FY22. Fashion, utility, and institutional contribution has increased from 15% in FY21 to 19% in FY22. E-commerce business contribution increased from 4% in FY21 to 7% in F
19%
o 14% in FY22. Fashion, utility, and institutional contribution has increased from 15% in FY21 to 19% in FY22. E-commerce business contribution increased from 4% in FY21 to 7% in FY22 and the Ind
4%
has increased from 15% in FY21 to 19% in FY22. E-commerce business contribution increased from 4% in FY21 to 7% in FY22 and the Indian home textile business contribution ••INDO COUNT
7%
rom 15% in FY21 to 19% in FY22. E-commerce business contribution increased from 4% in FY21 to 7% in FY22 and the Indian home textile business contribution ••INDO COUNT .\1,. Complete
1%
ome textile business contribution ••INDO COUNT .\1,. Complete Comfort increased from 1% in FY21 to 2% in FY22. We continue to remain laser-focused on increasing our share in the eCommer
2%
siness contribution ••INDO COUNT .\1,. Complete Comfort increased from 1% in FY21 to 2% in FY22. We continue to remain laser-focused on increasing our share in the eCommerce and branded
153 million
omes the largest home textile bed linen company globally with an annual capacity of approximately 153 million meters. We are confident that this foray will successfully meet our long-term aspirations and c
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Guidance — 20 items
K.R Lalpuria
opening
“The retail ecosystems mismatch supply and excessive inflation have hampered sales in the key regions due to this pressure we expect sales to be challenging in the current year as people are cautiously buying discretionary products.”
K.R Lalpuria
opening
“Now on the company’s performance: We have recorded 17% revenue growth in FY22 despite the above challenges and have achieved the volume guidance of 75 million meters.”
K.R Lalpuria
opening
“We have also achieved the margin on revenue guidance overall.”
K.R Lalpuria
opening
“We have been able to meet the margin guidance for FY22 and we have followed a disciplined hedge policy for raw material.”
K.R Lalpuria
opening
“The increase in home textile capacity from 90 million meters to 108 million meters, this capacity will be operational by Q3 FY23 as we have to add balancing utilities equipment.”
K.R Lalpuria
opening
“Complete Comfort the top of the bed capacity is under good progress and we expect the facilities to be operational in H2 FY23.”
K.R Lalpuria
opening
“The proposed capex will be towards an additional spinning capacity of 68,000 spindles.”
K.R Lalpuria
opening
“We plan to spin value-added specialized yarn products.”
K.R Lalpuria
opening
“We would incur a total capex of Rs.270 Crores which will be funded through a mix of internal accruals of about Rs.95 Crores and debt of Rs.175 Crores.”
K.R Lalpuria
opening
“The project will be completed by Q4 FY23.”
Risks & concerns — 4 flagged
The retail ecosystems mismatch supply and excessive inflation have hampered sales in the key regions due to this pressure we expect sales to be challenging in the current year as people are cautiously buying discretionary products.
— K.R Lalpuria
Pankaj Bobade: Do you expect pressure on margin in the coming quarter at least for one quarter?
— K.R Lalpuria
basically, the logistic costs have amplified and containers are nowadays reaching US port taking almost two months so quarter wise guidance has become very difficult for us to provide but yes we are quite hopeful that we should be able to provide you some guidance when things improve say maybe on a subsequent call.
— K.R Lalpuria
Whatever inventory they have is not relevant to the today’s consumers and the consumer are looking at more essential because of the inflationary pressure.
— K.R Lalpuria
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Q&A — 9 exchanges
Q
First of all, a big congrats on a decent set of numbers. Sir my first question is one of your competitors had mentioned the demand shift ••INDO COUNT .\1,. Complete Comfort from home textiles to apparel since the economy has now opened up there is a visible decrease in this work from the home scenario which was earlier the case. So, in this scenario how confident would be with this increased capacity of 153 million meters, and where we would land up in terms of capacity utilization for FY23 and thereby in FY24?
K.R Lalpuria
See the demand has deferred only in home textile, it has not shifted, so there is no structural shift as far as demand is concerned that we are observing. It will continue only. It is a matter of time that once the inventory get released and the geopolitical situation improves and in India once you see that the raw material prices stabilize as the new season start I think the home textile will certainly have a good demand going forward and over and above you see we as a company are also working upon very bullishly about the home textile front where India is positioned as a country very strongl
Q
See first of all you see you need to understand that this is a voluntary mute as far as demand from the large US market is concerned the reason being because we all know that there is a mismatch in demand and supply that the goods reaching out there it is almost 8 weeks now and the retailers are unable to plan their buying or sourcing properly and so the inventory levels have gone up and that is the reason they have not reordering very quickly and secondly because of the inflation in this areas due to the geopolitical situation and the price rise on the raw material side as well. So once this
Management
Q
Thanks for taking my question. Sir, I hope the new acquisition has been consolidated by now?
K.R Lalpuria
Yes. The acquisition is completed by now on April 2, 2022. Pankaj Bobade: On April 2, 2022, so in the balance sheet which it has been released it would not be included right? K. Muralidharan: No, it will not be included. I had that discrepancy because, in the balance sheet at March 31, 2022, it shows Rs.332 Crores of noncurrent assets as against Rs.7 Crores on March 31, 2021. So, I was just thinking whether this was the goodwill of any sort or what sort of there is content? K. Muralidharan: I will explain, that some advances have to be given for acquisition, so we had given some advances to GH
Q
We will provide you offline. We will provide these numbers once we get hold of it. Abhineet Anand: Second thing is in terms of when we consolidate GHCL this year fixed assets you are saying around 330 odd Crores will get added right? K. Muralidharan: Rs.350 Crores gross of value. Abhineet Anand: On this what could be your working capital or networking capital? K. Muralidharan: Around Rs.240 Crores is the networking capital. ••INDO COUNT .\1,. Complete Comfort Abhineet Anand: So around Rs.600 odd Crores so the corresponding debt that we will be taking for this? K. Muralidharan: No, these are fi
K.R Lalpuria
Yes, so we acquired 192 looms with our GHCL acquisition of the Home Textile business, and earlier this was supported by GHCL own spinning unit at Madurai. So now in order to have captive consumption for this 192 looms which is our always strategy to support whichever assets we have we need to support it through captive consumption that is the reason we are going in for value addition and we will be spinning in time to come high-value yarns and which will also be from our customer side a compliance wherein ••INDO COUNT .\1,. Complete Comfort we can ensure them of total traceability and accounta
Q
We are refraining as I mentioned earlier from providing any volume guidance because you see in today’s world there are so many moving pieces. basically, the logistic costs have amplified and containers are nowadays reaching US port taking almost two months so quarter wise guidance has become very difficult for us to provide but yes we are quite hopeful that we should be able to provide you some guidance when things improve say maybe on a subsequent call. ••INDO COUNT .\1,. Complete Comfort Komal Maheshwari: Will we be able to maintain the EBITDA margin like we posted 19% in FY2022, will we abl
K.R Lalpuria
Margin guidance also as I mentioned we have not providing currently we are working upon it and as I mentioned earlier in my speech also that again there are raw material, energy, and logistic cost, we refrain first in giving a guidance overall, but our endeavor is there to work on healthy profitability on the back of our hedged raw material as well as the positive currency and our continuous efforts to improve overall product mix. So, mid-term to long-term we are quite positive, and India as I mentioned is very well positioned and things should subside going forward and we should do well. Koma
Q
Mr. Lalpuria Ji many congratulations for achieving a very strong result in a very challenging environment last year. Our simple analysis is that you are not able to give a guidance but assuming if you are even at the same level I am sure you will grow because you are going to add something from the acquisition so obviously you cannot be 70 million, or 80 million meters like you were last year you are always be something plus assuming the challenging environment there will be a good cash flow during the year plus how much of your money is blocked up in the government receivables that government
Jiten Doshi
Post March as on 31st March what was the amount? K. Muralidharan: Around Rs.170 Crores or Rs.172 Crores. Which you have received about an Rs.110 Crores. K. Muralidharan: Yes. Mr. Lalpuria assuming that your inventory normalizes you will release about Rs.200 Crores to Rs.250 Crores minimum cash from there? Yes, please. So, given that your government scripts can be liquidated you have an operating profit as well as you are able to reduce inventory and curb your working capital, there should be an easy debt reduction of at least Rs.300 Crores to 400 Crores that we are seeing is that correct. Yes,
Q
Thank you so much for the opportunity, Sir. Just two questions; one is this spinning capacity that you are planning to add is this part of a PLI scheme in the textile, PLI in any way, or this would have not been part of that?
K.R Lalpuria
No. It is not part of that because you know the PLI scheme is only for technical textiles as well as manmade fiber so far. The government is trying to see how it comes up with a PLI II scheme wherein it can make it more broad-based and include cotton and other areas also in it. So, we are waiting for those fruits to happen but currently, this is what is under PLI. I am sorry you have in the past talked about entering into newer segments of fashion bedding and so on and so forth and our understanding is that that is more oriented towards manmade fibers ••INDO COUNT .\1,. Complete Comfort and to
Q
Yes, the numbers like they were at 828 which Mr. Muralidharan has informed earlier and the volumes were at around 19 million to 20 million. Prerna Jhunjhunwala: Just wanted to understand the composition of your inventory with respect to how much of it is finished goods and how much would be RM or WIP?
K.R Lalpuria
Overall inventory is what I have just given we can give you offline the split between this figure. Prerna Jhunjhunwala: The third question is on interest, the interest outgo for the quarter has reduced though our debt numbers on an annual basis have increased so just wanted to understand the interest cost and why it is so low? K. Muralidharan: There is a subvention of interest that is we get about 2% subsidy on interest if you see the last quarter we did not receive it because the scheme was not renewed but now the government has come up and said that this scheme for subvention is there so we
Q
Thank you. With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information kindly get in touch with me or Strategic Growth Advisors, our Investor Relation Advisor. Thank you.
Management
Speaking time
K.R Lalpuria
28
Jiten Doshi
12
Moderator
11
Pankaj Bobade
7
Kapil Jagasia
6
Amit Kumar
4
K R Lalpuria
1
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Opening remarks
K.R Lalpuria
Thank you. Good afternoon and a very warm welcome to all of you to Indo Count Industries Q4 and FY22 earnings call. I hope you and your family are keeping safe and healthy. I have with me Mr. Muralidharan, our CFO, and Strategic Growth Advisors, our Investor Relation Advisors. We are happy to connect with you all once again to discuss the Q4 and FY22 performance. I am pleased to inform that the Board of Directors have selected Price Waterhouse Chartered Accountants LLP as the company’s statutory auditor in place of the retiring auditors. ••INDO COUNT .\1,. Complete Comfort Let me start with the industry and business scenario in Q4 and FY22. We ended FY22 on a good note as we constantly improved our performance despite a wide array of external challenges. Given the conditions, we focused on building our brand and executing efficiently resulting in constant double-digit revenue growth over the past two years and a significant market share and penetration gains throughout our portfolio we
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