Nitin Spinners Limited

Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Dinesh Nolkha

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Nitin Spinners Limited August 08, 2022 Indian spinners are at a steep disadvantage since domestic cotton price is Abnormally higher than the international cotton prices, making it difficult for Indian yarn producers to compete in world markets.

— Dinesh Nolkha

Moreover, shortage of the physical cotton in India have made the situation even more difficult.

— Dinesh Nolkha

Due to increase in raw material costs and a small reduction in production, the margin remained under pressure.

— Dinesh Nolkha

In view of current volatile situation, we are increasing the share in the value-added segments to reduce our risks.

— Dinesh Nolkha

Sir, I just wanted to understand how are you operating in current scenario where cotton price is really expensive, and it is difficult to pass on the higher price to the customer?

— Prerna Jhunjhunwala

So, we do not expect that this challenge will last for another six months or so.

— Dinesh Nolkha

First is, we are having a very uncertain environment all around the world.

— Dinesh Nolkha

So, all these factors are actually putting, let's say customers are not very sure whether what we should do in such uncertain times.

— Dinesh Nolkha

As we get to know from various retail sales happening all around the world, that there is no major decline in the apparel sales as such.

— Dinesh Nolkha

So, we do not see any major challenge over there.

— Dinesh Nolkha

It was very volatile in the month of April.

— Dinesh Nolkha

It was very volatile, and in June it became too low.

— Dinesh Nolkha

So, that is the only challenge which we have.

— Dinesh Nolkha

Sir, my concern here is that, if such a situation arises in the future, because by FY24, I think all of our capacity will come on board.

— Dinesh Nolkha

So, that will help us in also diversifying our existing risk cycle.

— Dinesh Nolkha

Q

Now I will hand over the call to Mr. Nolkha, Managing Director of the Company. Over to you, Dinesh sir. Thank you, Awanish ji. Good evening and a warm welcome to all the participants to this investor conference concall of our first quarter results. I hope you all are keeping safe and healthy. I have with me, Mr. P Maheshwari, Chief Financial Officer of the Nitin Spinners. I hope all of you must have had a chance to look at our investor presentation that is uploaded on the company's website, as well as on the stock exchanges. Let me first start with the industry and business scenario. As you al

P. Maheshwari

Thank you, sir. Good afternoon, everyone, and thank you for joining the call. I would like to share operational and financial highlights for the quarter ended 30th June 2022. Revenue for the current quarter increased to INR709 crore from INR555 in Q1 FY22, that is increase of 28% Y-o-Y. On quarter-on- quarter basis, the same has reduced by 8% mainly due to increase in inventories. EBITDA for the quarter stood at INR109 crore as compared to INR129 crore in Q1 FY22 that is lower by about 15% on year-on-year basis. On quarter-on-quarter basis, the same is reduced from INR167 crore to INR109 crore

Q

Sir, what was our average realization in spinning yarn and Knitting Fabric and Woven Fabric for Q1?

Dinesh Nolkha

Basically, you want to know the breakup of the top line or you want to Yes, sales price like what was, like INR400 per kg or what. Nitin Spinners Limited August 08, 2022 Normally we do not disclose these particulars as what average realization we get. But I can just, I can give you a ballpark number, that we have realized more than INR400 a kg in the yarn side. Okay. And sir, fabric? This Woven and Knitting Fabric? Similarly, I think always Knitted fabric will be always higher than the yarn segment. In the Grey Fabric segment also normally, it is a mix of Grey, as well as the finished one. So,

Q

Sir, I just wanted to understand how are you operating in current scenario where cotton price is really expensive, and it is difficult to pass on the higher price to the customer? So, what is your current operating utilization across businesses? And I mean, what kind of strategic decisions you have taken to overcome losses in the next six months? Nitin Spinners Limited August 08, 2022

Dinesh Nolkha

First of all, Prernaji, as we envisaged that the situation would normalize once the new cotton crop comes in, as we are already seeing the prices of raw cotton in the future or the new crop is already getting in line with the international markets. So, we do not expect that this challenge will last for another six months or so. We are expecting that another three months or so, by mid of November we should be in a normalized position. Regarding the three months which we have in hand at the moment, and already one and a half months, which has passed, we are trying to see that we do not buy the n

Q

Not at this point of time, Aman. We are not looking at any inorganic growth. We are already into a phase where we are increasing our capacities by around 40% in spinning by organic manner. So, at this point of time not looking for anything beyond that. Aman Madrecha: And sir, no change in plan about the commissioning of the project, right? Everything is on track, right?

Dinesh Nolkha

Yes. Everything is on track. Capacity expansion plan is going as per schedule. Spent nearly 10% of the project commissioning and capacity additions. All the effective steps have been taken. Do not see any issue there. the money on Aman Madrecha: Okay. Because some players have halted their expansions and so, like. And sir, out of this total mix of around 500 sorry, we're spending INR700 crore for spinning. So, what would be the mix like? How are we looking to fund this thing? Out of this total INR955 crore, one-third is, nearly 30% is our internal accrual, which we are getting and about, INR65

Q

Buyers aren't currently sourcing. So, I just wanted to know that the issues, whether there is an issue on the customer’s demand side or due to falling cotton price they are not sourcing it?

Dinesh Nolkha

See, there are two issues attached to it. First is, we are having a very uncertain environment all around the world. We have a few challenges like Russia, Ukraine standoff. Number two, we have, there is a mindset that U.S. is going into recession. Thirdly, China having a COVID at the moment. That China's COVID policy, zero COVID policy where there is a lot of stoppages in China. So, all these factors actually and then the volatility in the commodity prices. So, all these factors are actually putting, let's say customers are not very sure whether what we should do in such uncertain times. So, w

Q

Yes. I just wanted to understand, what is the current cost of debt?

Dinesh Nolkha

Our current cost of debt is, our long-term debt is costing about 3% net of the state investment subsidies and working capital loans at this point of time, after all this increase in MCLR and other things is about 7%. Blended costs is about 4.5%. So, this current, this new debt that you will raise will be of the similar cost? Will get state subsidy on that also? Yes, of course. We'll get the state subsidy on that as well. And it will be even lesser than this. So, this state subsidy is not, you are not looking at it, it won't get withdrawn anytime soon, because there are murmurs of --- other sta

Q

So, trying to understand FY22, we had a very sharp increase in margins, as one of the reasons also obviously, increasing cotton prices. So, if you assume a normalized scenario, not what we are facing now, and not that we be faced FY22, so in a normalized scenario, what could be the margin for the yarn and fabric business be? I've been elaborating on this always that the normal margins from the yarn business is in the range of 15% to 18%. That is a normalized margin. On the Fabric side, the normalized margins are in the range of, for integrated textile players like us, is about 18% to 22%%. So,

Dinesh Nolkha

Yes. Abhineet Anand: Okay. Secondly, is there a conversion ratio of ICE cotton to the Indian cotton because a lot of people have been emphasizing that ICE was at USD1.50 fallen to USD0.95. India prices from INR1 lakh is only down to INR85,000. So, that's like comparing the peak to down, but I am saying just on an average, if we have to convert those numbers to Nitin Spinners Limited August 08, 2022 Indian, is there any number to that, so, that one can understand from an average perspective, what happened last full year to what has happened to Indian prices last full year? The average ICE price

Q

Basically, in the Q1, the spread is in the range of about INR90 a kg. It was very volatile in the month of April. It was very normal in the month of May. It was very volatile, and in June it became too low. At this point of time, if you say, it depends on the cost of cotton which we consider. So, it will vary for each spinner at this point of time. Shradha Agrawal: Assuming the cost of cotton is INR83,000 a candy, then what is the spread that you would be making?

Dinesh Nolkha

On INR83,000 a candy the delta would be about INR55 a kg or INR60 a kg. Shradha Agrawal: Okay. Sure. At these spreads, what is the margin that we can expect for the industry? At INR50. At this level, I think it will be in single digit margin.

Q

The first question is on the current situation of cotton prices, the disparity between the global prices versus the Indian prices. I understand that is like a one-off situation, but, sir, if the situation arises again in the future, how do we plan to mitigate the situation? First of all, this is a situation which is not happened in past and this was first time that we are seeing that on one side there is no raw materials. Raw material is scarce. There is no raw material available. And on the other side, we are seeing that the finished goods does not have demand. Normally, this does not happen.

Dinesh Nolkha

normal circumstances, imports could have been opened up in reasonable time. India could have imported a lot of cotton and accordingly taken care of all the shortages, which has happened in India, and also the prices of let's say, raw material would have been in parity with the international prices, because Indian cotton was far, far expensive than the international cotton. So, this situation would have not come, I hope that our policymakers understand this and keep the imported cotton freely available as they have a very good support mechanism in terms of minimum support price already in cotto

Q

My question was regarding the yarn spread as you mentioned it was INR90 per kg. Earlier we used to see your level of INR300 per kg to INR350 per kg. What do you think is the normalized level of spreads that we will have for 18% margin that we talked about?

Dinesh Nolkha

Normally, as I told you, with 15% to 18% means, around 15%, 16%, the margins are the different. It depends on the cost of the mill. It should be in the range of INR90 to INR100. The yarn spread? Yes, yarn spread. The normalized yarn spread? Yes, normalized yarn spread. And this was INR90 to INR100 was available to us in the past year, which is the from 2015. 2014-’15 to 2017-‘18 also, we had this kind of margins.

Q

Sir, over long-term, do we have any plans to enter into garmenting?

Dinesh Nolkha

Long-term is a word which needs to be looked into. But I would say at this moment, we are not having any plans. Going forward I would not like to comment as such, at the moment. But we cannot rule it out, right? Of course, you can say that. We are in textiles and garment is one of the second last chain. After this, there is only retail left. So, you cannot rule this out. We are into this business and we have grown this horizontally and vertically, both integrated ourselves from the yarn to others. So, we should never rule that out. Okay. And sir, one more thing. Fabric generally provides highe

Q

Hi, sir. Most of the questions have already been answered. My question is on two fronts. One is, can you please tell us what percentage of the revenue comes from top five customers?

Dinesh Nolkha

I think the total revenue from top five customers could not be more than about 15%, 16%. Okay, sir. That's good. This China Plus One thing that's going on, so who's going to benefit more from it, the manmade fiber industry or the yarn particularly? Like in the yarns also we have manmade, as well as in the cotton. But here the whatever is getting shifted out of China, because a lot of restrictions has come in on the cotton production of the China. If you see, what has happened is they've banned the Xinjiang cotton to be used in Europe and U.S.by most of the brands. So, a law has also been passe

Q

I just had a follow up question on the comment made just sometime back, that the cost of investment by including MMF based production will increase if we are setting up a capacity in spinning for cotton plus MMF versus only cotton. I just wanted to understand the Nitin Spinners Limited August 08, 2022

Dinesh Nolkha

difference between the two? The cost difference between the two types of investments? No, no, no. I think you misunderstood my answer. I have informed that our capacities which were installed pre-2014 are not suitable to run the synthetic fiber. If we have to run synthetic fiber on them, we have to make a lot of investments. Post that, what we have done is, the new equipment which is coming in, are now suitable to run both the kinds of fibers. This is, when we do initial investment, we can just with a very small number, with a very small amount of money that we are able to run basically synthe

Q

Quarter three would be very --- still too early to predict quarter three, because quarter Three, when we when the crop comes in, what is the kind of situation of the Indian spinning mills and how the demand is there. So, these two, three issues will be there. But definitely we expect Q4 to be very normal. That should be a very, very normal quarter. In Q3, we have to still see the timing. That depends a lot on when the rain are coming up. If we receive rain at the late end of the season, that delays the cotton crop, arrival of the quantity which is coming in. So, there are many issues involved

Dinesh Nolkha

I'd like to thank everyone for joining in the call. I hope we have been able to address most of the queries. For any other information, further information, you can get in touch with our finance team, as well as our Investor Relations advisors. And thanks again once again for taking the time out and joining us on the call. Nitin Spinners Limited August 08, 2022

Q

Thank you.

Management