BANSWRASNSEQ1 FY23August 1, 2022

Banswara Syntex Limited

6,696words
102turns
10analyst exchanges
3executives
Management on call
Ravi Toshniwal
MANAGING DIRECTOR
Pankaj Gharat
CFO
I Am Joined On The Call By Our Cfo
Mr. Pankaj Gharat and SGA – Our Investor Relations Advisors. I hope everyone has
Key numbers — 40 extracted
rs,
her blends. We are in the business of producing yarn, fabric, and readymade garments. Over the years, we have exported our goods into over 50 countries including the developed markets of the US, UK, C
67.4%
equal to our strongest quarter in the last year. The total income for quarter 1 FY23 increased by 67.4% to 355 crores. The proportion of our high margin value added business which includes fabric and g
355 crore
our strongest quarter in the last year. The total income for quarter 1 FY23 increased by 67.4% to 355 crores. The proportion of our high margin value added business which includes fabric and garments has i
57.4%
rtion of our high margin value added business which includes fabric and garments has increased to 57.4% of the total sales in quarter 1 FY23 as compared to 55.8%, so almost a 2% increase as compared to
55.8%
es fabric and garments has increased to 57.4% of the total sales in quarter 1 FY23 as compared to 55.8%, so almost a 2% increase as compared to quarter 4 FY22. The proportion of exports dropp
2%
nts has increased to 57.4% of the total sales in quarter 1 FY23 as compared to 55.8%, so almost a 2% increase as compared to quarter 4 FY22. The proportion of exports dropped to 48% of the
48%
lmost a 2% increase as compared to quarter 4 FY22. The proportion of exports dropped to 48% of the total sales in quarter 1 as compared to 51% in quarter 4 FY22, the export of fabric seeing
51%
The proportion of exports dropped to 48% of the total sales in quarter 1 as compared to 51% in quarter 4 FY22, the export of fabric seeing the highest percentage decline of about 12%. This
12%
red to 51% in quarter 4 FY22, the export of fabric seeing the highest percentage decline of about 12%. This is majorly due to the seasonal variations in demand in quarter 1 as compared to quarter 4.
1%
o quarter 4. However, the production levels of the fabric divisions witnessed a minor increase of 1% and the garment division had an additional production of 6% more jackets and trousers on a quarte
6%
visions witnessed a minor increase of 1% and the garment division had an additional production of 6% more jackets and trousers on a quarter-to-quarter basis. The yarn division is already running at
136.5%
ision is already running at optimum production levels. The EBITDA for quarter 1 FY23 increased by 136.5% year-on-year (Inaudible) 5.06. The profit before depreciation and tax (Inaudible) 5:05 profit for
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Guidance — 20 items
Ravi Toshniwal
opening
“Going ahead, we expect domestic demand to continue to remain strong while we do see headwinds in exports due to the recession fears.”
Ravi Toshniwal
qa
“So, we are sensing that there will be a challenge in regard to having a product mix that meets this need of inflation and we have been able to cost re-engineer many products using a more synthetic blend.”
Deepak Poddar
qa
“So, ideally it will be margin accretive for us, right?”
Ravi Toshniwal
qa
“Now we see a reversal in trend where the retailers are getting a price where (Inaudible) 24:39 will be falling and retailers have started to increase a little due to inflation.”
Ravi Toshniwal
qa
“We do see that the synthetic yarn margins have been good for us, and we will continue to expand in this synthetic yarn business, and we will be utilizing more of our available capacities in finishing with some outsourcing.”
Ravi Toshniwal
qa
“Our yarn business continues to be the main driver of profitability – synthetic yarn – and we really do believe that synthetic yarn, in particular the dyed yarns we do, will be continuing to be having a good market as it is not really, the potential hasn't been completely exploited here.”
Ravi Toshniwal
qa
“After that comes the fabric business, which is also growing, and the garment business is at this point really oversold but we expect also that the garment business cannot be grown beyond a particular scale fast enough.”
Ravi Toshniwal
qa
“So, we will be focusing on growth first in spinning and then in garmenting and then finally fabric.”
Ashay Jain
qa
“Lastly, as you mentioned on yarn business, can you throw a bit more light on how will yarn business pan out going forward?”
Pavan Nahar
qa
“Sir, can you please spell out the CAPEX that you plan in FY23, FY24, and whatever little visibility on FY25 and where it would be spent?”
Risks & concerns — 10 flagged
The proportion of exports dropped to 48% of the total sales in quarter 1 as compared to 51% in quarter 4 FY22, the export of fabric seeing the highest percentage decline of about 12%.
— Ravi Toshniwal
Considering that there have been issues on the Russia side and there is some slowdown visible on the Europe side as well and you are quite present in the Turkey market, can you give some color on how you see the demand growth rate and what type of products are in the demand, etc.?
— Niraj Mansingka
It is a very important question because at this point, one definitely sees that slowdown(Inaudible) 11:27 amount in all of the European countries has been quite drastic, and I think the exception is probably only France because it has more (Inaudible) 11:39, Germany, Turkey, and many of the countries we export to including UK are experiencing a very high inflation.
— Ravi Toshniwal
So, we are sensing that there will be a challenge in regard to having a product mix that meets this need of inflation and we have been able to cost re-engineer many products using a more synthetic blend.
— Ravi Toshniwal
Garment capacity increases in India have begun to happen at a very fast pace but it continues to remain a challenge.
— Ravi Toshniwal
Yes, the only challenge is that this biomass implementation has many challenges to it.
— Ravi Toshniwal
If we step up to the challenge, I don't see why we cannot do it.
— Ravi Toshniwal
However, this continues to be a challenge and I think it will take 6 months to a year before it completely becomes what is on par with our competition.
— Ravi Toshniwal
It is difficult for me to put a number on it right now.
— Ravi Toshniwal
This is a bit of a challenge and that is why it is taking a while to make an underground cabling operation.
— Ravi Toshniwal
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Q&A — 10 exchanges
Q
I just had a question on the market in the export. Considering that there have been issues on the Russia side and there is some slowdown visible on the Europe side as well and you are quite present in the Turkey market, can you give some color on how you see the demand growth rate and what type of products are in the demand, etc.?
Ravi Toshniwal
It is a very important question because at this point, one definitely sees that slowdown(Inaudible) 11:27 amount in all of the European countries has been quite drastic, and I think the exception is probably only France because it has more (Inaudible) 11:39, Germany, Turkey, and many of the countries we export to including UK are experiencing a very high inflation. So, we are sensing that there will be a challenge in regard to having a product mix that meets this need of inflation and we have been able to cost re-engineer many products using a more synthetic blend. So, we have increased the am
Q
Sir, I just wanted to understand now taking the last argument forward like we have stopped the job work and utilizing for our own use. So, ideally it will be margin accretive for us, right? going forward?
Ravi Toshniwal
Yes, hopefully. At this point, it will depend on how much customers are willing to pay and what value addition we can bring to whatever greyish fabrics we buy from outside, but it looks positive, it looks very good. And you did mention that we have been able to pass on any kind of cost increase. As a result, we could maintain our operating margin in spite of cost escalation. Now, in maybe next 2 to 3 quarters, once your alternative fuel comes through, ideally wouldn't that result in expansion of margin for us? Would that be considered as another lever for margin expansion for us? Yes, the only
Q
Sir, I had just two questions. Firstly, I wanted to understand what is that one factor which differentiates our company from our peers?
Ravi Toshniwal
I would say that the biggest factor for us is being able to make innovation at an affordable price to give you a product that is better than what the Chinese are doing, and which is still better than the Turkish prices to offer products that give value to the customers. My other question is, are we going to focus now more on the synthetic yarn business, or will our focus be more on the fabric and the garmenting business? We do see that the synthetic yarn margins have been good for us, and we will continue to expand in this synthetic yarn business, and we will be utilizing more of our available
Q
A few questions, starting with if you can just throw some light on the domestic demand scenario? And as you have mentioned in your opening comments that our order book is full until the end of the financial year, so where is this order coming from? Any specific regions?
Ravi Toshniwal
Ashay, I spoke specifically of the garment order book, not our fabric or yarn order book. And the garment business for us is not expected to exceed 300 crores in the FY23. Having qualified that, I can say that the garment order book is full from all of the retailers in India and we are talking about retailers who dominate the Indian space like for example the Arvind Group or the Madura Group as well as the brands of Reliance Retail, Lifestyle, and various other formal and smart casual brands of India, but we are talking about both the retail private label brands as well as brands like Arrow an
Q
Sir, can you please spell out the CAPEX that you plan in FY23, FY24, and whatever little visibility on FY25 and where it would be spent? Because, today I can clearly see that we are going to be investing more on the spinning side. In the past, we have discussed about investing in solar and I don't think we are planning to invest much into weaving and garmenting anyways does not require much and spinning is where we will be investing. So, can you please just explain and year-wise too?
Ravi Toshniwal
We are planning to invest around 200 crores overall CAPEX in the next two years and about 100 crores will be in spinning and 100 crores will be within all of our solar plus weaving and finishing and other parts and garments included. Of this 200, how much would be spent this year? Out of the 200, the amount that we expect to spend this year will be about 100 crores roughly – maybe 100 to 120, that's the range. And this 200 will suffice as things stand today to meet our 250-260 crore EBITDA guidance for FY25? Correct, absolutely it will. And to which we need to add about 40 crores outlay that w
Q
My first question is that who are our key customers for garmenting business? And are we looking at expanding our product portfolio?
Ravi Toshniwal
Dipti, we have both customers in the domestic and the export business. In the domestic part right now, it is growing much stronger, and we have all of the brands like Van Heusen, Louis Philippe, and others from the Madura fold. We have all of the brands which are coming in like Arrow and Vanheusen and the brands of Blackberrys and others in India plus all retailers like Reliance Retail, the brands which are associated with Lifestyle and Lifestyle Retail and Shoppers Stop and many others including Tata Trent. All of these big retailers and big brands who do sport casual and smart casual are all
Q
Sir, my first question is, what is our gross debt as on Q1 FY23?
Ravi Toshniwal
It should be 320 crores about. Sir, my second question is, when we say around 1,600 crores of revenues and 15% to 17% of EBITDA margin by the financial year '25, do we assume that yarn prices would remain stable? There are several assumptions. The margins on the yarn prices should remain stable. Prices may go up or down depending on the raw material scenario. We have to see still what happens on the exchange rate. The broad assumption right now is that we are on a growth trajectory for specialty synthetics and continue to be a large player in this in India. We are one of the largest in this se
Q
Just wanted to understand, on the yarn side and on the fabric side, what are the capacity utilizations right now?
Ravi Toshniwal
On the yarn side, it is like more than 95%. 90% plus at least. And on the fabric side, as far as finishing is concerned, we probably are only at about 60% to 70% on finishing. Weaving capacities are quite used up, although we are buying now grey from outside or we are getting job work done outside or knitting done outside because our capacity is both for knitted fabric as well as woven fabric in finishing in synthetics. And that is where we are going to add more capacities? That is the easiest low-hanging fruit for us to get more turnover by simply using our finishing capacities and buying gre
Q
Can you please throw some more light on the specialty products like the piece type products and high-end wool fabrics whereas you mentioned we have seen more demand?
Ravi Toshniwal
The piece type products are products now of specialty polyesters mainly where we are talking about, high-twist polyesters, which give you a very good performance with stretch. These are the kind of fabrics that are now used in many of the top brands of the world and these kinds of fabrics require us to have the greyish available from which all yarns are available in India and weaving capacity is also plentiful. What is missing in India is the piece dyed capacity that we have. We have the necessary expertise for this, which we have worked on in learning with our French partners and with our Por
Q
I would like to thank all of the people who attended this earnings call. Thank you for your guidance and your support of our company. We continue to work on developing better name for India in the global market and to use this opportunity to be able to make some headway in being able to be an alternative available from India to provide value-added specialty synthetics. Thank you everyone and look forward to meeting you in the next quarter with hopefully similar results. Let us see how things go and let us hope the world remains safe for all of us considering all of the headwinds that are happe
Management
Speaking time
Ravi Toshniwal
46
Pavan Nahar
14
Moderator
12
Anant
10
Deepak Poddar
5
Niraj Mansingka
4
Ashay Jain
3
Dipti Kothari
3
Nisha Desai
2
Rishikesh Oza
2
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Opening remarks
Ravi Toshniwal
Thank you, a very good afternoon and welcome to everyone. It is my great pleasure to announce our Q1 FY23 earnings conference call and I hope each of you and your families are in good health and if at all affected by COVID, have the mildest of symptoms. I am joined on the call by our CFO – Mr. Pankaj Gharat and SGA – Our Investor Relations Advisors. I hope everyone has had the chance to go through our updated investor presentation uploaded on the exchanges and our company website. For the benefit of audiences who are joining the earnings call for the first time, I would like to give a quick overview of the company followed with a review of our financial performance during Q1 FY22-23. Our company Banswara Syntex is a vertically integrated textile company, and we specialize in the production of fiber to garment in blended specialty synthetics mainly. We also do certain other blends. We are in the business of producing yarn, fabric, and readymade garments. Over the years, we have exported
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