ICILNSEQ2 FY23November 19, 2022

Indo Count Industries Limited

8,161words
84turns
11analyst exchanges
2executives
Management on call
K.R. Lalpuria
EXECUTIVE DIRECTOR AND CHIEF EXECUTIVE
K. Muralidharan
CHIEF FINANCIAL OFFICER – INDO COUNT INDUSTRIES LIMITED
Key numbers — 40 extracted
rs,
ason and the New Year ahead. I have with me Mr. Muralidharan, our CFO; and Strategic Growth Advisors, our Investor Relations advisor. Happy to connect with you all once again to discuss the Q2 and H1
20.6 million
. Coming to our performance and recent updates During the quarter, we have achieved a volume of 20.6 million meters. We have witnessed good traction in the domestic market for our brands, Boutique Living an
10%
rs. Our e-commerce business is on a growth path and by FY '23 we are targeting this to contribute 10% plus of the top line. During the quarter, we have witnessed volatility in cotton prices. However,
90 million
and cost with respect to our capex project which entail incremental home textile capacity from 90 million to 108 million meters. This will operationalize by H2 FY '23. Cut/sew facilities and additional T
108 million
th respect to our capex project which entail incremental home textile capacity from 90 million to 108 million meters. This will operationalize by H2 FY '23. Cut/sew facilities and additional Top of the Bed c
INR 270 crore
l also complete by H2 FY '23. Enhancement of spinning capacity to 68,000 spindles with a capex of INR 270 crores is on track and this also will complete by H2 FY '23. Now some updates on the B2C and D2C segm
INR 49.99 crore
onsolidated financial performance. Kindly note that Q2 FY22 financial includes RoSCTL benefits of INR 49.99 crores referred to a INR50 crores for the period of January 1, 2021 to March 31, 2021. We will compar
INR50 crore
. Kindly note that Q2 FY22 financial includes RoSCTL benefits of INR 49.99 crores referred to a INR50 crores for the period of January 1, 2021 to March 31, 2021. We will compare our performance therefore e
INR 849 crore
ne off. Also note actual H1 FY '22 figure does not include Bhilad Unit figures. Total income is INR 849 crores in Q2 FY 23 versus INR 767 crores in Q2 FY 22. Total income is INR 1,571 crores in H1 FY 23 vers
INR 767 crore
22 figure does not include Bhilad Unit figures. Total income is INR 849 crores in Q2 FY 23 versus INR 767 crores in Q2 FY 22. Total income is INR 1,571 crores in H1 FY 23 versus INR 1,476 crores in H1 FY 22. S
INR 1,571 crore
. Total income is INR 849 crores in Q2 FY 23 versus INR 767 crores in Q2 FY 22. Total income is INR 1,571 crores in H1 FY 23 versus INR 1,476 crores in H1 FY 22. So the income has increased on a Y-o-Y basis.
INR 1,476 crore
n Q2 FY 23 versus INR 767 crores in Q2 FY 22. Total income is INR 1,571 crores in H1 FY 23 versus INR 1,476 crores in H1 FY 22. So the income has increased on a Y-o-Y basis. EBITDA, INR 120 crores in Q2 FY 23
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Guidance — 20 items
K.R Lalpuria
opening
“With the new cotton crop season coming in, we believe that India will be at par with other countries for cotton prices scenario.”
K.R Lalpuria
opening
“We believe the medium-term recovery of demand will be largely aided by the downward trend in pricing for the new cotton season, the resolution of supply chain concerns and the actions taken by the individual governments to combat inflation.”
K.R Lalpuria
opening
“We will be able to offer a large bouquet of offerings, including a range of products from GHCL's kitty to our existing customers.”
K.R Lalpuria
opening
“Besides we also aim to target our existing range of products to GHCL's existing clientele.”
K.R Lalpuria
opening
“With this cross-selling opportunity, we will be able to realize synergies from this acquisition.”
K.R Lalpuria
opening
“I'm also happy to update you that we are on track both in terms of timeline and cost with respect to our capex project which entail incremental home textile capacity from 90 million to 108 million meters.”
K.R Lalpuria
opening
“It will be available in stores and online in the US, Canada and Mexico markets with retail partners in spring 2023.”
K.R Lalpuria
qa
“So we expect that the price should moderate as compared to last year and it will provide us an opportunity for us to reduce our raw material prices going forward.”
K.R Lalpuria
qa
“As we all have been saying about how we are focusing upon fashion bedding, utility, institutional bedding; how we are focusing on different strategies to promote licensed branded goods; how we are promoting B2C and D2C brands; how we are playing on the domestic front towards promoting our brands; how we are promoting the utilization of capacities going forward and building synergies on to operational efficiencies.”
K.R Lalpuria
qa
“So even though those all impacted, but our efforts will be to see how we can sustain or improvise on our margin profile going forward.”
Risks & concerns — 7 flagged
And secondly, as we move forward till the end of this year because we are carrying high cost cotton in the Q3 as well, but the season have already started, the cotton prices have come down and even though it is volatile, we see that the crop size is good.
— K.R Lalpuria
Good numbers in a difficult environment.
— Kapil Jagasia
Even if we sustain those, at least we'll protect our market share and we'll service our customers much better and we'll work hand-in-hand with the customers to see how they can over tide this difficult situation.
— K.R Lalpuria
So only if you look at the FY23 situation, because of the inflationary trends and the situation out there, which is due to the geopolitical concern, there has been a slow off-take on the branded good side and on the high price goods.
— K.R Lalpuria
Just because of the geopolitical concerns, this year was a difficult year for everybody.
— K.R Lalpuria
So going forward at least for the moment, there is no concern as far as the availability of containers is concerned for exports.
— K. Muralidharan
You see, it's quite volatile to give purely a margin guidance.
— K.R Lalpuria
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Q&A — 11 exchanges
Q
I had a few queries on our numbers. Like current quarter we have a gross margin close to 51% and just wanted to know if we had any benefit of a low cost inventory from March 2022 over here. And also is our low cost inventory completely exhausted or some is still available with us?
K.R Lalpuria
Thanks, Bharat, for the question. If you look at the Q1, it was a one off because the quarter was covered in the season like say during December, January and February so it was at a competitive price. And as the price went up, we have a first-in first-out methodology to capture our cost. And during the quarter the price at which we considered our raw material cost was higher than the Q1 so there has been an impact on the gross margin due to this. And secondly, as we move forward till the end of this year because we are carrying high cost cotton in the Q3 as well, but the season have already st
Q
Good numbers in a difficult environment. Sir, my first question is on the demand outlook. Like we already are into mid-November so any improvement seen here on the demand environment in US or Europe markets? And also what would be our order book position as on today?
K.R Lalpuria
See, first of all, you see the demand is still subdued. We are all expecting that once the holiday season ends, how the retailers have fared on to their sales. That will be the basis of informing you how the demand has improved or whether it is the same because the inflation is still continued in the US. It only moderated to some extent. But the geopolitical concerns or the high inflationary environment and our increase in input costs, all are impacting the overall sluggish demand off-take. So we believe that you see post the holiday season at least this would improve the inventory levels with
Q
First of all, just wanted on GHCL side in the balance sheet, what is the fixed asset and working capital that has been added, sir?
K. Muralidharan
Abhineet, about INR 340 crores have been added in the fixed assets. These are reflected in the property and equipment. And on working capital side? Working capital side we added about INR 300 crores roughly in terms of inventory and receivables. Second, from the global retailers, how are the inventory levels? Are they still high, sir, or there has been some -- for the last say six to nine months, how has been the trend? The trend continues because you see earlier the transit time taken for the ships to reach there was almost 45, 50 days and now it has reduced to 30 days so quicker receipt of g
Q
Can you please highlight on like how are we looking at volumes given the current scenario? Because as we are in the process of increasing the capacity from 90 million meters to 108 million meters so can we say that the volumes would be higher or the same as last year? Like can you please throw some light on this?
K.R Lalpuria
See, the volumes may be similar to what we performed in the first two quarters to some level depending upon how the holiday season pans out. But the capacity additions are all long-term strategies, because we see a lot of things getting promoted out of India, the China-Plus-One strategy, the FTAs, India's position on to the cotton side of the supply chain, India being considered as a highly growing country where everybody would like to participate in their growth and with all the kind of relationship which we are developing currently with different countries and trade blocks. I think these are
Q
The reason for the boom in the home textile was work from home culture related to pandemic. So now the pandemic is over so whether...
Management
Q
Sir, the reason for the boom in the home textile was -- one of the major reason was due to this pandemic work from home culture. So now the work from home culture I think it has come down a bit so whether we will get that business going forward?
K.R Lalpuria
Yes. Home has become the center stage during pandemic, but we all feel that there has been a structural shift how you look up at your home now. And everybody is upgrading and decorating their homes to see how they can live much better life and lifestyle. So it has become the center stage of our life and lifestyle. Secondly, you see the wellness factors like it's better sleep so our product is connected to the wellness factor. So this will definitely do well in the coming year what has been anticipated in all the discussions going on and we see an uptick into areas wherein fashion bedding, util
Q
Congratulations to report such good set of numbers in prime times. My question to you and the management is that on a macro level like what is happening in Pakistan economy right now, wouldn't the buyers there who were sourcing from Pakistan looking at India as a sourcing country? And plus today, FTA has opened up in Australia, have you started making any headway on that side? So if I look at this way things, you have more buyers coming to yourself. If I'm correct in next two years to three years, don't you see that whatever capacity you have built up, you should be able to utilize that capaci
K.R Lalpuria
So thanks, Sajal, for the very good question. And certainly you see there are challenges in the Pakistan economy. Pakistan is also a strong contender on the textile front with both raw material and a good setup. Unfortunately, they had their own problems on the flooding side as well as you see on the power side, on the gas side to be precise and so the supply chain has been disrupted. And secondly, you see Pakistan is at the lower end of the market segment and India is positioned on to the mid to high segment. So they were able to do much better in EU, UK and other lower segment of the marketp
Q
My question has been asked and answered.
Management
Q
Sir, from your vast experience on the sector, can you throw some light in the whole chain of the textile part? Spinning, let's assume lot of spinners are making loss and all last quarter and probably their margins have now come up to a break-even point. So is it fair to understand that for spinning, you start breaking even then after three months, six months, the HT part of the business starts doing better? Is there any cycle like that?
K.R Lalpuria
See, I know my business and I'm a focused person on my business home textile so I cannot comment on a spinning standalone business. However, you see every business will do well in the value chain because you see India stands out to meeting the expectation level of the global textile trade in all contexts. Because the production has been discontinued in developed nations in both spinning, weaving, dyeing, finishing; India has got a good advantageous situation where it should excel in all these fields. So definitely all the textile companies and the sector overall will play an important role int
Q
Sir, I just missed your guidance on the margin in the coming quarters like in the next two quarters of this fiscal.
K.R Lalpuria
You see, it's quite volatile to give purely a margin guidance. But you see definitely the Q3 will be, may be on similar lines what we reported for Q2 and maybe we'll see an uptick on the Q4 side. So we'll refrain from providing a margin guidance at this moment because we need to also watch the holiday sales as well as our cotton prices how they pan out. So sir, with the holiday sales you will be getting the top line. So is it possible that we get the bottom line also with the good holiday season? So we are confident. With all the strategies which I spoke about, we are confident of having susta
Q
Thank you. Looking beyond the short-term challenges, we remain optimistic about the textile industry landscape. As the overall business environment has started to improve and moderating input cost and improving consumer sentiment as well, we at Indo Count Industries are well positioned and market ready for the upcoming quarters. 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 Relations advisor. Thank you.
Management
Speaking time
K.R Lalpuria
32
Moderator
13
Abhineet Anand
10
Vivek
6
Kapil Jagasia
5
K. Muralidharan
5
Bharat Chhoda
4
Aman Sonthalia
4
Aman Madrecha
2
Sajal Gupta
2
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Opening remarks
K.R Lalpuria
Thank you. Good afternoon and a very warm welcome to all of you to the Indo Count Industries Q2 and H1 FY 23 Earnings Call. I extend greetings to all of you for the festive season and the New Year ahead. I have with me Mr. Muralidharan, our CFO; and Strategic Growth Advisors, our Investor Relations advisor. Happy to connect with you all once again to discuss the Q2 and H1 FY 23 performance. Let me start with the industry and business scenario during Q2 and H1 FY 23. Global businesses have been impacted by inflation and higher interest rates. Our industry has been impacted by these challenges in addition to the problem of over investment in inventory by big box retailers. Consumers continue to focus more on purchase of essential products rather than discretionary purchases and this has caused challenges in offtake for our industry. We believe that this should continue for a couple of quarters. Talking about our key markets The upcoming holiday season demand is expected to be highly prom
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