HIMATSEIDENSEJune 6, 2023

Himatsingka Seide Limited

6,136words
93turns
8analyst exchanges
5executives
Management on call
Shrikant Himatsingka
MANAGING
Dilip Panjwani
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, STRATEGIC FINANCE
Sivalai Senthilnathan
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER,
Shilpa Shanbhag
VICE PRESIDENT,
Prerna Jhunjhunwala
ELARA SECURITIES INDIA PRIVATE LIMITED
Key numbers — 36 extracted
98%
ment during the quarter, the capacity utilization levels at our manufacturing facilities stood at 98% for our spinning division, sheeting division was at 61%, and the terry towel division was at 65%
61%
at our manufacturing facilities stood at 98% for our spinning division, sheeting division was at 61%, and the terry towel division was at 65% for the quarter. The revenues from brands for the quarte
65%
98% for our spinning division, sheeting division was at 61%, and the terry towel division was at 65% for the quarter. The revenues from brands for the quarter stood at INR424 crores versus INR548
INR424 crore
erry towel division was at 65% for the quarter. The revenues from brands for the quarter stood at INR424 crores versus INR548 crores during the same period last year. And for FY '23, the revenue from brands c
INR548 crore
as at 65% for the quarter. The revenues from brands for the quarter stood at INR424 crores versus INR548 crores during the same period last year. And for FY '23, the revenue from brands came in at INR1,713 cr
INR1,713 crore
548 crores during the same period last year. And for FY '23, the revenue from brands came in at INR1,713 crores versus INR2,260 crores during FY '22. We continue to see improvement on the demand front as our
INR2,260 crore
same period last year. And for FY '23, the revenue from brands came in at INR1,713 crores versus INR2,260 crores during FY '22. We continue to see improvement on the demand front as our global clients have mad
INR560 crore
to see gradual softening during the quarter. We've also successfully completed the fund raise of INR560 crores from the International Finance Corporation Washington during the quarter, and this inclu
INR100 crore
om the International Finance Corporation Washington during the quarter, and this includes INR100 crores of foreign currency convertible bonds. On the debt front, we continue to deleverage. And our n
INR2,587 crore
le bonds. On the debt front, we continue to deleverage. And our net debt for Q4 FY '23 stood at INR2,587 crores versus INR2,639 crores at the end of Q3 FY '23. This was a short business update on our side. An
INR2,639 crore
front, we continue to deleverage. And our net debt for Q4 FY '23 stood at INR2,587 crores versus INR2,639 crores at the end of Q3 FY '23. This was a short business update on our side. And I would just like to
INR2,587 crore
share price it is convertible and your overall -- I think net debt in the presentation stands at INR2,587 crores. So can you give us what's the average cost of the overall debt to give some guidance on the int
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Guidance — 20 items
Shrikant Himatsingka
opening
“I think that will be better in terms of giving more time to question and answers.”
Shrikant Himatsingka
opening
“We will be focused on clocking progressive improvement as we move through the fiscal.”
Bhavin Chheda
qa
“So can you give us what's the average cost of the overall debt to give some guidance on the interest cost going into FY '24 and also the repayment schedule of the debt.”
Bhavin Chheda
qa
“And any guidance on interest costs for next year?”
Shrikant Himatsingka
qa
“And as far as overall cost, interest costs are concerned with our deleveraging sort of focus, we hope to bring that down a little.”
Bhavin Chheda
qa
“So what's the trend looking like because from the other peers also who have already declared their results and given guidance, we are seeing very strong utilization.”
Rusmik Oza
qa
“A related question, sir, what kind of improvement we can expect in gross margins keeping in line that cotton prices have come down in FY '24 vis-a-vis FY '23?”
Rusmik Oza
qa
“So can we expect it to grow around 20% for the whole of FY '24?”
Shrikant Himatsingka
qa
“Unfortunately, I can't answer that question specifically, but I think, of course, there will be variations from quarter-to-quarter depending on product mix and things of that nature.”
Manish Dhariwal
qa
“So going forward, is that a metric that you guys are kind of focusing on?”
Risks & concerns — 8 flagged
So that is what depressed the asset turn, but the benefits were supposed to come through in the EBITDA, which is what was happening until we hit a volatile phase post COVID and we are now in the process of correcting that.
— Shrikant Himatsingka
It's difficult to pinpoint the margin differential that comes in through branded revenues.
— Shrikant Himatsingka
So going forward, you see, I think one of the challenge that we face is on the balance sheet where our debt is significantly high.
— Manish Dhariwal
But historically, up until this volatile period, we had basically 2 essential metrics that we made sure we that adhered to.
— Shrikant Himatsingka
So it's difficult to sort of if you were to base your model on that, I understand where you're coming from, but let's have a chat offline so that I can explain how the model works for your assumptions and computations.
— Shrikant Himatsingka
So it's difficult for us to pinpoint how much is imported.
— Shrikant Himatsingka
So to the first, it will be difficult for us to quantify efficiency of Pakistan, right it will be difficult.
— Shrikant Himatsingka
It's difficult to predict the commodity beyond the point.
— Shrikant Himatsingka
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Q&A — 8 exchanges
Q
Yes. Congrats on a good quarter and strong turnaround with positive profit. Sir, few questions, first, on the leverage side, you have raised money from IFC. If you can give us what's the average cost of that money. I think there's an FCCB component. So at what share price it is convertible and your overall -- I think net debt in the presentation stands at INR2,587 crores. So can you give us what's the average cost of the overall debt to give some guidance on the interest cost going into FY '24 and also the repayment schedule of the debt.
Shrikant Himatsingka
So thank you, Bhavin. So the IFC debt that we just raised and we have FCCB that we just raised, we divide into 2 buckets. One is the NCDs that we placed, which is for about INR460 crores and INR100 crores of FCCBs that we place. The cost of the NCDs are comparable to current prevailing INR debt costs. And the FCCBs, as we had said in our disclosures have an YTM of 4.5%. We have been conscious of making sure that the tenor is something that is long term and the debt we have raised is 12 year money. So that's about IFC. What will be the overall cost of debt? And any guidance on interest costs fo
Q
Thank you for the opportunity. I wanted to know, out of the total quarter we use, how much is imported, especially from U.S. and how much is procured domestically because internationally, U.S. cotton prices have corrected sequentially over the last few months, but Indian cotton prices remain little sticky. I just wanted to understand this piece.
Shrikant Himatsingka
Unfortunately, it fluctuates from quarter-to-quarter depending on the product mix. But you're right that U.S. cotton prices have corrected, Egyptian cotton prices have corrected. Indian cotton prices have softened as well. So I think all in all, we can't be specific about how much is U.S. cotton and how much is Indian cotton because it fluctuates. But I think we should stand to benefit on all 3 fronts progressively as we make our way through the fiscal. Okay. A related question, sir, what kind of improvement we can expect in gross margins keeping in line that cotton prices have come down in FY
Q
I wanted to understand, why is sales down Q-on-Q because we were actually moving up on the curve, on the improvement curve. So we actually see that Q4 sales is down compared to Q3. So could you help us understand that.
Shrikant Himatsingka
These are ordinary course fluctuations, Manish. Q3 is a little more seasonal than Q4 in our business. Sometimes it's spread between Q2 and Q3. Sometimes it's more Q2, depending on client preferences. Q4 tends to be a little soft. But as far as I see, we are in the region of INR700 crores. We seem to be okay, as I see it. And we seem to be in line for improving this further as we go into the fiscal. Okay. As a follow-up, how does the seasonality work in our business. You mentioned about Q2, Q3. It's very simple. Either Q2 or in both Q2 and Q3, there is uptick because international market prepar
Q
Maybe I missed this earlier, but this is just a little bit on the final product. How is the demand in each of the countries? And how are we seeing that now because we target has a $500 million loss, Inventory loss. So how is their demand coming along and other players along in U.S?
Shrikant Himatsingka
That might be a client-centric development. Generally, we are seeing a reasonable improvement in appetite as far as demand is concerned. The FY '23 was pretty dismal on the demand front and we've all shared with you why and the reasons for the low demand during the year. But now we are seeing appetite come back. And as I was telling somebody earlier, as we go through the fiscal, we think that there will be improvement on this front. There could be buckets where you read news items or occurrences that might suggest something else. But if I look at it thematically, it seems to be in a much bette
Q
Congratulations on good set of results and thank you for giving me the opportunity. My first question is in regard to how is the demand scenario in other countries like China, Pakistan, Vietnam and Bangladesh, what is the global scenario?
Shrikant Himatsingka
Thank you for the question Riya. As far as we are concerned, Asia Pacific has not been a very large market for us because of the nature of fragmentation, although we have made a lot of inroads over the last couple of years. But Asia Pacific has other, let's say, developments which are of relevance to us, right? We've all been talking about the China plus one sort of team that seems to be playing out. My own observation is that as far as our industry is concerned. And as I see it, it seems to be becoming a little more intense before China plus one thing. As in there seems to be a lot of migrati
Q
Just want to understand if you can quantify the average realization of your seat this year versus last year?
Shrikant Himatsingka
Yes, this is -- it fluctuates. So it's difficult to sort of if you were to base your model on that, I understand where you're coming from, but let's have a chat offline so that I can explain how the model works for your assumptions and computations. But an average realization, I can't be specific about. Okay. So another point is that how much in our fabric sorry, fibre, how much is imported and how much is domestic? And apart from cotton, are we also dealing, I believe, for upholstery items we could be dealing with some other manmade fibres. So if you can quantify in terms of percentage, what
Q
Sir, my question is one company, Bed Bath & Beyond. They have filed for bankruptcy. So do we have any receivables on there?
Shrikant Himatsingka
No, we do not. But we have reduced our exposure even during the fiscal significantly. So it won't have any material impact on us from a revenue standpoint or a receivable standpoint. Okay. Okay. Sir, my second question is just with respect to the revenues. So with the current improvement, fair to say, by Q1 or Q2, we can go back to our INR800 crores of quarterly run rate. Unfortunately, I can't specifically outline that number for you. But as I was sharing with everybody, we are focused on the currency in the 700 to 750 range, and we are going to done for progressive improvement from here. So
Q
As always, it's such a pleasure to have interacted with all of you. I do hope I answered most of your questions. If you have anything further to ask and to clarify to get in touch and we will be happy to take you through your queries to the best of our ability. Thank you once again for taking the time. Thank you.
Management
Speaking time
Shrikant Himatsingka
42
Moderator
10
Surya Narayan
10
Riya Mehta
9
Manish Dhariwal
7
Rusmik Oza
4
Dhananjai Bagrodia
4
Bhavin Chheda
3
Rishikesh Oza
3
Prerna Jhunjhunwala
1
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Opening remarks
Prerna Jhunjhunwala
Thank you, Ranju. Good evening, everyone. On behalf of Elara Securities India Private Limited, I would like to welcome you all for 4Q and Full Year FY '23 Post Results Conference Call of Himatsingka Seide Limited. Today, we have with us the senior management of the company, including Mr. Shrikant Himatsingka, the Managing Director and CEO; Mr. Dilip Panjwani, Executive Vice President and CFO of Strategic Finance; Mr. Sivalai Senthilnathan, Senior VP and CFO, Manufacturing Operations; Ms. Shilpa Shanbhag, Vice President, Strategic Finance. I would now like to hand over the call to Mr. Shrikant Himatsingka: for opening remarks and business update. Thank you, and over to you, sir.
Shrikant Himatsingka
Thank you very much. This time around, we are presuming that we've gone through the financials, obviously, the stand-alone consolidated quarterly and FY financials. So I would like to welcome all of you, and thank you for taking the time today. I'm going to take you through a brief business update and then open the floor to questions. I think that will be better in terms of giving more time to question and answers. So on the business update front, our Q4 FY '23 operating performance continued to demonstrate progressive improvement on the back of improved capacity utilization levels, softening raw material prices and the marginal easing of energy costs. As a result of the above capacity utilization across our plants, witnessed sequential improvement during the quarter, the capacity utilization levels at our manufacturing facilities stood at 98% for our spinning division, sheeting division was at 61%, and the terry towel division was at 65% for the quarter. The revenues from brands for t
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