HIMATSEIDENSEQ3 FY22February 24, 2022

Himatsingka Seide Limited

7,656words
77turns
9analyst exchanges
1executives
Management on call
K. P. Rangaraj
President Finance and Group CFO, Mr. Dilip Panjwani,
Key numbers — 40 extracted
72%
uring facilities during the quarter stood as follows: Terry towel division during the quarter was 72% as compared to 71% in the previous quarter. Sheeting division recorded 81% capacity utilization,
71%
ring the quarter stood as follows: Terry towel division during the quarter was 72% as compared to 71% in the previous quarter. Sheeting division recorded 81% capacity utilization, which was the same
81%
during the quarter was 72% as compared to 71% in the previous quarter. Sheeting division recorded 81% capacity utilization, which was the same in the previous quarter and spinning division 101.5% was
101.5%
corded 81% capacity utilization, which was the same in the previous quarter and spinning division 101.5% was largely in line with the last quarter. During the quarter, revenue streams from brands stood
Rs. 556 crore
s largely in line with the last quarter. During the quarter, revenue streams from brands stood at Rs. 556 crores versus 551 crores during Q3 FY21 and Rs. 574 crores during the previous quarter. Inflation on th
551 crore
the last quarter. During the quarter, revenue streams from brands stood at Rs. 556 crores versus 551 crores during Q3 FY21 and Rs. 574 crores during the previous quarter. Inflation on the raw material, en
Rs. 574 crore
quarter, revenue streams from brands stood at Rs. 556 crores versus 551 crores during Q3 FY21 and Rs. 574 crores during the previous quarter. Inflation on the raw material, energy and logistics fronts have had
Rs. 792.68 crore
I will now move on to the financial section: Consolidated total income for the quarter stood at Rs. 792.68 crores versus Rs. 681.66 crores during the previous year. This represents an increase of 16.3% year-on-
Rs. 681.66 crore
he financial section: Consolidated total income for the quarter stood at Rs. 792.68 crores versus Rs. 681.66 crores during the previous year. This represents an increase of 16.3% year-on-year. During the quarte
16.3%
. 792.68 crores versus Rs. 681.66 crores during the previous year. This represents an increase of 16.3% year-on-year. During the quarter ended December 2021, the Company recorded the realization loss o
Rs. 8.48 crore
ear-on-year. During the quarter ended December 2021, the Company recorded the realization loss of Rs. 8.48 crores due to decline in realizable value of e-scrips under RoSCTL and RoDTEP schemes. This impacted th
Rs. 131.76 crore
CTL and RoDTEP schemes. This impacted the total income. Consolidated EBITDA for the quarter was Rs. 131.76 crores versus Rs. 157.34 crores during the previous year. The EBITDA margin for the quarter stood at 16
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Guidance — 20 items
K. P. Rangaraj
opening
“We expect the inflationary headwinds to continue for the next couple of quarters.”
K. P. Rangaraj
opening
“We continue to be on track for debottlenecking, sheeting and terry towel plants and expect the new capacity to start commencing operations in H2 FY23 as was informed to you all earlier.”
K. P. Rangaraj
opening
“Our view on the medium-term industry outlook and India's positioning as a major global supplier continues to be optimistic.”
Shrikant Himatsingka
qa
“So, all these factors combined the medium-term outlook and model as far as India's positioning is concerned, I think the way we look at it remains intact.”
Shrikant Himatsingka
qa
“Yes, I think the Company has done a fairly good job in Q3 vis-a-vis our operating margins, but the inflation the way is playing out is it is sort of a moving number and a moving sort of target.”
Aman Sonthalia
qa
“So, whether we are confident enough in the next one or two years, we will be able to use that capacity?”
Shrikant Himatsingka
qa
“Yes because again, let me say that this demand, let's say softness slash overhang is as I said, the way we look at it is more short term, the medium term continues to look as it did in terms of it seems to be intact and the definition of short term as we see it at this point is over the next six months’ post that from a medium-term standpoint, we do not think that the model will suffer a great deal.”
Shrikant Himatsingka
qa
“So, we will be happy to take it offline and take you through it to more granular sort of detail.”
Shrikant Himatsingka
qa
“At this point, we anticipate broad stability, but as I said, it is a moving target and we will have to wait and watch.”
Prerna Jhunjhunwala
qa
“I think there will be more to come with these portfolios in the coming year because even in FY22, we did lose a few months of demand on the second & third wave and so on.”
Risks & concerns — 13 flagged
We are cautious on capacity placements in light of the current inflation scenario and supply chain challenges.
— K. P. Rangaraj
8.48 crores due to decline in realizable value of e-scrips under RoSCTL and RoDTEP schemes.
— I will now move on to the financial section
Fair question Aman ji the demand piece is a little difficult to predict because it could be a Company-centric phenomenon, there is some inventory correction happening in the major markets vis-a-vis retailers and supply chain congestion and some inventory corrections could possibly lead to some movement in demand.
— Shrikant Himatsingka
Having said that, as far as the current quarter is concerned, and your question is concerned there could be impacts of moving inflation during the quarter, although we are trying to mitigate it to the best of our ability, but it is difficult to predict where will we come in at vis-a-vis margins.
— Shrikant Himatsingka
Yes, it is difficult to make accurate predictions on demand Prerna, as you can imagine.
— Shrikant Himatsingka
So, it is difficult to get an accurate read in terms of what is really happening.
— Shrikant Himatsingka
It is retailer specific, channels specific, products specific and therefore, it is difficult for me to summarize this directionally for you.
— Shrikant Himatsingka
Himatsingka has chosen not to encash these scrips because the markets did go through a temporary let us just say supply pressure, as we saw it on the scrips, and hence, the realizations on the scrips were a little volatile in the early part of the year, but we have been seeing some subsequent improvement, week-on-week in the scrips realization rates, which we hope will normalize in due course.
— Shrikant Himatsingka
In fact, as Ranga read out earlier, we are a little cautious on capacity placements in the short term.
— Shrikant Himatsingka
I have a few questions one, share the magnitude of the impact of the cost increase because of the fuel.
— Neeraj Mansinghka
Okay, considering that the volume growth rate in the US does not pick up because of the overhang of supply sector or the slowdown in these products?
— Neeraj Mansinghka
I would want to ask that what are the tailwind that we have seen in the future to come as we are aware of the headwind the US inflation and the demand going slow, but what could go right that the demand can kick in and what would be four factors or two-three factors which we would see as a tailwind?
— Riya Mehta
So, there is product repricing, there is potential cost easing as far as input costs are concerned, there is a China Plus One but I would say that other than a China Plus One there are other jurisdictions as well which are under pressure for sociopolitical or geopolitical reasons, which make India a promising destination to source from.
— Riya Mehta
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Q&A — 9 exchanges
Q
Sir, my question is that recently I have heard the conference call of Welspun and Indo Count they were expecting a demand dip in the next two quarters. So, whether we are experiencing the same thing in our Company, whether the sale will come down in the next two quarters.
Shrikant Himatsingka
Yes. Fair question Aman ji the demand piece is a little difficult to predict because it could be a Company-centric phenomenon, there is some inventory correction happening in the major markets vis-a-vis retailers and supply chain congestion and some inventory corrections could possibly lead to some movement in demand. As far as we are concerned, at this point if I take the next couple of quarters, it is looking broadly stable. So, we are not seeing any strong uptick nor are we seeing any major negative movement, we are seeing it as stable at this point. But this is something that will play out
Q
Sir in this demand related issue that is cropping up, could you give us some color on US versus non-US portion of demand? How is it shaping up and how is Disney acquisition getting traction in current scenario and how are you looking at it?
Shrikant Himatsingka
Yes, it is difficult to make accurate predictions on demand Prerna, as you can imagine. Various retailers are seeing this in different ways and are going through different experiences. So, there are clients who are pushing back on supply and there are clients who want more of it. So, it is difficult to get an accurate read in terms of what is really happening. But yes, it is true that there are certain sections of the market as I said earlier, where some demand overhang is being witnessed, basically on account of a confluence of events that include supply chain issues, late arrival of seasonal
Q
Sir a couple of questions. So, firstly, on the realization loss on the value of the scrips that we hold, could you quantify what is the current amount of scrips that we hold and is there any chances that these provisions would continue in going ahead as well?
Shrikant Himatsingka
The losses that we have taken for the quarters to the tune of eight and half crores, we chose not to make it an exceptional item because we thought that it would be an interest of investors to not show it as an exceptional item because in YTD numbers it would anyway be subsumed into the normal P&L. So, therefore, we did not show it as an exceptional item, but the hit as you read is approximately Rs. 8.5 crores and e- scrips we hold are to the tune of approximately Rs. 175 crores at this point. On the losses that we have booked is essentially, on the realizable value, losing realizable value th
Q
My question pertains to the consolidated debt; can you clarify the consolidated gross debt number was around Rs. 2675 crores.
Shrikant Himatsingka
Yes the consolidated gross debt was 2675 and the consolidated net debt is 2512. So, the debt has corrected from last quarter marginally, it would have corrected more substantially had it not been for the blockages that we witnessed in the realizing of scrips during the quarter, but that is something that is work in progress as I just shared with a little earlier and once that comes through that piece should help in further de-leveraging. As a team, we will be focused on deleveraging, as we said, our major CAPEX cycle is over. Unfortunately, we were hit by this hyperinflation sort of cycle over
Q
Could you could you please highlight the reason for a sharp increase in other expenses on a I -- -Q basis?
Shrikant Himatsingka
Vaibhav it is driven by freight and energy.
Q
Sir my first question is on top line, because in second quarter, you had mentioned that you had lost around 3% of the revenues because of these logistic issues. So, if we take into account then the sequential fall seems slightly more exaggerated. So, any issues faced this quarter as well on the logistic side?
Shrikant Himatsingka
Yes, so fair question. So, the overhang up 2-3% was not necessarily made up this quarter, the overhand continues. So, therefore sequentially, the read is, whatever it is, it is not more than what it is, the way you are looking at it therefore would not give you an accurate picture, because the 2-3% that we lost in revenues the last quarter, while it came in this quarter, but the same overhang continued in this quarter as well, broad supply chain disruptions continue. So, therefore, it is a like to like comparison and in this business, there are seasonality’s to home textiles and I would the Hi
Q
Thank you. I have a few questions one, share the magnitude of the impact of the cost increase because of the fuel. How large was the fuel cost? Shrikant Himatsingka: We cannot specifically take you through our fuel cost breakups minutes Neeraj, but what I could tell you is energy inflation is what we pretty much saw through hikes in coal prices. which was upwards of, I would say, around 150%. At an index level, it was even higher than that, but with prior contracts and weighted averages, bringing it down a little, that is the kind of impact we saw on fuel, namely coal and general energy inflat
Neeraj Mansinghka
Got it, the other thing is, sometime back you had broken even on EBITDA side on Terry Towel. Can you give some color? I do not want to get the exact number or something like that, but how what were the margins of the Terry Towel division and how do you see it moving? Neeraj, our home textiles business because our spinning is a captive plant, right and to our home textile for our sheeting yarn requirement largely, and the Company buys a lot of yarn over and above what it produces internally. So, the entire revenue that you are currently seeing is generated from our home textile business and the
Q
I would want to ask that what are the tailwind that we have seen in the future to come as we are aware of the headwind the US inflation and the demand going slow, but what could go right that the demand can kick in and what would be four factors or two-three factors which we would see as a tailwind? Shrikant Himatsingka: Well, the tailwind I mean quite honestly, I do not see any specific tailwind to share with you at this point. It is one of those times where there seem to be more challenges in tailwinds at this point, but I think one can take solace in the fact that the inflation cycle has no
Riya Mehta
Thank you sir that was quite brief explanation for the same. My second question will be in the last two three quarters, before the last one to quarter we were have a flavor that we could reach 18 to 20% EBITDA levels and targeting for 20 to 22%. So, are we seeing FY23 to be such kind of a year or we procrastinating more of headwinds to shadow. So, 20-22 % is again, our stable state numbers, which as I earlier stated, I remain with those projections that we would be back to 20-22%. I think the question is when, quite honestly, nobody envisages this inflationary sort of cycle to turn into a week
Q
So, as always, it was such a pleasure to interact with all of you. I do hope that we answered most of your questions. If anything remains unanswered, or if you have any further questions/queries, do reach out to us and we will be more than happy to answer your queries to the best of our abilities and until then, do take care and looking forward to catching up with you all during our next call. Thank you very much.
Management
Speaking time
Shrikant Himatsingka
29
Moderator
11
Aman Sonthalia
7
Neeraj Mansinghka
6
Dikshit Mittal
5
Prerna Jhunjhunwala
4
Vikas Jain
4
Riya Mehta
4
Kaustubh Pawaskar
3
K. P. Rangaraj
1
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Opening remarks
Prerna Jhunjhunwala
Thank you, All. Good evening, everyone. On behalf of B&K Securities, I would like to welcome you all for Q3 FY22 post results conference call of Himatsingka Seide Limited. Today we have with us the senior management of the Company including Mr. Shrikant Himatsingka, Managing Director and CEO, Mr. K. P. Rangaraj – President Finance and Group CFO, Mr. Dilip Panjwani, Senior Vice President & CFO –Strategic Finance and Mr. Sachin Garg, VP - Strategic Finance. I would now like to hand over the call to the management for initial comments. Thank you and over to you sir.
K. P. Rangaraj
Thank you Prerna. Good evening, ladies, and gentlemen. On behalf of Himatsingka Seide Limited, I would like to welcome you all for the Q3 FY22 Earnings Call. As usual and in accordance with the past practice, I will start this earnings call with a business update followed by some pointers on the financials and followed by debt. So, I will now start with the business update section. The Q3 FY22 witnessed marginal improvement in capacity utilization levels at the terry towel plant. The capacity utilization levels of the sheeting plant remain stable. We are cautious on capacity placements in light of the current inflation scenario and supply chain challenges. We consider these challenges to be short term in nature and should iron out over the next couple of quarters. The capacity utilization levels of our manufacturing facilities during the quarter stood as follows: Terry towel division during the quarter was 72% as compared to 71% in the previous quarter. Sheeting division recorded 81% c
I will now move on to the financial section
Consolidated total income for the quarter stood at Rs. 792.68 crores versus Rs. 681.66 crores during the previous year. This represents an increase of 16.3% year-on-year. During the quarter ended December 2021, the Company recorded the realization loss of Rs. 8.48 crores due to decline in realizable value of e-scrips under RoSCTL and RoDTEP schemes. This impacted the total income. Consolidated EBITDA for the quarter was Rs. 131.76 crores versus Rs. 157.34 crores during the previous year. The EBITDA margin for the quarter stood at 16.6%. Consolidated EBIT for the quarter stood at Rs. 91.57 crores versus 119.54 crores in Q3 FY21. Consolidated PBT for the quarter stood at Rs. 43.83 crores versus Rs.74.65 crores in the previous year. As per the last communication from Government of India, interest benefit for the pre- and post-shipment rupee export credit under interest equalization scheme was available till September 30, 2021. There has been no further notification on the same hence in th
I now move on to the debt section
The Consolidated gross debt as of 31st December 2021 stood at Rs. 2,675 crores compared to Rs. 2,681 crores at the end of the previous last quarter the total term debt stood at Rs. 1,711 crores and total working capital debt stood at Rs. 964 crores. The cash and cash equivalents at the end of 31st December 2021 stood at Rs. 163 crores. Consequently, the Company's net debt outstanding as of 31st December 2021, stood at Rs. 2,512 crores which was marginally down compared to Rs. 2,527 crores as of 30th September 2021. This completes the update. I would like to now pass on the question-and-answer section to our Managing Director Mr. Shrikant Himatsingka.
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