Thank you so much. Good morning, everyone.

Happy to have you at our earnings call for the third quarter of 2026. This quarter continued to be impacted by the steep tariff on exports from India and the expiry of AGOA, which provided duty-free access from Africa to the US.

The UK FTA signed in July 2025 has still not kicked in. In the meanwhile, many competing countries in Asia had a relatively advantageous 20% reciprocal tariff to the US and duty-free access to EU and UK.

To combat this, we initiated several measures like securing our US business by strengthening our relationship with customers and offering discounts on US shipments from India to part offset the steep tariff. Secondly, streamlining operations across India and Africa to extract further efficiencies to reduce unit cost of operations.

Thirdly, striving to increase business from Europe by increasing volumes with existing customers. We've also initiated the onboarding of a new customer from EU.

The expiry of AGOA impacted the order book for Africa in Q3, resulting in a dip in revenue from the region. Further, there were some supply chain disruptions in Africa, which impacted the business in the region.

Imposition of incremental reciprocal tariff on Asian countries from August '25 resulted in Africa regaining its tariff advantage. There's a reasonable possibility of AGOA getting extended soon.

This has allowed us to rebuild the Africa order book for future periods. During the previous call, I had talked about a transformation from seeing tariff as an enemy about to defeat us, to recognizing it as a source of power and knowledge that would make us formidable.

We continue to seek ways to reinvent ourselves and leverage our strengths to deal with demanding externalities. In the quarter, we reported a total income of ₹998 crores, a flat year-on-year performance.

Our India operations continued to maintain its growth momentum, registering a growth of 8% YoY, despite being impacted by the steep US tariff for the entire quarter. We reported an EBITDA of ₹96 crores, a decline of 18% year-on-year.

This was primarily due to sharing a considerable portion of the US tariff burden with our key customers. Adjusting for the burden shared, our EBITDA should have grown by 17%.

On the demand front, apparel exports into the US witnessed a continuous decline since July 2025, despite retail sales posting a stronger growth during that period. Most US retailers have so far not increased the prices for their customers.

This is likely to change in 2026, as retailers are seeking to pass on some of the cost increases to their customers. Clearly, brands in the US are hesitating to build inventory at higher tariffs, and/or may be anticipating price [increases?]

. Imports from EU and UK showed a higher growth in the period January to November 2025 over the same period previous year.

For the quarters ahead, the company has the visibility of a good order book for both India and Africa business. On the margin front, we anticipate US reciprocal tariff on India to continue to impact the next quarter.

Any positive outcome on US-India trade deal would, of course, offset this impact. Africa business is seeing some tailwinds.

Our strategic investments in BTPL, which is a fabric processing unit, strengthens vertical integration, enabling better customer service, faster delivery, and creates an opportunity to improve margins. Our fabric investments and diversification into Africa will support our ability to somewhat deal with the steep US tariff burden.

Significant progress is being made in these areas. We are also directing capital expenditure into areas that will support our future growth.

In the long term, the recently announced India-EU FTA will open access to a significant market, placing Indian exporters at par with key competing countries like Bangladesh, Vietnam, and a 12% duty advantage with China. This, along with India-UK FTA, would accelerate sourcing from India.

High US tariff continues to remain a source of concern. Thank you for listening.

I will be happy to address any questions that you may have.

Good morning to the team and thank you for giving me the opportunity. Sir, my first question is around the margin structure.

While your investor presentation explains that immediate cost pressures, if we take out specifically disclosed one-offs, do you believe the current gross margin profile reflects a new base, or is there any embedded operating leverage that is not visible at current utilization levels? There is some sort of an echo.

I couldn't hear you properly. Would you be able to repeat your question, probably speak a little more slowly?

Sure. Sure.

Okay. While your investor presentation explains that immediate cost pressures, if we take out explicitly disclosed one-offs, do you believe the current gross margin profile reflects a new base, or is there any embedded operating leverage that is not visible at current utilization level?

If your question is there any one-off expenses impacting this quarter, is that the question?

That is not explicitly disclosed.

Apart from the tariff effect, whatever we have disclosed, we have also taken a hit of ₹3.4 crores on account of our gratuity restatement because of the new labour wage code. Other than that is all regular whatever has been reflected.

Was that the question? I'm sorry, really, I couldn't really understand your question on account of the...

My question is basically that one-off that you have disclosed, apart from that, any other disclosed that is we have to consider? Sorry

Okay. Am I clear now?

You're better.

Yeah. That's what's my question that I'm asking that apart from the disclosed one-offs, is there any other one-off that we have to consider in the current margin level?

No, as Sathya said, barring that labour code-related gratuity provision, which was mandated by the new labour code, that was a one-time to an extent of 3.5 crores, there is no other one-time. The whole US tariff burden is the impact that we've had during this quarter.

That amounts to about ₹40 crores, ₹40.2 crores. That's the net cost of tariff burden that we shared with our customers.

My second and last question is around just wanted to understand regarding a product mix as a margin lever. What proportion of current revenue comes from program-based or repeat orders versus seasonal or fashion-led orders?

How does this product mix impact margin stability across cycles?

Almost all our business comes from fashion orders. We don't do large program-based orders as yet.

In the future, we may be doing it, but most of the orders are sought and won on a seasonal basis. We do get, usually, a year-round visibility from our customers at a macro level, and then specific style-wise orders come at the beginning of each of the fashion seasons, primarily to allow us to buy the fabric and convert them.

The reason why we focus on such programs are that they are better margins as opposed to year-round programs where we end up competing with Bangladesh or other low-cost regions who may also play that tariff game.

Okay. That's it from my side.

I will join back in the queue.

Thank you.

Good morning, sir. Thanks for giving me the opportunity.

My question is again on the margins. I just want to understand that this quarter, we've seen full impact of US tariffs, and despite that, on sequential basis, if you see, excluding the other income, you were able to maintain the margins at around 8% if you exclude the other income on consolidated basis.

Again, in this quarter, we have seen the Africa utilizations were quite lower considering the AGOA impact and there was some supply disruption. I believe that the Atraco margins would also be at the lower end.

Considering that, in Q3, should we expect the margins to remain at this level or better off considering the fact that we might see some utilization level improving in Africa, India is doing reasonably well despite the fact that the US tariff continues to hit the margins, we have done well. Just an understanding from your end.

Sure. AGOA impact, while AGOA's full brunt was faced in Q3, we also had some issues in Q2, because AGOA expired on 30th September 2025, and that is for shipments landing in the US on or before 30th September, even second quarter was impacted.

In fact, we did have an improvement in EBITDA margin in Q3 in Africa, thanks to a lot of operational steps we took, and that will continue to sustain in the quarters ahead. In Africa, we see we have good margin primarily because from Q4, we have built a solid order book, primarily because in the month of August, we saw Asian countries see their reciprocal tariffs go up to 20%, while Africa remained at 10%.

We do have even without AGOA, Africa enjoying a superior tariff regime as far as US is concerned. That has also helped us to build the business in Africa.

There is a likelihood of AGOA getting restored, likely with retrospective effect. That's work in progress, and we will have to wait for when that happens.

If that happens, then there will be further this fillip to Africa. That in mind, we are confident of the business prospects in Africa.

In fact, operations are more or less well set. We will see some good EBITDA contribution going forward.

In some ways, you could say that region has bottomed out, and performance will improve from here on. India, our performance will really depend on when the US reciprocal tariff gets corrected.

Until then, we will continue to operational improvements to offset the steep reciprocal tariff we are facing. Any way to take out efficiencies, etc.

is on the cards and we are working on it. This Q3, we were able to pull some performance out of India, and we will continue to do that going forward.

I would think that in the Africa, you will see the prospects improve because of macroeconomic improvements. India, until the US tariff corrects, the macroeconomics will remain what they are.

In the longer run, EU FTA will kick in, and so will UK FTA, but until that happens, we may see some improvements only coming in from internal improvements that we will usher in.

Right. My second question is understanding on the India business.

This quarter, we have seen 50% growth, and in your initial comment, you mentioned that you are seeing uptick the volumes from EU and UK where you are trying to increase the orders for your existing client and you are trying for the new customers. Is that helping us to achieve this growth?

Because US, I believe, there might be some decline in sales for this quarter considering the overall decline in apparel, or whether you were able to maintain whatever sales or the order was on the year-on-year basis?

We have managed to protect ourselves, from an order perspective, protect our business from the US tariffs. We have maintained our business volumes.

If you look at our revenues for Q3, which is more or less flat with Q3 of last year, this is after accounting for discounts for US customers. In some ways, we have actually grown the business YoY.

That is because we have customers keep business within our business fold and ensure that we deliver well. Consumers are continuing to repose faith in Gokaldas in India.

In fact, adjusting for discounts, there has been a minor growth. If you look at our order book for Q1 of Q4 and Q1 of next financial Q1 of next financial year, we have a decent, robust order book for both the quarters.

We are holding onto the business. The concern remains that if the US reciprocal tariff remains, or the incremental penal tariff remains for a long term, then what happens.

We will still have to wait and watch how that unfolds. For now, we are holding onto business.

We have, in fact, minorly increased our business with US customers. With European customers, we are growing very fast.

We continue to do that. We have also, as I said in my opening remarks, we've added one more customer whom we will onboard in the next one or two months, so that'll also give a further incremental growth from European business side.

We are seeking ways to derisk ourselves. This is a journey that we will go through the next several quarters where we will rebalance, at least out of India, the business between US and Europe.

European customers generally are smaller in size compared to US customers, it takes a bit more time. We are working aggressively on that strategy to balance our revenue between these two regions going forward.

Hope that clarifies.

Right. Yes, sir.

Last one, in earlier call, you mentioned that diversification is one of the strategy you're looking in terms of the production base. You are looking at Bangladesh as one of the option if this tariff issue continues for another quarter or so.

Any comment on that front, whether you are willing to shift some of the base or production base to Bangladesh or where the tariff rate is around 20% and you get some headroom?

We do have some subcontract relationships in Bangladesh. We exercise that option all the time, and even now, we do use those capacities for our benefit.

Any investment in Bangladesh would be considered only after some clarity on the macroeconomic situation in Bangladesh. There is an elections supposed to happen sometime in February, and we will take a call post that looking at how Bangladesh shapes up.

In the meanwhile, we are also open to looking at other geographies. All those are work in progress.

It may take time. It all depends on what our final conclusions are on relative attractiveness of those regions, and how the tariff situation plays out in India.

We are working on it. Bangladesh we are using as a subcontract arrangement.

Taking over a factory in Bangladesh, we will wait till clarity on geopolitical impact.

All right, sir. Thank you, and all the best for the quarter.

Thank you.

the queue.

Thanks for the opportunity, sir. Am I audible?

Yes.

Yeah. Sir, larger part of margin benefit is coming from the gross margin expansion.

Despite we have passed on certain discounts to US customers, can you help us understand what has led to this? Is it because of product mix-related gains or is there something different in between?

Gross margin improvement happened because of, of course, more productivity gains and also product mix changes. We had particularly in spring summer, we do have a lot of India-based fabric that we use, and we also did a strong negotiation with fabric suppliers given the tariff-related challenges that we had.

All of that also helped us.

Sir, from the tariff perspective, as per our earlier understanding that the penal part is largely getting absorbed by the manufacturer, is there any change in that part, or is it still continued?

Can you say the question again?

Sir. As per our earlier understanding, within the tariff part, larger part of the penal portion, which is 25-odd percent, is absorbed by the manufacturer.

Is there any change in that part, or is it still continued?

It is still continuing. Penal tariff, a large portion we are absorbing.

We are trying our best to pass on some of that to our suppliers as well. We do that too.

Trying to recover some of those additional burdens from our supply chain.

Got it. Sir, lastly, from the volumes front, can you call out separately what is the Indian business and African business volumes in the third quarter as well as nine months?

The total volume is 15.53 million. ₹572 is the realization.

For standalone, for India, I have separately for Africa. Africa is 36.82, 3.68 million.

₹402 is a realization. The differential is Indian operation.

Got it. For nine months,

for nine months, Africa volume is 10.65 at ₹428.

Okay.

The total volume is 41.13 million, ₹649.

Got it. Thanks.

That is it for my side. Thank you.

Good afternoon, sir, and congratulations for good set of numbers in this difficult times. My first question is out of the ₹40 crores which you have taken, what was the total impact of the penal tariff?

I think the total impact of the penal tariff was closer to ₹60 crores, and we set off about ₹20 crores of it from our supply chain.

Okay. If this penal tariff does not go for next two or three quarters, do you think this ₹40 crores will be there till the time this penal tariff do not get solved?

Of course. Yes.

Okay. Because now it has been more than, can make it, like 5, 5 and a half months can make it we have been talking about it, are you finding any different attitude of US buyer towards now negotiating new deals with them, or do you, because you don't want to lose a customer, you have been negotiating the way can make it to just customer stays with you?

No, we've been negotiating with the customers so that we can assure the customers to stay with us. That's going on.

We are hoping that there should be some resolution to the US tariff soon. We're waiting for it that US and India can come to an agreement soon on the trade deal.

Until then, these discounts are panacea for the situation that we have. That's the best we can do.

I think in the longer run, we need to see a more equalized tariff between ourselves and the rest of the competing countries. The other option is to continue to increase our business in Africa as well as increase European business in India to combat this.

Okay. The last question is, it's an interrelated.

One is, can you call quarter three as a bottom out for Gokaldas in terms of margin, in terms of growth? Second is, when you're looking for European business, because the order quantities are small, the margin profile will be better than the US customer, correct?

To answer your first question, is this a bottomed-out performance? From an India perspective, while it is a bottomed-out performance, we will see that Q4 also somewhat similar, because the tariff regime is not changing, any improvement will only come through operational improvements from an India business standpoint.

Yes, we have bottomed out, and hopefully once the tariff situation changes or improves, we'll see improvements. As far as Africa is concerned, we have bottomed out, and we should start seeing improvements going forward.

On a consol basis, I think we can say firmly that this is a bottomed-out performance, and going forward, things should better from here on, primarily led by international operations. What was the next question?

Second question is when you are getting additional business from the European customers, the margin profile will be better than the US customer?

European margin profile is better than US now, because we are, we are in that regime of penal tariff and we are offering some discounts to US customers. The European customer margin, in these circumstances, are better.

If you if you look at it from a, pre-US penal tariff standpoint, US US businesses are much better than Europe, simply because of the size of the relationship, the scale of operations, etc., that we get from US customers. European businesses, given that the retailers are a bit smaller, we tend to have a little sharper margins.

Also, Europe gets duty-free access from Bangladesh, Pakistan, Sri Lanka, Vietnam, so many places. They tend to squeeze us and compare us with landed duty duty-free price points that they get from other regions.

That can only be set off once the US European FTA kicks in sometime in 2027. Once that happens, European margins will also improve.

Okay. Thank you, sir.

Thank you.

Sure.

Thanks for the opportunity, sir. My first question is, could you please walk through the BRFL acquisition, by when it will be fully integrated, and how much do we currently hold it, and how much we have to spend more in terms of cash outflow?

The BRFL business, if all goes as planned, it should happen sometime in the second quarter of next financial year. The exact timing cannot be stated here, because it depends on the NCLT process and the regulatory process.

As and when it happens, it will. Our expectation is that it should happen sometime in Q2 of FY '27.

As far as BRFL's performance goes, I think we have been investing in that entity through OCDs and extending support by buying fabric from them and connecting them to customers, etc. We've been seeing some business traction, growth for BRFL.

There has been a continuous improvement in its performance. Far, I think we have invested in OCD to the extent of about ₹175 crores in BRFL.

We've also bought 19% stake in the company paying about ₹72 crores. The rest of the stake, equity stake will be bought as and when the regulatory approvals come in in Q2 of next financial year.

The business will get consolidated as and when that happens.

Thanks. Second question is regarding the capacity expansion plan, out of the ₹105 crore plan for FY '26 new capacity, could you please tell where is this deployed and what are the timeline?

How ramp-up of this would impact our margin profile going forward?

There are two units in India, one in Bhopal, the second unit is coming up and phase is coming up. The other unit is in Karnataka [unclear]

Sincere apologies, I think the line dropped. We are back on.

As I explained, we have invested in the capacity expansion in Bhopal, the second unit, as well as one more unit in Karnataka. These two are in advanced stages of execution, completion, and we expect the commercial production to happen the next financial year.

Apart from that, we have expanded the capacity in Kenya. That's a substantial portion.

We are also expanding with a new machineries and bringing up another unit additionally in the existing premises itself. That will also come on-stream in the next financial year, in Q1 FY '27.

Sir, and the second part of the question, how it would impact the margin profile? The ramp-up usually what we have seen historically whenever there is a ramp-up, there is a margin impact we face.

What we evaluate?

Most of the ramp-up related challenges have been addressed because currently expansions are all happening in the units where we have operations. We don't anticipate a significant

[unclear] Thanks a lot. I'll join back the queue.

Yes.

Hello. Am I audible?

You are. Thank you.

Thank you for taking up my question. I want to be a little bit negative on the side that if the trade deal does not happen, how it will impact our top line as well as margin, and will we take a price hike, and what's our strategy going ahead?

If you're saying if the tariff doesn't correct, is that the question?

Does not happen, yeah.

If the penal tariff does not get corrected, right? See, we are working on that assumption, right?

Unless there is a clarity on penal tariff, we have to work with the assumption that the Indian tariff stays at 50%. Our order booking for Q4 and Q1 is on that basis, and we have already booked orders accordingly.

At the moment, we are working on Q2 orders as well, and it is also going in the right direction. From a order book standpoint, we're not seeing so much of challenges.

We are pursuing as much business growth as possible and trying to keep our factories full. Having said that, the margins will stay impacted until the penal tariff is in place on account of that tariff-related discounts that we will still have to extend to American customers.

I don't see any ability for us to increase price in India. With high tariff as well as the expectation of inflation in US, etc., our ability to increase prices is next to zero.

We will have to continue to seek ways to grow margins by operational improvements, supply-related cost savings, as well as continue to book business by giving tariff-related burden share or tariff-related discounts.

Okay. If we are diversifying our US operation to Europe as well as European Union, how it has performed in last 6, 7 months?

Our European revenue is constantly increasing quarter on quarter. We were at about 13%.

Now, we are further increasing it going forward, we'll be about 15, 17%. We are constantly increasing our European business going forward.

That journey will continue for us as we progress. We will be adding also European customers, so that this is the way we will combat it.

The other thing is we are also looking at putting more American business into Kenya where there is a duty advantage, and that region will also possibly grow faster with American business.

Okay. AGOA, there is a likely chance [to get?]

extended. When there will be a clear idea about that?

It's going through the US Congress. My sense is we will get to know within a month as to the status of AGOA.

Month of February, we will have a clarity.

Okay. Thank you.

Thank you so much, sir. That's it from my side.

Thank you.

Good afternoon. Thanks for the opportunity.

My question is you just mentioned that despite the discount that were given in Q3, your gross margin that improved because the benefits of Indian-based fabric that was used and strong negotiations that were done with the fabric suppliers. I just want to understand is this benefit a one-off that were got in Q3, or do we see this benefit in Q4 as well?

Basically, I want to understand the trend of the gross margin. Do we expect this...

Hello. Am I audible now?

Yes, you are, Samay.

answer his question, because I got his question. Unless, if he's still online, I wouldn't mind answering.

The gross margin is also a function of product mix. Product mix, for spring summer, we usually have a little better gross margin during this period.

Having said that, we'll continue to seek gross margin improvements wherever possible by better negotiations with the supply chain, better product mix that suit our gross margin, etc. We'll continue to seek.

Would there be a further gross margin improvement in the quarters ahead? It's not that easy.

We will continue our endeavor, but it's going to be difficult to further improve it. We will try.

Gross margins in Q3, you mentioned that despite the discounts given in Q3, they improved because the benefits of Indian fabric that was used as well as strong negotiations that were done with the fabric suppliers. What I want to understand is, was this benefit a one-time that you all had in Q3, or do you see this benefit in Q4 as well?

Basically, I want to understand, will the gross margins improve in Q4, or they remain steady? Okay.

See, again as I said, the vendor negotiations have happened in Q3, and that benefit will continue as long as the tariff-related pressures remain. Will the gross margin improve in the quarters ahead, or how will the gross margin change?

I think it will remain steady on all the sourcing-related benefits that we have driven in as long as the US tariff continues. It will vary based on the product mix.

Product mix to product mix, there are some gross margin variations that we will see. For now, I think we try to optimize the product mix so that we can drive up our gross margins.

When we get into fall winter, the profile may slightly change, because we switch to autumn winterwear where the gross margin profile is slightly different. The fabric becomes more imported.

There may be a little higher cost of fabrics that we will incur, the gross margins may drop. During those times, we get a better realization from cost of manufacturing.

We tend to retain our EBITDA margin nevertheless. There are nuances in the business which sometimes swings between gross margin to cost of manufacturing.

Effectively, we tend to protect our EBITDA margins all the time. Coming back to your specific question on is there any one-time benefit that we got, the only one-time benefit we got was our negotiations with supply chain as far as raw material is concerned, which is linked to US tariff staying high.

As long as that remains, that benefit will continue as well.

Okay. Thank you for this.

That was really helpful.

Thank you for the opportunity, sir, and congratulations on a resilient set of numbers. Just wanted to understand your revenue and profitability between standalone Africa and Matrix businesses.

EBITDA margin of Atraco, between Matrix and the India operations, almost it is...

Sorry sir, I didn't hear your number.

EBITDA margin from Atraco is 1.5%, 1.5%, while the EBITDA margin for the India operations remains the same level. The average.

Okay. Yes.

Sir. You said 1.5% in Africa?

For this quarter, yes.

What would that be for nine months? It is [unclear] Why is it so low with AGOA agreement?

Because the business volumes went down in Africa. We were unwilling to extend discounts in Africa to offset the loss of AGOA, and at these decisions were taken in January, February of 2025, because we could, we tend to book orders for Africa well in advance.

We could see that AGOA could be allowed to expire by the current administration, and we were not willing to hold on to the business just by giving discounts. We wanted to also take some business Most of that is done, and as I said, once the volume kicks back in, and in Africa we tend to do over $25 million a quarter, once that that kind of volume kicks back in to Africa, you'll see a surge in EBITDA margins, because, the fixed costs gets amortized over a bigger business volume, EBITDA margins will swing back from the fourth quarter fourth quarter onwards.

In the nine-months period, we did a break-even. There is ₹4 crores loss.

We did good numbers in Q1, but Q2 was a big impact we have taken.

Understood. Sir, how do we see margins for FY '27 in India and Africa businesses?

How are you treating the Europe orders, whether it is more from India or from...

My India business, if the reciprocal tariff remains at 50%, the India business margins will remain where they are. We will continue to seek improvements on the margin side by improving operational efficiency, but that's only how the margin improvement may happen.

In Africa, we could probably see a good improvement. I am expecting Africa's EBITDA margin for next financial, that is FY '27, by the second half of that year, cross 10% easily, maybe even stay at an average of 10% in '27 based on the order volume that we anticipate.

Understood. Sir, if your Africa business was 1.5, that means your India business would be more than 10% in this quarter.

It's 20 crores.

Yeah. Understood, sir.

Yeah. Sir.

Thank you so much, sir, and all the best.

congratulations to the management for a decent set of results despite the challenging environment. My first question, sir, is that UK FTA has been signed for the past five months.

How has been your interactions with your clients in UK, and do you see some uptick in business from the UK region? That is my first question.

Okay. UK FTA was signed in July 2025.

However, not seen the benefit of FTA flow-through. It is awaiting implementation.

At the moment, the exports from India are still tariff-rated, and we have not seen zero tariff benefit flow-through as yet. The challenge with such a situation is that businesses take commercial decision.

They would like to see a zero-rated tariff before moving significant volumes to India. Else they tend to lose an opportunity of securing the tariff benefit.

Moving the volume from Bangladesh to India, what happens until the tariff regime actually kicks in? Directionally, many UK customers are talking to us, exploring stepping up business volumes, etc., but the real benefit of all of that will happen once UK FTA comes into effect.

It is awaiting parliamentary ratification. It is awaiting implementation.

We are waiting to see how soon that will happen.

Sure, sir. Sir, on second one, EU FTA, do you see any non-tariff barrier which may impact India, similar to what UK FTA is there, in terms of compliance cost, product mix, do you foresee the same thing?

Whatever non-tariff barriers exists exists even today, and we are able to address those. From a compliance standpoint, etc., we are very high up there compared to most Indian suppliers are.

Whether it is an environmental compliance, social compliance, etc., etc., we have, zero liquid discharge, zero hazardous chemicals discharge. We have renewable power in most of our factories.

Our labour compliances are one of the best in the country or or best among the suppliers. We don't see any non-tariff barriers impacting us as impacting Gokaldas.

From a from a actual tariff implementation perspective, that that's the only one. When European countries start importing at zero duty, which is when the implementation start, maybe this happens sometime in 2027, we will start seeing good amount of business flow coming to India.

In the meanwhile, we have to seek business by continuing to have tariff disadvantage vis-a-vis Bangladesh, Sri Lanka, or other regions. We're still getting that kind of business growth from from Europe.

We will accelerate once the FTA comes into effect.

Sir. One question more.

Harsh. I would request you to rejoin the queue.

Sure.

Sir. Congratulations on maintaining good numbers in a very difficult environment.

A couple of questions. As you said, sir, your order book you must have already filled up for this quarter, as well as you're saying for next year first and second quarter also mainly US clients.

What my question was, I understand the tariff is implemented when the goods land in US. Whenever there is a reversal of a tariff, any goods landing there after that date, the incremental benefits start coming to us, because I believe there is a three-way sharing, right?

Clients are sharing some part of the tariff, you're sharing some part of the tariff. Whenever that reverse goes, we don't wait till next order, and the reversal starts coming from that day onwards?

Good question. Just to clarify, we have secured business until Q1.

Q2 is work in progress, and so far it directionally going well. As far as the penal tariff and the tariff-related burden share, it will reverse the day the penal tariff goes away.

That incremental 25%, if it is reversed, then we will have our discounts being adjusted from the next shipment onwards, and not necessarily from the next new orders that we book.

My question was so basically it happens even if your shipment is gone from India, normally it's a 20, 25 days cycle. Even when it lands in US, that benefit starts coming in, right?

Yes. Yes, it will.

If if our customer is able to take the goods at less than 50% tariff, let us say let's say the penal tariff of 25% goes away on on a certain date, 1st of May, then any goods which they are able to clear customs in US at 25%, not 50%, our tariff for those our our burden share stops from those shipments onwards.

Sure. Sir, my second question, I understand is tariff is on incremental portion over raw material and any goods which are imported from US.

In any part of your business overall, you have imports from US where already you are getting some benefit, or there isn't much imports from US into your company?

Yes, of course. If I use US cotton, for instance, and as long as the import the the component of US, US source is greater than greater than or equal to 20%, we can get a set-off for that amount in the reciprocal tariff.

We are using US cotton as much as possible in our raw materials, because we can get that 50% offset on US-based raw materials. We're using all those tools available at our disposal to minimize or reduce the burden.

Have you maximized it, or this keeps on increasing US cotton imports every quarter?

This is a function of product mix. Wherever we are able to use US cotton, we will.

We...

How much percentage of cotton is US cotton right now in your portfolio?

Yes, I think we should have about 20 a little above closer to 25% of the FOB in cotton-based garments as US cotton.

Sir, the third one.

What will happen in the first quarter is that we will be switching more to synthetics. That is when some of these benefits may come down, because then we will be using synthetic fabric from the Far East.

Sure. My last question, sir.

As UK, it would be signed anytime, but the announcement happened a year back, and India-EU announcement has just happened. Just taking example from UK announcement which happened last year, I'm sure you would be seeding that market, because whenever the parliamentary approval comes, directly benefits on margins and overall business comes in.

Obviously, the players will seed the market much ahead of actual tariff implementation. Can you give some example of how UK business has been performing and how many clients you must have added in last 1 year or so and how experience has been from the announcement till date in the UK market?

Because I believe the similar pattern would follow in the India-EU also.

Right. UK is a much smaller market compared to EU, and we have three customers from UK that we are supplying to.

We are seeing fair amount of growth in the revenue from these customers. However, at the moment, the growth is coming without any tariff-related benefit accruing to the customer or to us.

The growth will get expedited once the tariff kicks in. Until then, it's about onboarding a customer and preparing ourselves for a duty-free future.

As and when that kicks in, that's when the real transaction will happen. See, customers are also commercially oriented.

If they get zero-duty imports from Bangladesh, and it is still charged from India, they will not move significant volumes. There will be testing, preparing the grounds, etc., which is all happened.

Now, we're waiting for the actual tariff to get related before real volumes will flow.

Thank you, sir. Thank you.

Hi Shiva, thank you for the opportunity. Congratulations on a good set.

Yeah. We are seeing some media commotion on Bangladesh facing some kind of internal crisis, and also the factory is shutting down, probably in February.

Is there any substance to this, and if there is, then what kind of impact are we seeing on the overall supply chain?

In terms of competition? While there is a lot of news in Bangladesh, the production volumes from Bangladesh has not really fallen.

Factories are working, and factories are continuing to export from Bangladesh. While there are some challenges brewing in that country on account of factor costs going up, on account of geopolitical situation, we have not yet seen an impact on Bangladesh till date.

Having said all of this, brands with whom we keep having conversations, are also concerned about how the elections will play out, what kind of situation will be there on the ground. Now that visas for Indians are also restricted in Bangladesh, movement of people between these two countries have become a challenge.

A lot of brand people also are not able to visit. Some of these challenges are becoming significant from a ease of doing business perspective.

This may have some impact going forward. We will also have to see how elections play out in Bangladesh and how the factory operations are, whether they're impacted or not.

It really needs to play out in the next few months.

Okay. The ₹60 crore impact, net ₹40 crore impact, is this a stable state tariff impact that we are expecting as long as the US tariff stays?

Yes.

Okay. Okay.

In terms of European Union, whenever the FTA comes on board, what is the opportunity size for our company considering the products we are in?

When the European FTA kicks in?

Yeah.

It's a very significant opportunity. It is an immense opportunity, I would say.

Europe buys about $75-$80 billion of goods, and once we get a zero tariff from India, that's a very large opportunity even though European retail is more fragmented than US is. We would see a lot more volumes move to India once that happens.

Of course, these things take time to build up, and I would anticipate that European FTA by the time it kicks in itself will be a year and a half. I would think that the opportunity scale can be massive.

Okay. Sorry, sir, earlier I did not really get the number on the margins in India and in Africa.

If you could just spell that out once more?

Africa in Q3 is 1.5%.

The expectation.

In Q3, it is 1.3%.

Expectation, yeah.

He's talking about expectations. You're talking about expectations?

Yeah.

Africa for next financial year, we are anticipating at least in the second half going to 10%, in the first half staying at between 7% and 8% EBITDA margin. Our endeavor will be to see if we can get there faster, but that's the expectation going forward.

Okay. So, 1.5% to 7.5% to 10%?

Let me just answer that question. That improvement will happen primarily because the order book is going to swell, and that itself results in better capacity utilization.

See, in the immediate wake of AGOA pull out that we did not deliberately step in with business discounts, etc., primarily because the African margins were also low, and we really did not want to go down that path. We were reasonably confident that AGOA will get restored, and we did not want to participate with discounts, and then get into long-term margin decline kind of situation in Africa.

We took a conscious decision not to go down that path there, while in India, we did take a conscious decision to quickly participate in tariff-related discounts to hold the business in India. In Africa, we saw a business dip in Q3 and Q2, which is where we got impacted on account of fixed costs, which will get reversed starting Q4.

India margins stay at 8% currently?

India margins will stay where they are until the US tariff remains.

Okay. Okay.

Thank you.

Hello. Am I audible?

Thanks for the opportunity. My question again is related to the tariffs and the sharing of the tariff burden.

How does rupee depreciation play out here, since we have seen a very aggressive rupee depreciation against euro as well and GBP in the last six months besides US dollar? A related question here is that if I look at the sharing formula that you've been talking about, is my thinking correct that your US business is in very low single-digit EBITDA, while Europe actually could be higher than double-digit for overall company back and company EBITDA to come at around 9%?

Thanks.

Right. In terms of currency, we hedge our receivables.

While the currency may have depreciated sharply to about ₹91 to a US dollar, our realized currency will be a lot different, depending on what we hedge. Our hedge rate for Q3 was about 88.5 or thereabouts.

That prevents us from currency volatility. If we had not hedged, it would have helped us.

We adopt a very prudent currency policy and hedge all our receivables for the next two quarters and most of the receivables for third and fourth quarter at any point in time. We have a one-year forward cover program that we closely implement.

From a currency standpoint, eventually the benefits will come through. The business is transparent.

Customers will also try to take advantage of the situation, otherwise the competition may end up giving some bit of it. As long as the steep US tariff remains, maybe since we are bearing a significant burden, we may tend to hold on to some of those currency for now.

Eventually, in the longer run, those do get shared.

Thank you very much. A related thing is as and when the penal tariffs come down, is there a waterfall where the suppliers will get the first benefit, and then you would get the benefit in terms of pairing of the penal tariff burden?

No. Penal tariff, as soon as the penal tariff is brought down, the benefit has to flow through the supply chain.

From the orders that do not get impacted by penal tariff, we will save the discounts, and our supply chain also, we will tend to give them the benefits of that. While we are imposing certain costs on our supply chain, that also will be taken off from that point.

Thank you very much, and best wishes.

Hi. Thank you so much.

On the Africa business, I just wanted to understand that we've got a tariff advantage over other Asian counterparts. There is a related logistics cost with respect to raw material availability, etc.

If we consider all these factors, how does Africa stack up against countries like Bangladesh, Vietnam, with and without AGOA?

Today Africa has a 10% tariff delta with Bangladesh. The reciprocal tariff in Africa is 10%, Bangladesh is 20%, right?

Now, if AGOA is restored, if you look at cotton garments, the average duty is about 18%, and if you look at synthetics, it's about 28%. If AGOA is restored, the underlying duty gets rated to zero.

Then for cotton garments at 18 + 10, 20 the delta will be 28%, and for synthetic garments, it will be 28 + 10, 38% delta vis-a-vis Bangladesh. That is when Africa power comes to play.

At the moment, means the delta vis-a-vis Bangladesh is 10%. Does that clarify?

Understood. If say the penal tariffs go away, would we still continue on the strategy of diversifying customers and supply base, or would we more comfortable with the US-focused operations that we have currently?

No, if the penal tariff goes away, we would be very comfortable doing US business. US retailers are large.

US retailers have longer run sizes, which allows us to operate efficiently. It's a very good market.

It's a high consumption market. We would be very keen on continuing our US business.

We have very good relationships with the US-based customers. That goes without saying that US will become a dominant buyer for us if penal tariff.

Okay. If the penal tariffs go away,

we'll continue with the strategy of focusing on the US and...

Right, but keep in mind having seen tariff volatility, diversification will continue to remain a thesis for us. That doesn't mean that we will pivot out of US.

We will take on more of Europe, and if European business gets FTA benefits, we will see a lot more growth happening on European side, the portfolio may get rebalanced a bit, for sure. That wouldn't mean that we will significantly reduce our exposure to US.

If the penal tariff goes away, US will also have its reasonable share in our business.

Understood. Thank you.

Thank you.

Hello, sir. Can you hear me?

Yes. Sir,

I just have one doubt with respect to the African operations. Given that you're confident that 25 million quarterly volumes will come from Q4 with respect to the African business, if we shift majority of our US shipment to Africa, our tariff burden will also reduce, as well as the African business will ramp up, which will help in getting 10% margin from African business.

Is my understanding right?

No, it is not, because Africa also has capacity constraints. Our endeavor is for next financial year try to push African revenues to 120, $125 million or thereabouts next financial year.

India's revenues are much higher than that. We cannot move garment or reroute it through Africa.

Whatever is produced in India will get tariffed based on the tariff applicable for India. Whatever is produced in Africa will get tariffed based on that region.

The amount of orders that we can shift from India to Africa will depend on how much capacities we have there, and we will tend to maximize that going forward. Since Indian volumes are pretty significant, close to about $350 to $375 million, and of which about 70% is to the US, we will continue to see that that is being impacted here.

We cannot reroute it through Africa. That is not an option.

No, no. I didn't mean reroute it, but just to increase the capacity in the African entity and then try to bring down the orders from India to USA and replace those from African entity.

That was my question.

At the moment, our aim would be to push as much business from India to Africa, fill more India with European business as far as possible. We don't intend dropping India volumes at all, and grow our revenues from Africa.

That's the plan going forward. We may be able to bring on board going forward.

Understood, sir. Sir, just a last question.

With respect to Indian entity, what is the total capacity in India and how much is the current utilization?

Our current utilization is in Q3 and all it is full. The manpower and machine power capacity is almost going full.

At the current rate in Indian operation, we should be able to do around the top line in the range of ₹750 to ₹800 crores. This is without considering the new capacity which are coming onboard.

The volume figure, sir, what's the quarterly volume from Indian entity? Approx?

Sorry. The current capacity in India is around ₹850 crores.

Yeah. I think we will be able to add more, because we have one more factory in Bhopal and an underutilized factory in Karnataka, and plus the unit in Jharkhand.

I think Indian capacity can be increased, in my opinion, by another 200-odd crores further from where we are. We have not fully allowed those capacities to be staffed with people, looking at how the tariff is playing out.

We wanted to see if we can get more European business or the right kind of business to expand. I still see with the kind of capex that we've done in the past, we should be able to push up additional revenue annually to the extent of about 200-odd crores.

How much this Bhopal, Jharkhand, and Karnataka additional volume comes from these three entities?

No, no. These three entities put together can contribute about ₹500 crores annually.

Having said that, we are already utilizing a portion of those capacity, but very small, and we will probably ramp up by another 200-odd crores going forward. The real test for that will be how the tariff plays out, when will the European FTA kicks in, that is when some of these capacities we will start utilizing more of.

At the moment, we have not started ramping up people there, while the factories have been built out, because these decisions were taken pre-penal tariffs. Once penal tariff has come on board, we are going slow on onboarding these capacities.

As I said, we will have the potential to up our revenue annually by about ₹500 crores, but we will wait for the right timing before we bring the necessary staffing and ramping up the capacities decision is taken place.

Understood, sir. Thank you.

Sir, just wanted to clarify again, thank you for the opportunity. That we have a run rate of almost ₹2,600 crores on the standalone entity on Indian side.

Is it fully utilized? What is the revenue capacity right to put, how much if you run full, what can be the revenue for that?

Hello?

Sorry, as I said, the additional revenue that we can drive from India is to the extent of ₹500 crores. We do have the physical capacity.

We have not really put in the workers there, because we want to wait and watch as to how the tariff situation unfolds and when the European FTA and all kicks in, right? We will have to build up that volume for this additional incremental capacities that that we have available at our disposal, but we have not ramped up the people there.

We will be doing it. Since these factories are already in the region where we are operational, our ramp-up costs will not be high.

We will be able to ramp them up faster. When we ramped up Bhopal first unit, it took us 2 years before we started break breaking even and contributing to profits.

The newer units will probably start contributing much faster given that we have an installed base in all these regions, we have primed ourselves up for for all of those. Having said that, this incremental ₹500 crores, I don't think will happen soon as getting additional business at these kind of tariffs will take time.

We may also be cautious in building up additional revenues in these time. We will wait and see how how all of these unfold in the quarters in the in the months ahead.

Sir, on the Atraco side, including four of Kenya and one of Ethiopia, you've said $150 million is revenue potential from that. What is the current run rate of revenue?

Current run rate is about 120 to $125 million.

What is the current revenue right now?

Current revenue we will be at around 90 to 100 crores close $100 million.

90 to $100 million. The last question on the margins of India, can you just put the numbers please?

I think if you remove the Atraco margin, how much will be the margins from your India manufacturing?

We are around 10% level in India, the operations. Margin level.

Is there a breakup you can give on how much percentage you would get on exposed to Europe higher versus US? Is there a

Africa operation is only 1.5%. The remaining amount you can really arrive at it, that is the India operation.

Sir, from India, if you're exporting to US or Europe, what is the difference in the margin today?

Oh, US US here. US margins will be in the low single digits post tariff discounts, whereas European margins are in the region of about 11, 12, 12.5%, thereabouts.

You see further scope of increasing the Europe side? From...

Oh yeah, our aim is to increase the European business. We will continue to endeavor doing that.

The question is how do we rationalize the capacity between US and Europe and what is the timing up to which this penal tariff will remain? We'll have to balanced call on some of these.

We also have booked revenue from our US customers all the way to Q1 and including Q2. We'll have to balance all of these capacities.

Some of these capacity allocations will unfold in the quarters ahead. We cannot pivot in the short run as we do book orders well in advance.

Good morning, sir. Sir, am I audible?

You are.

Sir, just now you said that the European and this India FTA deal is going to be a great opportunity. My first question is that how do you plan to navigate it, and will you be taking some leased-out facilities, or will you be expanding?

Second question is regarding the African operation. Africa sits in a very sweet spot given this tariff structure.

How do you plan to expand there, especially with respect to US business? Third, if you can give me some idea about the US and the European mix going forward with respect to share customers.

If European business comes, we will have incremental capacity in our [unclear] some new factories and take on additional European business. We're not going to cannibalize US business at all.

In fact, those capacities are given, and we will continue to hold on to our US business. As far as Africa is concerned, while most of the in Africa are American, we are also onboarding some European clients now as Africa goes duty-free to Europe as well.

Hitherto we did not have European customers there, but for now we are actually adding European customers into Africa as well. That's an incremental opportunity that we're looking at in Africa.

As far as the US-Africa mix is concerned, today European business is closer to about 40 15 15-odd percent of our total revenues. Intention is to take it up to 20, 25.

These things do take time. These things take several quarters before the percentage of the revenue for Europe gets built up.

Keep in mind that, either for UK or for Europe, we still don't have a zero-rated tariff. We're paying full tariff.

We are unlike Bangladesh, Vietnam, Sri Lanka, Pakistan, and all these other competing countries enter Europe with zero tariff. Some of those European growth, while it is happening, will only get accelerated or the ratio will get rebalanced only when India's FTAs kick in with its zero-rated tariff.

There has been some GSP withdrawal from European Union with respect to Indian operation as well as the Kenyan one. Will it have some impact?

That's 20% of 12%, that's 2.4%. That is operating in the margin.

There it doesn't make an impact at the moment.

Thank you, sir. Thank you.

Hi, Shiva. Thank you so much for the opportunity, and always a great insight on the sector and how the company is moving towards those lines.

One thing which I wanted to understand is that since the tariffs has been imposed since long now and it's not in our hands that when the resolution will come in. For the brands also then inventory was also on the lower side.

When you talk to the players in the US and the brands in the US basically, then is there an inclination towards supply chain shift? I know it takes a lot of time, but is there an inclination towards that we should shift the supply chain a bit?

See, if the high tariff continues on India, right, then anything is possible, right? If at 50% tariff, it's everybody's bearing a pain.

The supplier is bearing the pain, the buyer or the retailer is bearing the pain. If 50% tariff we're hoping that some resolutions can be found, or people like us will give some options of part sourcing from other countries so that we can bring the tariff burden on our customers.

India operations, if 50% tariff doesn't change soon, change in the next several months, we may have brands looking at options to diversify their sourcing. These are early days.

We don't exactly know how brands are thinking, because they are also finding it difficult to onboard capable suppliers in other regions, they're continuing to buy from India. We are continuing to explore how we can support them and minimize their tariff burden.

All of those are going on. As I said, these things will play out in the next several quarters depending on how the tariff regime unfolds.

Got it. With respect to the EU FTA, the opportunity size is very large and it's huge, that's there.

Considering the players that are already there in the EU market, like how the brands are sourcing from Bangladesh or Vietnam, so that share is also pretty huge. Basically, for us as a country, how easy it is for us to compete in that market once the tariff is also resolved?

How are the brands thinking in terms of sourcing from India and not from other countries? How is the onboarding cycle of customers in the EU considering the market is very fragmented and small order sizes?

Okay. No, most Europeans are buying a lot from Bangladesh.

They are seeing geopolitical concerns in Bangladesh, on one hand. They're also seeing an advantage of buying from India, given that prospectively our tariff will go down.

Many of them are actively present in India trying to onboard suppliers in India, looking at options to buy from India even for retailers who hitherto not buying from India, buying only from Bangladesh and other duty-free regions. There are a lot of retailers who are now actively considering India.

That's the good news, and that will play out incrementally going forward as India-EU FTA comes to fruition.

Okay. Did the order

Thank you so much.

Hi. Thank you very much and congratulations on good set of numbers in challenging times.

I have two questions. One is on margin, and another is on Europe and diversification strategy.

First on margin, see if I look at ₹40 crores of one-off which is on account of tariff, and if I adjust for that, the India margin looks really, really good. It just goes above 13%.

That we have not seen even in the years when there was no tariff and we were running at a high capacity. Is there something I'm missing here?

Or not? Secondly, within that once tariff goes away, can we really go to 13% kind of margin?

That's for question one. Question two is with respect to tariff.

Despite tariff impact, you have 25% disadvantage when it comes to US. Now, despite that, you are able to make some positive margins.

In Europe, your disadvantage is much lesser. Why not think of onboarding Europe and UK clients starting now itself and give them that discount and ramp up the capacity utilization and improve overall EBITDA, though margins would be lesser, but overall EBITDA can go up even if you give 10, 12% discount, because with 25% kind of discount, you're still making good positive margin in US?

These are the two questions.

Okay. Yes, adjusting for margins, the India margins are strong and will continue to remain.

This is primarily because we have also unleashed a lot of operational improvements and some significant cost management here and efficiency management here. That's one of the reasons.

As far as rebalancing US, Europe, while that continues, some of these orders are booked in the long term. We also have strong relationship with customers.

Our US customers are also persevering with us in the hope that the penal tariff will go away. We don't also want to reduce their business volumes, keeping a lot of short-term considerations in mind and then hoping that once the penal tariff goes away, trying to build back the business.

US businesses are generally a little more profitable than European given business volumes. We also have to balance some of these considerations when we look at the portfolio between US and European customers.

We will walk that path very carefully. While we will expand European business, that's purely an intent.

We do not want to contract US business as if the penal tariff is removed, we will see ourselves to be in an advantageous position with those US customers, and we don't want to lose that.

Hi sir. Congratulations on a very resilient performance in difficult times.

Just two questions. What is the current mix of revenues from India to US and Europe?

My sincere apologies. We both, Sathya and I, our CFO and I are both outside of India.

It's an international line. For some reason, we're seeing it drop after a certain duration.

Apologies for this. Let's get started.

Sir. Can I continue?

Yes.

Hi. Sir, congratulations on a great quarter despite difficult times.

Two questions. First is, could you give the split between US and Europe exports from India?

From India?

From India.

US and Europe, only from India. Can you ask the next question while we give you that date answer?

Sir, it was a related question, because to my understanding, US exports would be still at a higher number. Despite making low margins in the US exports from India, we are still at a blended 11, 12% margin in India.

Didn't get the math well here.

From India, we are doing almost around 70%. 70% was revenue from India.

US? Europe?

Europe was the balance.

Yeah. Pretty significant.

Significant part, almost 17, 18% will be Europe, but rest of non-US business will be at higher margins. Yeah.

Europe is just you're saying margin of 11, 12%, and US margin is mid single digit, and your India blended margin is 11, 12%, is 10%. Despite 70% of your business coming in at low single-digit margin, how is India blended margin so high at 10%?

I'm sorry, India business is around 62% blended, because I have to include the other operation from Matrix also, sorry about it. 62.

Yeah. 62% US.

62% is US, India operation.

Yeah. Sir, the question still remains, right?

60% of the business operates at low single-digit margin, even then on a blended basis, we are getting 10%.

Correct. When we say single-digit margin, when we look at EBITDA margin for US, it is in the order of how much?

6-7%? 6-7% for US.

European margin or non-US margins have actually kicked up because of the cost efficiencies that we drove. That is at a blended region of about 13 and a half or thereabouts, right?

That gives you the average whatever average you have.

Got it. Sir, just another clarification, you mentioned that you could negotiate with your vendors because you had a higher proportion of India-based raw material in the product mix this time.

I think on one of the questions, you also mentioned that you had a higher proportion of US-imported cotton, which might come off in the next season when you have a higher proportion of synthetic, which will be supplied from Far East. Was it more of India-based raw material, or was it more of US-based content?

How do we see margins then progressing from here on?

Again when we look at Q1 onwards, we have to look at the supply chain and I'll have to relook at what is the US component in the supply chain, but we may not have as much of US cotton in Q1. We may see some amount of tariff burden slightly increasing on that count.

It may not impact margins much. It may affect us at about a percent, percent and a half, but my sense is we will continue to look for ways to improve our margins in terms of either operating efficiency or supply chain sourcing, how much of that we push back to our suppliers.

All of that will have to play out. We will try to protect our margins as far as possible in that period.

Hello. Am I audible?

You are.

Okay. The first question would like to ask is at present, the US customers were reduced buying from us, or some of them maybe would have stopped buying from us?

In that case, where are they buying from?

They have not. They have continued to buy from us.

None of them, right?

Correct.

Does the present numbers include the labour code cost in it?

Yes.

That's all. Thanks a lot.

Hi, am I audible?

Yes.

My question is, there's some examination that the US Supreme Court is making on the legality of these tariffs, and they might pronounce a result this month. Is there a possibility that your customers get back the tariffs that they have paid?

Since most of the tariff has been absorbed by the company, is there a possibility that they pass on that recouped tariff from the US government to you in the form of special income?

It's a very good question. At the moment, it looks unlikely because they have also borne the cost of all those litigations, etc., and that's a refund at risk.

It's highly unlikely that that benefit will accrue down to the supply chain. It will be unfortunate, but our retailers will get a windfall gain if that happens.

Okay. My second question is on the India business.

When I say India business, I mean you selling to customers in India. What's the volume on that, and is there a strategy to improve the volumes and the geography?

India,

at the moment, when we look at India business, it's largely to the international brands operating out of India that we supply. We do not cater to domestic Indian customers at all.

What is the strategy for India-based revenue? At the moment, we're not pursuing India retail as an option.

We want to see how the US tariff plays out, how the European and UK tariff plays out, because that brings in a new opportunity. We find margins supplying to India retail is low, given that we will be competing with a lot of smaller suppliers whose compliance costs and all of those will be a lot less.

We're not focusing on India retail at the moment.

Hello. Greetings to the management.

Am I audible?

You are.

Yeah. Sir, just one question on the yesterday's budget announcement, are there any changes on the export incentive schemes that have come through in the budget, and anything that you would like to explain to us on that?

No. There are no changes to the scheme.

However, the allocation to RoSCTL and duty drawback has reduced compared to the actuals spent in 2025-'26. I don't know how that's going to play out, unless the budget allocation is increased going forward, we're finding actually that the export incentives that we get and the budget allocated for that seems to have changed.

In terms of actual pronouncements, we have not seen any change, we'll have to see how that unfolds. Even in the past, we observed that the allocation at the budget level was lower, and then subsequently it was corrected.

We hope that it will be done that similar way. Otherwise, we don't have any specific information at this point of time.

Sure sir. Thank you very much, yeah.

Thanks for the follow-up, sir. Just one question.

In the starting of your call, you have mentioned that there has been a lot of cost efficiencies which has led to the margin expansion, or the improvement. Do you see any further cost efficiency or headroom left with for the FY '27?

Some of the efficiencies may come from a depreciated rupee, right? We normally don't take currency benefits to our advantage when we look at internal EBITDA margins, etc.

at a customer level. Some of that can also help us.

As I said, since we hedge, and our hedge rates for USD receivables is close to 88.5 or 89, and while the real currency is operating at closer to 91, there may be some upside sitting there. It also gets eventually competed out in the longer run, but in the shorter run, we may see some upside.

Any product portfolio, product mix change, etc. can also have a negative effect.

All of these do tend to sometimes cancel off each other, but there is a small upside in terms of currency sitting there. We'll have to see how that actually plays.

I wouldn't go and take that benefit much, as eventually these two get leveled out.

Sure, sir. Thank you.

Yeah.

Hi sir, just had a question. Even if we lose the penal tariffs that are there, the other tariffs are also India is a disadvantage compared to Bangladesh, Vietnam, Pakistan, Turkey, etc.

Do we see any implications actually in the longer term, even if this 25% goes away?

No. See

India is higher by 5%, you're saying that?

No, if India's tariff is 25% while Bangladesh is 20%, will that impact us? Answer is not much, because that's only a 5% delta.

It may impact partially. We may have to give some degree of offset to customers for that 5%, but since we are currently talking about a 50% versus 20% delta, that is not becoming a discussion point.

Once the penal tariff goes away, that may come in as a discussion point, and maybe we'll have to partially support the customers for that 5% delta. Will that impact business volumes much?

Answer is no.

Got it. The other question was that, when we look overall at our margins, historically, we haven't had really this extra 25% to really give back to the customers, yet we are ending up being profitable.

Just want to understand how that's actually playing out if we are passing on a lot of this. Specifically for the American orders, are they at break-even levels?

Are we making a small amount? Are we losing?

How long can we actually hold up and actually continue to subsidize this 25% penal tariff? See, when

US customers' EBITDA margins have come down, primarily because of the tariff burden that we are sharing. Depending on the customer, the tariff burden shared is different, and we keep negotiating with our customers.

We get some offsets from our suppliers as well, because some of that tariff burden, we in turn push it back to our supply chain. Then we get some credit on account of depreciating rupee, we should not forget that.

Internally, we don't consider rupee depreciation for our calculations, because that's an externality from our standpoint, but at a P&L level, it does play out. We do get some offsets there.

Our US EBITDA margin, after factoring in some of those rupee depreciation benefits also, goes from low single digits to mid to high single digits, because that benefit also kicks in. Then, these kind of situations tend to benefit us for now, but when the tariff burden goes away, we will of course claw back on the burden share.

Then the rupee depreciation might then come back for discussion on sharing with customers. All of these will play out.

Let it play out when it has to happen. There are too many moving parts in the business.

Some to our favor, some to our disadvantage. What you see is the net results.

What we can focus on is to ensure that we execute well, we try to drive out costs as much as possible, and which is in our control, and that's what we do. Are these

people looking Yes, it does. I'm

No problem.

Hi, sir. Thanks for taking my question.

My question is related to the other income. Sir, what does the other income constitute here?

Other income, at the consolidated income level you are looking at, right? Yeah.

One is the

interest income,

interest on the OCD, what we have classified separately. Other than that, anything on the mutual fund investments and other investments what we are holding, that is the income what is shown there.

It doesn't take into account the currency impact in the No,

the currency impact and all is shown separately the below the line, right? There is a forex impact, gain or loss on account of foreign exchange fluctuation, we have shown separately.

Which is not part of our EBITDA margin, or it is part of our EBITDA margin that we report?

It is part of the EBITDA margin.

Sir. Sir, if the tariff situation reverses, we can expect that the US business to again generate say 12, 13% of EBITDA margin from the currently low single digit?

Yes.

Sir, the inventory you made a comment earlier that the retailers are also not stocking up because the prices are elevated and or probably they're anticipating some kind of slow down. If you can give some clue to who are our customers, are they in the premium segment, mid premium, or value segment?

What are the demand scenarios at the US customer side?

When you look at the aggregate macro data, if you look at the retail sales, re- retail sales for calendar '25, now we have data even till November, and we we are seeing it go up a little above 4%, and US imports are down by 1%. There is a delta there, right?

If US US retailers are importing less, even though the retail sales are going up, which clearly indicates that, they are not allowing their inventory to build up, and on the contrary, they're allowing inventory destocking to happen. People are not wanting to buy at 20% to 50% reciprocal tariff regime.

Or or are loath to build up inventory at these levels. They may be waiting for the Supreme Court order to see if, there is a tariff reversal before they start coming back for buying more.

We'll have to see how this plays out. They may also be worried about how inflation plays up in the next calendar year, that is 2026, which in which we are, and see how price increases, which which will go into effect this year, will also impact US retail demand.

Basis that, they will probably start building up inventory. For now, US imports are trending below US retail sales.

That's interesting to see, because then there is an incremental tightness in inventory that that you will see happen in the US, which may reverse. Now, how does this play out at an individual retailer level?

I think at the moment, it's across all segments that we are seeing it, including mid premium, premium to mass market. Mass market retailers are where bulk of them are.

We we will have to see, how how they will play going forward. Mid premium and above are actually trying to pass on more and more price price increases back to their customers.

Whereas all the others are holding back as much as possible, or passing on very marginal price increase to their customers. It will depend on how their strategy plays out in spring 2026, which will which is yet to happen.

The extended winter continues. US is seeing a brutal winter as we speak.

We will we'll have to see from spring 2026 onwards how how the how the retail market unfolds.

Sir. Thank you, sir.

Yeah.

Hello, sir. Good morning.

My first question is a little bit long-term. As we scale our presence in EU and UK, sir, do we anticipate any shift in working capital days?

Margins, as you said, in Europe, they are higher. Also, sir, please correct me if I'm wrong, since sportswear typically delivers higher margins, do we see any opportunity to meaningfully scale this segment to enhance overall margins over medium term?

Or this category likely to remain low and substantially dominated by China and Taiwan?

To answer your second question, our European customer is sportswear dominant, and in fact, that is one of the reasons why we were able to expand our margins also. We are continuing to push more sportswear-related business to offset some of the margin challenges that we have.

Are we are we pushing up European business keeping long term in mind? Absolutely, given that FTA is coming into effect, etc., we are pushing that European business up, and we will continue to do that.

Once European US FTA US penal tariff goes away, we will see some US business growth as well. We're not wanting to let go that opportunity.

We are continuing to engage with US as well. In terms of customer portfolio perspective, we're we're calibrating it very closely.

We are allowing US European business to grow faster for now, given that there is a tariff benefit for us serving Europe. How are we looking at sportswear?

We're looking at it favorably. We're trying to expand that business, and we are seeing good traction coming in from sportswear business, even though the natural home for sportswear is Vietnam and and those regions, we are seeing good amount of traction coming in that space for us.

Sir. Sir, and my second question is, will ASPs will get lower as we enter into knits and due to Atraco heavy casualwear?

Will what? CSV?

ASP, sir, average selling price. Average selling price, will it get lower?

ASP, huh.

Average selling price, will it get lower?

If Atraco's growth happens at a faster rate than India, definitely ASP average selling price will come down, yes.

Okay. Sir, my last question.

Sir, if this AGOA gets restored, sir, is there any duty refund we will get as in one-time gain?

If what gets restored? AGOA.

Sir, AGOA.

AGOA. Oh no, no, no, no.

All that will be prospective. I don't think we'll get a duty refund for past, yeah.

Sir. Thank you so much, sir.

That's all from my side.

Thank you for the opportunity. Just wanted to understand, with so many cost control measures undertaken internally and externally, how do we see a sustainable margins once this US trade deal settles and we enter into high growth period wherein FTA with UK and Europe are also signed?

Just wanted to understand how things will move, and how do you see business?

In the long run, there are many moving parts. One is trade deal, US US tariff.

At what level will it settle? Will it settle at 25, will it remain at 50%?

Will it come down to 25%? Will it come down to 20%, which is equivalent to, other other competing countries, right?

The margins will depend on all of that. Let's assume that the FTA, the the penal tariff goes away, comes down to 25%, at that moment, Europe US customers may come in and, start negotiating on that 5% delta with others other regions, which at the moment is being ignored given that the delta is so wide between 50 and 20.

What will be our margins at that point in time? I'm sure we'll be in 12% to 13% India margin for all business, including US.

Our advantage if if we merge BTPL, which is the fabric unit with us, will also help us nudge up our margins by a few percentage points because fabric will become internal, so that's that's an another dynamic that we will see in the longer run. European business will probably also help will will also come in at good margins, primarily because in the longer run, there'll be European FTA in place, so that'll help.

For for the moment, we do have some currency-related benefit coming into us. If the currency strengthens, it may have a deleterious impact on the margins.

We will have to see how that plays out. There are all these moving parts, your guess is as good as mine.

On an average, if you have to ask me, if let's say currency strengthens or part of the currency benefit gets goes back to our customers, while US tariff comes down to 25%, European FTA kicks in, we should be able to operate at 12% to 13% EBITDA margin in India and about 10% to 11% in Africa.

That's really helpful, sir. Thank you so much.

Sir, just wanted to understand that you had highlighted earlier when I'd asked you regarding the impact of a 4-5% of benefits which maybe Bangladesh, Turkey, etc. might have over us won't be that much of an impact.

What I understand, it won't be that much of an impact in lieu of 25%, but actually wouldn't this be at risk of our customers looking to potentially diversify away from India?

Will they diversify away from India between 25% and 20%? Answer is no, because in India they do get some specific capabilities, etc.

that is very difficult for them to replicate elsewhere. People also want a diversified sourcing these days, given that tariff for any region can change anytime.

You saw how South Korean tariff suddenly go up by 10% based on some announcement by the administration. People will stay diversified.

Globally, US tariffs are super volatile across regions and will stay volatile, and that really means that US customers will stay as diversified as possible. We as a supplier also should stay as diversified as possible, and hence look at sourcing from or supplying from other regions just to deal with this volatile tariff situation that we find ourselves in.

Got it. Just the last question I had was I would assume just given all the ambiguity, are the inventory levels at our clients reasonably low, and how is end market demand looking like?

Just to know that in case we do see a reversal of this 25%, do we also see an uptick in demand and orders relatively?

No. I would say I'm a bit cautious there.

I'm worried about US. US inflation, everything depends on US interest rates, etc.

going forward. If US demand slows in 2026, either due to price increases being passed on to customers or due to tariff-related price increases impacting US customers, we may see some US demand coming down.

We also don't know how geopolitics are going to impact us as there is enough on the boil globally. How consumers tend to react to that situation in '26.

I wouldn't say there is going to be a demand upswing. On the contrary, demand growth will stay muted till this geopolitics plays out in 2026.

We will have to ensure that we consolidate the supplier base, which we always do whenever there are some such difficult situations, and hold on to our business, or try to get business in lieu of other suppliers, and we will continue to focus on that or think about that.

Understood, sir, and all the best.

Thank you.

I have elaborated a lot during the call as we will stay focused on trying to improve our costs as much as possible, look at our supply chain wherever there is a possibility to extract more margins or optimize margins. The macroeconomic situation is still volatile.

The only benefit that I see in all of this is a weaker rupee, which will help from an export standpoint. The tariff regime, we hope, will settle down soon.

It is required, as US continues to be one of the largest markets and one of the most consumption-driven markets for us. European FTA and UK FTA needs to come home as fast as possible.

While the announcements have had a positive effect from a brand standpoint looking at India sourcing, for it to take effect and business volumes to go up, we need to see the FTA being operational, which is sometime away. Once all of those happens, the long-term benefit for India will be immense, as Europe is a fairly large market, almost as big as US is.

If US tariff comes down, I think it'll be good for operations out of India. In the meanwhile, we will continue to diversify.

We will continue to expand out of Africa, and we'll continue to expand out of other regions, and seek margin improvements wherever possible. Thank you.