Thank you, Sania. Good evening, everyone.

On behalf of 360 ONE Capital, I welcome all participants and the management of Vardhman Textiles to the 1Q FY 2027 concall. From the management, we have Mr.

Neeraj Jain, Managing Director; Mr. Sushil Jhamb, Director, Raw Materials; Mr.

Rajeev Thapar, CFO; and Mr. Varun Malhotra, Head of Finance.

Without further ado, I would like to hand over the call to Neeraj sir for his opening remarks, post which we can open the floor for the Q&A session. Thank you and over to you, sir.

Good afternoon, everyone. The results are already out for Vardhman Textiles.

There's an improvement in the numbers in terms of percentage as well as the absolute amounts. The major difference we look at in the spinning business has been there has been some improvement in the yarn prices.

Also, partially there's been an advantage in terms of the raw material available earlier and the price increase which happened on the raw materials, as the yarn prices got adjusted to the new raw materials, there's a kind of a partial trading gain as well in the raw materials. On the fabric side, the improvement is not to the extent which should have been for two reasons.

One, during last year, because of the US tariff, there's been an issue, we missed the sampling of a particular season, and as a result of that, during this period, all the US orders did not come to India. Last one month or so, things have started improving, and we are expecting far better business in the next two, three months from the US customers as well.

Hopefully the utilization in the fabric business would start improving, though in terms of absolute numbers on the fabric side, we are almost comparable to what we did last year in the first quarter, a little lower than the fourth quarter this year, but we are hoping that this would start improving. Again, in terms of percentage utilization, it was lower because we added a new line also in the month of March, which could not be utilized fully.

On the spinning side, the utilization has been full, the margin have been good, and the overall demand is also good, which was originally started deriving from China. Our expectation on the various fronts in terms of raw materials, yarn prices, our view is, one, raw material is stabilized in international market in the range of about 78 to 81 US cents per pound, most of the time let's say the average 80 cents or so.

This is what it was almost comparable when we did the last call also, except for a few days where the July New York future was much higher, whereas the December and the next months were inverse, which was a clear signal that the July New York future may not be sustainable. As of now, there's no inverse situation in any of the months, there could be a possibility that these levels could be sustained.

Two, if we look at the raw material availability across globe, India, the rains' behavior has been very different. One, it's El Niño case, there could be a reduction in the overall rains.

Also, the variation in the areas has been huge. One, the rains started a little later.

Two, of course, it has picked up in a overall average, but still area to area, this has been different. As of now, the cotton sowing is almost comparable to the previous period with a gap of only 1% or 2% in our estimate, but we are yet to understand and look at what kind of growth or what kind of crop quality would be there as there has been very, very different scenarios of rain in the different areas.

Generally, whenever we see these kind of variations, there are always some quality concerns, and also the crop size also comes down because of the quality. It is very early to say as of now, and we have to watch it for next maybe two, three, four weeks to get a better estimate and idea of how Indian cotton behaves.

Brazil, there has been a reduction in area by about 5%, to that extent there could be a reduction in the crop there. Australia, there has been a major drop in the crop size.

The last year figures were much higher, this year we are expecting to be about 3.5 million bales, and going by the situation of water, maybe next year could be even much lesser, maybe about 2.5 million bales or so. The next major cotton growing area is USA.

The USA, West Texas still they're talking of drought conditions in that area, which means the crop over there can also be effective. China announced a designed reduction in their cotton growing areas because they want to concentrate more on the eatables.

Practically if we look at all areas, there is hardly any area which looks like is going to increase in terms of the cotton, but there are signs as of now where the reduction could be there. Based upon this, it's our view that the cotton prices may not come down a big way, rather may increase only as the consumption across the world are increasing.

That's on a cotton sowing area cotton growth and the production possibilities. Two, this has been a period where lots of uncertainty because of the US-Iran war happened, and the crude prices, we saw the crude prices touching $100, of course come down to about $87, $88 as of now.

As the crude increased, all the intermediary products increased, and that gave an increase to the polyester prices, acrylic prices specially. As a result of that, those prices are much higher than what it used to be pre-war.

That's also given some kind of a raw material increase across fibers as a sympathy to those fibers as well. To that extent also I think there's likelihood that if the prices of acrylic, polyester increases this way, there could be some possibility of increase in cotton demand in the various parts of the world.

Considering these, our view is that the prices may not come down in a very, very big way. Of course, future will tell whether our thoughts were right or wrong.

That's our view as of now, going by simply the demand-supply situation where the supply side is going to be reduced, the demand side is going to be increased. As I mentioned in the last call also, it looks like after three years, this will be a year where the production could be lower than the consumption, and this scenario may continue for next two, three years where we might look at a 2%, 3% drop every year in the cotton crop and maybe 2%, 3% consumption on the cotton side, which means a gap of 3% to 4% for next one to two years, which should be good enough to have the reasonably good prices on the cottons.

Coming to the Indian cotton, since the New York future increased from almost 67, 68 US cents to about 80 cents as of now, of course in this period most part of the quarter was almost in the range of about 75, 76, 78 cents US cents per pound. The Indian cotton which was ruling at about ₹55,000 a candy has also increased to today the CCI price is close to about ₹64,000.

There's been a corresponding increase, whatever this increase has happened in New York future, and along with that, the change in the dollar-rupee, the Indian prices also today are aligned to that. The Indian prices in terms of US cents today will be close to about 87, 88 US cents, and if we look at the Cotlook, this is about 91, 92 cents, practically today there's an alignment in terms of the international prices and the Indian prices, which was a big disadvantage till in the last two years.

This last three months think last four, five months, things are better to that extent. Another changes or another events which are happening on the cotton side, Chinese government started selling the reserve cotton.

They are issuing a quota of about 80,000 tons 8,000 tons per day. I think about 10 sessions have happened till now, and they are in a position to sell 100% of the cotton whatever they give as a quota.

The average price of that cotton which is sold in China as of now is close to about 115, 116 US cents. Even if we reduce the VAT out of that, it'll still be close to more than $1.

Which means the prices in China are much higher than the prices elsewhere. Now, this gives us a feeling, in case the Chinese mills are getting cotton at $1-plus, that means the margin available to them at the today's yarn prices will not be more than 65, 70 US cents per kg of yarn.

That also gives us a feeling, it means they will continue to buy yarn from outside China, be it India, be it Vietnam, be it any country. In our day-to-day experience, starting November, December last year, we are finding the Chinese demand to continues to be good, and our feeling is going by this cotton prices, it may continue.

The total export of yarn from India, it used to be about 95, 97 million kg or less than 100 million kg, which is increased to about 110 million kg as of now, net-net increase of about 15 million kg, which is primarily come from China only, and I think this can continue if Chinese cotton prices are in this range. In case India continues to export at 105, 110 million kg, and this already, as I mentioned, the capacity closure in India was also huge in last three years because of the losses all the spinning mills had, and the industry estimate was almost 12 to 13 million spindles got closed permanently, and we still feel that figure is same, there's hardly anything which has been revived in this period.

Going by the overall situation, not many projects have been announced even now on the spinning side. Last year, I think the additional capacity or the new capacity had come only about 0.5 million spindles, and this year also if we look at the projects announced till now, it will not be more than 700,000, 800,000 spindles in this year also on the expansion side.

Of course, a little improvement is happened on the machinery orders by all the machinery manufacturers, but that is more on account of the modernizations some of the mills have announced. That's on the spinning side in terms of the cotton as well as the yarn sales.

The ruling prices as of now for the international market on a 30s combed basis is close to about $3.20 to $3.30, and the Indian prices are also aligned ex-mill basis in India, almost the same prices plus-minus ₹2, ₹3, which is a normal gap we always find. On the fabric side, we had two issues.

One I mentioned, because of the US tariff, we skipped a particular season on sampling, as a result those orders did not come to India. Two, in the fabric side also there's always a lag when we can pass on the yarn prices to the customer.

Whenever the prices of yarn goes down, there's an advantage to the fabric division or a vice versa. This was a period where the yarn prices increased sharply, and it always takes some time for us to pass on to those prices.

Our feeling is, today even today we feel almost whatever price increase has happened on the yarn side about 60%, 70% could be passed on to the consumers, still 20%, 30% could not be passed on, but with the volume increase, hopefully those numbers would also be better where the costs will keep coming down and probably the margins could be restored. As I mentioned, we are comparable to the first quarter numbers last year, but about 3%, 4% lower than the fourth quarters, but going by the current quarter situation, it looks like we are definitely better than the first quarters.

That's in terms of capex, most of the capex is on line. We have started our one boiler, biomass boiler in Baddi last week only, and the another one in Madhya Pradesh is expected to start maybe in a month or so.

Most of the modernizations are completed, and we have also started working on the open-end project with a capacity of about 55, 60 tons per day. With the construction just started last week, and I'm hoping maybe next 10 months' time or so, this capacity will also be available.

The new site at Dhar, the government is still developing that land. Going by the physical progress of that land, I expect the land will be available to us by December.

Once it's available to us, we are in a process of completing our process where what we intend to do and when we want to start the construction. Hopefully by the time the land is given to us, we will be ready to start at least our first construction, maybe with the spinning project, and then later on we could add whatever more products we want to add there.

In terms of the committed expenditure, most of it is online. Hopefully with all these boilers coming up and the biomass, there would be a cost reduction advantages.

We're also invested heavily into the solar power and the wind power. Those advantages also partially has started coming in.

I think month after month in next six months, more and more advantages would start coming in. That's what my initial comments on the performance as well as our view on the industry.

I think the rest of the things we can discuss with the question-answers.

Thank you for the opportunity, sir, and congratulations on good set of numbers, recovery seen after long time. Just wanted to understand, what will be the order book situation currently in the spinning segment?

Normally in the export market, we are always sold for about three months. Domestic by design, domestic will never be more than 45 days.

If I look at last five years' history, this would be the average, 90, 95 days in exports, 45 to 50 days in domestic, and we are sold for those many number of days even today also.

Okay. Which means the bulk of the improvement in prices that happened in the month of April, May should be visible in Q2.

Is it the right way to look at it?

That's true.

Understood. Sir, second question was on fabric business.

Wanted to understand how is the progress in the new synthetic fabric business and what is your experience and whether you would be looking at expanding it further, what product segment are you looking at there, and kind of margin profile in that segment that you are looking at?

Our first idea is to utilize that capacity. Sampling is happening for various customers because these are all products which are new to us, and we are also learning and we require to do the sampling to give confidence to the customers because these would mostly be the replacement of imported fabrics.

The project started somewhere in February, March, and as of now we have a capacity of 15 lakh meters per month, our utilization is about 15%, 20% only as of now. I am happy to share, last one month we got two big approvals from the two big brands and where the production is starting this month itself within August itself.

I am hoping that our idea is within next six months we want to reach at least 70%, 80% capacity utilization, which is 20% as of now. This has two aspects to business: one is the basic products, second is the value-added or where we can say a part of the technical textiles.

As of now, starting is only with the basic products, and as we are in a position to utilize that, I am sure there would be the value addition also started happening. In terms of the first parameters in terms of quality, in terms of acceptability, are very, very good, and I am happy to share that.

Definitely once we make a success of this, because this is one business where our belief, India has a huge capacity shortages of this product. Definitely we'll look at it expanding as we are reaching near to the capacity utilizations.

Understood, sir. Sir, margins and ROCE as per your current experience, do you think the margins are much better or ROCE is much better than your existing fabric business, or is it equivalent?

Prerna, it is too early to say as utilization is only 15%, 20%. This is all again what kind of products are you in a position to replace from outside market.

As the fashion cycle are increasing, everyone wants the delivery on immediate basis. I'm sure anything you produce in India for the Indian market, we would be in a position to get some premium also compared to the outside markets.

My belief going by the per-meter cost of this product, the margin as a percentage to sales as well as a return on the capital employed could be better compared to the existing product lines. That's my feeling as of now, but of course it's a long way, maybe next six months we will be more sure on that.

That's fantastic to share because we were just wondering what is happening on that business and how we are looking at that business, because it's a good opportunity. Last question is largely on you've shared on cotton outlook and stuff, but do you see an opportunity to import at current prices for cotton, or would you still wait for the new season to come in?

Because we have import duty-free cotton at this point in time.

We are evaluating on a daily basis because there are two factors we have to look at. One is that what is the likely price in India even in the next season once it comes in.

The government has already announced 6%, 7% increase in the MSP. If I go by the MSP and the procurement by the CCI, practically it looks like the cotton will not be lesser than 50 ₹65,000, ₹66,000 even in the next season also.

In case one can get an opportunity to buy imported cotton within this cost today when the duty is free, we're definitely looking at, and wherever there's a possibility, we are taking those decisions, not waiting for only the Indian cotton. Because in any case we have to buy Indian cotton, but since this is a period where the window is available only for next two, three months, whatever could be done, we are surely looking at even at these prices also.

Understood, sir. Thank you and I'll come back for any further questions.

Thank you.

Congratulations management team of stellar set of numbers. My first question on the margin side.

We have done a very strong margin this quarter, and by the looks of it, quarter two, since we must have more cotton inventory at lower cost, could be better. What is after quarter two?

Will this trend of strong margin will continue or it will moderate after that?

No, surely it will moderate, there's no doubt about the same. My belief is it may not come down to the levels which was there before when we started looking at this increase to happen.

Because the industry was passing through a very difficult time last two years, where the spinning margins have come down to as low as 9%, 10% where the margin available or the conversion available was only about 65, 70 US cents. I think going by if the demand continues to be the Chinese demand or the overall demand-supply continues to be better, it can be in the range of about 85, 90 US cents.

These kind of numbers once whosoever has whatever inventory they have at lower prices, that advantage will be there. As those inventories are finishing, definitely there'll be some reduction happening, but may not come down to the last two, three years kind of a numbers, that's what I feel as of now.

Okay. Maybe 100 or 150 basis point moderation or more?

I can't say on the numbers, but definitely I am saying depending upon what inventory and how the yarn prices goes. Lots of uncertainty factors we have to incorporate in.

I can only say these numbers have some trading margins, which may not be available once we move to the market prices of cotton unless the yarn prices further increases. Understood.

Sir, our inventory level today on the cotton side? Sorry?

Our inventory level.

That's something we don't share.

Sir. Moving on the technical textiles side, this technical textile, whatever capacity we have, it is integrated with our grey fabric capacity, or it is all together different line from start

to end? It's a different line.

No, no. Our existing lines are more on where we start from the yarn, spinning yarn, and from there we produce the fabric.

These are all filament-based, it's a altogether different product.

Okay. Start to end, it is not connected with anywhere with the cotton lines?

No, no, no. It's not linked, but yes, customer could be common where they want 100% synthetic materials.

This is all 100% synthetic materials, only commonality could be customers in my view.

Sir, my last question on the new capacity side, anyway we are undergoing a huge capex and a few things are pending, but now since margin is going up, do we plan to invest which can give us further capacity, which can lead to top-line growth? Because whatever capex we are currently doing is modernization or power side, it will not give much on the top-line growth side.

Are we thinking on that line because now we have a better margin?

Yeah. On the top line, you're right.

The top line basically will happen only with the whatever unutilized capacity we have on the fabric side, both the cotton fabric as well as the synthetic fabric, that's one which increase can happen. Two, the new capex which is announced, which will be increasing our production by about 50, 55 tons the open-end, that will give us some addition.

As I mentioned earlier, the new piece of land which we have taken under PM MITRA Park, I think next three, four, five years, we'll have lots of projects we have in our mind, and depending upon how the business goes, there is an intention to put up capacities in that project, which will give a top-line growth also to the company for next three, four, five years at least.

Sir. Sir, thank you very much for answering my question.

I will come back in queue. Thank you.

Thanks a lot for the opportunity and congratulations team for great set of numbers. Just wanted to understand how are you seeing the demand trends across the domestic and export markets today?

Maybe can just highlight which geographies are seeing the strongest recovery. That's my first question.

In terms of garmenting or in terms of export, there seems to be a decent demand, there is not that we are finding it difficult to sell the products. India has a huge advantage, a natural advantage which we got created thanks to the government of India where all these FTAs have happened, UK and EU.

I'm sure there's lots of business these garmenters or the home textile could do in these countries. Since we are the textile material supplier to all these different line producers of garment as well as the home textile, our belief next two years is a genuine opportunity available to the Indian manufacturers to export to these countries.

Already demand as such is good, but with these two markets available to us, I am sure it'll be definitely a much bigger gain for the Indian market. To that extent, I think all manufacturers starting from spinning up to the home textile or up to the garmenting should get an advantage.

In addition to this, strong domestic market, which is also improving with the per capita income increasing every year.

All right. Just to continue the reply that you have given, are you seeing any changes in the customer ordering patterns, being it normalized or brands are still following the shorter ordering cycles and cautious inventory management?

How are you

seeing... Couple of things which are very clearly happening last two, three, four years and it is actually increasing.

One, the fashion cycle is reducing. Everyone wants to have a minimum inventory so that, one, their working capital comes down.

Also, the risk of obsolescence comes down. Any customer who is dealing with you wants a delivery of yarn let's say in 20 days, delivery of fabric in about 40 40, 45 days, delivery of garment in 60 days, 70 days kind of a situation.

That cycle will continue to screw, and whosoever is in a position to deliver will be a winner. That's one.

Two, the market is moving on a much bigger way on the new products. The innovation or the new products development in terms of colors, in terms of variation in the products is definitely something where the customer is appreciating.

Not that 100% product will come from them, but even 5%, 7%, 10% comes from them and 80%, 90% goes on existing kitty. Again, the capability, whosoever has those capabilities will get a first advantage so that that business could move on.

Third, the recycling is still in fashion, specially in the export market. The yarn or the fabric based out of the recycling, definitely some of the customers, specially the Europeans, are more interested in buying that.

Fourth is the green companies. Be it power, nobody wants the coal to be used or the fossil foil fuels have to come down.

That's something where the customer may not be giving you any direct advantage, but if you have, it's nice to have. The customer definitely appreciates that and is more willing to work with you in case you are in a position to do that.

Fifth is the compliances and the ESG. All your social compliances and all your fair practices with your all stakeholders is very important.

Now, look at a situation where customer wants all these, and they will not be in a position to have let's say 10, 20, 30 vendors. They want everything to be done by the vendor.

Any vendor who has a capacity, who has a muscles to follow the peak of the customers and in a position to deliver all these things, that advantage surely I'm finding, and that's the reason the organized players have some advantage where all these brands which are coming in and wants all this kind of facilities, their first preference goes to the organized sector. Size at times we feel size is a disadvantage, but I think this is a time where the size is becoming an advantage, because customer wants all kind of products, they want all the peaking to be managed by them, they want everything in a minimum number of days.

I think those are the changes which we started looking at last three, four years and is increasing every year. There is an improvement or an increase of pressure every year on that.

Okay. That's very helpful.

Final question from my side. You have undertaken doubling of capacity of garment from 2.2 million to 4.5 million.

Could you elaborate how things are proceeding there in terms of customer tie-ups, maybe some quantitative details like expected asset turns or margins? That would be helpful.

Yeah. Our existing capacity is only about 7,000 shirts per day, which is too small a capacity.

Business is doing well and definitely because we don't sell the product in our own brand, we are just giving it to the customer in terms of their own brands. And 7,000 is a capacity which is really minuscule from any customer's perspective.

We get two advantages with our garmenting: one, we're in a position to have the development which comes from the customer side also, which helps us in our both fabric as well as in spinning stage; two, there are some niches which can be definitely created in this business. Our feeling was that the kind of cost structure we have only on 7,000 shirts and also 7,000 shirts too small for any customer to be served to.

I think as a first step was, why not to increase it to double, at least make it a viable unit? Today our costs are much higher, the margins are much less.

Our feeling is once we are doubling this capacity, there's hardly any overhead cost which will be increased, and I'm sure then we could look at the margins in this business on a standalone basis so that a future decision could be taken whether we really want to go a big way into this business or not.

Thanks a lot for the detailed answer. I'll join back in the queue.

Thank you so much.

Hi, Neeraj. Good evening.

Thank you for the opportunity and congratulations. Sir, with the previous participant question, with 4.5 million capacity, what will be the peak revenue we will get at 100%?

Close to about ₹300 crore, ₹350 crore.

This will be fully operational end of March 2027 or will be Q1 2028? Quarter one,

no, June 2027, one year from, seven to eight months generally, but I still feel, because lots of workers are required to be trained, by the time we we take full advantage of actual utilization, it could be one year from today.

Current set of customers you said is primarily domestic or it is international also?

No, no, it's a mixture, we do about 30% export, 70% would be the domestic brands.

That's helpful. In terms of our product segment when I look at, yarn is 69%, I was more curious what kind of China export happens in this?

China, let's say from the Indian market, if India is doing about 105, 108 million kg per month, China is buying typically about 30%. Our kitty, it will be about 20%, 25% to Chinese, whatever we export yarn, whatever export volume is there.

The yarn, we have three segments: export, domestic and captive. All these three segments are practically 1/3, 1/3, 1/3 of the yarn we produce.

So 1/3, 33% export, which means about 7% to 8% of my total production goes to China.

Got it. The reason why I'm asking, because if you think China is going to buy, I'm sure next six months you will have definitely a visibility for your yarn requirement from China.

Is this cycle sign the kind of growth you have envisaged in Q1 will continue for at least next two, three quarters?

In terms of yarn demand, prices, it can, hopefully. The only difference in the margins could be depending upon when your old cotton finishes and when the new cotton you start consuming, so that's the gap which can come in.

Otherwise, in terms of the top line or the sales, I think seems to be feasible as of now for at least next three to four months' time.

Okay. When you say 1/3 is China, who are the other two countries which has shown this kind of resilience?

China and Bangladesh are practically taking 60% of yarn from India.

Okay. Okay.

Just last question on ₹3,600 crore capex what we are planning, what can come and which are the segments which you are deploying in FY 2027 and which will go to FY 2028?

Most of this capex, I think only about ₹800, ₹900 crore will go to the next year, remaining will be completed as already completed or will get completed within this year. Out of this, majority has been modernization and the power where all the power projects will be completed in next three months' time.

Most of the modernization is completed, it's one open-end project and some more modernization which can go to the first quarter next year. Other than that, everything will get completed within this financial year.

What will be total capex for Dhar from land to building and machinery?

For the financial year?

FY 2027.

You are talking for Dhar?

Yeah. The entire project Dhar, PM MITRA Park, your project, what you're trying to do.

No,

whatever capex has been announced, this does not take any expenditure on Dhar as of now.

Okay. That project is still under consideration.

It's still under consideration. We're waiting for the land to be available to us, because the government has to give us power, and we are expecting the power to be available not before June 2027.

We don't want to take a chance because it can further get delayed, I think we'll start construction only once we are very clear, for our construction and the project implementation will take up about 10 to 12 months' time. We start it only once we have a more visibility that the government is clear that they'll be in a position to give us power on this time.

All right. Got it.

Okay. Last question on the margin, I think we have spoke on much about it, but where do you think margin is going to be resilient?

Cotton prices obviously you would have some cover, but I'm asking this question not from till December, but post December, because right now the cotton sowing is also less, the El Niño effect, we are not sure what will happen. In that context, do you think this margin may not deteriorate to the 11% level what we have seen in past, or will be in the range of about 13%, 13.5%?

I'm not saying guidance, but I'm saying direction.

My view is, as I mentioned earlier also, we came down to 10%, 11%, which was really a kind of a desperate situation. My belief, 13%, 14% could be the right way of looking at it, which could be if we convert it into the margins available per kg of yarn, is giving us a conversion of about 80, 85, 90 cents.

Okay. Got it.

Really helpful, sir. Thank you.

Right.

Good afternoon, sir. Sir, what were the cotton-yarn spreads for us for Q1?

Cotton-yarn spread in this period, I'm not saying for me normally, it is always calculated on the market prices of cotton and the market prices of yarn. In this period, it was ranging about 90 US cents per kg of yarn.

Okay. This is like spot cotton and spot yarn if you compare, that was 90 cents per pound?

Correct. Correct.

Correct. Per kg.

Sorry, yeah, per kg.

Yeah.

Okay. You think broadly it should be in that 85 to 90 cents per kg range only

going forward? Historically, it's been in the range of about 85 cents to about $1, except last two, three years where it came down to 60, 65, 70 cents for Indian market.

Okay. Sir.

Thank you. That's all from my side.

Sir, congrats for the good set of numbers. Sir, my question is regarding where do you see our company in the next five years, number one.

Number two, our return on capital employed or return on equity is on very lower side. Anything, any guidance you don't give, that I know, how it can be increased, return on capital and return on equity?

Where you see our company in the next five years?

Next five years, as I mentioned earlier, we are hoping as the opportunity would be there in India because of all these FTAs and the Indian consumption increasing, there could be a possibility that we might look at some of the bigger projects in Dhar as the government is also promising the major growth to happen in these kind of areas. I don't have exactly because lots of ideas in our mind, which I'm hoping will be implementing in next two to three years' time, but definitely it could be good in terms of the overall top line.

The ROCE basically has a two factors: one, return on capital employed for the business side; second is, we have lots of investments available to us, which were kept as a future expansion possibility where that money is available with the company. If we look at the return on business side, it's still reasonably okay.

I believe in case we are in a position or whenever the right opportunity comes in, the company invest in a bigger way, which we intend to whenever there's a right time, to that extent, the treasury stocks comes down and the return on capital employed, that's the only way would improve.

Okay. We can expect in the next two, three years it can improve to a reasonable level?

No, I'm not saying two, three years, but definitely five years is a period where my personal belief, yes, it could be.

Sir. Thanks.

Great set of numbers, congrats.

Sir, just wanted to understand, in between China was not buying from India enough, and recently they started buying. What could be the reason?

Are they focusing on cotton businesses to larger extent?

No. I think they are still very strong on the garmenting side, and whatever was a thought that people are looking at China Plus One or they'll look at China to be removed, that's not the case.

With the kind of capacities they have, I think they'll continue to dominate. My thoughts are: one, as the government announced there that they want to reduce the cotton-sowing areas, which means they are too dependent upon the import cotton more and more in future.

Two, the costs are increasing there, especially in the South China, which was originally where lots of industrialization is there. Of course, the new area they're trying to develop is the Xinjiang area.

A lot of capacity which already got shut down, or maybe the cost over there has increased in a big way so that I think they might have to look at how do they replace the capacities or they reduce the capacities. Now, if the cotton prices are there with a $1-plus than the rest of the world, the cotton prices are in the range of about 89, 90 cents, 10% to 12% increase for them is a huge cost.

I think rather looking at a basic yarn, because they're very strong on the garmenting, they are very strong on the fabric finishing. Could be possibility or a part of their strategy that rather than looking at producing yarn, why not to import yarn, at least the first leg is over, convert it into the finished fabric, and this also reduces the risk of Xinjiang cotton, which is again banned by many countries, especially the USA.

As whenever they are buying the local yarn, there is always a challenge and a concern whether it is made out of the Xinjiang cotton or not. When the yarn is coming from India or Vietnam, at least that risk is over for them.

I think this could be what I feel genuinely they may look at, rather than looking at taking a risk when the final garment shipments happen and then in the testing you find, oh, there's something happened at a local level, why not to import the yarn and then export the garments?

This is sustainable in your opinion going forward as well, this Chinese sourcing from India?

Looks like.

Okay. Sir, anywhere spindle addition is happening in the world, or is it that India is the only country which is adding spindles?

A very interesting question. If we look at China, there's some spinning is being added in Xinjiang area, but more than that, they are stopping elsewhere.

The net-net, there's hardly any increase in China. From a peak of about 116, 117 million spindles, they're down to about 84, 85 as of now.

Look at Indonesia, they have reduced, they're not adding. Look at Vietnam, almost saturation is there, they're not adding.

Look at Turkey, in a very, very bad condition, and slowly they have to reduce their capacities only. Look at Bangladesh, they're not adding anything.

The only one country where some small increase may happen is the Egypt or India as of now. Of course, tomorrow people are talking of Africa to develop and those things, that happens, but as of now, I don't think any part of the existing clusters of spinning is increase other than the India or Egypt as of now.

That is positive for margins in the longer term in your opinion, or the moment the margins start coming in there would be increase in capacity? What is your take on the long-term profitability of the spinning business?

Should be. My only concern has always been the cotton availability at the right prices.

Now with the government allowing us for four months, we're still requesting government to give our more visibility on a sustainable basis. If you look at last 15, 20 and these two years, three years also, the spinning margins have come down not because of the demand side, but only because our raw material was much more expensive compared to the rest of the world.

In case our raw materials are aligned to the world markets, I don't think really in terms of competition there would be a really, really big issue for India to compete.

Understood, sir. Thank you, sir, and all the best.

Thank you for the opportunity. Sir, just one question.

What kind of opportunity do you see in recycled cotton yarn? With the cotton prices being firm and I believe lot of cotton will not be getting recycled, technology-wise, in the medium term, is it feasible and at a larger scale, is it feasible in terms of ROCE and in terms of pricing?

If we look at the model, this nothing to do with the ROCE or with the availability of cottons. Basically, all this idea started from Europe where they wanted to reduce the consumption or a dumping of the material to save the Earth.

This is the passion they had, and that's what this is happening. In terms of cost parameters, in terms of return on capital employed or in terms of availability of fiber or spinning of fiber, there is a dramatic improvement happened in last two, three years, and today up to 30%, 40% recycled fiber with the virgin fibers on the ring also is possible.

We are doing it very regularly. In any case, through the open-end, it is possibility to do even more than that also.

I think rather than the return on capital employed, the idea was how do we reduce the landfilling of which is happening because of the garmenting. That's what the thought was, and my belief, this may continue for a few years till the time we reach a saturation on that also.

Technology-wise...

Technology-wise, it's okay. Mechanical recycling is there, people are talking of now the chemical recycling also, lots of experimentation is going on, but as far as cotton is concerned, mechanical recycling is reasonably good, and sufficient capacity is already available in the system.

Okay. Thank you.

Thank you all the investing community who has been with us for last so many years. Whatever are the results, we try to give our opinion as honestly as we can.

Of course, there could be difference of opinion or there could be things can go in a different way because it's a all dynamic world. Going by the situation, as of now, it looks like things have improved in India for most of the textile players.

With all these FTAs and the opportunities available for future, we definitely see far better times in the times to come. Of course, as I mentioned, the trading gain may not be there, but definitely going by the overall opportunities, we feel it could be a right time for India for next couple of years to show the demonstration that the growth could be there in this industry.

Thank you very much.