Thank you, Shailendra. Good evening, everyone.

On behalf of 361 Capital, I welcome all participants and the management of Vardhman Textiles to the 4Q FY26 concall. From the management, we have Mr.

Neeraj Jain, Joint Managing Director; Mr. Sushil Sharma, Director Raw Materials; Mr.

Rajeev Thapar, CFO; Mr. Mukesh Bansal, Head of Fabric Marketing; and Mr.

Varun Malhotra, Head of Finance. Without further ado, I would like to hand over the call to the management for their opening remarks, post which we can open the floor for the Q&A session.

Thank you, and over to you, sir.

Good evening, everyone. Thank you for joining the fourth-quarter call.

The results are available to you. This period, last six months have been—there are some good and some bad news.

The good news is, one, the US tariffs were over. As a result of that, India became more competitive.

The kind of desperation which was there for our garment exporters or the home textile, that's over, and things have started moving back to the right direction. Also, this was a period where we started looking at new geopolitical concerns, starting with the Iran and US war, which created some of the disadvantages or some of the disruptions in the system, be it logistics, be it crude, which has impacts on the various businesses, including the textile business, which I'll come to a little later.

Also, this was a period where the cotton prices started going up internationally. The New York future from 61, 62, 63 cents went to as high as 82, 83 cents.

As the consequence of that, the Indian cotton also moved from Rs 52,000, Rs 53,000 a candy to about Rs 68,000, 67, Rs 67,000, Rs 68,000 a candy. Which means the the cost of raw material increased in a big way in this period.

There has also been an improvement in the yarn prices both on account of the raw material push as well as the better demand also, which I'll come again a little later. In between, the dollar-rupee also moved, which was also beneficial as most of the textile is based upon the exporting community, some advantage came because of that also.

These have been the macro-level events. Now we can look at it one by one.

Clearly, the US tariffs that have given an advantage. I understand the export the the utilization of exporters who were directly exporting to USA from India, be it home textile or be it the garment exporter, has calmed down to about 50% to 60% in this period.

Also, they were giving heavy discounts to the US brands to the extents at least to compensate 25% as the duty was 50%. As a result of that, their margins were affected and many products they were losing money.

As a result of that, they were shying off taking those orders, and as a result of again that, there has been major issues and concerns for those exporting community. Since we are the textile producer and we provide the material to them and they were not doing good, there was a pressure on the back process also.

All the people who were who are supplying either yarn or fabric to the garment exporters, they were also under a difficult situation, either on account of a lower both on account of the lower realization as well as the lower utilization. As soon as the US tariffs were away, slowly the business started coming back.

I understand as of now, both home textiles and the garment exporter to the USA, they're running almost 90%, 100% capacity utilization. As a result of that, from the country, they the overall export is better, and also since their utilization is better, the overall demand of the yarn is also better.

That's been a favorable factor in this period to start with. The second major event was the prices of raw material.

Now you look at the last two years, the New York future was continuously coming down. It came down to a one of the historic lower levels of 62, 63 cents.

I think this was a level where the the farmers are not actually earning a lot internationally, there was a fear whether the cotton crop will come down or will increase. It was all a concerns and issues which were there in our mind.

In between, there was a weather bad weather condition which was announced by USA in the Texas area, where it is as of now it is projected that 91% drought conditions are there and it is likely the overall crop size in USA will come down. Also, the Australian crop size got reduced.

From 55 million bales, it was expected to be about 41 million bales. The Indian crop also came down against the last year's figure of about 31, 31 and a half million bales.

This year, it is projected to be about 29 million bales only. The Brazilian also was not increasing.

There was a possibility either the same or small reduction in that also. As a result of that, the overall cotton stocks which we saw increase in the closing stocks of cotton worldwide last two, three years, that got balanced.

Or rather, it was projected that the we will be the world will be reducing the closing stock of cotton maybe to the extent of half million tons to 1 million ton. The moment it was realized, there was this was one of the factors where the prices of cotton started going up in the international market.

Two, as the tensions started in Iran and USA, the crude prices started increasing, which has a direct impact on on man-made fibers, especially polyester. The polyester prices increased in this way in a big way.

As the cost increased because of the crude, all the synthetic fiber prices started increasing. We look at acrylic fiber, the prices increased almost by about Rs 80, Rs 85 a kg in this period.

Polyester fiber prices increased by Rs 25, Rs 30 a kg, and all other cellulosic also started increasing. Somewhere somewhere it looks like the the cotton fiber also got a sympathetic increase on account of that also, since the synthetic prices were increasing.

Somewhere I think that was a support given which was which the cotton fiber got and the prices were also standard to that extent. Third, since the the demand in this period started improving.

There are two factors how the demand started improving. Pre-war, I'm talking of, starting in the month of October or so, the two factors on the spinning side which had happened in last some time: one, since the industry was not doing well, we understand as per the industry data estimate that total of about 11, 11 and a half million spindles have stopped permanently into the system.

As shared earlier also, our rated capacity in India was 53 million spindles. Normally, we add about 2, 2 and a half million spindles every year.

If we go by the normal years, our capacity this year should have been about 59, 60 million spindles. Against that, last three years, there was hardly any expansion happening, but contrary to that, 11, 12 million spindles got permanently stopped into the system.

Practically, the the working capacity today in India will not be more than 41, 42 million spindles as per the industry estimate. There's no government data available, but this is the industry estimate.

Which means there was some balancing of the spinning availability or the yarn availability came into the system, where the overall production came down. This was one factor where the surplus capacity got vanished.

Two, we saw geopolitical tensions, issues, concerns in Bangladesh six months before. Because of that, I think some of the brands or some of the orders got transferred to China also.

There was local Chinese demand, there was export Chinese demand, and some orders shifting from Bangladesh to China. China, if you look at the Chinese cotton total, they they have about 80% of their consumption.

They are the Indian they have their internal cotton and 20% they import from outside. Out of the 80% which is their internal production, 80% of that comes from Xinjiang area, which is banned by the USA as of now.

It looks like either the brand suggestion or the local Chinese manufacturers, they decided, rather than buying the local yarn, they started importing cotton yarn from India, from different countries, including India. The prices were low, they started buying big quantities of yarn from India.

Suddenly, starting October, November, we found the yarn demand to be very good in the export market, and the prices started going up for the yarn also. India, we normally export about 100 million kg of yarn every month.

It is the average for last two, three, four years. Out of that, China used to be about 7 or 8 million kg only.

If you look at the last four, five months data, China is consistently buying about 30 million kg. Practically, another 20 million kg demand came to India, and Indian export started reaching or touching almost about 120 million kg plus.

This became the yet another factor where the yarn prices started improving in a far better way, not only to compensate the cotton prices, but definitely beyond that, and suddenly spinning margins started improving into the system. This demand of China continues even today also, and I think most of the spinners, they're sold for about two to three months in forward as of now as far as the export is concerned, and to that extent they try to cover the cotton also.

Two, since on the Indian side, the Indian crop size is not likely to be more than 29 million bales. Going by this increased activity of yarn, it is expected our full-year consumption can be in the range of about 33 million or 34 million bales.

Now suddenly there was a realization that the cotton cotton is not available in India, and there was the the various industries included or the various industries association, they started going to the government to allow the duty-free import of cotton so that by the time we finish our existing cotton, there should not be a shortage of cotton into country. The Ministry of Textiles could understand, and they took a total view of the industry, and they wrote it to the Finance Ministry and the Agriculture Ministry that there is likely to be a shortage of cotton going by the better activity and the better profitability of the spinning sector, the cotton should be allowed duty-free coming to India so that there's no shortage of cotton in the month of August, September, October, or so and so on.

This information also spread into the system that India is likely for a limited period or a maybe six months, I do not know what government decision could be, whether they'll take a decision or not, we are not sure, but definitely the market perceived the Indians will buy to buy more cotton internationally, which also gave some strengthening to the New York future in this period. The third factor was as the cotton started going up, I understand the hedge money or the speculative money also started coming to this trade.

Today, the last two, three years where the speculators as per the data which is available in the system, they were negative or they were short on the New York future, they started going long on the New York future. Which means the cotton in the 80, 82 cents level got stabilized in this period.

Now this got this has a big advantage if New York future remains at 80, 82 cents for the Indian market. India had a peculiar situation where our cotton prices were very high because of the minimum support price, though CCI was acquiring cotton, they were buying cotton, they were selling in the market, but at the same time there was a loss which was coming to the CCI in this period.

As soon as the cotton started going to about 80, 82 cents New York future, the Indian cotton prices became aligned to the world market. As of now, even going by our MSP, our cotton is not expensive compared to world market.

Rather, it is aligned to the long-term average we which we used to look at it always in last 15, 20 years, that we are New York future plus 5 to 8 cents cotton, which is prevailing as of now. Suddenly our the all the spinners which were losing money on account of a very high cotton prices, that factor also was that also got aligned into the system last couple of months.

As a result of that, the spinning margins were normal, which earlier was not sufficient or was not normal because we were very, very expensive on the cotton. The New York future, whether it will sustain or not, I'm not very sure, but definitely if you look at the other countries, India today our cotton price are 87, 88 cents, New York future is at 84 82, 83, 84 cents, the Brazilian cotton is available at 94, 95 cents, which is aligned to it, the Pakistani cotton, which is inferior to Indian cotton, is again aligned to 85, 86 cents, which is aligned with the with the normal relativity, and also the Chinese cotton today are in the range of about 103, 104 cents, which normally they are always higher to India by about 15 cents or so, which is also today as of now aligning to that also.

Today there's hardly any disruption as far as the long-term the cotton prices have have been in this relative to each other. In this period, the cotton to Indian spinners was available at a right price, yarn demand was okay, the prices started improving.

Just to give you an idea, the lowest prices of yarn in the month of November, December were ranging about $2.65 to $2.70 for 30s combed. Today the same price is ranging between $3.30 to $3.35.

Same way, the another advantage which came to India that with the rupee moving from 90 to about 94, 95, our cotton cost in terms of US cents came down. Also the conversion was better available to the Indian textile producers, not only spinners, to the everyone who is exporting, the operation to some extent was viable as far as the spinning is concerned, which we saw after two, three years.

Going forward with the next upstream products, the fabric margins were very good before the increase in the yarn prices. I think now slowly, because the overall demand is good, even for the fabric also the demand is not bad, everyone is trying to increase the prices.

There's always a resistance whenever the prices goes up to increase on the upstream products, and vice versa of that, whenever the yarn prices goes down, the garment or the fabric prices doesn't go down in the same fashion. The fabric also they have increased the prices.

There's always a lag of two to three months, and I hope, going by our position today or most of the other fabric producers, both either knitting or the woven, it looks like that we are trying to to push this system, and we would be in a position to get that increase hopefully in the times to come. Same is the situation with the garmenter where they are now trying to increase the prices.

One, they've got an advantage because of the dollar-rupee. Also, they're trying to push with the brands to increase the prices, and it's always a power of negotiation we have to see, but definitely going by the total increase, it looks like the brands have started talking to increase the prices.

Few brands have started giving small increases, but I think it's a time where we have to look at maybe next one, two months more more clarity comes on this issue. Second, on our capacities, in between, we have taken Vardhman has taken a very big capex plans.

On the spinning side, it was more of a modernization. I'm happy to share almost 90% of the modernization got completed in this period, and whatever is left, I think this current financial year next six, eight months we'll complete.

As a result of that, we are much more strong on the shop floor, both in terms of flexibility, quality, and also the cost factors. I'm sure that advantage will come to us in the future times, both in terms of the cost as well as because of flexibility the better products which we can produce and give it to the various customers.

On fabric side, there were two major expansions we have taken. One was the performance fabric, which plant was commissioned during the last financial year.

I think normally it takes about 6 to 9 months' time for the orders to come in as it's a new venture for us. I hope next 6 to 9 months we should be in a position to utilize it fully, or better utilization will happen where and we hope that this will be a new line for us where the lots of expansion or major expansions can come in as there are hardly any players for 100% synthetic into in India.

The second factor was the fourth line, which was of cotton and normal fabric production, which was also commissioned during the year. As far as as soon as we commissioned that line, there was this issue of US tariffs, practically we couldn't utilize that capacity, but slowly we've started building on that also.

In terms of our volumes, we would be doing one of the highest today, but still we have unutilized capacity, which I expect maybe next 6 to 9 months' time we should be in a position to complete that. In addition to that, there was there's a huge expenditure we wanted to or we are doing on on green power, be it biomass boilers, etc., etc.

All those projects are likely to be commissioned in next one to two months, and after that, I think June or July onwards, we should start getting advantage of that also, both in terms of green power as well as some cost reduction possibility going by these raw material differentials as of now. These are this is what is in this period major changes which have happened.

Now I think remaining parts we can cover in the Q&A session. Thank you.

Hello, sir. Am I audible?

Hi. Thank you for the opportunity, sir, and congratulations on a decent set of quarter.

I just had a few queries regarding the industry and the business. Firstly, as you said that Indian cotton prices used to trade at a premium to US cotton, but right now it is trading at par.

How has this impacted the demand for yarn? I know you mentioned that the demand for yarn is better, though it is also visible in the realization that if we see the realization for yarn has increased.

Are we able to pass it on to the customers?

The yarn prices are determined by the international cotton. Even if our cotton is expensive, we can't pass it on because that's an Indian phenomena only.

One, in any case, the yarn price is whatever is the cotton internationally, that is determined by the international market, and even if our cotton is expensive, that has to be borne by us. That's first point.

Two, since the overall demand was better, both on account of the demand as well as the increase in cotton prices, that could be passed on comfortably to the customer as of now.

Okay. Okay.

Understood, sir. On the demand side, sir, like how is the demand shaping up with the US US has opened up, right, post tariffs?

And

Demand is as of now the demand of yarn is very good. You look at most of the US brands, the first-quarter numbers, the retail size increased from 4% to 10% on the various brands.

The demand from US is really good, and as a result of that, I think the overall textile demand as of now seems to be pretty good.

Understood, sir. Sir, if we move on to the fabric segment, how is the industry pass-through situation panning up right now?

Like you said that there is a lag. Prices have increased, but there is a lag.

How is the customer conversation shaping up?

Now the customer is very clear they don't want to give any increase, but I think since the raw material prices are increasing, the intermediate products, they don't have a choice. Nobody would like to take the losses.

Everyone is trying to push the prices and some increases are happening selectively. It's not that the increase are not happening.

As I mentioned, since there's always a lag and whenever you want to do a new business, there's always be a resistance. With every day, every month, every order, there's some price increase which we are pushing to the customers.

Sir. On the spread side, sir, have the spreads also improved from post tariffs, pre-tariffs on the yarn segment?

Spread hasn't improved. Yes, spread definitely has improved, as I mentioned, because our spread was less because our cotton was very expensive.

Since our cotton is aligned to the international market, our spreads have definitely improved.

If we can quantify that in some numbers?

If you look at the Indian prices today, the cost of Indian prices is about 85 87, 88 US cents. If I convert 87 cents, it comes to about $2.35, $2.38 or so.

With the price of $3.30 today, with this kind of a rupee, 90, 95 cents spread is available, which 4 months back was only about 60, 65 US cents.

Okay. There is a 50% jump in this spreads that we can see.

40 or

from the worst to the best, because this happened slowly. The impact will come in the times to come, but yes, 40%, 50% spread improvement is there as of now.

Sir, is this sustainable, can we go ahead with this number or will there be some correction in these spreads if the prices of yarn comes down?

As I mentioned, there are two issues which are beyond our control. One, New York future will come down or not, I'm not very sure.

If New York future remains at these levels, practically the Indian MSP issue or our cotton prices going beyond a point, that issue can be taken care of. New York future will go up or not, it's something I can't really really predict.

On the demand side, as I mentioned, since the demand from China has been good in this period because they are full of orders from the various brands. I think to that extent it looks like it can be sustained for some period of time.

Sure, sir. I'll turn back.

Sir, for the opportunity. Sir, my first question pertains to the industry dynamics.

Sir, as you indicated, close to around 11, 11 and a half million spindles are off the market. Sir, as per your experience, let's assume that these healthy spreads sustain for a longer period of time.

How much period would it take for these capacities to come back into the market or is it more structural in nature, people are right now not investing and it might take couple of years to again come back to that 50, 53 million spindle capacity?

There are two things which has changed in this time. One, as per the industry estimates only again, the total number of spindles in India was 53 million.

At the same time, the number of mills were close to about 3,000. We understand the 11 million spindles which are off the system, almost 1,000 factories have gone shut down.

Which means indirectly, some consolidation of the industry has happened. All these small spinning capacity, 4,000, 6,000, 8,000 spindles, which in any case was very, very difficult to manage in today's time, I think that's one segment which is going off to the system.

Two, the industry has passed through a very, very difficult time last two, three years, nobody is looking at a very big expansion to start immediately. I think everyone is looking at more clarity on the import policy of government and what happens.

My feeling is in case these margins or this kind of cotton prices sustain for next 3 to 6 months, then people will start looking at more projects to come in into the system. You go back to the machinery manufacturers, which are one of the best way to measure what is happening on the industry side especially on the expansion side, their utilization are improved, but more from the modernization orders rather than the expansion orders as of now.

People have started talking on the expansion side. As of now, there are not really very big projects which has started working on it, and I feel maybe next 6 months to 9 months' time people will wait before they can start off or they start taking up the new projects.

Two, industry definitely will be more consolidated. Those 4,000, 6,000, 8,000 plants will never come back in this system, and it will better if organized player comes back to the system, which are more sustainable in terms of their profitability aspects, the overall structure, my personal view is, will keep improving only from here onwards.

Good evening, sir. Sir, I have two questions.

The first one, our operating profits are not look as good as maybe people like Nitin Spinners or GHCL Textiles. Is it because the fabric price increase will happen with a lag and hence Q1 numbers would show more of it?

That's likely to happen.

Okay. Sir, and what what were the what was the export percentage for the quarter export as a percentage of revenue for this quarter versus YoY same time last year?

Our

direct export company as a whole has always been in the range of about 44%, 45% plus/minus 1%, 2%.

Okay. This is as a percentage of revenue, right?

Yes.

This has been maintained. There has been

no issue on Yeah.

Okay. Sir, then is it fair to say that since exports have not been impacted, with the fabric doing better, we'll do much better in Q1?

Can we say that, in short, our performance in Q4 was it not as much as it could have been just because of the fabric part, which takes a lag effect?

Going by the spread improvements, which is looking like as of now, I think most of the textile companies to do far better in the first quarter.

Okay.

Including our company. Including Vardhman.

Sir, and what with these higher cotton cost which have come in, even then it should be okay as you said the current cost and current yarn prices, the spreads are okay. One can assume even Q2, 3 assuming the current status remains, even Q2, 3 could be better assuming the current spreads remain?

That's true. Assuming the current prices of yarn, current dollar-rupee, and the current prices of cotton, it will be better compared to the last year.

Anyone if they have cotton available to them, which is at a cheaper price, that advantage should be additional available to them.

Okay. Sir, year-end, this time we are having what, 3 months' inventory or bit more for cotton?

Hum log normally share karte hain numbers, par hamara normal coverage jo hai hum 6, 6 se 8 mahine ki rakhte hain year-end ke upar.

Okay, 6 to 8 months' cotton you have at year-end?

Hum normally rakhte hain, main year to year numbers I disclose,

but

a general because seasonal

hai jo October se lekar March tak aani hai. Matlab main pooch rahi thi ki March mein hamara kya 6 months ka cotton rahega?

Hai matlab, raha hoga? Ma'am,

I'm trying to explain you. The cotton in India comes in the month of October.

Most of this gets vanished by March. Most of the companies on March numbers will have 6 to 7 months inventory, most of the companies.

Sir. Because of this seasonality.

Thank you, sir. Thank you.

Good evening, sir. Sir, I just wanted to expand on the last point that you made.

Since bulk of our procurement has happened by the financial year-end types, what would be the average cost of cotton that you procured because that will be the base for the cotton for the rest of the financial year? Will it be close to

I will not like to give the numbers at what cost I've bought, but I can give you how the market has behaved in this period. If you look at today's price of CCI selling, it is Rs 67,000 a candy.

They increased this price almost by Rs 5,000 in last one week only. Practically, the CCI price one month before was Rs 57,000, Rs 58,000.

Eventually, anyone who has an inventory available in the system will be definitely much lower than the today's price. Which includes us?

Includes us. Understood.

Understood. Sir, I know a speculative question, but any viewpoint on how US New York future cottons would do considering the drought situation in the US?

Will it sustain at 82, 83 historically and how

As I mentioned, the drought is not the only reason. I mentioned earlier also drought is one of the reason.

Also the crop in India and Australia was also lower. The demand-supply got readjusted.

For the first time after 3 years, there will be a reduction in the closing stock of cotton. All these factors and then the synthetic other prices increasing, giving the possibility of some consumption change or a replacement from polyester to the cotton, all those factors have played it into this role.

There's not only the drought condition of USA, but the many factors could have played a role where suddenly people are more optimism is there on the New York future.

Okay. Understood.

That's all my questions, doctor. Thank you.

Thank you.

Congratulation, management team, on decent performance with gross margin expansion. My first question, sir, related to this only.

If look at the number where gross margin was higher quarter on quarter 300 basis points, but due to other expenses, margin expansion was not reflective at EBITDA levels. Sir, could you just give a good highlight on what led to a great increase in other expenses and when it will get normalized?

Is there is something one-off?

Okay. There has been one item which has been charged to the revenue in this period from the other expenses.

Whatever is the foreign exchange position we have taken, that gets marked to market on every month-end. In this period, the rupee has moved very sharply.

Whatever we have been selling because our policy whenever we book the export orders, most of the time we like to cover the rupee at the same rate. Rupee moved suddenly to Rs 94.80 or so on 31st March.

Whatever we have sold, that was required to be normalized on the mark-to-market basis, and we provided a loss of about Rs 57, Rs 58 crore in this quarter on that. That advantage will come to us in the next quarter.

Now all our exports will be moving at Rs 94.80 or whatever the market rate going forward. That one-time hit, it is definitely impacted our margins in the fourth quarter.

Okay. The hit was exact number?

Rs 57, Rs 58 crore is the provided as mark-to-market.

Okay. That will not be there going forward or there will be some reversal of that?

Depending upon that what the dollar-rupee finishes. I can't say tomorrow it goes to 97, we might have to provide.

It goes to 90, then that advantage comes in. I can't speculate on that, but yes, whatever was on 31st March, we have provided for that.

Sir. Sir, second question.

You have already highlighted that at March-end, everybody inventory is 6 to 8 months. As a strategy, what would be the number at the September-end general number?

Now one, I'm not saying everyone had an inventory of 6 to 8 months. I said most of the good textile mills, since it's a seasonal product, they try to cover their cotton normally 6 to 8 months' time, but the company to company, it could be very, very different.

Two, new cotton will start somewhere in October only. By September, we have to exhaust most of our stock, and we have to start preparing for the buying once the new arrival comes in.

As the new arrival will come in somewhere in the month of October, and if we have a 6 to 8 months, any factory has an inventory of 6 to 8 months' end, they'll be finishing in this period, and then eventually they'll have to buy new cotton starting September, October, November.

Okay. Fair enough.

Sir, one quick question on the capex side. You talked about increasing your garment capacity, which is still a very small part of our overall business.

Are we thinking seriously to have major expansion in garment segment and go broaden our product profile the way you have mentioned in your PPT?

Earlier, we were not very sure we really want to expand the garment capacity or not, but definitely the business is whatever small capacity we have, we are doing good. Our costs are very high.

The first step is let's make it a little viable unit. In case we can make money on the expanded capacity also, then we'll look at it differently.

As of now, the only idea is it's a good business where we are dealing with some of the brands, we are supplying the material to them, or we are giving them the final product. Just to serve to that, we have decided to expand this capacity so that we are more viable.

Whether we'll do it in a full-fledged basis in the future or not, there's no decision as of now on that. It's a first step where we're looking at whether we can make the business viable.

If yes, a fresh view has to be taken by the management. As of now, there's no decision that we'll be looking at it in a very, very big way, not neither yes nor no.

We'll look at it or we'll evaluate it later.

Sure, sir. Sir, what is our average realization per shirt ballpark number?

$5.

Sir. Thank you very much for answering my question.

All the best, sir.

Sorry, sorry, sorry, sorry, $7.5.

$7.5.

Yeah.

Sir. Thank you.

All the best.

Thank you for the opportunity. Sir, can you tell me what was the average spread earned by us in FY26?

I can't say what was Vardhman spread, but the industry spread for the year average will not be more than 65

cents. 65 cents.

The current market conditions you were saying that the spread has increased to about 90, 95?

Correct.

Okay. My second question is that in the last two years when cotton globally was cheaper than cotton in India, because of which and our cotton yarn realization is linked to cotton globally, I'm sure the industry must have made representations to the ministries regarding this disadvantage that Indian spinners had.

What anything structural that has happened to address this gap that this disadvantage that Indian spinners had?

Most of the industry, we have been going to the government and we have only one request made to them that you allow the duty-free import of cotton in India. That will have a balancing effect automatically, because if CCI buys all the cotton or majority of the cotton, there are two ways of looking at it: one, the CCI sells it at a normal basis so that there's no disadvantage to the Indian spinner, that could be one; two, to have a right price discovery, you allow the duty-free cotton to happen in India, so that automatically will happen in the times to come.

The industry issue is only and only we are not talking of MSP, we are not talking of increasing or we are not talking of not supporting the farmers. The industry viewpoint is simple that the cotton should be allowed in India duty-free so that the price discovery happens automatically.

Textile minister is totally aligned to that. They have already written couple of times to the agriculture and to the finance.

No decision is happened, but I'm sure at least our ministry is aligned to our thoughts.

Okay. My final question is on all the FTAs that have been signed with the US, with UK, with EU.

Let's say that the demand for all the textile industry from India it improves, but because of this cost disadvantage, will we be able to compete in case cotton again duty-free import is not allowed of cotton and then again y'all fall back into that same problem of high cotton prices?

There are two things we are talking to the government. One, as the demand would increase on account of the FTA, definitely we will be requiring more raw material, be it synthetic, be it cotton.

Whatever cotton we have, it may not be sufficient for us to supply it in case the garment exports or the home textile exports increase a big way from India. Both the logic we have been giving: one is on the cost prices that we should be competitive; second on the availability of raw material, because any industry if they put in the capex, the raw material should be available at the international competitive prices.

These are the both the issues can take care of if they allow the duty-free cotton to India. Let's see what happens.

Got it. All right.

One good thing in between what has happened is that the CCI pricing policy this year has been good and they've been selling the cotton based upon whatever has been the long-term alignment of Indian cotton with the New York future. To that extent, there was no disadvantage for most period last 6 months to 9 months.

That's why the industry is in a better condition. I should give that credit to CCI for that.

Okay. Understood.

Thank you. Those were my questions.

Hi, Neeraj ji. Good afternoon and thanks for giving us very detailed update.

I have one question mainly with respect to the announcement which government has made yesterday, Mission for Cotton Productivity. What I could see in that is that it is not talking about the introduction of the new variety of seeds, but it is largely talking about all the farm improvement practices and stuff like that, high-density planting and all.

Do you think that if India has to move from 450 kg per acre to let's say even to US level of 700 to 800 levels, will this be suffice or what is your thoughts around this?

Dekhiye, aap mere personal views thode se different ho sakte hain than whatever we are thinking. You look at the overall lesser crop in India, one is the seed quality, second is the practices, and third is the land holding, because our land holdings are also very small in India and any kind of automization may not be possible there also.

You look at the total crop in India, it's 30 million bales and almost 6 million farmers are producing that. That means average per farmer we have only 5 bales.

Whereas you go to the US or to Brazil or to Australia, the number is in thousands of bales, not less than that, or maybe in lakhs of bales. Eventually, we are looking at seed, we are looking at productivity, we are looking at processes, but the holding is also playing an important role in terms of the overall optimization.

Going to a US level of 700 or the Brazilian level of 2,000, I don't know, but definitely we can improve upon from where we are. Again, today Brazil is at 2,000 and they're still optimizing, they're still looking at more experimentation, they're still looking at what more can be done.

Our cost will definitely be expensive going by our land holdings also. Having said that, we have to start somewhere.

It's a good initiative which the government has taken, and I'm sure if we can take this 450 to even 550, we can increase our productivity by 20%, which will give a relief to the overall cost, as the MSP is dependent upon the cost to the farmer plus 50% remuneration. If their cost come down, definitely it will have an impact in their better realization and a better cost for the industry as well.

Understood, sir. Sir, the second question is given that now the expectation for next year overall for the industry is looking quite positive and we have already done modernization capex largely in the last two, three years, which will bode well for us, but beyond this, because you need to plan from now to utilize that incremental cash generation.

From a capex perspective, are you planning anything?

Two things. I think you're right.

Not only us, most of the industry is waiting because the situation is a little better after a long time, everyone is trying to look at whether it is sustainable or not. In between, one, we have taken a one open-end project which was hold on, we are likely to restart that.

Also, we have taken a new piece of land in PM MITRA Park in Madhya Pradesh. That land is likely to be given to us as per the government progress as of now by December or January this year.

Once the land is available to us, we'll start working. We're already on the drawing boards.

We are putting up some ideas. Maybe next two, three months, we'll finalize those ideas also, and by that time, we'll look at a sustainability of the system also.

Not only we, there are many players we are looking at because this FTA demand will start happening somewhere 15 months down the line. We have to prepare.

Within next 2 to 4 months, we'll have to start looking at what all is required in country, and all the good players have to prepare themselves so that those capacities could be put in. We are also gearing up ourselves, and I'm sure next two, three months we'll finalize our plans as well.

On the spinning side. On the fabric side, we in any case have a surplus capacity, we'd like to utilize it next six months.

By the time we utilize it, there are some ideas in our mind what to do next into the next financial year also.

Okay. In the existing set of verticals only, like yarn, fabric, you have ventured into a little bit of synthetic

As of now, we are restricting ourselves to this only, as of now.

Sir. Thank you.

All the best.

Hi. Very good afternoon and thanks again for the detailed explanation.

Sir, I have two questions. One related to what you explained that India should have had a spinning capacity of 58, 59 million versus operational today at 41, 42.

Given the environment where spreads are expanding, the cotton prices have actually aligned of India and international, which actually solves a big problem, a potential FTA with Europe and UK, which is an incremental positive to play out like you're suggesting over 12 to 18 months, and an incremental development in terms of if the import prices or the import duties are actually dealt with correctly by the government, this is a most promising commentary, if I may say so, that I've heard in a long time along with a very wide gap of required capacity versus available capacity at play. Would this really mean that a very large expansion of capacities can come through over the next 3, 4 years if the cycle sustains, the import duties are taken out, and the FTAs actually start to bring in benefits?

I will bring in my second question once I hear on this.

Okay. I'd like to make one correction.

Your all the data and facts you have given is correct except one. When I said the capacity should have been 60 million, it should have been going by the tradition or the conventional increase which happens every year.

Whether we require 60 or not, it's a separate question. We were at 53.

Normally, we were adding 2 and a half million spindles every year, we should have reached 59, 60 against we are at 41. Two, the Indian spinning capacity, lots of spinning capacity was very, very unviable, inefficient, which is going out of the system.

If we look at the total demand in India today, 41, 42 million spindles are sufficient as of now for the country, and that's why our margins have become better. Now going forward, as the expansion will happen by way of more FTAs and the demand coming in, we definitely require more spinning capacity.

Whether it is 60 million or 45 or 50, that will depend upon how much new business we can generate with these FTAs. Definitely there is a scope for the country if with all these FTAs coming in, the demand on the garmenting and home textile increases, definitely on the spinning side, we will be requiring a much bigger capacity as a country.

The good part is all the smaller players have gone out of the system, now the new expansion hopefully will come more in the organized hand, which means there will be a better competition compared to the very, very unorganized competition.

Right. Sustained profitability for the industry and helps capex building as well.

Fair.

Correct. Sir,

the second question is more related to this situation where geopolitics is what you referred to where some countries who are also manufacturers and exporters have been having issues. Those issues, in my understanding, have worsened in the current West Asia war, if I may say so.

Is that correct as an understanding and is there a further weakening of other Asian competitors which will give a sustained advantage to India? Is that a fair assumption or an understanding or that is something where we can see a comeback from them very quickly?

If we look at the spinning sector, the five countries are taking 90% share in the spinning: China, India, Pakistan, Bangladesh for captive, Vietnam. These are the five countries which are taking care of almost 80%, 85% of the world spinning capacity.

Let's look at it one by one. China, they started reducing their spinning capacity almost 15 years back.

From peak of 112 million spindles, they are today down to 84 million spindles only. Though they have announced some capex in the Xinjiang area where there are lots of cotton, at the same time, the government of China this year has officially announced that we want to reduce the cotton in the Xinjiang area and we want to move more on the food articles as the country will be requiring more food grains for their consumption.

Which means the cotton will come there also. If we look at last 10, 15 years as I mentioned, their peak capacity from 112 million spindles have come down to 84, the inference could be that they will not be expanding in a big way.

Second country is the Pakistan. Now Pakistan again, if you look at their own issues and concerns, be it political, be it power availability, or any other factor, I think there is a limitation, they will also not be expanding their business in a big way to cater to the international demand.

Third is the Vietnam. Now Vietnam already it's a very small country, small population, and they have done fantastic job in the textiles starting from spinning to the garmenting.

As their per capita income has started moving up, there is more interest for the people to go in for the electronics and the service industry there also. With a small population, we don't feel that Vietnam will be increasing further on the spinning side, rather whatever is there they can at best utilize that, not likely that they will be expanding the spinning business to that extent.

Fourth is the Bangladesh. Bangladesh is very strong on the garmenting.

After China, they are number two players, almost $55, $54, $55 billion of work of exports they are doing on the garmenting side. Their spinning capacity today is about 14 to 15 million spindles and the utilization is not more than 55%, 60% even as of now.

Since they are very strong on the garmenting, some groups have gone back-to-back where they have put in a spinning capacity, but spinning is a very, very large capex required and they don't have cotton, they'll have to import everything. Eventually, it looks like the major spinning expansion may not happen in Bangladesh also.

On the garmenting side they may continue to grow, as a result of that they'll be requiring good quality yarn as well as the fabric they will require. To that extent they'll have to depend upon someone else.

The last out of these five is the India, which is today the best place because we are number two spinning capacity in the world. Even with the 41, 42 million spindles, we are the second largest in the world today in terms of technology, in terms of cotton availability, and in terms of the overall clusters and the geopolitical, I think we are definitely better placed.

I can only hope that India should be in a position to take full advantage of this situation. The only caveat I have in mind is that the raw material availability at a international competitive prices, which we have been talking to the government, and we are hopeful that the government looking at the overall potential will definitely understand and look at something like this.

Thank you, sir. That's very, very helpful once again.

Yes, sir. Good evening, sir, and thanks for the opportunity.

Sir, you have outlined lots of reasons for the tailwinds for the industry. My question from the next season perspective, do you think that the next season cotton also get impacted because of the weather conditions as well?

Yeah. There are two factors: one is the physical cotton, second is the future cotton.

Whatever is the weather conditions announced today, it's already captured in the future prices. Going by the situation, if things goes worsen, it can increase.

If things become better or the more rain happen, it can soften also. Cotton is one product where based upon the future events which are likely to happen, it's already capturing into the market very, very well.

From cotton prices perspective, you think that is already captured in the cotton prices from international perspective, right?

As of now, yes, but so one is the more news coming in, based upon that whatever condition can happen; second is the possibility for the hedge fund or the speculative fund, which is beyond control of anyone of us.

Sir, second question is that while you are saying that the spreads have increased almost by 40%, 50% from their lows, what has been the spreads at the peak in the past and do you think that the spreads can rise further from the current levels as you move ahead to the next season?

Most of the times, if we look at last 20 years except the years which could be very good or very bad, the $1 spread is always considered to be good for the spinning industry.

Okay. With rupee depreciation, that will add extra to the earnings of the spinners for the industry?

It's true.

It should normally because our cotton is about 50%, 55% of the total finished product. Whatever with the rupee changes happening, the cotton will align to in US cents very cotton gets aligned to US cents very fast, because anyone who is buying here will always look at New York future and the landed cost in India based upon the US cents.

Whatever is the value addition, that advantage comes in with the with the weaker rupee.

Sir, my next question is, up to what time do you expect this spreads to sustain? Meaning, do you think this to sustain from one, two quarter perspective or maybe four, five quarter perspective?

How should we look at that?

Today things are good. It's really really difficult for me to say whether New York future will remain at these prices or what will happen to the China or the wars.

It's very difficult, but I can say as of now things are looking nice and there doesn't seems to be any big concern. Rest, it's very difficult for me to predict whether it can be for five quarters or one quarter or two quarters, but as of now and I can tell you most of the spinners from India in export market are sold for 3 months as of now.

No, my reason of my question was because some of this reasons which you highlighted, like on the spinning capacity wise, these are structural reasons and though they are not seasonal. From that perspective

From that perspective, it's a better place. Then the cotton prices or the demand structure or anything happening on the war side, there are so many factors today that anything can play anything.

Yes, in Indian context, with the closure down of part of the capacity, it can be a better place. Also we have a better situation going forward because of the FTAs, and next 12, 15 months definitely things are likely to be better only for Indian garmenters and the home textile.

To that extent we have a optimism to that extent as well.

Based upon our judgment and our thought process, we have tried to give whatever best knowledge we have. Rest the events occurring in the across borders are so fast, so many that it's impossible for anyone to understand and know the impact of that on the overall industries.

Definitely, as I mentioned, after two, three years, there seems to be some respite to the industry. Again for the reason as I mentioned that our raw material became more competitive and with the better demand and the lesser capacity, we are definitely better balanced as of now.

I hope the next year should be better year for most of the textile companies, including Vardhman. In the meantime, most of the industry has a optimism based upon all the FTAs which the government has done, which could be a major growth engine for our garmenters and the home textile.

We being the textile producer or textile material supplier to them, if they do well, definitely our company can also do well. Thank you very much for your confidence and your support always.

Let's hope things will be better in the next times to come.