Vardhman Textiles (NSE:VTL) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Vardhman Textiles Q1 FY 'twenty seven Earnings Conference Call hosted by three sixty one Capital Market. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to miss. Thank you, and over to you, ma'am. Thank you, Sonia. Good evening, everyone. On behalf of three sixty one Capital, I welcome all participants and the management of Vardhman Textiles to the one q f y twenty seven con call. From the management, we have mister, managing director, mister, director, raw materials, mister Rajiv Kapur, CFO, and mister Vardhmanhotra, head of finance.

1:01 Without further ado, I would like to hand over the call to Nirat, sir, for his opening remarks, post which we can open the floor for the q and a session. Thank you, and over to you, sir. Good afternoon, everyone. So 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 has been an advantage in terms of the raw material available earlier and the price increase, which happened on the raw material as the yarn prices got adjusted to the new raw materials. So there's a kind of a partial trading gain as well in the raw materials.

1:51 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 U. S. 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 U. S. Orders did not come to India. But we are now last one month or so, things have started improving, and we are expecting far better business in next two, three months from The U. S. Customers as well. So hopefully, the utilization in the fabric business will start improving, though in terms of absolute numbers on the fabric side, we have 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 will start improving.

2:49 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 fab on the spinning side, the utilization has been full. The margins have been good and the overall demand is also good, which was originally started deriving from China. Our expectation on the various trends in terms of raw materials, young prices, view is, one, raw material is stabilized in international market in the range of about seventy eight to eighty one US cents per pound. Most of the time, let's say, the average 80¢ or so. And this is what it was almost comparable when we did the last call also except for a few days where the the July in your future was much higher higher whereas the December and the next month were inverse, which was a clear signal that the July New York future may not be sustainable.

3:53 And as as of now, there's no inverse situation in any of the months. So there could be a possibility that these levels could be sustained. Two, if you look at the raw material availability across globe, India, there has been very... The the... It is... The other has been very different. One, it's a leaner case, so there is... Could be a reduction in the overall range. Also, the variation in the areas has been huge. So one, the range started a little later. Two, of course, it has picked up in overall average, 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 rains in the different areas.

5:02 Generally, whenever we see these kind of variations, there is generally, there are always some quality concerns and also the crop size also comes down because of the quality. But 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%. So 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 $3,500,000 bills. And going by the situation of water, maybe the next year could be even much lesser, maybe about 2,500,000 bales or so.

5:51 The next major cotton growing area is USA. So 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 designed reduction in their cotton growing areas because they want to concentrate more on on the eatables. So 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. So these are based upon this, it's our view that the cotton prices may not come down in big way rather may increase only as the convention across the border increasing.

6:44 So that's on our cotton growth and the production possibilities. Two, this has been a period where lots of uncertainty because of The U. S.-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. And as the crude increased, all the intermediary products increased and that gave an increase to the polyester prices, acrylic prices especially. And as a result of that, those prices are much higher than what it used to be pre war. And that's also given some kind of a raw material increase across fibers as a sympathy to those fibers as well. So to that extent also, I think there's likely that if the prices of acrylic polyester increases this way, there could be some possibility of increasing cotton demand in the various parts of the world.

7:42 So 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. So 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. So there could be a I mean, 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 23% 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 cotton.

8:32 Coming to the Indian cotton, since the New York future increased from almost US0.67 dollars to about US0.80 dollars as of now. Of course, in this period, most part of the quarter was almost in the range of about US0.75 dollars $0.76.00 $78 per pound. The Indian cotton, which was ruling at about INR 55,000 of candy has also increased to today. The CCA price is closed about INR 64,000. So there's been a correspondent increase, whatever is increases happen 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 U. S. Cents today will be close to about U. $0.07, U. S. Cents.

9:19 And if you look at the quarter, it's about US0.91 dollars US0.92 dollars So practically today, there's an alignment in terms of the international prices and the Indian prices, which was a big disadvantage in the last two years. So this last three months, things 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. So they are issuing a quota of about 80,000 tons 8,000 tons per day. So they are sold close to about, I think, about 10 sessions have happened till now. And they are in a position to sell 100% of cotton, whatever they give as a quota.

10:07 And the average price of that cotton, which is sold in China as of now is close to about US$115,116. Even if we reduce the VAT out of that, it'll still be close to more than $1 So which means the prices in China will 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 on the today's yarn prices will not be more than US$6.05, 0.70 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. And in our day to day experience starting November, December last year, we are finding the Chinese demand to continues to be good.

11:02 And our feeling is going by this cotton prices, it may continue. The total export of yarn from India used to be about 95, 97,000,000 kg or less than a 100,000,000 kg, which has increased to about 110,000,000 kg as of now. So an increase, net net increase about 15,000,000 kg, which is primarily come from China only. And I think this can continue if Chinese cotton prices are in this range. And in case India continues to support at one hundred and five one hundred and ten 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.

11:51 And the industry estimate was almost 12,000,000 to 13,000,000 vendors got closed permanently. And we still feel that figure is same. There's hardly anything which has been revised in this period. Going by the overall situation, not many projects have been announced even now on the spinning side. So last year, I think the additional capacity or the new capacity had come only about zero five million spindles. And this year also, if you 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 has happened on the machinery orders by all the machinery manufacturers, but that is more on account of the modernization some of the mills have announced.

12:37 So 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 30 pound basis is close to about $3.20 to $3.30 and the Indian prices are also aligned as well basis in India almost at same prices plus minus INR $2.03, which is a normal gap we always find. On the fabric side, we had two issues. One, I mentioned the as because of The U. S. Tariff, skipped a particular season on sampling. As a result, those orders did not come to India. Two, the fabric side also, there's always a lag when we can pass on the yarn prices to the customers. So whenever the prices of yarn goes down, is an advantage to the fabric region or 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. So our feeling is, I mean, today, even today we feel almost whatever price increases happen on the yarn side, about 60%, 70% could be passed on to the consumers.

13:53 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. So as I mentioned, we are comparable to the first quarter numbers last year, but about 3%, 4% lower than the fourth quarter. But going by the current quarter situation, it looks like we are definitely better than the first quarter. So that's in terms of CapEx, most of the CapEx is online. So we are we have started our one boiler, biomass boiler in Vadi last week only. And the another one in Madhya Pradesh is expected to start maybe in a month or so. And most of the modernizations are completed.

14:38 And we also started working on the open end project with the capacity of about 55, 60 tonnes per day. So the construction just started last week and I'm hoping maybe next ten 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 we are in a process of completing our process. We have what we intend to do, and then 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. So in terms of the committed expenditure, most of it is online.

15:34 Hopefully, with all these boilers coming up and the biomass, there would be a cost reduction advantages. We also invested heavily into the solar power and the wind power. Those advantages also will partially started coming in. I think month after month and next six months, more and more advantages would start coming in. So 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 very much. We will now begin the question and answer session.

16:20 Anyone who wishes to ask a question, you press star and one on your touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prerna from Ileira Capital. Please go ahead.

17:09 Thank you for the opportunity, sir, and congratulations on good set of numbers. Recovery seen after a long time. Just wanted to understand what will be the order book situation currently in this domain... In the spinning segment? Normally, in the export market, we are always sold for about three months. By design... I mean, domestic will never be more than forty five days. So if I look at last five years history, this would be the average nineteen ninety five days in exports, forty five to fifty days in domestic, and we are sold for those many number of days even today also. Okay. So which means the bulk of the improvement in prices that happened in the month of April, May should be visible in q two. Is it the right way to look at it?

17:58 Yeah. That's true. Okay. Understood. And the 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 segments are you looking at there? And kind of profile... Margin profile in that segment that you're looking at? So our first idea is to utilize that capacity. So the 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 get confidence to the customer because these would mostly be the replacement of imported fabrics.

18:47 The project started somewhere in February, March. And as of now, we have a capacity of 15 lakh meters per month. So our utilization is about 15%, 20% only as of now. But I'm 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. And I'm hoping that our idea is within the next six months, want to we want to reach at least 70, 80% capacity utilization, which is 20% as of now. This has two aspects of business. One is the basic product. Second is the value added or where we can say a part of the technical textiles.

19:32 As of now starting is only with the basic products and as we will we are in a position to utilize that, I'm sure there would be the value addition also started happening. In terms of the the first parameter in terms of quality, in terms of acceptability are very, very good, and I'm happy to share that. And definitely, once you make a success of this, because this is one business where I believe 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, margins here are... Margins and ROC as per your current experience, do you think the margins are much better or ROC is much better than your existing fabric business, or is it too bad?

20:26 Prevna, 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. And as the fashion cycle are increasing, everyone wants to deliver on an immediate basis. I'm sure anything we produce in India for the Indian market, we would be in a position to get some premium also compared to the outside markets. So my belief going by the per meter cost of this product, the margin as a percentage of sales as well as the take 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. We are... 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. It is a good opportunity.

21:19 Yes. And last question is largely on... You've shared on cotton outlook and and stuff. But the... So 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 evaluate it 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 season once it comes in. The government has already announced 67% increase in the MSP. If I go by the MSP and the requirement by the CCA, practically, it looks like the cotton will not be lesser than $50.65, 66,000 rupees even in the next season also.

22:09 In case one can get an opportunity to to buy embodied cotton within this cost today when the duty is free, we're definitely looking at it and wherever there's a possibility we are taking taking those decisions, not waiting for only the Indian cotton. Because in any case, we have to buy India Indian cotton, since this is a period where the window is available only for next two, three months. So whatever could be done, we are surely looking at even at these prices also. Understood, sir. Thank you, and I'll come back for questions or any further questions with you. Thank you. Thank you. The next question is from the line of Avnish Chandra from SMIFS. Please go ahead. Congratulations, management team on a stellar set of numbers. So my first question on the margin side.

22:56 So we have done a very strong margin this quarter. And by the looks of it, quarter two, since we must have more quarter inventory at lower cost could be better. But what if after quarter two, will this trend of strong margin will continue or it will moderate after that? No. Surely, it will moderate. So there's no doubt about the same. But 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. So we are the spending margins have come down to as low as 9%, 10% where the margin available or the conversion available was only about US0.65 dollars $0.70 I think going by the demand continues to be the Chinese demand or the overall demand supply continues to be better.

23:51 It can be in the range of about US0.85 dollars $0.90 But these kind of numbers, one, whoever 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. So maybe 100 or 150 basis point moderation or more. Can't say on the numbers, but definitely, I'm saying depending on what inventory and what how the yarn prices goes, lots of uncertainty factors we have to incorporate in. But I can only say these numbers have some trading margins, which may not be available once we move to the market prices of cotton under the prices further increases.

24:41 Understood. And, sir, we... Our inventory level today on the cotton side... Sorry? Our inventory level Sorry. That's that's something we... Sorry. That's something we don't share. Okay. But moving on the technical textile side. So this technical textile, whatever capacity we have, it is integrated with our gray fabric capacity or it is altogether a different line from It's a different line. So... No. No. So we... Our existing lines are more on where we start from the from the yarn, spinning yarn, and from there, we produce the fabric. These are all filament based. So it's all together different product. Okay. So start to end it is it is not connected with anywhere with the cotton lines. No.

25:30 No. No. No. It's not linked, but yes, customer could be common where they want a 100% synthetic materials. This is all 100% synthetic materials. So the customers' only commonality could be customers in my view. Answer my last question on the new capacity side. Anyway, we are undergoing a huge CapEx and a few things are pending. But now since the 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. So are we thinking on that line? Because now we have better margin. Yeah. So on the top line, we are right. The top line basically will happen only with the whatever unutilized capacity we have on the fabric, like both the cotton fabric as well as the synthetic fabric.

26:25 That's one which increase can happen. Two, the new CapEx which is announced, which will be increasing our production by about fifty-fifty five tonnes of open end, that will give us some addition. But as I mentioned earlier, we are the new piece of land which we have taken under PM Mitra part. 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. So there is an intention to put up a competitors in that project, which will give a top line growth also to the company for next three, four, five years at least. Okay, sir. Thank you very much for answering my question. I will come back in queue. Thank you. Thank you. The next question is from the line of Roshan from Antique Stock Broking.

27:13 Please go ahead. Yeah. Thanks a lot for the opportunity, and congratulations team for great set of numbers. So just wanted to understand, you know, how are you seeing the demand trends across the domestic and export markets today? So maybe, you know, you can just highlight which geographies are being the strongest because... Yeah, that's my first question. In terms of garmenting or in terms of export, there seems to be a decent demand. So this 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 have happened, UK and EU. And I'm sure there's a lot of business with the government or the home textile could do in these countries. So since we supply the other textile material supplier to all these different line producers of government as well as the home textile, I believe next two years is a genuine opportunity available for India to the Indian manufacturers to export to these countries.

28:22 So already demand as such is good. But with these two products, with these two two markets available to us, I'm sure it'll be a it'll be a definitely a much bigger gain for the Indian market. And to that extent, I think all manufacturers starting from spinning up to the own textile or up to the government team will get an advantage should get an advantage. In addition to the strong domestic market, which is also improving with the per capita income increasing every year. Alright. Just to continue to the reply that you have written. So are you seeing any, you know, changes in the customer ordering patterns, you know, being it normalized or brands...

29:12 Or brands are still, you know, following the shorter ordering cycles and cautious inventory management. How are you seeing them? Couple of things which are very clearly happening last two, three, four years, and it is actually increasing. One, the cycle the fashion cycle is reducing. Everyone wants to have a minimum inventory so that one, their capital working capital comes down. Also, the risk of obsolescence comes down. So any customer who is dealing with you wants a delivery in... Delivery of yarn, let's say, in twenty days, delivery of fabric in about forty forty, forty five days, delivery of garment in sixty days, seventy days kind of a situation. So that cycle will continue to screw and whose service is in position to deliver will be a winner. That's one. Two, the market is moving on a much better, much bigger way in the new products. So the innovation or the new products development by... In terms of colors, in terms of variation in the products is definitely something where the customer is appreciating.

30:15 Not that 100% product will come from them, but even five, seven, 10% comes from them and 80, 90% goes on existing. So 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, especially in the export market. So the recycled, the yarn or the fabric based out of the recycling, definitely some of the customers, especially the Europeans are more interested in buying that. Fourth is the green companies. So be it power, be it nobody wants the coal to be used or the fossil fuel has to... Fossil fuel fuels have to come down. So that's something where the customer may not be giving you the any direct advantage, but if you have, it's nice to have. So the customer definitely appreciates that and is more willing to work with you in case you are in a position to do that. And fifth is the compliances and the ESG.

31:11 So all your social compliances and all your your... As a fair practices with your all stakeholder is very important. Now look at the situation where customer wants all these in addition, and they'll not be in a position to have, let's say, 10, 20, 30 vendors. So they want everything to be done by the vendor. So 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 there have some advantage where all these brands which are coming in and wants all these kind of facilities, their first preference goes to the organized sector.

31:57 And the size, at times, we feel size is a disadvantage, but I think this is a time where the size is becoming an advantage. Our customer wants all kinds of products. They want all the taking to be managed by them. They want everything in a minimum number of days. So I think those are the changes which we started looking at now three, four years and is increasing every year. And there is an improvement or an increase of pressure every year on that. Okay. That's very helpful. And final question from my side. So you have undertaken of doubling of capacity of the government 2,200,000 to 2,500,000. So could you elaborate, you know, how things are proceeding there in terms of customer tire? Maybe some quantitative details that can I expect that asset on your margin, and that would be helpful? Yeah. Yeah. So our existing capacity is only about 7,000 shares per day, which is too smaller capacity. Business is doing well and definitely whatever because we don't sell the product in our own brands. So we we are just giving it to the customer in terms of their own brands. And 7,000 is a capacity which is really miniscule from any customer's perspective.

33:10 We get two advantages with our fabric. We are with our government. One, we are in a position to have the development which comes from the customer side also, So which will help which helps us in our both fabric as well as the spinning state. Two, there are some issues which can be definitely created in this business. So 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. So I think it's the first step of why not to increase it to double at least make it a viable unit. Today, our costs are much higher, so the margins are much less. Our feeling is once we are doubling this capacity, there's hardly any overhead costs which will be increased. And I'm sure then we could look at the margins in this business on a stand alone basis so that a future reason could be taken whether we really want to go a big way into this business or not.

34:06 Okay. Thanks a lot for the detailed answer. I'll join the. Thank you. You. The next question is from the line of Shirish Vardhisi from Motilal Uswal. Please go ahead. Hi, Niraji. Good evening. Thank you for the opportunity and congratulations. Sir, with the previous participant question, with 4,500,000 capacity, what will be the peak revenue we will get at 100%? Close to about INR 300 crores, INR crores, $3.50 crores. And this will be fully operational end of March twenty seven, or will be quarter one twenty eight?

34:51 Quarter one... No. March... June 27. One year from... I mean, eight to seven to eight months generally, but I still... There's a lot of workers are required to be changed. So by the time we we take full advantage of actual utilization, it could be one year from today. And current set of customers, you said, is primarily domestic or it is international also? No. No. It's a it's a mixture. So we do about 30% exports. 70% would be the domestic brands. Okay. That's helpful. In terms of our product segment, when I look at, Yaan is 69%. So I was more curious what kind of China export happens in this? So China...

35:38 Let's say from the Indian market, if India is doing about hundred and five hundred and eight million kg per month, China is buying typically about 30%. So RTT RTT, it will be about 20, 25% to China. Whatever we export. Yeah. Whatever export of YAM is there. So the YAM segment... So the YAM, we have three segments, export domestic and captive. All these three segments are practically one third, one third, one third of the yarn we produce. And there's a one third, 33% of cases, which means about seven to 8% of my total production goes to China. Okay. Got it. So 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 requirement from China.

36:27 Yeah. So is this is this cyclophane the kind of growth you have envisaged in quarter one will continue for at least next two, three quarters? So in terms of demand prices, it can, hopefully. But you only only difference in the margin, which is depending upon when your old quarter finishes and when the new quarter will start consuming. So that's a gap which can come in. Other way, in terms of the top line or the sales, I think, seems to be visible as of now for at least next three to four months now. Okay. And who are... When you say one third is China, who are the other two countries which has shown this kind of resilience? So China and Bangladesh are practically taking 60% of January from India.

37:15 Okay. Okay. And just last question on 3,600 crore CapEx what we are planning, what can come and which are the segments which we are deploying in FY '27 and which will go to FY '28? So most of this CapEx, I think only about $809,100 crore will go to the next year. Remaining will be completed as already completed or will get completed within this year. And these... Yeah. Out of this, majority has been modernization and the power where the... All the power projects will be completed in the next three months' time. Most of the modernization is completed. So 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.

38:03 So what will be total CapEx for Dhar from land to building and machinery? For the financial year? Yeah. FY '27. You're talking for Dhar? Yeah. The entire project Dhar, PM Metra Park project, what you're talking about? So so whatever CapEx has been announced whatever CapEx has been announced, this does not take any expenditure on Dhar as of now. So Okay. That 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 they are expecting the power to be available not before June 27. So we are... We don't want to take it because we can further get in it.

38:49 So I think we'll start construction only once we are very clear, because our construction and the and the project implementation will take up about ten to twelve months time. So we'll start it only once we have a more visibility that the government is clear that there'll be no position to give us power on this side. Alright. Got it. Okay. And last question on the margin. I think we have just spoken much about it. But where do you think margin is going to be resilient? Mean, 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 Aligno effect, we are not sure what will happen. But 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 and a half? I'm not saying guidance, but I'm saying direction.

39:44 My view is, as I mentioned earlier also, we came down to 10, 11%, which was really a kind of a desperate situation. But my my belief, 13, 14% could be the right way of looking at it, which could be the conversion to the margins available for the year. Jan will give us a conversion about $8,085.90. Okay. Got it. Really helpful, sir. Thank you. Thank you. The next question is from the line of from Financials. Please go ahead. Yeah. Good afternoon, sir. Sir, what were the cotton yarn spread for us for q one? So cotton yarn spread in this period...

40:32 I'm not saying what means. Normally, 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. So this is, like, spot cotton and spot yarn. You compare, that was 90¢ per pound. Correct. Correct. Correct. Per kg. Sorry. Yeah. Per kg. Yeah. Okay. And you think broadly, it it should be in that 85 to 90¢ per kg range only? Yeah. Historically, it's been in the range of about 85¢ to about $1 except last two, three years where it came down to $6,065.70 for Indian market. Okay. Okay, sir. Thank you. That's all from me. Thank you.

41:19 Before we take the next question, we would like to remind participants that you may press star and one to ask a question. The next question is from the line of Anil Kumar Sharma, an individual investor. Please go ahead. Congrats congrats for the good start of numbers. So my question is regarding how do you see where do you see your company as a company for in the last next five years, number one. Number two, our return on capital implied or return on equity is on very low side. Anything, any guidance you don't get that I know what any can can... How it can be increased?

42:05 Return on capital and return on equity, and where you see our company in the next five years? So next five years, as I mentioned, 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 NAR as the government is also promising the major growth to happen in these kind of areas. So I I don't have exactly... Because there's lots of ideas in our mind, which I'm hoping we'll be implementing in next two to three years' time. But, definitely, it could be good in terms of the overall top line. The ROC basically has a two factor. One, the return on capital employed for the business side.

42:57 Second is we have lots of investments available to us which were kept as future expansion possibilities where that money is available with the company. So if I look at the return on business side, it's still reasonably okay. And 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. So to that extent, the trading stocks comes down and the return on capital employed, that's the only way it would improve. So... Okay. So 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 my personal belief, yes, it could be. Okay. Thanks. Thanks. And let's set a number.

43:49 Thank you. The next question is from the line of from Alera Capital. Please go ahead. I just wanted to understand, in between China was not buying from India enough, and recently they started buying. What could be the reason? Are focusing on cotton, yarn, cotton businesses to a larger extent? Alright. If you look at, you know, the source No. No. So they started looking at... I think they are still very strong on the commenting side. And whatever was the thought that people are looking at China plus one or they'll they'll look at China to be removed. That's not the case because the kind of capacities they were, I think they'll continue to dominate.

44:35 The my thoughts are one, as the government announced there that they want to reduce the cotton swearing area, which means they are too dependent upon the import cotton more and more in future tools. There are also the costs are increasing there, especially in the South China, which was the originally where there are lots of industrialization is there. Of course, the new area they are trying to develop is this in India. And lots of capacity, which already got shut down or maybe the cost over there have increased in a big way, so that I think they might have to look at how do they replace the capacity or they reduce the capacity issue. Now the cotton prices are there with the $1 plus and the rest of the world, the cotton prices are in the range of about $0.89 $0.90 10 to 12% increase for them is a huge cost. I think rather than looking at a basic yarn, because they're very strong on the commenting, they're very strong on the fabric finishing.

45:32 So only possibility as a part of their strategy that rather than looking at producing yarn, why not import yarn at least the first leg is over, convert it into finished fabric. And this also reduces the risk of zinc and cotton, which is again banned by many countries, especially The USA. Whenever they're buying the local yarn, there's always a challenge and a concern whether it is made out of the rings and cotton or not. But when the yarn is coming from India or Vietnam, I think that is over for them. I think this could be what I I feel. Generally, they will look at rather than looking at it taking a risk when the final government shipments happens. And then in the testing, you find out that something happened at the local level, try not to pull the yarn and then export the garments. So this is sustainable in your opinion going forward as well, like, this Chinese sourcing from India? Looks like. Okay.

46:27 And, sir, anywhere spindle edition is happening in the world, or is it that India is the only country which is adding spindles? So 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 it as well. So the net net, there's hardly an increase in China. So from a peak of about 116,000,117 million dollars spenders, they are down to about 84,000,085 million as of now. Look at Indonesia, they have reduced, they are not adding. Look at Vietnam, almost saturation is there, they are not adding. Look at Turkey in a very, very bad condition, and they slowly they have to reduce their capacities only. Look at Bangladesh, they are not adding anything. So the only one country where some small increase may happen is that Egypt or India.

47:17 As of now, of course, tomorrow people are talking of Africa to develop and those things. It's... If that happens. But as of now, I don't think any part of the existing clusters of spending is increasing other than the India or Egypt as of. So that is positive for margins in a 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 spending business? Should we my only concern has always been the cotton availability at the right prices. Now with the government allowing us for four months, we are still requesting government to give us more visibility on a sustainable basis. So if you look at last fifteen, twenty and these two years, three years also, the spending 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. So 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.

48:22 Understood, sir. Thank you, sir, and all the best. Thank you. The next question is from the line of Munish Gurke from HDFC Mutual Fund. Sir, just one question. So what kind of opportunity do you see in recycled cotton yarn? I mean, with the cotton prices being firm and I believe a lot of cotton will not be getting recycled. So I mean, technology wise, I mean, in the medium term, is it feasible? And I mean, at a larger scale, is it feasible in terms of ROC and in terms of pricing? And, sir, if you look at the model, there's nothing to do with the ROC or with the availability of patents. Basically, all these ideas started from where they wanted to reduce the consumption or a dumping of the material to save the art. This is the passion they had, and that's what 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's a dramatic improvement happened in the last two, three years.

49:32 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 possible to do even more than that also. I think it's rather than the return on capital employed, the idea was how do we reduce the land filling of car... Which is happening because of the government team. 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. But technology wise Technology wise, it's okay. Mechanical recycling is there. People are talking about now the chemical recycling also. There's lots of experimentation is going on. But as far as cotton is concerned, mechanical recycling is reasonably good, and the sufficient capacity is already available in the system.

50:26 Okay. Thank you. Participants who wish to ask a question, please press star and 1. Reminder for all participants, please press star and 1 to ask a question. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Thank you, and over to you. So thank you, all the investing community who's been with us for last so many years. Whatever are the results, we we try to give our opinion as honestly as we can. And, of course, there could be a different opinion or there could be things can go in a different way because the... It's all dynamic work.

51:19 But going by the situation, as of now, it looks like things have improved in India for most of the textile peers. And with all these and the opportunities available for future, we definitely see far better times in the times to come. Of course, as I mentioned, this trading may not be there, but definitely going by the overall opportunities, we feel it could be a right time for India for the next couple of years to show the demonstration that the growth could be there in this industry. Thank you very much. On behalf of three sixty one Capital Market, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.