Filatex India Limited ($526227)

Ladies and gentlemen, good day, and welcome to the Filatex India Limited Q4 FY '26 Conference Call hosted by Branding Edge. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Janhavi Kankriya from Branding Edge. Thank you, and over to you, ma'am.

Thank you. Good evening, everybody, and welcome to Filatex India Limited's earnings call to discuss the Q4 and FY '26 results. We have on call with us Mr. Madhu Sudhan Bhageria, Chairman and Managing Director; Mr. Ashok Chauhan, Chief Visionary Officer; Mr. Nitin Agarwal, Chief Financial Officer; and Mr. Vedansh Bhageria, Vice President, Corporate Strategy. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that the company faces. May I now request Mr. Madhu Sudhan Bhageria to take us through the company's business outlook and performance, subsequent to which we will open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Janhavi. Good evening, and a warm welcome to all of you attending our earnings call for the quarter ended March 2026 and FY '26. I trust you would have had the opportunity to go through the presentation, which has been uploaded on our website as well as the stock exchange. Before we get into the detailed numbers, I would like to briefly address how we are presenting performance this quarter. Typically, we review performance on a sequential basis comparing Q4 with Q3. However, the current quarter has been impacted by an unusually volatile external environment. The sharp and rapid movement in crude oil prices during the quarter created significant uncertainty across the value chain. Given the strong linkage of our business to crude and its derivatives, the volatility disrupted the normal operation rhythm of the industry. As a result, the Q4 versus Q2 comparison does not provide a like-for-like reflection of underlying business performance. It is influenced more by short-term external shocks rather than structural or operational factors. Therefore, for a more meaningful assessment, we are presenting year-on-year comparison, Q4 FY '26 versus Q4 FY '25 and a full year performance FY '26 versus FY '25. I believe this approach is better to capture the true trajectory of the business, excluding transient volatility. We will, of course, address any specific questions on sequential movements during the Q&A. I'll quickly run through the key performance numbers. On a year-on-year basis, profitability showed an improvement. The revenue in Q4 FY '26 stood at INR 985.5 crores compared to INR 1,080 crores in Q4 FY '25. Sales volume of Q4 FY '26 were 89,841 metric tonnes marginally lower than 96,561 metric tonnes in the corresponding quarter last year. Profitability metrics improved materially. EBITDA increased by 13.86% to INR 86.26 (sic) [ 86.24 ] crores from INR 75.73 (sic) [ 75.72 ] crores in Q4 FY '25. PAT reduced by 2.75% (sic) [ 2.73% ] to INR 40.25 crores compared to INR 41.39 (sic) [ 41.38 ] crores last year. For the full year, FY '26, the company reported a marginal decline in top line and volumes while delivering strong growth in profitability. Revenue in FY '26 stood at INR 4,160 (sic) [ 4,161 ] crores as compared to INR 4,252 crores in FY '25, reflecting a slight decline. Production volume stood at 3,89,027 metric tonnes, just about 0.5% lower than 3,91,300 (sic) [ 3,91,303 ] metric tonnes in FY '25. Sales volume was reported -- recorded at 3,88,800 (sic) [ 3,88,113 ] metric tonnes compared to 3,90,200 (sic) [ 3,90,210 ] metric tonnes in the previous year. Despite the modest decline in revenue and volumes, EBITDA increased significantly by 34.5% to INR 346.50 crores, up from INR 257.70 crores in FY '25, indicating improved margins and operational efficiency. PAT rose by 36.7% to INR 183.9 crores compared to INR 134.6 crores in the previous year. The Indian textile industry entered FY '26 on a strong growth trajectory. The demand of polyester yarn was robust, and we had a good performance till Q3. I had mentioned that the EBITDA in the first 3 quarters exceeded the EBITDA of the previous year. However, escalating geopolitical conflict of Iran, Israel and U.S. caused uncertainties and tensions in the Middle East, disrupting this momentum. In all these years, we have not witnessed such disruptions spread across the UAE, Kuwait, Saudi Arabia, Oman, et cetera. Strait of Hormuz, one of the busiest shipping traffic lanes was under siege. A sharp surge of 40% to 45% in petrochemical input cost driven by crude-linked volatility, both in terms of price as well as availability plays significant pressure on the polyester value chain. At the same time, weak demand and cautious market sentiment limited the ability of manufacturers to pass on these cost increases, resulting in margin compression across Yarn and Fabric segments. Temporary policy interventions, including short-term custom duty relief have had limited on-ground impact due to long import cycles, highlighting the need for more stable and predictable policy support. In addition, supply chain disruptions, particularly uncertainties in availability of input materials and shipping routes, coupled with rising logistics costs have made forward planning increasingly difficult. India's dependence on imports, especially for MEG, continues to remain a structural concern. Workforce availability has also emerged as a challenge with migrant labor shortages affecting operational continuity in several regions. As a result, the industry is currently witnessing a phase of production rationalization with companies prioritizing operational stability and cost efficiency over aggressive volume growth. Despite these unforeseen near-term pressures, the underlying fundamentals of the industry remain intact. The current slowdown appears to be cyclical and sentiment driven rather than structural. As textile continues to be a nondiscretionary consumption category, as geopolitical conditions stabilize and input costs normalize, therefore, demand is expected to return, positioning the industry for a gradual recovery. In the European Union, the competitive picture is set to change quite sharply once the India EU agreement comes into force. The EU represents a large and attractive market over $370 billion, offering substantial headroom for Indian exporters. India will effectively move to zero-custom duty from 10% to 12% presently on most textile and apparel exports. In simple term, EU is moving towards a structure where India and Vietnam are at zero-duty, while Bangladesh faces a possible step-up in tariffs after 2029, and China remains at a clear disadvantage. In the United States, the situation is very different because there are no free-trade agreements with India, Bangladesh or Vietnam for textiles. U.S. market size is also large at around $300 billion. All 3 countries, India, Vietnam and Bangladesh export broadly under the same standard tariff structure, typically ranging from about 8% to 20% depending on the product. China is the clear outlier as it faces additional Section 301 tariffs on top of the normal duties, taking its effective tariff burden to roughly 15% to 45%. This creates a substantial pricing disadvantage for China and has been a key driver behind the shift of sourcing to other countries. India's upcoming PTA capacity addition is now becoming a tangible led by GAIL and Indian Oil Corporation. GAIL's Mangalore plant is expected to commence commercial production around July 2026, making it more immediate and creditable source of new supply. Indian Oil's Paradip PTA project is making good progress and commissioning is targeted around December '26. Together, both projects could add about 2.4 million tonnes per annum of PTA capacity, significantly reducing India's import dependence. Reliance is also setting up a large capacity of 3.2 million tonnes, which is likely to go on [ stream ] by end of calendar year 2027. So next 24 months would make a structural shift in PTA availability in India. In spite of all conflicts and upheavals of Iran, Middle East, U.S. causing, which are disrupting the well-established supply chain and logistics, we remain resilient, and we are buoyant about the medium-term prospects of polyester industry. Structural capacity additions in PTA, easing of policy-related cost risk, improving global trade sentiments and disciplined execution of our CapEx program together provide a strong foundation for sustainable growth and margin resilience. Filatex is under a comprehensive CapEx program of INR 690 crores aimed at driving the next phase of growth and strengthening its value-added portfolio. This includes a PFY brownfield expansion, enhancing FDY/DTY capacities and optimize the product mix towards higher-margin segments alongside a textile to textile recycled greenfield project that establishes a circular polyester platform, converting end-of-life textiles into virgin-grade polymer and yarn. The company is also implementing automation at its Dahej plant to improve operational efficiency and reduce labor dependency while advancing its renewable energy transition to significantly increase the share of green power in its energy mix. In addition, a steam distribution initiative is being developed to monetize surplus steam from the captive power plant by supplying it to nearby industries, promoting energy efficiency. Collectively, these initiatives are expected to deliver an annual EBITDA impact in the range of INR 218 crores to INR 230 crores, while reinforcing Filatex competitiveness, sustainability and long-term growth trajectory. All our planned projects are now at an advanced stage of construction and installation and are progressing well in line with our execution road map. The initiatives across recycling, capacity expansion, automation and energy transition collectively reflect our continued focus on building a more efficient, sustainable and future-ready business. Barring any unforeseen circumstances, equipment deliveries are expected to remain on schedule, supporting timely commissioning. Overall, this integrated CapEx program is shaping up as a well-coordinated effort towards strengthening operations, improving cost efficiency and advancing our sustainability objectives. Thank you for your patient listening. Now I'll be glad to answer your questions. Thank you.

[Operator Instructions] The first question is from the line of Surya Narayan Nayak from Sunidhi Securities.

Am I audible properly, Sir?

Yes, you are audible.

Yes, you are audible.

Okay. So sir, as we progressing Q1, we understand that the volatility [ as a reason ] still higher. And presumably, it will be remaining so in the Q2 also. So considering that, what would be our production planning for first half because you said that the market is remaining cautious. So are we going to suboptimally use our capacities below maybe 1 lakh tonne per annum -- per quarter?

You see, today, it's very dynamic time. So we are very cautious, and we are taking decisions based on the current market situation, which are changing day-to-day. So yes, definitely, we will be not producing full 1 lakh tonnes in this quarter. It could be lower by anything from 20% to 25% minimum as of now. But it's hardly 1 month which is over in this quarter. So it's difficult to say how it will shape up in the next couple of months because things are very, very dynamic, you also know. Every day, things are changing.

Yes. So -- and secondly, sir, we saw that there is a foreign exchange fluctuations charge of around INR 13 crores that has came in Q4, so which has actually dented our bottom line, though we were -- we did better in EBITDA gross margin, everywhere. But just to understand from your -- structurally that after the PTA plants that will be coming up in the form of the GAIL and others, so -- but still we will be depending upon the MEG. And for a tonne basis, I would say 600-plus kg of PTA would be required plus around more than 400 kg of MEG will be required. So if that is the case of that proportion, then how the mitigation on the foreign exchange fluctuations will be catered to because we are not exporting too much to -- in our bucket. So how you are going to mitigate going forward? Because rupee is also sliding and that scenario is going to also not help us, yes.

You're right. And so we have taken a cautious view, and we would be hedging more from now on. See, there is a misconception, you require 860 grams of PTA and only 340 grams of MEG to make 1 kg of polyester. Also, the price of MEG is much lower than PTA. So if you go cost-wise, hardly the cost of MEG is less than 25% in the whole scene. Still, whatever it is, we will try to take care that we don't lose so much. It also -- even if we would have hedged totally, then also the hedging cost is around 3.5% to 4% per dollar. And we, at any given time, have exposure of around INR 500 crores to INR 550 crores. So in any case, even if you hedge, then also you lose around INR 17.5 crores to INR 20 crores every year in the hedging cost. Of course, this quarter, we have been caught on the wrong foot. So this war has continued longer than expected. But henceforth, we are taking precaution that it doesn't repeat.

Because your...

I'm sorry to interrupt Mr. Nayak, your voice is -- we are not able to hear you? You can please use a headset phone?

Am I audible now?

No, still -- next question is from the line of Harshit Khadka from RoboCapital. Yes.

Am I audible?

Yes, you are.

So sir, the INR 690 crores of CapEx that we are doing, how much of that would be equity and debt? I mean I just want to understand the split.

Equity -- debt, I can tell you, debt is around INR 335 crores, rest is equity.

Right. Sir, do you have any outlook for that for FY '27 and '28?

FY '27 end, we would have a debt of around INR 350 crores to INR 360 crores on the [ outside. ]

Right. And sir, my second question is regarding ROE. Like what kind of ROE profile are you targeting?

I think by end of this year, our ROE has come to 12.96% as compared to last year 10.62%. And hopefully, we should be able to add another 100 or 200 basis points in this year if things become all right in this quarter. If they continue for long, then it's difficult to say.

Next question is from the line of Niraj Mansingka from White Pine Investment.

I just wanted to understand on the -- you said -- you mentioned about a difficult scenario. Can you elaborate on that? Is there a volume issue? Is there availability of raw materials?

Raw material is not an issue. The problem is the prices have gone up very high, and we are not able to pass on the full price and demand is also low because the downstream doesn't want to buy at higher prices because they're not able to sell goods at higher prices. And everybody is afraid if the war stops, there will be a sudden drop in the raw material prices. So everybody is cautious. And fabric is such a thing that people can postpone their buying for some short time. So that is what is happening right now. Although now some recovery in demand we can see from starting of this month. So let us see how things go forward. Basically, people are not able to digest such high prices as of now. So they are a little cautious at this moment. And traditionally, also, see April and May are not very good months. There's a lot of migration of the labor. And this time, labor migration has increased drastically due to the shortage of LPG, the cylinders and all. So these -- all these migrated labor use the cylinders and the cost of the cylinders have gone very high. And there was some fear among them. I don't know what, but yes, there is a fear. So labor has been going back to their native places in huge volumes. And this West Bengal elections also and election in other places also supported this. So all-in-all, this has happened. But now I think labor has started coming back. So maybe by end of this month or middle of this month, things should normalize.

Got it. But in terms of you are not able to increase the prices, can you tell how the spread was in Q3? And what was the average for Q4? And what is it currently? Any typical spread that you track?

Q3, we were doing around INR 9 a kg profitability, which dropped this quarter in the month of March significantly because of March thing. March, the results are slightly better because also we got -- because the prices increased, there is some stock profit also involved in this. Otherwise, we would have lower profits.

But how much did it fall to in the month of March as much as? Average of March...

March -- if I take March independently, I think we would be EBITDA neutral. There would be hardly any EBITDA in March. If we take prices of the raw material on the current day and the sales on the current day.

Got it. Got it. And what about today, like how is it right now?

Today also, it is almost EBITDA neutral at the moment.

Got it. But with the crude price correcting, do you see this -- your margins coming back after...

The problem is not the crude price being high or low. The problem is the fear that it will fall once the war stops. We have witnessed such high crude prices previously also in the long time back and also higher than this. But if you feel the prices are going to go up, the demand is there. But if you have a fear that it can fall any day, which it did once there was a truce, It fell to almost $85. So that fear is there among the people. If that fear goes away, it doesn't affect too much to them buying INR 10 costly or cheaper in the final product.

Got it. But what is the comment? Can you comment on the inventory in the system of the -- of your customers? Like how is it right now? Any thoughts on that?

Right now, everybody has zero inventory on the raw materials. Finished inventories are a little higher because everybody has sales problem. But the raw material, everybody is keeping on a very, very low inventory.

Your customers, they are hardly having much of yarn...

Yes. They don't have any yarn. And similarly, we don't have too much of PTA, MEG, but we have some finished products, extra production stocks, although we have curtailed production so that we don't go beyond certain days. We don't want to keep too much of stock. But yes, it is on a higher side.

So how does it work out in the sense that when there's a demand pull, is there availability of imported products right now in the market or...

Imported was also coming in a big way. But I think going forward, it will not come because Chinese prices are very high. Also, government had, for the time being, removed the duty on PTA and MEG till June. So that also helped a little bit. But otherwise, also Chinese prices are quite high, even if we take it into account, like our prices are lower by INR 10 to INR 15 than Chinese landed prices as of today.

You're talking of PTA, MEG both?

No, I'm talking about yarn. PTA, MEG, of course, we get at the landed price only there because it's almost like a semi-monopoly kind of a situation.

Okay. Sorry, I missed a lot, I just repeat what you said. You said the Indian yarn prices today are lower than the Chinese imported ones -- and the China...

PTA, MEG, we get at import parity only. There, we don't get any discounts, I mean, major discounts from the suppliers. They are pegged at import parity more or less.

So your raw material is same as what the Chinese guys are facing, but your selling prices are 10% lower, and that's the reason for the compression in margins today.

Right. Our prices are higher than Chinese because Chinese get PTA much lower. We import from China only PTA. MET, yes, we are both equal. But in PTA, definitely, our prices are much higher to the tune of the freight and cost of handling, which we have to incur extra for getting it to India, which is at the moment around INR 8 to INR 10 because the freights are also very high today.

Okay. Got it.

That is inbuilt in the Indian price.

Next question is from the line of Saloni Munshi from Crisil.

Am I audible?

Yes, you are.

Yes. I just wanted to know since the revocation of QCO in November, have we seen any impact on our business for the Q4...

Yes. After the QCO revocation, there was a -- I mean, there was a lot of imports from China. So that's why we also had some margin pressure in this January and February. We corrected the price to avoid imports, but still there was a lot of imports happening and which is coming till now. But now the Chinese prices have moved very high. So new imports will not come in future. But whatever had been booked earlier is still coming.

Okay. And secondly, we have heard a lot about like substitution, people will be moving towards cotton from synthetic and all. Is that possible like since polyester has different properties?

No, no, no. That's a myth. Nobody can move from polyester anywhere because anything other than polyester is either 50% to 100% costlier than -- minimum 100% costlier than polyester. So who would like to move to a costlier product.

Next question is from the line of [ Ujay Sehgal from PinPoint X Capital. ]

Am I audible?

Yes, you are. Please go ahead.

Sir, I wanted to know regarding the steam project, what is the progress on that? When should that be online? Because that had a good saving on a small CapEx?

Yes. So that should be online. It was supposed to be online in June, but we are facing some delivery issue in the turbine. So maybe 1 month more, maybe in mid-July, max.

And regarding the recycling project, sir, what are the time lines? Are we on track? And we've been hearing news about...

That is to start by end of September. And right now, everything looks to be on time. I don't see any delay in that.

Okay. And we've been doing like tie-ups with Decathlon and like other...

Yes, yes. We are in talks with a lot of companies. And hopefully, we should be having a good start once we start. And we are also doing seed marketing with them. We are -- from our pilot plant, we are giving them samples and getting approvals so that they can place some bigger orders once our plant is operational.

So you don't see any challenge in booking the whole production once you have...

There are a lot of challenges. I don't say I don't see, but we are trying to work on it. It's a new product, new everything. So there would be challenges. But yes, we are trying our best so that we can overcome them before our plant starts in terms of sales because it's -- you know with all the brand, it's a little longer time line until they approve the things.

And I believe, sir, our main market for this was the EU, European Union. So with the FTA coming in, would that further give a fillip to us?

Yes, it can give a further advantage to us once it is operational. I think I believe it will be operational by end of this calendar year, the way things are.

Next question is from the line of [ Sagar from Ashfeldt Investments. ]

Am I audible?

Yes, you are.

Yes. Sir, what is your gross asset turn on this greenfield project and brownfield project?

Say again, please?

Gross asset turn. So basically, what kind of revenue are you expecting from this INR 300 crores CapEx from greenfield and...

See, the brownfield, we would be doing around INR 500 crores top line from the brownfield and around INR 350 crores to INR 400 crores in the greenfield of recycling.

Okay. Fair enough. And sir, you told us about this Indian Oil and GAIL and Reliance is putting up their PTA capacity around 2.4 million this year and next year, 3.4 million. So what is their current capacity for PTA? And also then we would be taking from them and would be any cost advantage to us? Are they cost advantage?

Once a commodity becomes surplus in a country, automatically, everybody would compete and give you at a better price. Right now, Reliance produces around 4.2 million to 4.4 million tonnes, Indian Oil produces around 0.7 million tonnes. And GAIL, this is the first one.

Fair enough. So -- you are saying that -- also you said that currently, demand is an issue -- selling is an issue basically and everyone is running low on raw material. So...

Availability is not an issue, but see, demand for the yarn is an issue. That is why everybody is running on a low capacity. Overall, the industry is running at around 60% capacity utilization. We are running at around 75%.

Fair enough. Sir, in terms of global polyester yarn demand. So I was reading an article where China is also saying that they want to have better ROE, ROCE on their capacities and all...

So they are also rationalizing their capacities. They are closing down plants, which are inefficient and not profitable. So that is why you can see the price has gone quite high. So because they also want to make profits now.

Yes, what do you...

Things normalize, we will be able to capture that also.

Yes. So how do you think industry in next 2, 3 years?

I think once this war stops, things normalize, industry [indiscernible] very well. These are going to be very golden years for polyester once they stops.

Fair enough. And also, I mean, this textile to textile thing, so is any global company [ or pair ] that we can study because this is a complete new thing, right? And...

There are a lot of companies who are planning to bring it, but there is no company which is operational as of now. There is only one company in China, which is operational. For that data, I don't think is easily available. Cyclone is the name of the company. But right now, there are 2, 3 companies [Foreign Language] [ Carbios ] is trying, now [ Loop ] has tied up with [ Ester. ] So even if you just study the Loop project with Ester, they are putting almost 2.5x CapEx per tonne than what we have put. And if you see their pricing and EBITDA commitments, they are much higher than what we are saying. There is -- there are a lot of companies. You can Google it, you'll get a lot of companies who are doing chemical recycling, and they have spent millions and millions of dollars in research but still they have not come up with any big plant.

So what you're doing is quite special basically, right?

Yes, it is. Let's hope it works well -- our money on it.

Yes. So then how do you -- when you approach a client, let's say, how do you -- I know that you have a pilot plant, then you had that Decathlon and all...

The pilot plant, we show in the product, they test the product, they check every quality, they make fabrics out of it, garments out of it. And if they are satisfied, then they would go ahead with bigger orders in future.

And in the first year, so what's the expectation in terms of capacity utilization you have for this plant.

First 6 months, I don't feel that we would be able to utilize fully, maybe around 70% or 65%. But then next 6 months, we should be almost full capacity. First 6 months...

60%, 70% is also very good.

Yes, yes. Because I feel that much because the kind of tie-ups we are having and the talks we are going on. I'm sure because it's not a big capacity, 75 tonnes per day is not a big capacity. There are people who can buy the whole 75 tonnes in one go.

And sir, in terms of prices, so what would be the difference of a normal polyester yarn per kg size versus textile to textile yarn realization difference?

No, it could be ranging from like today, the price of virgin yarn is around INR 120. This could be INR 180 to INR 225.

Next question is from the line of from [ Disha from Sapphire Capital. ] You are audible ma'am, please proceed.

So if I look at your past 12 to 15-year quarterly run rate, it has sort of been in the range of INR 1,000 crores to INR 1,100 crores [ sort of clip. ] But given this expansion that is going to come online, how do you see growth in FY '27 and going ahead? Any color on that?

See, right now, with this war situation, I can't give you any good guideline. If the normal year, we would do at least INR 500 crores more than what we do in a year, which is INR 4,200 crores, INR 4,300 crores. So we should be close to INR 4,800 crores with the new CapEx, which we are doing in Filatex. With the subsidiary CapEx, that will add another INR 350 crores to INR 400 crores more.

So you're hoping for around INR 4,800 crores [ sort of clip, ] right?

Yes. In a full year or full operation year, we should -- no, but this FY '27, only 6 months we will get for the new production. So it will -- may be around INR 4,500 crores in this year. And FY '28, it could be around INR 4,800 crores in Filatex and another INR 400 crores from Ecosis.

Okay. Okay. Fair enough. And how should one look at the margins going ahead? What's the steady state that you're targeting?

I think steady state, we should do something about double digit in Filatex. Of course, in [ textile, ] the EBITDA margins would be around 30% minimum.

How much?

30%.

That's the subsidiary business?

Yes. That's a Specialty business. So that will definitely have more margins than this.

Okay. Okay. And how do we see this subsidiary sort of revenue shaping up? What percentage of the overall revenues are we targeting?

I gave you the numbers, you can calculate the percentage. I said INR 350 crores...

No, no, going ahead.

So that's the full capacity-wise, it can do around INR 400 crores. So it's not going to increase. The full capacity utilization also, it gives you INR 400 crores.

Next question is from the line of Hitaindra Pradhan from Maximal Capital.

Am I audible?

Yes, you are.

So sir, first question is this INR 690 crores CapEx that you are doing, you said INR 335 crores will be the additional debt that you will take. So remaining everything will come from the internal accruals or you will do some fundraising?

No, no, all internal accruals.

Okay. Understood. Secondly, when I look at your base Polyester business, so that has been doing like 8% sort of a margin, if I exclude the other income. So going forward also, should we consider this 8% as the base for our PFY business?

No, no. The base has to go to at least 11%, 12%. Otherwise, nobody would reinvest in this business. So today, typically 2 lakh tonne plant cost around INR 1,700 crores, INR 1,800 crores. So if you don't -- which is 2 lakh tonnes means around INR 2,250 crores to INR 2,400 crores of top line. So you have to generate around 12% to justify your investment.

Sir, agreed. But in a lot of commodities, at the end of the day, you are making these sort of lower margins and lower ROCE only when you compare it to greenfield, it doesn't make sense.

Then you will not see a growth in that commodity. Nobody will put up a new plant for that. So every year in world, you need 3 million, 3.5 million tonnes of polyester and right now, the polyester capacity worldwide, I mean, the production worldwide would be close to 53 million to 54 million tonnes. India is doing around 5.5 million tonnes. China is doing around 42 million, 43 million tonnes. China will also not grow if they don't get around 10% margin.

Okay. Okay. So let's say, it reaches to 10% odd. And then you are also doing this renewable and steam project, which is -- and...

This year, our margins was around 8.9% full year -- 8.33%. Now PTA coming to India with all these companies, that will add at least 1%, 1.5% more margin. So above 10% is a very, very easily achievable at least once the things are normalized.

Understood. Understood. Now you also mentioned that you can get a PAT of INR 218 crores to INR 230 crores from all these initiatives. That is the annual PAT which will be added...

That's not PAT. I said EBITDA, not PAT.

INR 218 crores to INR 230 crores of additional EBITDA you can get.

EBITDA from all these investments, yes.

And sir, by when can we hope to reach to this level?

No. All these things will be more or less commissioned by September. So in the second half, barring the recycle, we should be utilizing the capacities fully more or less so the [indiscernible] which is going to generate around INR 80 crores, INR 90 crores of EBITDA. So if you leave that, -- so we should be able to get at least INR 140 crores, means INR 70 crores additional EBITDA in this year from the other operations.

Okay. So everything else will get immediately utilized, including the PFY expansion.

A month or so, I mean, not immediately, but not more than a month is the lag time for everything. Team could take 2, 3 months. Initially, maybe we do 70%, 80%. And within 2, 3 months, we'll be able to add more clients.

Understood. Now coming to, sir, Ecosis, so right now, you mentioned that there's some pilot going on with a couple of clients. So what is the technology? So now you are giving them the final product and then they will be manufacturing. So have you received any positive or negative feedback till now from these clients?

No. There is no negative feedback. It is a process which is a longer process. You have to submit sample, it goes to their different places, then it gets converted into garments and then they do -- it's a long process. It takes 4 to 6 months for any big company to approve things, minimum.

Okay. So when are we expecting to -- in your own mind, like when you will get confidence that, okay, now the validation of this for the clientele that I'm targeting is over. When is that milestone, sir?

It's difficult to say. There are so many clients, like 2 we have already achieved. Now with others, we are working. And I hope that we should be able to complete the desired quantity by this year-end at least, the number of customers we need to sell our full volume.

Okay. No, sir, but I was thinking that given the requirements of these customers, which are very large, even if you satisfy the requirement on the technical parameters for one client, your entire capacity should get booked by this one client itself, right? So then...

Yes, but we would not like to do that. We'll be dependent on that, supposing he stops buying what do we do. So nobody wants to be dependent on one client. We would like to have a basket of clients.

Okay. Okay. And...

Sorry to interrupt Mr. Pradhan, please rejoin the queue for follow-up questions. Next question is from the line of Anuj Haria from Inter Globe Services.

My question is more around the PTA facilities that are coming up. So now with the new brownfield capacity coming up in September, our total capacity will be somewhere nearly 4,70,000 metric tonnes. So in absolute terms, can you quantify how much -- how many crores of rupees will be saving when the new PTA plant comes live in July and December?

Savings in terms of what? You have to buy PTA. Right now, we are importing, then our imports will reduce once this plant comes in operation.

Correct, correct. So basically currently, the freight charges extra that we're paying, how much...

No, no. But see, even the Indian, they are not leaving anything. Whatever is the landed cost of the imported, they are charging at the same price. So there will be no savings. The savings will happen once PTA becomes excess in India, then they will compete and sell cheaper than the landed price.

Okay. Okay. Got it, sir. Initially to begin with, there would not be any savings or margin improvement on this front...

There, but very negligible. Once both the plants are operational, IOC and GAIL, then maybe some savings will creep in because then there will be enough PTA available and they would like to fight among themselves to get hold of the customer. So they could offer some extra discounts.

Next question is from the line of Surya Narayan Nayak from Sunidhi Securities.

Yes, sir am I audible sir properly. Hope I'm audible?

Yes, yes.

Yes. So sir, just to understand one point that in the textile to textile recycling, when the [indiscernible] will be recovered, so that has to be again further processed. So if that is the case, then are we going to utilize the new facility that is upcoming new facilities to process the same? And second question is that in the glycolysis process that we are currently implementing, if my understanding is right. So that is actually giving the PET, which is nearly in terms of quality parameters, virgin PET, then my point is that because of this crude volatility and the PTA, MEG issues, so are we thinking of having more of the recycling facilities to extract the PET rather than -- that is the recycling route rather than the virgin route because the mandate from the EU side is increasing. So what is the call on your side for the long-term view?

See, long term, definitely, we would like to go more for recycling only. We will not invest too much money in the virgin. This also virgin we have invested is a brownfield project. So we had certain extra chips available or certain places where we could add value. There, we had invested this INR 235 crores. Going forward, I don't think too much opportunity would be left and major expansions would come only in the Recycle business where we would be converting textile waste into virgin chips. Yes, this yarn facility, we can use for virgin as well as recycle, which new or existing, which we have right now. So we can use any facility for converting from virgin or recycle. Once you have a chip, then every facility is similar.

So this INR 300 crores of facility, the end product will be cheap or we will be processing -- or the end product be the yarn?

It will be only chip. Yarn, if need to be processed, it will be processed in the existing facility or the new machines, which we are putting.

But the mandate from the global brands that is coming, that is for the yarns, not the chip. I mean if -- my own understanding from it...

We will make chip from the existing facility and give it to them if they want yarn.

Okay. But their mandate is only from the recycled one, I mean, especially from the chemical process.

Yes. So the chip is basically made from textile waste that is what the mandate is that your raw material should be textile waste, not PET bottle.

Correct.

Yes, we are making the chip from textile waste. And after that, if we make yarn from that, it still qualifies for their -- whatever they have the mandate for.

Correct. So my point is that is it not prudent -- in the cost-wise, is it not prudent to go for that kind of facilities more going forward rather than -- I mean, the scale of more rather...

Chip plant, see, my technology is to convert waste to chip. My technology is not there to convert chip to yarn. I can sell chip to people who are making yarn. I may not invest on something which is already there. There is no technological advantage. So I will make chips and there are a lot of people who can make yarn and give it to the customers. We already have yarn capacity. We can use that also. But if you require more yarn and if we have more chips, then there are a lot of people who would be willing to buy chip and make yarn and give it to people, all these brands.

So beyond these brownfield facilities, we will not focus on the yarn more on the cheap side, am I right?

Yes, you're right because that is what the technological advantage we have and what is what we have developed.

Okay. And sir, regarding the...

I am sorry to interrupt, Mr. Nayak, please rejoin the queue for follow-up questions. Next question is from the line of Niraj from White Pine Investment Management.

Just a clarification. You said about the prices in India is lower for the polyester yarn. What I understand is for you, your cost is similar to what Chinese guys are bearing with -- adjusted for the freight cost but the realization that you are getting in India are 10% lower than what China competitors are getting. Is it the right understanding?

Yes, yes. So because in India, demand is very low, and we are competing amongst each other, and we have -- all of us have cut production also. That is why the margins are lower at the moment. Once the demand picks up, everything gets normalized.

So on a like-to-like basis, because the prices are 12%, there's a possibility of maybe INR 10 to INR 12 -- INR 8 to INR 12 jump in the prices once the demand comes back. Is it the right understanding?

Yes, right. You're right.

Next question is from the line of [ Sagar from Astrolette investments. ]

Sir, just one thing I wanted to clarify. So you said that 30% margin on textile to textile plant. On other hand, your presentation says around INR 65 crores, INR 80 crores of EBITDA. So margin should be 20%, right? You said 30% on the call.

The margin is 30%, maybe it's very difficult to predict right now. But I'm saying minimum 30% EBITDA we should get.

Okay but then you made in the presentation like INR 65 crores, INR 80 crores EBITDA and your revenue would be...

INR 85 crores for recycle, not INR 60 crores. INR 80 crores to INR 85 crores, I have always maintained for recycle, which is on a lower side. It can always be improved once things crystallized. I've tried to be not too optimistic, be very conservative -- we are getting, we are feeling we should be able to do better in the percentage...

Understood. And sir, just one more thing. So the past participant has asked, we have the technology of polyester chips and we will be converting that to the yarn and or maybe polyester chip selling to the other player to convert it to the yarn. So it's a backward integration, right, I think. So how would your revenue would grow in FY '28. So this -- let's suppose that this INR 300 crores, INR 400 crores of top line that you are targeting, if you use that internally, right, to make the yarn, then your margins will increase, but your sales will not be, right?

Yes. If I -- you're right, if I use that volume to convert in-house, then my top line will not grow too much. It will grow with the only incremental value addition, which I'm doing.

You're right. And...

My idea is to sell chip more than convert it. Conversion, I'm doing to satisfy them initially, yes, this can be converted to yarn and it will give you a better result. But eventually, see, that is not a technology. From any chip you make a yarn is same thing. So the value addition is not going to be very extraordinary in converting from textile recycled chips to yarn or virgin to yarn. So going forward, we would like to invest more in the technology, which we have developed now.

Ladies and gentlemen, we will take that as the last question. I would like to hand the conference over to the management for closing comments.

I'd like to thank all the participants. So next time, we see you after another 3 months. Thank you very much for sparing your time and joining us in our call. Thank you very much.

Thank you very much. On behalf of Filatex India Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.