Gokaldas Exports Limited (GOKEX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of Gokaldas Exports Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Binay Sarda from Christensen Advisory. Thank you, and over to you, sir.

Thank you, Rutuja. Good morning to all the participants on this call. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with our business risk that could cause future result performance or achievement to differ significantly from what is expressed or implied by such forward-looking statements. Please note that we have mailed the results and the presentation, and the same are available on the company's website. In case if you have not received the same, you can write to us, and we'll be happy to send the same over to you. To take us through the results and answer your questions today, we have the top management of Gokaldas Exports Limited represented by Mr. Sivaramakrishnan Ganapathi, Managing Director and CEO; and Mr. Sathyamurthy, Chief Financial Officer. We'll start the call with a brief overview of the quarter gone past, and then conduct Q&A session. With that said, I'll now hand over the call to Mr. Siva. Over to you, sir.

Thank you, Binay. Good morning, everyone. Happy to have you at our earnings call for the second quarter of FY '22. The start of Q2 was a turning point for us. We just came out of a devastating second wave of COVID-19, which had brutal consequences for the nation socially and economically. Unfettered after the severe lockdown in Q1, we displayed an extraordinary level of agility and customer responsiveness to step up our business performance. The company had one of the best quarters ever, posting a revenue of INR 446 crores, a growth of 29% over the previous year. Our export revenue growth was 34.6% given that we have reduced focus on domestic customers. We delivered an EBITDA of about INR 54 crores and a PAT of INR 28.6 crores, both of which are the highest ever. Retail apparel sales for calendar year 2021 in our largest market, the U.S., has been robust with sales up 6% YTD over 2019 level. E-commerce is 41% above 2019 levels, both have passed pre-pandemic level. European data also indicates that 2021 sales is catching up with 2019 levels steadily. After gaining market share in FY '21 by consolidating suppliers, the company is well positioned to leverage growth in retail sales. With China continuing to be constrained by trade restrictions, COVID resurgence and high cost of labor, while Vietnam also impacted by a surge in COVID, customers are looking out to diversify their supply base. The government of India has come up with a strong support for Indian textile industry by announcing a stable policy regime, a new PLI scheme, and has initiated discussions with several countries for FDA. A confluence of these factors is propelling the business prospects for the Indian apparel industry, especially for those having a strong track record of quality and consistency. Our order book is robust for the next 2 quarters, exerting tremendous pressure on available capacity. Looking at the prospects, we have set up 2 new units in Tumkur and Bommanahalli in Karnataka in the quarter, which will ramp up in the next 6 months. We've also initiated work on a new greenfield unit in Madhya Pradesh, which will be commissioned in early FY '23. We provided a safe work environment to bring back our 24,000 people after the lockdown and recruited about 4,000 additional people across our factories in the quarter. We are also looking for additional capacity for growth and are exploring a unit in Tamil Nadu. By creating some additional capacity in our existing units and strong utilization, we could deliver an improved EBITDA going forward. While the new units that we have created will have a deleterious impact on margins for 6 months until they ramp up, continued effort on improving productivity in existing units could offset some of it. We are hampered by a severe supply chain constraint in the form of availability of containers and shipping capacity, impacting flow of raw materials and finished goods. Raw material prices are also going up. Our endeavor is to ensure that we pass through most of the raw material costs to the customers and absorb the rest through efficiency improvements. With growth in business and supply chain constraints, we have had to plan for incrementally higher level of inventory in the quarter to the tune of INR 107 crores, which is somewhat disproportionate to business growth. This, along with delayed receipt of RoSCTL, increased our working capital deployed in the business. While the government is indicating release of RoSCTL payments soon, we may have to live with higher inventory level for some more time until the supply chain constraint stabilizes. We have the management talent to sustain our growth. We have plans to invest about INR 340 crores over the next 4 years for capacity creation, modernization and new ventures. This will help us drive growth of the business in the near future. Apart from growth in India, we are also exploring options to grow in other low-cost countries and will take appropriate steps to ensure that we have a sustainable business footprint, which is capable of scaling profitably. I wish you all Happy Deepawali, and thank you for listening. I would be happy to address any questions that you have.

[Operator Instructions] The first question is from the line of Akshay Chheda from Perfect Research.

Sir, I had basically 2 questions. One of it is what competitive advantage do we have against other MNC players in the industry? And the second one being, has COVID resulted in reduction of competitive intensity from local players?

So the manufacturing base does not have too many MNC players at least in India, but globally, there are some players who are transnational in their characters. And we end up competing for business globally. We are bidding for a business from one customer. They have options to also outsource it to Bangladesh or Vietnam or China or Indonesia or wherever they wish to procure from. So to that extent, our competition is global. And to that extent, we may be dealing with a lot of transnational companies as well. So I hope that answers your question.

Yes. Actually, I wanted to understand the advantage. Basically, why would anyone come to us and not outsource it to anyone else, as you said, from Bangladesh or China or anything?

So there are several reasons for that. All large buyers would want to procure products which are specific to certain regions, which have certain characteristics, signature from those regions and which have the raw materials available in those regions. Keep in mind that the fashion industry is extremely quick in response to market needs and are constantly looking for low lead times. So if the raw material sources are available in India, for example, cotton, viscose, staple, fiber, et cetera, then governments which utilize those fabrics would tend to get produced more in India rather than some other country because the fabric ecosystem exists in India. So India has got a very robust excise ecosystem, not just the apparel manufacturing, which gives an advantage to this country. Second, we are globally cost competitive and globally benchmarked when it comes to quality, consistency and on-time delivery. We have one of the best metrics in the industry as far as these measures are concerned. And automatically, that means that customers will come to us to procure their goods. So to answer your question very simply put, we compete very well with international players. We have excelled against them, and we have sourced and won business while fiercely competing with them.

Right. And about the second question, sir, about the COVID resulting in a reduction of competitive intensity from local players.

So there are smaller players who may have had some challenges. During the time of COVID, some of them did shut shop. And those who remained are now seeing good business prospects as well as there is, in general, an excess of demand over supply for the time being. So the -- to an extent, the supplier base has been reduced, which -- so that partially answers your question. But then those who are still there are still in the business. But larger buyers have tended to consolidate suppliers and we have -- larger players like us have been beneficiaries of that move.

The next question is from the line of [ Siti Jain ] from [ Canada HSBC ].

Sir, this current level of turnover, does it include like previous quarter backup? Or do we expect such high levels of around, just say, INR 450 crores of turnover can be sustained, sir?

Good question. So obviously, there was an order backlog as in Q1, we could not deliver our goods as the factories were shut in the months of May and June. But keep in mind that we were fully booked for Q2 and Q3 as well and now for Q4 as well. So the situation is that the deferment of production from Q1 has to be absorbed in Q2, but this automatically means that the Q2 production gets kicked onto Q3. And to an extent we are accommodating by producing it using overtime or incremental capacity that we are creating and a very little extent through some outsourcing transactions that we did. And this will continue in the quarters ahead as well. So to simply answer your question, would this be sustainable in Q3 from an order and revenue perspective, answer is yes because we do have this kind of order capacity, which will take up our order book, which will take up our capacity and hence, deliver revenue in the quarters ahead.

Sir, given this run rate, can we target at INR 20 billion -- INR 2,000 crores turnover next year, sir?

So everything depends on the capacity and how fast we can build capacity. Our endeavor would be to bring up capacity as fast as we can and as operationally feasible -- in a operationally feasible manner as we can. So we are quite growth oriented and would like to deliver growth going forward, and we will do our best.

Okay. Sir, despite inflation and no one-off, we were able to do 12% margin. What are the key success factors, in your view, had helped to achieve this margin? And do you think such margin performance we can sustain given the continuous inflation?

Okay. So raw material inflation and labor cost inflation are the 2 major inflation that we deal with. So when it comes to raw material inflation, we endeavor to pass on our raw material costs back to our customers. Our order booking process is such that when I book an order and confirm it, we do have a back-to-back understanding with our raw material suppliers for the raw materials, along with locking in -- they are locking them in for their pricing. So only in rare events have we not been able to pass on the entire cost of incremental raw materials back to our suppliers, but then in both cases, we tend to operate with higher level of efficiencies and overcome that. But by and large, we have been able to pass most of it back to the customer. The inflation in labor costs as year-on-year, they are not allowing both -- there is a labor cost, wage inflation, which happens in line with CPI. That has to be overcome with better productivity, which is a work in progress and we are doing as well. So all in all, we tend to push back inflation to the customers or absorb the productivity as the case may be, and we've been reasonably successful in doing so. Coming to your question on is the margin sustainable, there are a few other factors which are at play as well. So what we produce in Q2 and Q3 are different. In Q2, we produce a lot of autumn wear, which tends to be outerwear intensive or outerwear heavy, whereas in Q3, we produce a lot more for spring and summer, which are more so for spring, which are lightweight. So the characteristics and the profit margins are slightly different, not a lot -- whole lot different. So that will have a bias in the margin, albeit very small. The other factor is that the 2 new units which we have commissioned in September are going through a ramp-up, ramp-up in manpower and ramp-up in productivity as well, and will take 6 months for them to reach the peak production and peak labor force. So which means in the month -- in the quarter of Q3 and Q4, those 2 units will have a negative overhang overall, even though their revenue contribution is not very large. So to that extent, there will be an EBITDA margin pressure coming from some of the 2 new units, but that will fully catch up by Q1 of next year, and we will be back to normal. Having said all of this, so there are all these moving parts which may have a very small impact on the EBITDA margin. I don't anticipate a big delta. We would still be in double digits going forward.

Sir, given the [indiscernible] money which has come in, so finance costs will reduce, right, sir, significantly?

Yes.

Okay. Sir, you highlighted now a new CapEx plan of INR 340 crores in our presentation. Does this -- does that include the Tamil Nadu one, which you have spoken in the opening remarks, sir? Or that is apart from the INR 340 crores?

No, that is inclusive of Tamil Nadu.

So MP and Tamil Nadu is part of that INR 340 crores, sir?

Yes, Indeed.

Perfect. Sir, when will that get concluded, sir, Tamil Nadu one?

So we are working on it. We will let you know as soon as it is concluded. There are several discussions going on, on that. We would like to do it as early as possible. Hopefully, in this financial year itself, if we can.

So congratulations for a brilliant performance, sir.

The next question is from the line of Venkat Samala from Tata Asset Management.

So my question is from the way I think about the business moving forward, demand is not really an issue, but the supply is. So could you help us understand, in the next 12 to 18 months from the way you are looking at the supply expansion scenario, how much can we expand our capacities by -- range would also be okay.

See, so if you look at the 2 new units that we brought in, which is -- which are in Karnataka, both of them put together at peak will contribute INR 260 crores of revenue, so once they're fully productive and fully ramped up. The expectation from our MP unit when it is fully ramped up from Phase 1 is INR 150 crores, Phase 2 is another INR 150 crores. Phase 2 will work -- will start only after Phase 1 is commissioned. So let's only take Phase 1. So that's another INR 150 crores. So in total, INR 310 crores. Tamil Nadu will also yield about INR 60 crores, INR 70 crores to -- when it fully ramps up. So that's the kind of capacity expansion for new capacities we are looking. They're still looking out for additional capacities, which are all work in progress, and I don't want to commit anything until we have a clarity on some of those capacities that we are working on. In addition, we will also be looking at incrementally augmenting capacity in our existing factories wherever possible. The -- there is not a whole lot of capacity available in our existing factories. But to the extent we can drive it through productivity improvement or some marginal improvement, marginal incremental lines that we can put in, we would go for that as well. So that's the kind of capacity road map for the very, very immediate and visible duration what I'm talking about. We are constantly active, as I said, in terms of looking for more capacity creation. And as I mentioned, since growth is a function of capacity creation, we would be very aggressive in this endeavor. And you could see that in the way we have already brought up 2 new factories and are working on more. We are also looking at bringing up some capacities outside of India. One of the countries that we are looking at is Bangladesh, but we are not averse to other options as well. And we currently have some outsourced operations going on there, which are all on test and trial basis. And we seem to be encouraged by what we are seeing. So if and when we are fully convinced and if and when we are in a position to set up some operations there, we will do that. Given the prospect, we will try to conclude all of these things at the earliest.

Understood. Understood. So I guess the management has been speaking about expansion in Bangladesh for some time now, right? So just wanted to understand in terms of advantages and risks that we could face when we would be manufacturing from Bangladesh. And also, could our margins, if we choose to manufacture from Bangladesh, be any different from what it is right now? And lastly, on this Bangladesh bit, I mean, by when are we likely to take a call on this geography?

Okay. So the advantage of Bangladesh is fairly evident. It is one of the largest apparel manufacturing countries after China. The large buyers tend to favor Bangladesh as it's got abundance of labor availability and government policies which favor the garment sector. So the country does have quite a bit of advantages going for it. It also enjoys a duty-free access to EU, which makes it immensely competitive when it comes to serving European customers. Apart from EU, it also goes duty-free to Canada and Australia. So there are several advantages of going to Bangladesh apart from simply proximity to the country as well. There are disadvantages as well in terms of logistics with Chittagong Port being congested and with land routes between India and Bangladesh being congested, resulting in fabric movement taking time. But all put, Bangladesh does have a cost advantage, has abundance of talent and a capable, growing apparel industry base. So that's the attraction. There are other countries as well which are attractive, but Bangladesh seems to have all those benefits. In terms of risks, of course, there is always a risk of going into a new country which is different from ours and where there are entrenched players being present. So we will be very cautious when we go in, and we will be careful to mitigate all the risks as a responsible company.

Right, right. And just as a follow-up, by when are we likely to take a call about expansion into this geography?

My feeling is that we should be able to take a call before the end of this financial year.

Okay. Okay. Okay. And my last question is that in the presentation, we've also spoken about foray into new business categories like technical textiles, knitwear. So how are we thinking about this? And again, I mean, in terms of strategy time line, if you could give some color, that would be helpful.

So they're all work in progress and a bit premature, but I didn't want to preclude or foreclose anything from a disclosure standpoint, and that's why we said what we said. So for example, we are strong in the woven space, and we don't have any serious presence in the niche space at all. But if you look at our customers, they sell both woven and knitwear in their stores. So if you walk into a Gap store, you will find a shirt and a T-shirt being placed side by side. So our customers can, for instance, have the -- have a demand for knits as well. Now globally, if you look at knit, it's almost 50% of apparel trade, with wovens being the other 50%. So while we are a player in 50% of the market, there is still an opportunity for us to play in the other 50% by catering to our existing customers with whom we have deep relationships. So that's the factor which is driving us to explore knits as a business unit, not to mention that there is reasonable growth in that segment as well. So we're working on it. And again, we'll take a call by end of this financial year on our knit investments. We -- if it is conducive and if it is making financial sense, then we will definitely be quite keen on going down that path.

Understood. Understood. And one final one, if I may squeeze in, a bookkeeping question. In this quarter's financials, did we include any RoSCTL income of the previous quarters? Since the time it is recognized -- I mean the rates are finally determined by the government?

No, we did not.

Okay. Okay. So only for this particular quarter it's put.

Correct.

The next question is from the line of V.P. Rajesh from Banyan Capital.

Congratulations to you for a great set of results. I joined this call a little bit late, so I'm not sure if you have answered this. But this INR 340 crore CapEx, what is the time line of this? Given the capacity expansion that you just explained, it doesn't look like that you will consume a lot of this cash for that capacity expansion.

So see, the current plan for us to utilize the INR 340 crores is by FY '25, but bulk of it will be consumed by FY '24, so the next 3 years, okay? That's point number one. That's as it stands today. We will try our best to see if we can further speed this capital deployment as a faster deployment means faster growth, right? But we will have to make sure that we are deploying it properly and deploying it successfully so that we can get the desired rate of return from these capital. So while we are a financially conservative company, we will be very aggressive in looking at growth options. And the timing of this plan, what we have indicated, we will try our best to see if we can advance that. So that's where we are with respect to the CapEx deployment.

Right. Okay. And then second question, on the margin side. It seems that 12% includes FX gains. And if we exclude that, then your margin is around 10% -- a little over 10% from what I can see. So do you foresee further margin expansion from this rate? Or the inflation we are seeing on the raw material side, this is something is what you should expect, let's say, in fiscal year '23 also?

So the FX gain is a misunderstanding in the system. We work on a hedged P&L and not on the spot P&L that spot rates that obtained. So our accounting standards make us recognize revenue at the prevailing spot rates in the quarter. So whenever we send goods and we recognize revenue at the then prevailing spot rate multiplied by the dollar revenue that we get and thus deliver -- arrive at our revenue. However, when we actually do business and actually do our costing, et cetera, we work on a hedge rate and then price our orders on that basis. So at the end of the quarter, where -- if the prevailing spot rate during that quarter is -- let us say, in rupee terms, right, rupee to dollar terms, is higher than the hedge rate, we will end up booking a hedge loss. And if the prevailing spot rates are lower than the hedge rate, we will book a hedge gain. But in reality, the prevailing spot rates has no basis or no bearing on our pack. So regardless of what the spot rates are, my pack will be the same because I do a business on the hedge rate and I book my orders on the hedged P&L. So you may see if the rupee was, let us say, at INR 78 versus INR 72, you could either see a gain or a loss as the case may be, but net-net, it will not have a bearing on the pack. I hope you understood that point. So I would not back up or adjust for the hedge gain or hedge loss as the case may be because that's not how the business is done. It is done on the hedged P&L.

The next question is from the line of Sunil Kothari from Unique BMS.

[indiscernible]

Your voice is breaking, sir. We cannot hear you properly. Can you please check?

Hello? [indiscernible]

Sir, it is breaking in between.

Okay. Let me ask afterwards.

We'll move to the next question, which is from the line of Kush Gangar from Care PMS.

My question was regarding the asset turns for this new CapEx or the plans that we have in FY '24. What would be the asset turns for those?

So we can reasonably assume it to be 4x.

4x. Okay. Okay. And you mentioned INR 340 crores, the greenfield project in Tamil Nadu included as part of this, but the 2 new factories, which have been operational, would be over and above the INR 340 crores that we are looking to. Is that right?

So the Tamil Nadu project is not greenfield. The Tamil Nadu project is a leased unit that we are looking at, just to clarify. Our Madhya Pradesh project is greenfield. Apart from that, we may -- in the future, in that INR 340 crores, we will also look at a combination of greenfield and brownfield expansions as we speak. And as far as the CapEx is concerned, the existing 2 new units are also included in the INR 340 crores, the existing 2 units which have come up last month.

Okay. Okay. And what portion of the current growth in this quarter was due to price realization being up due to cotton prices being higher? So what was price growth for the quarter?

In the second quarter, you mean?

Yes, in Q2.

[indiscernible] very, very low because second quarter we would have done -- the booking of business for the second quarter was done almost in the Q4 of last year. So there -- it might not have had much of an impact. As you recall, cotton prices have gone up pretty significantly, but that doesn't mean that all that translates into a yarn price growth. Yarn price, it translates to a lower extent in terms of yarn price growth. For example, Y-o-Y cotton prices would have gone up by 40%, but yarn prices have gone by 24% and fabric price has gone up by 8%. So reality speaking, we buy only fabric and we don't buy cotton. And since we have long-term contracts with our fabric suppliers, we tend to keep the fabric prices also nearly status quo. So we are not exposed to so much of spot volatility in the market as much as you think. And certainly, cotton prices don't immediately have a bearing on our raw material prices. So factoring all this in, the price increase has not been much in the quarter.

Sure. Understood. And by when do you expect us to be in the tax or MAT range?

I mean we anticipate it from FY '23 onwards.

FY '23 onwards. Okay. Sure. Yes, that's it.

The next question is from the line of Bharat Chhoda from ICICI Securities.

I just had a question regarding this -- whether we'll be foraying into newer projects like technical textiles. And anything that you have worked on over there, what will be the targeted margin in those? And also, PLI has been announced, and we have a good amount of products which are in -- from the manmade fiber garments. So how would the PLI play out for us if you look at it from a future perspective?

So the PLI guidelines are still awaited and they are work in progress. We are keen on looking at PLI. And definitely, if it makes sense, we will avail of it as well. So we are very keen to do that and keen to get into the space, which PLI encourages, which is manmade fiber-based apparel products. So there is a lot of work going on in this space. Our interest still remains high. As and when the clarity on PLI emerges, we will go forth and do the needful to avail of PLI based on the conditions which government spells out in the detailed guidelines. As far as the other projects are concerned, for example, knits or any other projects, they are all work in progress. They are all early days as we speak. And it just gives you a flavor of what we are thinking about and what we are looking on. The detailed project reports are all work in progress as we speak. So it's a bit premature to conclude on what kind of margins, et cetera, that those individual projects would yield. Initially, they will all start small and then build up as we enter into a new space. So the current business, which is apparel manufacturing, will continue to be a dominant portion of the business for at least a couple of years. And those will tend to have a bigger impact on the years ahead subsequently. So I wouldn't count on too much of margin data going forward from some of these new projects, but specific margins of the projects are a bit premature for us to discuss.

Sir, a connected question, like would it require if we go for PLI, would it require our lines to be rearranged like separately for [ MMF ] to get that benefit? Is that under the guidelines or something we'll have to restructure the way we make the products or put it in a separate company? How would that work? Any idea on that, sir, if you could...

So PLI is applicable for a new unit only. And one of our new units will have to be configured for availing of the PLI benefit and produce products which meet with the criteria. So we cannot avail of that in our existing units. So reconfiguring lines in our existing units, et cetera, doesn't make much of a sense. We will be looking at a new unit and then working on PLI -- availing the PLI in that new unit.

So would that entail that some customers who are already using your product would be given sourcing from that plant? Is it possible, that restructuring?

Yes. Correct.

The next question is from the line of Anish Jobalia from Banyan Capital.

Congratulations for a resilient quarter and a successful fundraise program to fast set our growth potential. So sir, first question is Slide #17, we'll be allocating INR 40 crores towards new initiatives in FY '22 itself. So could you elaborate a bit more on what are the plans here?

New initiatives.

You're talking about new initiatives. Okay. So this would -- we are currently looking, as I said, at international expansion, right? So by the end of this year, we are hoping to conclude our expansion in Bangladesh or any other country as the case may be. And we may have to start deploying capital to that effect. So it is capturing some of that in our manufacturing unit in a country outside of India, and that's what it is. We may also incur a small amount of CapEx if our knit project gets accelerated. But that's something which we will have to take a call as we go forward.

Okay. So -- and what would be the potential revenue contribution from the Bommanahalli unit in H2? I mean, does this unit increase our expectation of revenues for FY '22 versus what you are expecting, let's say, the start of the year?

So Bommanahalli unit in FY '23 will contribute INR 80 crores, okay? Now in FY '22 H2, its contribution will be less than INR 40 crores because it will be in a ramp-up mode. So in my assessment, it will be between INR 25 crores -- INR 20 crores, INR 25 crores or thereabouts.

Okay. Okay. And out of the INR 340 crores CapEx, which is planned, so INR 270 crores is looking towards growth. So would it be correct to assume that this CapEx can give us around INR 1,100 crores, assuming the 4:1 asset turnover, over the INR 1,500 crores revenue potential from the existing assets, and another INR 160 crores from the leased assets in Tumkur and, say, Bommanahalli that's resulting into a revenue potential of INR 2,700 crores by FY '25? Is that the correct way to think about this?

So you are directionally going in the right direction. So all -- Tumkur and Bommanahalli is also included in the INR 340 crores, so just to get you a flavor. The modernization CapEx also does yield some incremental productivity and incremental revenue. So if I were you, I could probably take INR 340 crores and then apply a broad ballpark assumption of ForEx.

Okay. Fantastic. And you think this is achievable by FY '25 considering the time of ramp-up between, say, commissioning and ramp-up time. I mean I know that you have very quick ramp-up.

Because most of the CapEx is advanced, right? In FY '25, we are talking of very little CapEx.

If I could squeeze one last question, sir, like what is your expectation of H2? And in terms of revenues and margins directionally would be helpful to know, sir.

The order book is full. So our current capacities are what they are, with only very limited ramp-up happening from these new -- 2 new units of Tumkur and Bommanahalli. So we are still constrained by capacity. So revenue-wise, you could see some -- you could draw your own conclusion from where we are in Q2. So that trajectory will continue. As far as margins, I did mention that the 2 new units may have a small impact on incremental margins as initially any unit that comes on stream will have a tendency to bring down -- tendency to operate at low margins before they catch up. So that impact will be there. But by and large, margins will be in double digits for sure. Margins -- we will try our best to hold our margins or work at high margins, even though there may be some pressure coming from the 2 new units, which is only momentary or temporary because that will also be fully caught up by the first quarter of next year.

So even if you are then 12% -- right. So...

Revenue growth, we may see some marginal revenue growth due to the new capacity.

Okay. So if you are then 12%, then these new capacities could purely draw this margin downward by max like 1%. So say, 11% seems to be a reasonable number to think about, right?

Yes.

The next question is from the line of Rahul Jagwani from PGIM India Mutual Fund.

Siva, congrats on a strong quarter. So actually, my question is continuing with the CapEx. So I mean just looking at your plans outlined in the presentation of the INR 340 crores, plus, I mean, if a strong performance continues, you'll have good cash generation internally also, and you've also raised this INR 300 crores in your [ QIP ]. And plus this INR 150 crores line in the fixed deposits. So I mean, is there something else we are planning which are not yet outlined, like maybe some inorganic expansion? Or I mean, is your new initiative on knitwear and Bangladesh not included in this number? I mean I just wanted some clarity on that.

No, no. So knitwear and Bangladesh are included in the INR 340 crores number. Coming specifically to CapEx, when we do a INR 340 crore CapEx, and let's assume that we do a ForEx -- revenue assuming a ForEx [indiscernible], and assuming that we have 90 days of working capital requirements, you need 1/4 of that, which is back to INR 340 crores of working capital requirement as well to handle this growth, correct? So effectively, when I talk of INR 340 crores of CapEx, I will need another INR 340 crores, INR 350 crores of working capital as well as we go forward. Now we could, of course, use debt for working capital, but we will also have to use our margin money and some amount of money that we will have to deploy for working capital requirements as we ramp up the business. In addition to that, when we accelerate the CapEx deployment or advance the CapEx deployment, initially, the free cash flow that we may have may not suffice for all the CapEx deployment. And that's the reason why I think we will need all the funds that we have at our disposal to ramp up growth. Obviously, if the opportunity arises, we will look at incremental growth avenues and hence, utilize the capital wisely. We will be very circumspect in deploying the capital, and we will make sure that the capital will be deployed only if we are convinced that the deployed capital yields the required rate of return. So to that extent, there will be a high degree of discipline in deploying the capital. But we are not averse to looking at incremental options over and above what we have indicated so far. This is -- what we have indicated is what we have internal visibility into for now. And whatever else is in the theoretical realm or in discussions are not here -- not outlined as of now.

Okay. Okay. Got it. And just secondly, I mean, any new additions in [indiscernible]?

So it's a great question. We are in -- we are caught between a rock and a hard place as far as this one is concerned. We do have active discussions going on with new customers. But we are in a dilemma to see how we onboard anyone -- any incremental customer as we don't have really capacity to offer. So it's a very difficult situation that we are in given our capacity constraints that we are operating. We do have customers who want to work with us. We do -- we also want to work with those customers, but unfortunately, we don't have capacity to offer.

The next question is from the line of Pulkit Singhal from Dalmus Capital.

Congrats on a good set of numbers. I just wanted to understand from a debt-to-equity ratio perspective, currently, I think -- I mean, at least in FY '21 and INR 133 crores on net debt and INR 340 crores of gross debt, how do we look at this ratio going ahead? What is the revenue [indiscernible] after having raised the INR 300 crores of equity cap?

So I mean as of 31st September, our net debt is around INR 217 crores. So with the available funds, we anticipate -- with additional INR 80 crores CapEx planned during this financial year, we anticipate this year-end, we will be ending up with a surplus of at least INR 50 crores is what we anticipate at a net debt level. Going forward, for the next 2 years, about INR 110 crores and INR 110 crores each what we are likely to spend on CapEx as well as the working capital requirement. So our net debt we anticipate in FY '23 to be around the INR 200 crores is what we anticipate. That's a peak level, what we project from the -- with the available expansion plans.

Right. Right. I was just trying to understand from a -- I mean this is based on current visibility, but obviously, there are various opportunities that come by. How do you look at the capital structure in terms of what is the ratio you are more comfortable with, if such an opportunity does arise?

Obviously, this really frees up -- there are limits available for us for -- to take care of any expansion plans that can come up apart from whatever we have detailed out. So this will give enough -- provides enough flexibility for us to really fund that. So to that extent, the balance sheet provides the support. So the net debt to equity will remain a bit low for some time to come until we bring on more CapEx or new ventures as we keep deploying them.

Right. Right. Secondly, on the -- I mean the cotton prices are up 40%, 50%, as you mentioned how the translation we had in fabric is happening. It's much lower at the fabric level. But obviously, I mean, if cotton prices were to remain at this level, that has to transfer sooner or later even into fabric prices and [indiscernible] level of contraction in margin. So when that happens, if cotton prices were to prevail at the current level, INR 60,000, INR 65,000 [indiscernible], do you think -- how much of the price increase could happen at the fabric level if that was to translate in the next 6 months or so?

So it's a very complicated question to answer and for us to fathom because there are multiple factors at play here, right? So not all -- cotton price going up by x percent doesn't mean fabric price going up by a similar x percent because not all component of fabric is a cotton, right? There are other clinicals and stuff like that, too. So as the value addition keeps happening, there are -- the percentage increases don't translate in a linear [ path ]. Second, fabric manufacturers or yarn manufacturers also buy cotton opportunistically at their lows and stock them. So these tend to be commodity. So for example, yarn price increase has only been about 20-odd percent. So why is that? Because they -- when the cotton prices are at their lows. So the spot rates are volatile, and you may find some prices vary. So when I say 40% is the September numbers that I mentioned, but YTD average, cotton price increases would not be this high. The current cotton inflation is mainly because of agriculture-related reasons, cotton availability in the U.S. and India and other places. So these volatilities do get tapered or tempered as we go up the value chain down to fabric. That's point number one. Second, there is also the brands which are telling the government, we'll also take a suitable cost regarding blends, et cetera, if one particular fiber is too expensive so that they can reduce the overall cost of fabric and hence overall cost of garments. So there are multiple things at play, which means that this volatility does not impact our business directly. Having said that, the directionally higher costs will be there, which eventually will have to be absorbed by our customers and pass down to end customers. So that's how it works.

Right. So based on your current CapEx, I mean, for the year broadly, how much does cotton contribute to your fabric costs in general?

Our fabric costs -- for example, our fabric purchases would amount to close to 40% of our revenue.

The next question is from the line of Jayant Mamania from Care PMS.

Congratulations for the great set of numbers. Mr. Ganapathi, can you tell us what is the cost advantage to India in terms of percentage of cost as compared to Vietnam and China? And to what extent we are disadvantaged compared to Bangladesh?

Okay. So when it comes to labor cost, India's labor cost is close to $160 per month, whereas China, again, it varies from close to interiors, but it will operate at about in excess of $250 per month. And Vietnam, again, big cities like Ho Chi Minh City and Hanoi are operating at $250. Interiors are operating at about $180, $190 or something, so on an average, say, about $200. So India is comparatively cheaper than China and Vietnam. Adjusted for productivity, they will have at least 15%, 20% higher productivity than India. So adjusted for productivity, India may come closer to Vietnam, though a bit short but still cheaper than China. So that's as far as the labor part is concerned. As far as the fabric and other raw material costs are concerned, there are certain elements where China will be cheaper because they have a massive textile ecosystem, which is highly efficient in terms of their productivity, cost of capital and cost of power being lower. They do have certain advantages there. So net-net, they do have their advantages, we do have our advantages. But we are more sustainable because our cost structures are still cheaper and their costs are going up. In addition, trade restrictions on China means that their costs will only keep going up -- cost of doing business will only going up. So net-net, I do see a strong advantage occurring for India. And hence, any fall -- any outflow of business from China, which will continue to happen, will seek destinations like India, Vietnam and Bangladesh. So any good player in India will certainly have an advantage to take over those business opportunities, and we are also doing the same. When it comes to Bangladesh, their cost structures are even lower than India. Productivity is as high. And I believe that Bangladesh has at least a sustainable business opportunity for the next 5 years or even longer. So Bangladesh will be a formidable country to reckon with from a cost perspective.

Can you tell us what percentage of cost will be India at an advantage as compared to Vietnam and China?

So as I said, I mean, from an EBITDA margin, we may come to about 2%, 3%, 4% advantage.

Okay. Okay. Okay. So looking at the robust order book and the concern on the manufacturing side, and we have started outsourcing from Bangladesh, how big this outsourcing can be?

So outsourcing cannot be big. Outsourcing is only to keep testing the waters. The -- it is only to -- only a step before setting up manufacturing in that location. So I don't foresee outsourcing as a business continuing for long or even being significant for us.

The next question is from the line of [ Malaisa Olof ] from [ Saan San LLP ].

Heartiest congratulations to Mr. Siva and his team for excellent results. Historically, we have a weak quarter 1 and quarter 2. In such scenario, these results are really commendable. Sir, my question to you is a little on logic that we have small, small facilities in Karnataka. We are also expanding in MP, then we are thinking of having facility in Tamil Nadu. So when I look at all these facilities, I just want to understand from you what is the thought process of the management to manage these small facilities at different, different locations, especially also with some of the requirements of ancillary facilities like embroidery, printing and all those things. So does it make sense to have bigger facilities at one location? Or you are comfortable managing and adjusting these ancillary facilities at smaller facility at different, different locations?

Okay. So obviously, if given a choice, we would like to set up bigger facilities. When I say bigger facilities, I mean facilities with about 2,000 people in one location. And that kind of reaches its peak of incremental marginal returns. We have gone for smaller facilities recently. Our existing facilities are, by and large, large ones. We have consolidated most of them. But incremental facilities, we have gone for smaller ones. For example, the 2 units that we set up in Karnataka, both are small ones, and they were done in response to an urgent need to step up our capacity. So we look for leased facilities. And when you're looking for leased facilities, you may not have the option of getting the one of your choice but an option of getting what is available at what best you could do with them. So given that scenario and given the imperative to bring up capacity at the soonest, we have taken appropriate decisions to go for smaller facilities in proximity to our existing facilities as Tumkur and Bommanahalli, both are not too far from Bangalore so that our ancillary facilities can -- ancillary support can still be extended from our Bangalore units. So looking at the circumstances, we have taken a specific call to go ahead with them. But if we are setting up our own larger units, for example, the one in Madhya Pradesh or future greenfield units, they will all be larger size. I hope I clarified.

Great. Great. So that's really helpful. And sir, my another question to Mr. Sathya. There is one write-off of INR 2 crores in case of some deposits or advances. So what is that? And we have incremental stock of about INR 107 crores in the current quarter. Does it relate to some finished goods which were ready to dispatch and couldn't dispatch because of container shortage or supply chain disruption? Or it is raw material and because of a hike in the prices, we have extra raw material? So just a little more light on stock available and this write-off.

Okay. Our inventory, what we carry as of 30th September is almost 98 days. There's almost 15 days over than our normal limits what we want to carry. As you said there, to avoid the supply chain disruption, we have received the material -- we have planned the material and received it ahead, and we are holding it. And that's the reason you see this 15-day stock buildup, which will be there. And it is...

Raw material. It is not finished goods.

No. Both raw materials as well as the finished goods. Whatever is inspected and clear, still not clear, is bought up there close to around 15 days, additional stock buildup is there. So this we anticipate to continue at least for until this financial year-end. And hopefully, from Q1, once the supply chain disruptions or supply system is normal, we anticipate this 15 days buildup, whatever happens additionally, we'll be able to unlock it. And the other one is -- with reference to this is the expected credit loss provision which we normally make based on certain advances, whatever -- some [indiscernible] advances and other accounts whatever have been made. But normally, if it passes the aging process, we provide for it and subsequently on collection, we have got it. And that's the reason that is provided. We anticipate that will come back into the P&L in the moment when it is realized.

Great. Great. Clarification, in the previous question, you said that there is no excess of RoDTEP incentive of earlier quarters are credited in the current year, right?

That's right.

That is correct.

Because in last quarter also, I think we estimated our benefits, and accordingly, we took it credit in the quarter itself, even related to quarter 1. So I was just thinking that is there any balance which is still left out because last time we did it on estimated basis, the exact percentage was yet to be declared. So I thought probably there will be some balance left out to be credited in the current quarter.

No, no. So to clarify, in Q4, we did it in that -- on that estimated basis. And we had some balance to be credited, which we did in Q1. But in Q2, we did not have anything because in Q1 itself, the RoSCTL policy had come out and status quo was announced. So we took the full credit in Q1 for the Q1 and for the excess of Q4, whereas in Q2, we have just accounted for whatever has accrued to us in Q2.

The next question is from the line of Prerna Jhunjhunwala from B&K Securities.

Congratulations on a strong set of numbers, sir. Sir, most of my questions have been answered. I just wanted to understand one bookkeeping question on the volume of sales done. So volume as well as some color on the product mix in the quarter in terms of casual wear, outerwear, et cetera, that you share generally.

See, the casual -- outerwear, we did 56%, casualwear 25%, bottomwear 13% during the quarter.

Okay. And volume of sales, sir?

Volume of -- one minute, I'll tell you. It's about 5.3 million, 5.3 million pieces [ Vietnam ].

Okay. 5.3 million pieces. Okay.

The next question is from the line of [ Ashish Oblankwa ] from [ Investu Investment ].

I'm listening to you for the first time. And so I could understand from the discussion that has happened that China Plus One is one big factor that is driving the demand momentum. And so I wanted to understand your thoughts on deciphering how -- because quite a few years, we have not been growing on the sales front. And suddenly, there is a demand surge and we are planning capacity expansion and things will look to be going in a very good direction. So can we [indiscernible] between what looks to be temporary in terms of demand factors and what looks to be a very, very solid base for the next 5 years so that gives us the confidence that we will be growing at pretty good speed over the next 5 years?

Okay. So just to give you a historical context. We -- this company has been at about INR 1,000 crores for over a decade until 2018. After that, we moved to INR 1,400 crores in FY '20. So we have exhibited an aggressive growth even pre-COVID. Then we stagnated during COVID in FY '21 when we fell down to INR 1,225 crores. And then now we are back on track trying to catch up with growth again. So growth has been in the DNA at least for last 3 to 4 years in this company. Now of late, our growth trajectory has accelerated. And what is causing that? It is simply that during the period of COVID, that is FY '21, we consolidated the supply from other suppliers who are competing with us while working for our existing customers. So our revenue -- our export revenue in FY '21 only dipped by about 9%, whereas our customers saw sales fall in excess of 20% for FY '21. So clearly, we took up capacity -- or we took up a higher share of our customers, and now when they are back with incremental sales, we are riding the curve with them on a higher platform or on a higher base. So we -- this onetime gain that we took in FY '21, which did not show up much in revenue terms, will now play out for the foreseeable future because we have got that incremental market share. Second, the incremental sales which we are seeing in 2021 versus 2019 may -- contributed by people not having bought garments for 1 or 2 seasons, and hence, there is some bit of excess buying or [ events ] buying, whatever you want to call it, and which may or may not be fully sustainable in the years ahead. It will settle down to a more normal growth as opposed to this aggressive growth. For example, when I look at '21 versus 2019, as I said, the retail store sales were up 6% in the U.S. and e-commerce sale was 40% up. So that's a very, very large growth that we are seeing over 2019, which is pre-pandemic year. But will these kind of growth rates be sustained? Probably not. Probably it will slow down to the normal growth rate. But then for us, having taken the market share and having brought in several new customers who today are knocking at our doors for incremental capacity, I don't foresee much of a problem from a growth perspective since we have the opportunity to grow with the new customers that we have brought on board as well. So for example, in the last 3 years, we brought on board about 7 new customers. And they themselves are currently at about 13% in terms of the capacity that they use of ours. So we do have an opportunity to grow with them. We do have an opportunity to grow with our existing customers as well by taking a disproportionate share. And we have an opportunity to bring on new customers with whom we are having discussions. So there is a combination of factors which are at play as well. In addition to all of this, the supply chain -- the supply side issues, which are businesses going out of China. For instance, if you look at China, the Chinese -- exports from China to the U.S. has fallen by about 10% in the last 3 to 4 years in terms of market share. So it has come down steeply and early benefits went to Vietnam and Bangladesh. But we are also seeing some incremental benefits occurring to us. So there is a supply constraint as well coming in from some of the large exporting nations, which will also work in our favor. So all of this means that we have the opportunity to step up and accelerate our growth. Now none of this will materialize if we do not continue to execute very well and make sure that we deliver on quality, on time, et cetera, which we have established ourselves in the market as one of the best players. So we have to make sure that we continue to do very well execution-wise, then we can take our claim for a disproportionate growth, which we are what doing.

So yes, I understood the entire context. So you said we don't see a challenge on the normal growth rate ahead and you can also have a disproportionate growth going ahead. So what would that range be in terms of normal and disproportionate put together?

So again, I would reckon at this point in time that, that range will be the speed at which we can do our capacity increase. So the rock bottom would be 15%, but then I don't think we want to be there. We would like to do much more than that and be far in excess of that. And we are looking at capacity augmentation to support our growth much faster than that.

The next question is from the line of Bajrang Bafna from Sunidhi Securities.

Congratulations for a strong set of numbers. Just to summarize what we are discussing for quite a couple of times. There are contrasting statements which probably we are hearing from you or maybe from the industry for last almost 6 to 9 months. So the basic and the simple question is that whether India opportunity has arrived or not because the government, on the one hand, has highlighted a couple of schemes, whether it is RoDTEP, RoSCTL, then MITRA, [ Parks ] and all these things, which are pointing towards a superlative growth for the industry. And the target which we are hearing is from $30 billion, $35 billion to almost $100 billion, which is almost 3x what we are today. And even the industry veterans, whether it is the graphene industries or [indiscernible], they are also accepting that we will be at least doubling in next 5 years. But when we hear from you, again, there are contrasting statements that the customers are knocking at our door and we are not able to supply and we are ramping capacity with the capacity constraint. And simultaneously, we are highlighting that this would be temporary also, it may not be some sort of permanent. We are still lagging behind Bangladesh in terms of our cost structure. So -- and the government is saying we want to make global giants. So this is completely confusing the analyst community. You might have, in last 3, 4 con calls, realized that the kind of participation that is coming for the textile companies is humongous, which you might have not seen maybe in the last 10 years or so, whether pre-COVID or during COVID. So this is perhaps somewhat sort of a whole sort of questions which are coming to our mind, and we are not able to deliberately think in the right direction that whether in the opportunity has arrived, and can this industry be growing the way chemical has been for last 5 years, growing in double digits and that can be sustained for next 5 years or not. So if you could simplify, I know I have put up a lot of jargon and sort of complicated statements from the industry veterans. But if you could simplify this in a simple answer is that whether India opportunities arrive, can this industry achieve this $100 billion or maybe even $60 billion, $65 billion in next 5 years or not. If yes, then what we are citing that we will double over the next 5 years doesn't gel with us. So like you said, we are investing INR 340 crores, which will double our turnover in next 4, 5 years. So if you could simplify this for us, it will be really helpful, sir.

So I don't see the contradiction in what has been stated so far. So I'm not sure what you are referring to. When I say the cost structure, they are the cost structures what they are, right? When I say that India -- Bangladesh is less expensive than India, that fact remains. Having said that, India still is cheaper than China and Vietnam, and China is 10x that of India's exports when it comes to apparel, even now. And that's a huge opportunity for India to take advantage of, and India is taking advantage of. The fact that China market share is falling pretty steeply over the last 3, 4 years is also indicative of the fact that the opportunity segment for India is very, very large and will continue to remain large if this trend continues. And in every possible angle, it looks like the trend will continue. Demand -- end user demand is extraordinarily robust, that extraordinarily robust, maybe top of 40% growth in e-commerce and all, that may not be sustainable is what I'm saying. But then the growth is still high. All said, when we talk of a huge growth for Indian textile industry, that will remain. That is for sure. And players who are good at execution will be able to get a fairly lion's share of that growth. I hope that's understood. I -- coming to specifics on $35 billion, $100 million, I mean, we can talk whatever numbers we want, and there are a lot of components there. When we talk of $35 billion, we're talking of entire textile exports, including fabric, yarn, et cetera, et cetera. Now when I look at apparel exports, I feel that there is good growth opportunity available for India. Good players or big players like us can see disproportionate growth going forward, and I can see that happen at least for the next 5 years.

Got it. Got it. I think this satisfies all doubts which are in the minds of all the analysts. So -- but sir, just one thing, which is if we see our investment targets for next 4 years, which you highlighted, INR 340 crores, which can generate another, let's say, INR 1,500 crores kind of turnover, and we are already at that number perhaps with the current run rate with our existing capacity. So still, we are talking about just doubling the number over the next 4 years. So what can change this hypothesis probably which we are making right now?

Okay. So the few things which can change is that we may be able to extract an asset turn a little more than 4x. That's point number one. Point number two, we may also do more CapEx than what we have indicated as we go forward. And as we get into the rhythm of setting more capacities, we may accelerate some of the expansion plans and do much more. So for us, we are not limited by the numbers that we are indicating at the moment. If I see an opportunity to grow or get incremental business over and above what we have said, that is definitely on the table, on the radar, and we will take it up.

The next question is from the line of Venkat Samala from Tata Asset Management.

Sir, just wanted to understand, is there any progress on the INR 150-odd crore fixed deposit that was frozen for us?

Okay. Sathya, do you want to answer that?

Yes. We have already initiated the -- initiated actions with our private banks. Private banks have sanctioned the loan facilities. So we are in the process of migrating in this quarter itself. We expect to complete the entire excess by this quarter. If [indiscernible] be lower, the fixed deposit release can happen between December to January is what we anticipate at this point of time.

Okay. Okay. So by the time we have the next earnings call, probably all of that capital will be released, right?

Yes, we hope to get it done.

Understood. Understood. And one last question from my side is now that you're moving to this new MP facility, till now, we've been predominantly a southeast player, right? So do you foresee any risk in terms of managing a different pool of labor than what we used to previously or any other supply chain risk because we may be working with a different ecosystem of suppliers while we are manufacturing there?

No. So there is no supply chain-related issues because we work with suppliers pan-India as well as global, and those suppliers only will continue to support our Madhya Pradesh unit as well. So there is no change on that front. Yes, of course, it will be a new geography and a new labor pool. We are not daunted by that. We have already gone into several new locations within south, and we have seamlessly managed those. We do have the talent, the depth of leaders within our operations sites. We've created that capacity so that we are able to handle the new location like Madhya Pradesh. And Madhya Pradesh is a very conducive place also for doing business. So I don't anticipate any problem from that perspective.

Right, right. And just as a follow-up for that, and not just restrict it to Madhya Pradesh but more in line with whatever our capacity expansion plans are. So how do you think about recruiting and training new employees in anticipation of our capacity expansion?

So what we're doing is we are working with some training institutes so that the people who are somewhat trained in their training setup are being given preference to -- preference for recruitment. So we have actually recruited about 4,000 people in the last quarter, and we are continuing that growth as we go forward to handle incremental business. So we are doing that. We do have some amount of labor challenge coming in the south. And to that extent, we are also seeing if we can get some labor force from Orissa or some other places where there is some labor available. So all of that is work in progress. This is only to meet the incremental or delta wherever there is some amount of shortfalls. But by and large, our focus continues to be to see if we can get the labor pool from in and around our factories, working in tandem with training institutes, which will train some of those workers before we put them. Once they are internally recruited, we put them through a 21-day training before they are put on the job for production.

The next question is from the line of Dhruv Shah from Ambika Fincap.

Congratulations on a really good set of numbers. Sir, I just have one question that -- you alluded that a few of your orders you had given on job work. So why don't we take new orders from a new customer and bring them on board and give it to you on job work? I just wanted some clarification on that.

So there are several contractual obligations which come in the way of doing that. Sometimes, like pandemic, we may get exemptions to our contractual obligations and we may be permitted to do something like this. But in the normal course of business, we're not allowed to outsource or subcontract the work that is given to us. And there are several reasons for it. The subcontractors' own quality standards, workers' safety standards may be in question. Their units may not be compliant with these norms of the -- with the international norms. And we cannot 100% assure that whether they are paying fair wages to their employees. So there are a lot of constraints that we may have in terms of adhering to global standards when it comes to ensuring compliance with outsourced suppliers. That's the reason why, as an industry, we don't do a lot of outsourced work. It's fraught with a lot of risks going forward.

Understood. So in apparel, job work is strict, no, in general?

So apparel for international business is largely -- is a no. For domestic business, that's not a problem at all.

The next question is from the line of V. P. Rajesh.

Just a quick question. Are you seeing your customers also increase their prices? Or are they still far away from starting to [indiscernible] their prices?

Very good question. I keep pushing this all the time that prices have to increase. Yes, they're not dropping prices for sure. There is a minor price correction that we are seeing in some of the markets, which is a really good sign. We will have to wait and watch how this Christmas season sale goes and see if this year's pricing is -- how is this year's pricing vis-a-vis last year's pricing. That would be a great indicator. If the pricing to the end consumer goes up, then it's excellent for the entire value chain as some amount of inflation can be absorbed by the end consumers. I am keenly looking forward to it.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you so much for attending the conference. I am very confident that Gokaldas Exports can continue to grow and capitalize on the opportunities that are available in the market. The textile space is growing in the country, particularly because of good demand flow from the Western market. Many of those large buyers from the Western world are increasingly looking at India and other countries as an option to diversify away from China given that they have a fairly huge exposure to purchasing from China. And given the geopolitical risks, they are looking at options, and we figure favorably. Given that we have an excellent execution track record, we are in a good position to capitalize on that sentiment and take advantage of the available opportunity to grow. We are capacity constrained and continue to be, and we will do our best to unlock our capacity, which will yield incremental growth while we continue to focus on relentless execution excellence. So that's the situation we are in. And I foresee that for the immediate foreseeable future, about 3 to 5 years, the industry opportunity will be robust and strong and will -- this will mean that people who execute well will have a good opportunity going forward. Thank you so much.

Thank you. On behalf of Gokaldas Exports Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.