Himatsingka Seide Limited (HIMATSEIDE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to Himatsingka Seide Limited Q2 FY '22 Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Prerna Jhunjhunwala from Batlivala & Karani Securities. Thank you. And over to you, Ms. Jhunjhunwala.

Thank you, Neda. Good afternoon, everyone. On behalf of B&K Securities, I would like to welcome you all for 2Q FY '22 post results conference call of Himatsingka Seide Limited. Today, we have with us the senior management, including Mr. Shrikant Himatsingka, Managing Director and CEO of the company; Mr. K.P. Rangaraj, President, Finance and Group CFO; and Mr. Dilip Panjwani, Senior Vice President and CFO, Strategic Finance. I would now like to hand over the call to Mr. K.P. Rangaraj, for the initial comments. Thank you, and over to you, sir.

Thank you very much, Prerna. Good afternoon, ladies and gentlemen. On behalf of Himatsingka, we would like to extend a very warm welcome to all of you participating in this Q2 FY '22 earnings call. At the outset, hope you all had a great season of festivities after a long period of lull and you and your families are staying safe. I would like to -- I'll firstly take you through the business update followed by a financial performance review. And after that, we open the floor for question and answers. I start with the business update now. The demand for home textile products continues to be buoyant across geographies and categories. H2 FY '22 order book remains strong. The capacity utilizations for all our manufacturing facilities during the quarter ended September stood at the four as follows: Shaping division stood at 81% against 80% of the previous quarter; Terry Towel division recorded 71% capacity utilization against 66% in the previous quarter; Spinning division recorded 101.5% and the previous quarter stood at almost the same. During the quarter, our revenue streams from brands stood at INR 574 crores versus INR 535 crores during the previous year and INR 582 crores during the previous quarter. Inflation on the raw material, energy and logistics funds are in adverse impact on the operating profitability for the quarter while we partially mitigated the impact with revenue growth and price increases. We continue to focus on price balancing to address inflationary impacts. We expect these inflationary pressures to continue in the second half of FY '22 as well. The debottlenecking of the Sheeting and Terry Towel plants are being undertaken and expect to be commissioned during H2 of FY '23. I now move to the next section, which is comments on financial performance for the quarter as well as for the half year. The consolidated total income for the current quarter stood at INR 816.21 crores versus INR 659.55 crores in the previous year and INR 784.56 crores in the previous quarter. This is on a like-to-like basis. This represents an increase of 23.8% year-on-year and an increase of 4% quarter-on-quarter adjusted for the RoSCTL of INR 35.32 crores, which we recognized in the previous quarter. In addition, we lost approximately 3% of revenues during the current quarter on account of logistical congestion. The consolidated EBITDA for the quarter was INR 144.55 crores versus INR 96.9 crores in the previous year and INR 127.83 crores in the previous quarter. This is on a like-to-like basis. Consequently, the EBITDA margin stood at 17.7% in Q2 compared to 14.7% in the previous year and 16.3% in the previous quarter on a like-to-like basis. Despite inflationary pressures on EBITDA margins, our EBITDA margins improved quarter-on-quarter on a like-to-like basis due to higher price realizations and higher capacity utilizations. The consolidated PAT for the quarter was INR 48.03 crores versus INR 3.81 crores in the previous quarter, and a PAT of INR 37.57 crores in the previous year -- in the quarter ended March '21, sorry. I now move on to the consolidated financial performance for the half year ended 30th of September. The consolidated total income for the half year ended 30th September stood at INR 1,636 crores versus INR 842 crores in the previous year, which translates to an increase of 94.1%. The consolidated EBITDA for the half year ended was INR 307.69 crores versus INR 16.18 crores in the previous year, which translates to an 18x multiple. EBITDA margin stood at 18.8% in the current -- in the first half year versus 1.9% in the previous year. The consolidated PAT for the half year ended was INR 155.72 crores with a loss of INR 135.98 crores in the previous year. I now move on to the debt profile. The consolidated gross debt as of 30th September stood at INR 2,681 crores compared to INR 2,566 crores at the end of the previous quarter. The total term debt stood at INR 1,644 crores and the working capital debt stood at INR 1,037 crores. The cash and cash equivalents stood at INR 154 crores at the end of the quarter. Consequently, the company's net debt as of the end of the quarter stood at INR 2,527 crores as compared to INR 2,405 crores as of the previous quarter. The increase in debt is on account of accumulation of export incentives and enhanced working capital account of inflation and revenue growth. We expect the collection of export incentives during the second half of the year as stabilization of working capital requirements to negate the impact they have had on the net debt during the first half of the year. With this, I would like to complete my update. We'll be happy to take on your questions now. I would like to hand over to our Managing Director, Mr. Shrikant Himatsingka. Over to you.

[Operator Instructions] The first question is from the line of [ Ritesh Gandhi ] from Discovery Capital.

I just wanted to understand is that -- how is our ability to look -- actually, pass on the [ RN ] increases to our clients? How long is it going to take? And you had indicated the entire H2 will have impacts on the profitability. So if you could just give us the revised guidance for effectively where you see EBITDA margins going.

Thank you for your question. No, what we are saying is -- so we've always maintained that in this industry, if there is -- if the industry is faced with unprecedented inflation levels as it is facing now, it does take a couple of quarters to pass on meaningful increases as far as this industry is concerned. And so we are in the process of doing so. We didn't have the benefit of any increases during the first Q. We've got some increases during the second Q. And as we move progressively into H2, we should see more of that coming in. So I think H2, as things stand now, will continue to see us passing on the raw material inflation on to our clients, and that should be something that we witnessed during H2. At the same time, we are being a little cautious on the inflationary sort of -- as far as on the inflationary front, and we feel that these inflation is here to stay, unfortunately, during the second half of the fiscal. And the impact of which, we will try to continue to mitigate through better pricing vis-à-vis our clients. So all in all, that's what we see. And we should broadly expect to hold our EBITDA margins during the second half of the fiscal as things stand now. Of course, inflation -- the inflationary movement could see swings. But the way we are looking at it at this point is we continue to pass on pricing, mitigate the impact as far as possible of raw material inflation and hold EBITDA margins range bound to where we are at this point.

Correct. And the other question, sir, was with regards to if you could highlight your utilization levels across products. And if you could also, along, throw some light on the demand environment. Obviously, demand over the last 6 to 9 months has been extremely robust. Is this expected based on your existing dialogues and order books to kind of continue into H2 and beyond?

Yes. I mean, look, fundamentally, we don't see anything long as far as the demand environment is concerned. It's robust. I think the inflationary sort of [indiscernible] is going to be short-lived because either it will be largely mitigated by pricing and/or some softening on the inflationary front. So I think the demand outlook, as I said, looks buoyant. The inflationary impacts won't last long. The fundamental nature of the way we have petitioned remains strong, and we will continue to look at enhancing our utilizations going forward. That's how we see it. We've also mentioned the fact that our debottlenecking initiatives are underway and should be ready by H2 '23. So Himatsingka is on track to expand its capacities, both on the sheeting and towel plants. And the short term sort of volatility on the inflation and the logistical congestion funds I think will be handled by the strategies I outlined. And one thing I'd like to mention, other than price enhancements, growth, in itself, will be a mitigation measure as far as we are concerned.

All right. And on the -- so -- and on the -- actually, I mean, the volume front, do we expect any growth happening into H2?

Yes. With the increase in utilization levels, we see growth happening during H2.

The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.

Sir, my question is I think in on the margins. As you mentioned that raw material price pressure will continue and you have been taking price integration, some bit of impact would be seen in quarter 3 and quarter 4. But if we consider the base quarter, the operating -- the EBITDA margins were somewhere around 22-odd-percent. So considering that dip on year-on-year basis, there would be a dip in the margins. And secondly, should we also anticipate margins to be a little bit lower on the sequential basis because first half margins -- EBITDA margins were around 18%. So should we expect some bit of deceleration in H2 and once the raw material size stabilizes, albeit improving capacity will further improve?

We think that the EBITDA margin should be range bound going into H2, as I just shared at this point. Again, there could be vagaries on the inflation side, but the way we are looking at it at this point is the EBITDA margins going into H2 should be range bound from where we are today. And we will continue to focus on price increases and enhanced utilization to drive growth -- that will drive growth and, in turn, mitigate some of the inflationary impacts. Once we are done with dealing or once the intrinsic model is aligned to the new levels of raw material prices, our normal EBITDA margins that one seen as far as anything is concerned of in the region of 20% to 22% in that package will be back on the table. Unfortunately, these levels of inflation is not something that we predicted, now could we see it coming. But once we have done dealing with it in terms of mitigation, we should see our normal EBITDA margins come back.

So on the debt front, any particular target that you would like to show on that you are planning to reduce your debt by some crores over the next 2 years? Any debt reduction plan if you could specify?

Yes. Our focus on deleveraging will continue. Unfortunately, during the first half of this year, we've had some increase in net debt for the reasons that we've outlined. We have seen some congestion on the export incentive fund, which has caused some working capital movements. And in addition, we have seen congestion inflation play out. Y-o-Y revenue growth has also had some incremental pull on working capital. So all of these factors have essentially required some working capital debt enhancement during the first half. Most of these impacts, hopefully, will correct during H2 at some point and our deleveraging team will continue. The run rate of deleveraging should be in the region of approximately INR 200 crores, INR 250 crores a year in a normal fiscal, somewhere to that tune is what we see. Of course, that's subject to the inflationary sort of buckets being under control.

Right, sir. Right. And one last one, with this debottlenecking, by how much we should expect the capacity expansion in both of your segments by FY '23?

So Sheeting, we are looking at increasing our capacities to 108 million meters per annum. And in our Terry Towel plant, it will stand -- enhance to 40,000 tonnes per annum.

[Operator Instructions] The next question is from the line of [ Rosham Shah ] from Ares Capital Services.

I had two questions. First one is from an industry perspective. In the home textile, we are seeing both large and small players, everyone is adding CapEx and everyone is optimistic on the demand scenario. So 2 years down the line, how do you see this full capacity being observed as you see some pricing pressure? Just trying to understand, is this full CapEx demand driven or you'll see pricing pressure going forward when this full capacity of Indian players come on stream?

Well, it's difficult to take a 2- to 3-year outlook in terms of what will happen at that point in time. But from there, we are -- from what -- as far as we are concerned, we are looking at this capacity of this -- that are largely demand of it.

Sir, sorry, to interrupt you.

As far as...

[indiscernible] mutual line from your side, [ Rosham ]

As far as Himatsingka is concerned, these additions are being looked at because of the demand pull that we see in our home textile solutions center. And I think given the various macros that are playing out, there should be adequate demand to absorb these capacities. There could be movements from quarter-to-quarter, no doubt. But directionally speaking and architecturally speaking, these -- as far as Himatsingka is concerned, we see that this increased capacity should be absorbed by both international and domestic demand.

Okay. Sir, one more question. So on the margin side, if you can give break up, how much is due to raw material inflation? How much it due to other costs in terms of basis points impact in margins?

I think, essentially, the impact of the EBITDA from payment, essentially from raw material and from energy, both of these funds. We've also outlined the fact that, approximately 3% of revenues, we were unable to clock because of logistical condition, which added to the margin valuation. But essentially, it was raw material and energy.

Okay. So it'd be fair to assume that more than 200 basis points would be due to raw material costs. Would I be wrong in assuming that?

Yes. Bulk of it is raw material, yes. And even in energy plant, It's raw material, too, yes.

The next question is from the line of [ Bhiran Jira ] from Standard Charter Securities.

Sir, can you help me with the capacity utilizations in the current quarter for Sheeting, Terry Towel and spinning divisions?

Sheeting was at 81%, terry Towel at 71% and spinning was 101.5%.

Okay. Sir, one more bookkeeping question. With respect to the debottlenecking capacity that we're undertaking in the next 12 months, what is the total spend that you would have to do that -- for both the Terry Towel and Sheeting division both together?

Well, Himatsingka has an organic CapEx requirement of approximately INR 60 crores to INR 80 crores every year. And I was particularly sort of stressing on the fact that whatever debottlenecking initiatives we are undertaking will be within the realm of our organic CapEx budget over this time. So this year and next year's budget on organic CapEx will be sufficient meet to more or less meet debottlenecking requirements.

Okay. Okay. That's helpful. Sir, if you can help us on -- last 6 months has been very tough on the working capital side. Whole of the cash flow generation has been negative because of our -- realization is getting stuck in working capital. If you can help us, is this a new normal or we would be realizing everything in next 6 months and getting back to the whole working capital levels?

Well, we think the worst is behind us, and we should see the unwinding of all this during the H2 of this fiscal. Of course, my statements are subject to issues not dropping up on the COVID front and allied issues. But other than in those scenarios, we see that a lot of these conditions should ease up during H2 FY '22.

Sure. So just to follow up on this, sir, it would be very great that if everything eases out and unwind in the next 6 months. As for rough calculations, we would anyway generate around INR 500 crores, INR 600 crores kind of cash flow from operations in FY '22. And we just require, say, INR 60 crores, INR 80 crores as a CapEx requirement as you alluded. So what would be the balance capital utilization that you plan to because debt leverage -- deleveraging is just INR 200 crores, what you have been guiding. So where is the balance? Cash flow would be utilized and the capital would be utilized for the business.

What we can do is we can take you through the details off-line because that will take us -- so that you can sort of get your explanations to your satisfaction. Please reach out to us off-line, and we'll take you through how to look at the math on this front.

So definitely, I'll get back to you on the offline. Just on -- if you can help us on what's the capital allocation plans in case -- so we are very clear that INR 60 crores, INR 80 crores is the CapEx requirement. Other than that, where do we plan to use the cash flow that we're going to generate because we have been done -- we have done the capacity -- large capacity additions few years ago, and we were ramping up. And this is the time when we are reaping out a good, healthy cash flows. So what are the plans for that utilization of the cash flows?

It's nothing other than this. So there is a organic CapEx. There is principal and interest after the operating cash flow would go to address and organic dividends and tax. These are the only buckets there are. So this is what it would go to cover. And the specifics of this, we'll be happy to understand what you have in mind and take you through in greater detail offline.

The next question is from the line of [ Sheman Joshi ] from Centrum PMS.

I wanted to understand if you can give us some details. So one is over the RoSCTL benefit, which has been extended to 2024. But certain products were not covered under RoSCTL. They were going to be covered under RoDTEP. So whether we have recognized any equal benefit for the last 9 months during the quarter. If yes, what would be the quantum of the same, sir?

I don't believe we have recognized anything of that sort.

Okay. Because I remember reading in your -- one of your previous result of this that since we are not notified yet, we have not recognized it under RoDTEP, whether it was due on which products were covered. If you can give some details.

I don't think there's anything of that need to worry about.

Okay, sir. Also, sir, from an accounting point of view, your normal RoSCTL benefits, they are forming a part of your revenue from operations. Am I correct? Or you accounted on a 6-month basis or you account it every quarter on an accrual basis.

It's accounted every quarter as an integral part of total income revenue from operations.

Okay, okay. That is fair. Second question, which I wanted to understand was when I compare your results versus the peer results, specifically in the home textile space, we have seen quarter-on-quarter many. The large ones posting more than double-digit growth, if I have an adjusted growth for Himatsingka stand at around 4% on the top line. So could you tell us please the ones of having some better capacity at the moment where others are at already 90-plus percent utilization because we have recently ramped our capacity. So what is it that our revenue growth was in single digit, rather I would say only 4% compared to others which have been at double digits? Or is it a quarter-specific phenomenon and we expect the revenues to see stronger growth going ahead?

No. Just my own observation on this is, first of all, I can't comment on what my peers did and what...

When I'm looking at home textile -- sorry for -- I think specifically about peers, but because this industry is operating mainly in exports market and for us, as the investor community, it will be easier for us to compare on that front. We have been seeing strong growth in Himatsingka. And so does this pertain to this specific quarter? Or it is -- if you can just highlight some points from here?

I mean, I cannot comment on the sequential piece. Y-o-Y, we have grown approximately 24%, right? And we are pretty pleased with that performance. I would request you to decode the numbers of other players in the home textile space because they could be operating in segments, which we are not and so on. But we thought that the operating revenues were satisfactory for the quarter. And as I said, our order books for H2 remain buoyant at this point. And I don't see any concern for us from a standpoint of sequential growth or anything of that nature. I think we are holding stable, and we are focused on making sure that we are addressing the inflationary impacts that have risen during the last 6, 7, 8 months and making sure that margin profile is back on track.

Okay. And last from my side. Regarding your Sheeting capacity utilization. So before the debottlenecking, additional capacity kicks in from the second half of next year, as you have estimated. How do we expect the demand scenario that you're facing, you are witnessing right now? When do you expect the Sheeting capacity utilization to be going in the 90%, 95% range, closing to peak capacity utilization? I'm talking only about the current capacity, what's the post debottlenecking capacity?

I think going into the rest of H2, we should progressively see some increases on the utilization front, as I had outlined earlier. And the fresh capacity that we'll be bringing on stream will again progressively be placed as the way we see things at this point. Please do remember that a lot of these capacities in the industry are also geared for peak requirements that come up during any fiscal. So we are mindful of that as well, and we are equipping ourselves to make sure that we have the right quantum of peak capacity availability going forward. So basically, from our current capacities, we will continue to look at placing and enhancing our utilization levels. And once our debottleneck capacities come on stream, at this point, we are forecasting H2 FY '23. Those incremental capacities, as someone earlier asked, we feel will be absorbed by the demand that exists both internationally and domestically. And we will also keep additional capacities available for peak demand.

That's really fair. And then one last small question, if I can just squeeze in. Just in-house Spinning capacity. What kind of -- so it caters to what percentage of your total yarn requirement, if you can just say. And how much is knit from outside?

At this point, it caters to approximately 25% or lower.

The next question is from the line [ Aman Sonthalia ], individual investor.

Sir, my question is that, recently, we have started doing business with Walmart. And during the month of January, I think we have acquired Disney. So how this business can be scaled up in the future?

Well, I cannot specifically comment on either one, [ Aman ], but large clients typically continue to grow, and there are several funds on which we are working on that. And as far as Disney is concerned, it's outlined the fact that the revenue stream will start coming in this year. Is it going to create a very large additional revenue streams? No. This was -- this will help us maintain our organic growth rate and strengthen our juvenile brand portfolio. So I think all in all, if you see, currently, we are clocking revenue -- annualized revenue rates -- first half revenue worth INR 1,636 crores, which has seen some strong organic sort of movement. I'm talking for Himatsingka specifically. And all these initiatives, be it geographic expansion, product category expansion, enhancement of capacity utilization at our Terry Towel plant onboarding new brands such as the Disney portfolio, Himatsingka continues to lead the way in global traceability solutions in the carton space. So all of these initiatives have helped us keep our revenue momentum, and that's what we think will continue going forward.

Sir, recently, I have heard an interview of [ Mr. Pizgo ], and he mentioned that very soon India is going to sign FDA with the EU and most of it with the U.K. also. So how big the story is for the home textile sector?

Well, in addition to the China Plus One team that seems to be playing out, if the government does succeed in signing FDAs with these jurisdictions, it will definitely be -- it will definitely give a flip to the home textile sector. Now how much of the enhanced revenue streams will filter in immediately and how much will it take? A little while that time will tell. But I think that will be good news for the industry, and we'll continue to aid capacity utilization efforts by the industry if that were to happen.

And sir, how much is the export incentive we are yet to receive from the government?

I cannot comment on the number, [ Aman ]. But the government has not been dispensing export incentives, i.e., RoSCTL since the month of January.

Okay, sir. That, I think, is quite true, I think. And sir, one last question that since our plant is not running at full capacity and we are planning to expand the capacity by around 70%, if we take on an average, let's say, from Terry Towel and Sheeting, so whether we are confident enough that we can fill that quantity going forward.

No. We are progressively ramping up our Terry plant. Please the mindful of the fact that the Terry plant was commissioned during October '19. And 4 months later, after commissioning, we had to face the shutdown due to the pandemic. And then basically, we have ramped up our plant from a 0 to a 71% in about 17 months or less than that of effective running. So I think the underlying momentum of the ramp-up of new facilities is reasonably strong. And by the time those capacities come on stream, we are confident in progressively ramping that up as well. And as far as Sheeting is concerned, we have about 18%, 19% of headroom at this point, which we are working on placing. And the additional capacities that come onboard will also be progressively placed, as I said earlier. These are not things that can be placed overnight, but now can you build capacities in small increments. So you have to build capacities in slightly larger increments and place them progressively. So the rest of the headwind that we have on Sheeting, we are confident of hitting the -- going forward. And the fresh capacities that come in place, we feel that the global demand alignment is such that there would be capacity absorption progressively on that front as well.

And sir, last question is whether we are planning to enter any other product in the home textile sector, as I think whether we are in the fashion bedding also, sir, textile and utility bidding?

Himatsingka operates broad cross-section of product categories in the home textile space, probably amongst the broadest in the industry. So both our Sheeting and Terry Towel plants operate several -- operate in several subcategories. And on the Sheeting plant, we operate fashion bedding, we operate in the utility bedding space, we operate in the core betting space, we operate in the comfort bedding space. And we are constantly looking at enhancing our product offering adjacencies vis-à-vis global clientele. And the same whole goods in our Terry Towel plant as well. So we operate in the core towel space, the kitchen towel space, the beach towel space, the seasonal offering space and various other products, subcategories that go into catering to nuances of demand. So I think as far as Himatsingka product portfolio is concerned, it's broad and deep and it is strong from that standpoint. So while we'll continue to look to add to our adjacencies, we are pretty well positioned at this point.

The next question is from the line of [ Agatia ] from [indiscernible] Capital.

Yes, am I on?

Yes, sir.

Yes. My question is regarding the debottlenecking. Firstly, when did it exactly start? Which month will we start the debottlenecking CapEx that we have to do?

As we've said, that we are currently scheduled to commence during the H2 of '23. We'll keep all stakeholders posted on the development. We are taking it organically. There are no hurry to commission it. So it's currently scheduled for the second half of '23.

Right. So I mean, I was asking that from a perspective that I think in the last 2 [ quarters ] ago, you mentioned from the day we start the CapEx where -- so we start working on the debottlenecking, it takes 6 months. So I'm assuming you're going to start in January if it's going to take 6 months. Is that correct?

Yes, 6 to -- from the day we started, it could take anywhere between 6 and 10 months, depending on what the underlying asset is. But -- so when we say H2 '23, it's not all going to happen on the 1st of September, so to say. It will progressively kick in starting that time.

Okay. And my second question is more of a bookkeeping question. You said, I think, you recognized INR 35 crores of the RoSCTL last quarter, correct?

That's right.

And that is the revenue?

That's right.

Okay.

So excluding that, the sequential growth was approximately 4%.

Sorry, just one question. That INR 35 crores now was recognized last quarter. How much of that could have been recognized this quarter? And I'm just trying to make sense of it because if we recognize all of it last quarter, then how do I look at the group?

No, it's recognized every quarter. These are export sort of incentives that are approved on how much you export. So every quarter, you would approve your share for that quarter. It was just -- Q1 was an exception because the government was silent on its policy, which was made clear during the first quarter. So the first quarter recognized benefits that belong to the first quarter as well as Q4 FY '21.

The next question is from the line of Deepak Poddar from Sapphire Capital Partners.

Sir, I just wanted to have some clarification. You mentioned that once your cost mitigation is done, you expect normal EBITDA margin of 22%. Is that what you expect coming from first quarter of FY '23? Like -- so what's the time line when you expect this medication to get over completely?

It's a difficult question to answer, Deepak, because it's trying to -- it's -- we are unable to predict inflationary movements. We don't know how long this inflation is going to last, but most -- we are working on pricing strategies that help mitigate this inflationary impact as well as driving growth to mitigate this impact. Would it be reasonable to assume that, over the next 6 months, a lot of this would be mitigated? I guess so. But if there's another bout of inflation over and above what exists today, that's a fresh challenge that will present itself. So I think it's reasonable to assume that in the next 6 months, this will be sort of addressed largely speak.

Yes, yes. Sure. Understood. And anything on the growth? How do you see growth next year?

As we said, so we are currently seeing growth over 20 months. And we'll continue to see the utilization levels rise, both in our Terry and Sheeting plants, which will drive growth during the next fiscal as well. In addition... [Technical Difficulty]

Hello?

Participants, please connected while we reach the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected.

Yes. So as I was saying, the growth will come in from the existing headroom that we have in capacities, some cash capacity that we're bringing into debottlenecking initiatives during the second half of next fiscal. And of course, some value growth that is coming from the price increments that we have to undertake in order to mitigate the inflationary impacts. These will be the three broad markets that will drive growth as I see.

Yes, yes. Correct. So what sort of price hike we are looking at overall maybe until next 6 months and already we have taken? Would it be in the range of 10%, is what would be fair, I think, to assume?

I'm sorry. I can't comment on specific price rise sort of focus numbers. But I mean, the inflation is pretty heavy. So we would have to look at reasonable price hikes to be able to mitigate this impact. So the number you mentioned plus/minus would be reasonable, generally speaking.

Yes, yes. Around that range. And even next year, volume growth of 10% to 15%, would that be also a reasonable number to assume?

We do not give guidances on that. But yes, given the headroom we have in capacity and some fresh capacities coming on stream, we'll directionally be looking at enhancing our volume placements.

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

Sir, I wanted to understand the demand scenario with respect to many geographies. How are being -- because your presence in U.S., Europe, whether Eastern -- Asia as well. So how is the demand panning out? And how is the demand across brands and private label retailers? So these two aspects on the demand should help us understand the current scenario.

I think demand across geographies, channels, private label platforms and branded platforms remain pretty encouraging. So we don't think that there is any worry on that some. I think what's important is the price increase has to fit. It doesn't take very long for us to make this 81% utilization to 100% or 98%. It won't take very long. But we are making sure that we are adding utilization that is profitable and is something that we desire to have. So there is demand. The industry is grappling with -- at least, we are grappling with the inflation. And I think our focus is making sure that we get the equation right between pricing and capacities. So I don't see any issue on the demand front. I think what I see is just over the next -- in the short term, addressing this issue on the inflation.

Okay. Sir, the next question would be demand only. China's GSP status has been abolished by various countries, including Europe. So do you feel that is a great opportunity for us for further penetration in Europe?

I'm sorry, Prerna, your voice...

Okay. Am I audible, sir?

Yes.

Yes. So GSP status of China has been removed last weekend. I think December will be the last period when they don't get GSP benefits. So is it a great opportunity for Indian textile exporters, including Himatsingka, for further deeper penetration into Europe?

We are in the process of examining all the math that goes around the development, Prerna. So I think we'll be better positioned to answer it offline once we have done a little more in research on this. But Prerna, I'll say all of these developments, including the other things like the FDA that Aman spoke about will directionally point to opportunities for Indian textile players to capitalize on going forward.

The next question is from the line of Mr. Resham Jain from DSP Investment Managers.

So sir, just one question on the inventory front. At the retailer level, because of inflationary headwinds, typically, retailers try and mitigate their overall inventory in the system. At the same time, there are logistical challenges. And most of the retailers want to keep a higher inventory at this point of time. So how are you seeing the inventory situation with [indiscernible] currently, let's say, normalized pre-COVID period? Are they higher side, lower side? How are the restocking levels? Some thoughts on the inventory situation and the retailers.

My thoughts on the inventory situation, the retailer front ratio, it's a fair question, but it's not something that is a trend one can speak of, at least vis-à-vis the clients we deal with. I mean, pretty much every client is with its own -- has its own situation. So some clients are on the upper band of inventory levels and some have the inverse issue. So unfortunately, there is no common thread that we can see on that front.

Okay. So overall, on an aggregate basis, the inventory should be similar to pre-COVID levels. Is that a fair thing to generally anything?

Resham, let's take that offline because there's a lot of analytics around that, which one would have to delve into sort of arrive at a reasonable assessment. But I'll be happy to address that in greater detail.

I now hand the conference over to Mr. Shrikant Himatsingka for closing comments.

So as always, thank you all very much to take all this time and be a part of this conference. We do hope we have answered all your questions and queries. If there's anything that's remain unanswered or you would like greater clarity on, do reach out and we will be happy to assist you to the best of our ability. Thank you all again.

Thank you very much. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.