Himatsingka Seide Limited (HIMATSEIDE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Himatsingka Seide Limited Q2 FY '24 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Prerna Jhunjhunwala from Elara Securities Private Limited. Thank you, and over to you, ma'am.

Thank you, Yusuf. Good afternoon, everyone. On behalf of Elara Securities India Private Limited, I would like to welcome you all for 2Q FY '24 post result conference call of Himatsingka Seide Limited. Today, we have with us the senior management of the company, including Mr. Shrikant Himatsingka, Executive Vice Chairman and Managing Director; Mr. Sankaranarayanan M., President, Finance and Group CFO; Ms. Shilpa Shanbhag, Vice President, Strategic Finance. I would now like to hand over the call to Mr. Shrikant Himatsingka for opening remarks, post which we will take the Q&A session. Thank you, and over to you, sir.

Good afternoon, everybody. As always, thank you for taking the time to join us on the earnings call this afternoon. I will take you through a brief business update. And I'm assuming that the financials are something that you've gone through. So after the business update, I'll open the floor to Q&A, and feel free to ask me any questions that you might have. Our Q2 FY '24 operating performance continued to demonstrate progressive improvement Y-o-Y on the back of improved capacity utilization levels, softening raw material costs and marginalizing of energy costs. During the second quarter FY '24, our capacity utilization levels at our manufacturing facilities stood at 99% for our Spinning division, 67% for our Sheeting division and 67% for our Terry Towel division. We continue to see a stable demand environment driven by expanding client base and growing presence across new markets. We are happy to announce recently that we've launched our Himêya brand into the domestic market during the end of the last quarter. And we will be now focused on growing our market presence in India and aim to achieve revenues in the region of INR 1,000 crores over the next 5 years from this jurisdiction. Key raw material prices continued to remain stable during the second quarter FY '24 and thereby, contributed to improved operating margins Y-o-Y. Our net debt during the quarter remained range bound and stood at INR 2,579 crores versus INR 2,512 crores as of 30th June 2023. This was -- these are our brief thoughts on the business update. We will be happy to open the floor to Q&A, and I'll be happy to take questions.

[Operator Instructions] First question is from the line of Dhruv Bajaj from Smart Sync Investment Advisory Service.

Sir, firstly, congratulations on a good set of results on a Y-on-Y basis and on the launch of Himêya brand.

Thank you.

Sir, my first question entails regarding, do we plan on spending some additional CapEx on our Himêya brand since we are aspiring to grow this brand to INR 1,000 crore brand within 5 years? Or will the existing capacity be enough to cater to the demand?

Fair question, Dhruv. So as -- we don't see any specific requirements to augment capacity because of the launch of this brand. As I've shared with stakeholders earlier, the company will debottleneck its capacities as and when required within its annual maintenance CapEx and organic CapEx budgets. And we don't foresee anything beyond that as a requirement. So even if we have to debottleneck and/or augment capacities marginally in the medium term, we will do so within our annual maintenance and organic CapEx budgets.

Got it, sir. That helps. And sir, my second question is that although on Y-on-Y basis, our growth has been very good, but on a quarter-on-quarter basis, our volume growth seems pretty subdued. Like you mentioned that the capacity utilization has also remained stable on Q-on-Q basis versus our peers, who actually reported around 15% type of growth. So what is the reason behind the same? Like is it due to our target markets being a bit different versus them since we are more export focused?

So I mean it seems -- I mean, I can't comment on the others. But we have seen some improvement Q-on-Q also, but there are product mix variations, Dhruv, that keep coming through between quarters. So as far as we are concerned, we have been focused on making sure that we consolidate our performance. We focus on improving our operating performance. There could be movements between quarters, which ultimately, it's a 12-week period. So there can be company-specific, launch-specific, client-specific sort of conditions that differ from company to company. But directionally, as you can see, Y-o-Y, we are charting well.

Sure, sir. That helps, sir. And sir, how are we seeing the cotton prices at the moment since on Q-on-Q basis, our margins have remained relatively unchanged. However, based on our understanding, the cotton prices have went down a little. So can you please explain that variance?

No, that a little is a broad statement. The cotton prices during this quarter vis-à-vis last quarter have remained range bound. And on a Y-o-Y basis, they have continued to soften, as we said in our -- they have softened as we said in our business update. So at this point, our outlook is that for the first half, they've remained stable. The new crop is on its way in. And we will wait and watch as to how the markets react. At this point, we expect stability in cotton prices.

Got it, sir. That helps. And sir, if I can squeeze in another question then. I just wanted to know that we have made certain investments in FDs worth close to INR 200 crores for H1. But we have actually raised certain debt and equity component to meet our borrowing repayments. So can you please shed some light on that?

Dhruv, I think there's something that you've misunderstood or misread, but please reach out to us off-line, we'll be happy to take you through with more granular detail. I mean on the face of it, there's some -- the numbers don't seem right. So we'll have to get into some details and explain that to you.

Okay. Sir, actually, it was mentioned in the cash flow from investing activities that we have invested close to INR 200 crores in FDs, but no worries, I will take that off-line.

[Operator Instructions] Next question is from the line of Yash Tanna from ithoughtPMS.

Sir, firstly, regarding our debt repayments, there is -- our net debt has remained stable Q-on-Q as you said. And from your past statements, you said that debt reduction is our top capital allocation priority. So if you can help us understand, what is the broad plan for debt reduction? And would it be fair to assume that until we don't pay off a decent amount of debt, we will not look at further expansion or inorganic growth?

Thank you for your question. So it is a fair assumption to assume that we will not be taking on CapEx beyond our annual maintenance and organic CapEx requirements as we have stated earlier to stakeholders. Whatever we undertake will be within these parameters. And we continue our focus on deleveraging. And while it's been range bound Q-on-Q, but Y-o-Y, it's reduced by about INR 194 crores, our net debt. So we continue to focus on that and consolidate on our operating performance, yes.

Sounds fair. Any numbers that you would like to share with us? Probably 1 year or 2 years, what is our target?

Yes. So we expect -- so we -- from a June standpoint, Y-o-Y, we had leveraged -- deleveraged by around close to INR 300 crores. I mean right now, we are tracking about, let's say, close to INR 200 crores. So every year, we hope to deleverage in the region of between INR 100 crores to INR 200 crores. And that will -- that's something that we see. So that will take us to around -- close to INR 400 crores over the next 2 years in terms of total deleveraging is what we feel will happen.

Sure, sir. That's very helpful. The second question is on the trade receivable days. So they have shot up from about 18, 20 days I'm talking about pre-COVID levels, to 91 days in FY '23 and probably it's been little bit higher in H1 FY '24. So firstly, what is the reason for these trade receivable days increasing drastically? And how are we planning to get our working capital down since it's impacting our cash flows? And what would be the normal range for this?

It should be range bound. The reason you're seeing movement from pre-COVID to now on third-party receivables is because we've added a lot of third-party clients after the commissioning of our Terry Towel division. So pre-COVID, we had commissioned our Terry Towel division for commercial production in October '19. And our receivable complexion and our client base has significantly changed and broadened since then. And hence, there is a movement on receivables because of that because there are certain clients who we are not necessarily factoring in, so it is showing up on the receivables front. But the point of how much it should be, it should largely remain range bound is what we feel.

Right, sir. And range bound means this similar level of numbers that you've seen in FY '23 or H1 FY '24?

No. Even if I -- even if we continue to grow organically, we will attempt to optimize our working capital cycle such that it should be broadly range bound.

Sure, sir. Got it. And one question on the other expenses. So they are almost up by 32% on a year-on-year basis and 12% on a Q-o-Q basis which seems to have brought our EBITDA margins down a little bit on a Q-on-Q basis. So what are the major components in this other income? And what is the steady-state number for other income as a percentage to revenue for us?

No. So the other income -- you're talking about other expenses or other income?

Other expenses. So it's gone up 32%, I think, year-on-year.

Yes. So we will just check on the inclusions of some of the items vis-à-vis the grouping, and we'll be happy to get back to you on that. Please get in touch off-line.

Sure, sir. And I have also requested on mail to the Company Secretary, I think, for a few details. So if I could get a reply on that, it would be great. And congratulations on the launch of Himêya brand and best of luck.

Thank you very much. We will most definitely get back on your queries to the best of our abilities. And if you've already written to the Company Secretary that will be followed up. And this additional query of yours on other expenses will also be addressed suitably, yes.

Next question is from the line of Manish Dhariwal from Fiducia Capital Advisors Private Limited.

Yes. Am I audible, please?

Yes, Manish.

So first of all, my compliments on your kind of -- the last couple of years have been tough and CapEx coming up at -- in opportune time. Nobody could guess when COVID is going hit. So I think we've come out pretty well. So one, congratulations to the whole team, and I hope we keep on kind of going on that trajectory. So having said that, you did answer your question on the net debt level. I was not very clear about it. So at this point, we are at INR 2,579 crores of net debt as of September 30, 2023 balance sheet that's been shared with us. So say, in 3 years, so we are in like, say, '24, so '27, what would that number be approximately? this is the plan [indiscernible] schedules and everything that has been, like, decided like they are already pre-decided.

Based on the run rates or bands of run rates that I just mentioned to Yash prior to your query, we should be just under INR 2,000 crores.

Okay, okay, okay. That would still be pretty significant, in fact, but I guess, basis cash flows only one can kind of repays. So we understand that. Secondly, about this domestic market capturing, that has been kind of, I think, an idea that has been there with the organization quite some time. I do recall that a couple of years ago, we had made a similar attempt, Atmosphere and those kind of brands you kind of launched. So how are you kind of looking at the domestic market, if you could just give some sound bites on that?

So Himatsingka first entered the Indian market in 2003 with the launch of its luxury brand Atmosphere for Drapery & Upholstery products. While the launch was successful, the positioning of the brand was in the luxury category. And therefore, its scalability and reach were limited. Post that, we were largely focused on global markets and not the domestic market. And while the company grew, our focus was the North Americas, the EU, the U.K. and APAC regions. But we had spoken with various stakeholders and told them that our India plans are work in progress and under review. And we finally have sort of recalibrated our approach to entering the Indian market. The Himêya brand is positioned to cater to a very broad section of audiences across price points. This is not a luxury brand unlike Atmosphere, and hence, the potential to scale to the kind of numbers that we're looking at over the next 5 years. The market in itself is a maturing market. It's a growing market, and it's a consolidating market. So consumer preferences are maturing. The organized retail segment is consolidating. And the overall demand in the market is obviously growing just like various other segments. So with this sort of backdrop, we thought that we must most definitely be present in the market, and we must be present across price points and the categories that we operate in. And so that's what we're going to gun for over the next 5 years. It's also our attempt to make sure that we -- our revenue streams are more balanced and not just emanating from a few markets globally. It will also lend to better pricing power. It will lend to better -- I believe it will lend to better operating margins as well.

So I would subscribe to that thoughts myself. So what kind of outlay are we proposing to develop the domestic market, like, our presence there? So you have to set up the organization, you have to set up distribution, you have to set up a whole lot of things. So what kind of outlay are we proposing for this whole project, if I could use the word?

Manish, the outlay will not be significant or actually very material because of 2 reasons. On the manufacturing front, as I said earlier, we aren't estimating or forecasting anything specific for this foray as such. I'm not talking about INR 5 crores, INR 10 crores, INR 15 crores of expenditure here and there to augment some supply chain infrastructure and things like that. I'm talking of anything beyond the materiality threshold. And therefore, we don't expect anything material to be required on the manufacturing front. And whatever is required, if at all, will be within our annual organic and maintenance CapEx budgets. Vis-à-vis the distribution piece, the commitments will largely be coming in from the P&L and not from the balance sheet because investments won't be required. We're not -- in the world of home textiles, you don't go and start opening stores and things of that nature. You leverage existing distribution platforms nationwide, and your product actually reaches the end consumer based on the strength of those distribution platforms. So in other words, the nature of this segment is such that you don't invest in creating new platforms. You invest in leveraging existing platforms. And if you invest in leveraging existing platforms that definition of investment is largely driven by optimal models for product visibility, and that will largely sit in the P&L. So to answer your question, outlays are not going to be of any material kind as we foresee now for our foray and growth in India. Our commitments will be more driven on brand visibility and brand distribution, which will emanate from the P&L as we grow.

Absolutely. I got that. In terms of the brand visibility, there have to be some advertising campaigns and some above-the-line, below-the-line processes? So typically, about 5% of the revenue going towards the advertising piece. So -- but then that's only when the business has kind of matured a bit. So in terms of the numbers, would you have sort of some visibility...?

Let me say it this way, Manish. Unlike the world of fashion, we don't expect upfront bulk outflows to establish the brand, which will distort and/or materially impact our operating performance on the P&L front. We don't expect that because to our mind and to the best of our knowledge and experience, this segment doesn't warrant those kinds of spends unlike other segments that might need such expenditure. I mean I'm talking from a standpoint of materiality. So we should have a balanced approach as we grow.

Wonderful. Wonderful. So my full best wishes on this and all the very best. And we are going to participate in the whole growth, hopefully.

Thanks very much for your support, Manish. Thank you very much.

The next question is from the line of Ms. Prerna Jhunjhunwala from Elara Securities.

Sir, congratulations on a strong set of margins that you have reported. The last 3 quarters are very commendable. Just wanted to understand, earlier participant has already asked, but I just wanted to stress on utilization level improvement. How much can we see over the next 2 to 3 years? Can we reach full utilization levels around 85-odd-percent in the next 3 years' time frame?

Yes, absolutely. That will be our endeavor. In fact, 3 years is fairly long time. We should be there much sooner. I won't be able to commit as to when because it's a fluent in terms of -- fluid rather in terms of market conditions. But 3 years is a very long time for us to move from 67% to the higher 90s. We should be there -- we are targeting to be there much sooner, Prerna. As I said, there could be movements between quarters and things like that. But one has to keep in mind that quarters -- I mean it's essentially 12 weeks. So a whole lot -- I mean while most corporates are scanned and measured every Q, but a whole lot can't change in 12 weeks. So one has to look at it more directionally, which you are attempting to do rightfully so. And I feel that we should be capable of moving into the high 90s in terms of utilization much sooner than the 3-year time frame.

Okay. Sir, that's helpful. Sir, also, I wanted to understand the demand outlook in your key markets, U.S. and Europe and GCC where you have been gaining traction. So just some qualitative inputs on the demand scenario and how they are shaping up?

Yes. I think as we've outlined in our business update, we've seen a stable demand outlook. And I must be very candid and upfront with stakeholders, we're not seeing a whole lot of negativity of any kind nor are we seeing very strong upward trends of any kind. We're largely seeing a stable environment. There are pockets of upsides. There are pockets of stability, there are pockets of downside. But on the whole, it's a stable environment. That's really what we are seeing. Now it could change from company to company because there's no central or, let's just say, unified measure of demand. There are some parameters one can look at. But ultimately, it will be company-centric. And the outlook we currently have is stable with upward bias.

Okay. That's helpful, sir. And sir, is it across U.S., Europe and GCC, this is the same kind of environment you're looking at? Or is there some better demand traction somewhere like maybe in Europe or GCC and weaker in ...?

I see a fair amount of homogeneity. If there's any difference, it's really at a retailer level. It's not at a region level as we see it.

Okay, okay. Understood. And sir, could you give us some clarity on Himêya brand with respect to what kind of target audience you are looking at, like mass, premium or a mixture of mass plus premium? Or you will also look at the lower end of price point? And where -- what is your strategy with respect to distribution, especially whether it will be like more of departmental stores initially? Or I mean initially, if you -- what are your plans for the target audience as well as distribution?

So as I said, the brand is slated to be positioned for a very broad section of audiences. So we will cater to low mass and premium. There's no question about it. It is not a premium brand alone in terms of price points. It will appeal to price points across the board. Competing brands and offerings will not be less expensive. Himêya will be priced or rather is priced in a manner which is comparable, if not more competitive than competing brands, and hence -- for the kind of products that it's selling. And hence, we will be catering to a broad cross-section of audiences. Because if that's not our positioning, it will not be possible for us to scale to the kind of numbers that we want to achieve over the next 5 years. So it is imperative that the group position itself such that the brand is available across price points and hence, caters to cross-section of audiences. With the launch of Himêya, the group will operate 2 brands in India, which is Himêya and our earlier brand Atmosphere. We might be looking to even consider a third brand addition sometime in the medium term. That's something we're still evaluating. But we might operate with up to 3 brands in the country. As of now, it's...

Sorry sir, as of now?

As of now, it's 2.

Okay. No problem. And sir, are there any plans of launching Himêya internationally because you already have connect with the customers in international markets as well, maybe a D2C platform, et cetera?

We will be first focused on getting our momentum and rhythm with the launch that we've just sort of put through. And then at a suitable time, we will consider the brand's, let's say, positioning and appetite in other jurisdictions, including neighboring jurisdictions. So I think we will wait and watch for a little longer and channel our time and efforts in making sure that we get our entry right.

Understood, sir. The last question on branded revenues. What would be our share of branded revenues in total revenue today?

We will just -- can I take that off-line? We will have -- it's not part of our business update, but we will just get back to you on that.

The next question is from the line of Ankit Minocha from MRLR Capital.

My question is pertaining to the demand scenario in H2 again. I just wanted to understand that a little bit better. So if I look at last year, we did around INR 1,430 crores of sales in H2. And we spoke about festive stocking in the market kind of happening in H1. So do we see kind of some growth coming in, in terms of H2 sales as well? Or are we kind of seeing a flatter trajectory going forward?

I think I mean, at this point, we are tracking the way we are for H1 on a Y-o-Y basis. Our demand outlook was stable with the upward bias. And at this point, our focus is to really consolidate our operating performance and get our performance aligned appropriately, which is what we have hopefully achieved in the first half of this fiscal, and our efforts will be to achieve the same in the second half. Vis-à-vis your question on revenue growth on the second half, unfortunately, I can't make a specific comment on that, but we hope to continue to deliver a stable operating performance in H2 as well.

Right. Right. And in terms of growth in the long term, if I was to look at it, I mean, in the past 10 years, we've grown at mid-single digits CAGR; in the past 5 years, we've again grown at slightly lower than the single-digit CAGR. I mean if I was to look at this like a long-term investor and figure out that are there triggers now that you feel, especially with the upcoming FTAs or kind of -- what kind of traction you're seeing in your markets? Are there triggers wherein you see this growth significantly picking up in the next 3 years? Because you are talking about your capacity kind of reaching high 90s from the high 60s earlier than 3 years. So are there any triggers that you're seeing or playing in front of you or it's more optimism that we kind of -- your aim to reach there?

No. Let's examine factually. So we clocked revenues of INR 3,200 crores in FY '22, then we slipped again because of conditions that prevailed in FY '23. We have room for capacity utilization growth. We are well entrenched in global markets with the launch of our Terry Towel division. We have expanded our client base as well. We have a very -- so we have a holistic product offering, global reach, strong brand portfolio and global scale assets. And even our assets from an ESG standpoint are extremely well positioned. There's a China plus one piece playing out. There's a Pakistan plus two piece playing out. There's an FTA push and a domestic market push. With all these triggers, I think it's fair to assume that over the next 3 years, if not sooner, our capacity utilization level should see a boost. We mustn't forget that the last 3 years, the company has also lost a couple of clients, including some that aren't active anymore. And we have also intentionally discontinued some revenue streams of traded products, which we didn't think were adding value. So some of that has also sort of, let's just say, impacted our revenue growth numbers, but we did it in prudence to right align our revenue model. So that's what it is, and that's how I see our outlook.

That's very helpful. And my final question would be with regard to the relation of the pricing power in the market, especially with regard to cotton prices. So I mean, yes, when cotton prices go up, our margins can kind of suffer. But when they kind of go down, can -- does that translate into significantly higher margins for us? And can we kind of gain traction in terms of EBITDA margins whenever cotton prices go down?

Yes. In this industry -- I mean, look, Ankit, I've always been clear with stakeholders. I mean this is my point of view. I cannot comment on competition and other companies. But I just feel that this industry as far as pricing power is concerned, of course, it is a little challenged as far as pricing power is concerned. So we feel that with the diversification of markets and looking at a strong India presence, we should be aiding our ability on pricing power in the years to come, point number one. And point number two, our focus on innovation and brands will also help aid that piece. So that's what Himatsingka will specifically be doing to make sure that vis-à-vis the framework of this industry and relative to the challenges in this industry, we are positioned optimally as far as pricing power is concerned.

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

Congrats for good set of numbers. So my question is on the number of clienteles you have added in last 2 years, maybe prior to the COVID, what is the number of clienteles you have currently? Because I guess that is also one of the drivers which will help you to increase your utilization level going ahead, adding more and more clients in newer markets. So just a thought on that.

Your voice was going in and out. Can you just repeat your question, please?

Yes. So just wanted to know the number of clients you have added over the last 2 years, maybe prior to the COVID what was the number of clients you had? And right now, what is the sort of clientele you are having, so the increase in the clientele, if there is an increase in the clientele, number of clients and whether that will help you to push your utilization levels going ahead?

Yes. So Kaustubh, what -- I can't unfortunately specifically share the number of clients. But what I can tell you is the client addition has been significant after the addition of Terry Towel division because of the underlying nature of the business. And it helped augment our global client base. It helped us on getting into new jurisdictions and expand our channel mix. So we are expanding our client mix. We are expanding our channel mix. We are expanding our geography mix/market mix. And that's the combination we are playing. Unfortunately, we have had headwinds which have taken away from our revenue streams also. So our -- if you look at our revenue additions from a standpoint of sheer additions, we have -- on a net basis, it's not looking like much at this point. But on a gross basis, because we have had to fight some of the, let's say, loss of revenue streams we have had on account of either issues with clients because they aren't there anymore or we've had discontinued streams of certain products and things like that, our revenue additions -- I mean growth revenue addition has been pretty robust. And that's been aided by the enhanced client mix that we are currently operating with. So if -- we've had maybe a 5x jump or a 6x jump on client mix over the last 3 years just to give you an idea.

Okay. And just U.K. FTA, if that goes as per the plan, so that would further help you to add more clients into that region? Or do you already have a good base over there?

No, it could help us deepen and enhance market share, theoretically speaking. It's ultimately going to be a company-centric sort of development when it does unfold because there is competition as well. But if I look at it from a jurisdiction standpoint, India stand to gain should the FTAs come through. How the gain will be distributed between a few players, that's something time will tell. But it's definitely an advantage for the industry should the FTAs come through. And as I was telling the earlier speaker, in addition to the FTAs, there is the, let's just say, China piece that's playing out. There's also a piece on the Pakistan front because the jurisdiction is challenged on various fronts at this point, and India stands to potentially gain from that as well. Then there's another trigger of a strong domestic market that we see in the years to come, which we've finally started our journey on embracing. And our major CapEx cycle is over. So we have -- we are well positioned. So these factors are how we -- this is how we see the whole puzzle.

The next question is from the line of Aditya Sen from RoboCapital.

Sir, you said that our new brands will add approximately INR 1,000 crores revenue in the next 5 years. So this will be above our current revenue, right?

Yes. Hopefully -- as I said, that's how we are seeing it. Of course, there can always be headwinds. But I'm looking at it as over and above, you're right.

[Operator Instructions] Next question is from the line of Nagraj Chandrasekar from Emerge Capital.

Just your peers who thus far have upped their guidance...

Sorry to interrupt, Mr. Nagraj. Your voice is very low.

Can you hear me now?

Yes, this is better, sir.

Question is your peers who have reported thus far -- this being a very concentrated industry, your peers who have reported thus far have upped guidance on volumes. And we've also seen a narrowing of the India to global cotton price differential in favor of India, which also should theoretically help your Spinning side of the business with margins there, cotton arrivals being stable and whatnot in this season. So just wanted to get a sense of this 67% moving to high 90s you alluded to, to a previous caller. How quickly can that happen? On the Sheeting side, how quickly can you get back to the 12 million to 13 million square meters run rate you were doing in late '21? Should that not happen a lot quicker you yourself alluded to? And why have you -- you've seen your peers raise guidance quite significantly in con calls just over the past couple of weeks, why have we not been seeing the same sort of robust demand in the market?

Well, point number one, I can't answer for my peers. And we are seeing a stable demand environment with an upward bias. That's what we're looking -- that's what we have seen. And the other queries you had, do get in touch with us off-line because some of them are pretty granular, and we'll need to explain that to you, let's just say, or take you through our thoughts in a more granular manner for us to be on the same page. So I would really appreciate if you could get in touch with us, and we will take you through that.

Understood. But are you -- just directionally...

On the utilization question, sorry, the speaker asked me where I see -- would I see us reaching the high 90s over the next 3 years? And my response was, yes, most definitely, we see ourselves reaching that number in the next 3 years. But that's a fairly long time, and we should hopefully be there much sooner is what I said to that speaker. Now the definition of much sooner is a little difficult for me to articulate, but we see us getting there prior to the 36-month framework that was laid out by the speaker.

Got it. Got it. Got it. And just on the spinning side of the business, which I know you don't break it out, it's backward integrated into your home textile piece. But just on that part of the business, directionally, should you not see an improvement in margins, given -- if there is an uptick in utilization on our home textile side and decline in cotton prices....

Let me explain that, Nagraj-ji. Spinning is running full. So if the utilization goes up in home textiles, that will not change Spinning's fortunes because it's already full from a standpoint of capacity utilization. So let's now examine what can change Spinning's fortunes. You are saying that -- or not fortunes, but operating performance. And so you were mentioning that there's a narrowing of differential between Indian cotton prices and international cotton prices, and the narrowing of such cotton prices should augment the operating performance of Spinning. That's what you've mentioned, right? So is that right, Nagraj-ji?

Yes, yes.

So specifically speaking, we're not sure what you mean by saying that there is a lower -- let's say, there's a narrowing difference between Indian and international cotton prices. I'm not sure what that statement means because the varietals of Indian cotton and international varietals that are largely consumed in this industry are very different. And so we aren't seeing any specific narrowing of Indian vis-à-vis international cotton prices and hence, there sort of being any, let's say, improvement or potential improvement in Spinning performance. So the underlying statement and our observations, to us, don't seem right, which is why I said we'll be happy to understand your perspective and then share ours in greater detail. But let's take an example. Let's take our regular Indian cotton varietal, which is currently at INR 60,000, INR 61,000, which was the case 3 months ago and 4 months ago, and let us take the case of certain international varietals of cotton, which has also been largely range bound. If the 2 were to narrow, that means either the international has dropped or the Indian has increased. So the Indian has definitely not increased, and the international has definitely not dropped. So we don't see how there has been a narrowing of cotton prices vis-à-vis Indian and international varietals, so point number one. And point number two, even if they have narrowed in theory, there is no direct correlation to operating performance.

Understood. Understood. So you -- what you're saying is you're deriving the margin on the home textile side and that...

No. We aren't deriving the margins from the home textile side. We have capital employed in Spinning and therefore, Spinning has to earn its money and so on for home textiles. And the value chain has to earn its money at every step of the way. All I'm saying is, there is no direct correlation that we can comprehend wherein should there be, if at all, should there be any narrowing of Indian and international cotton prices, if that will necessarily create a positive impact for Spinning. That's an equation I'm not able to figure out offhand. We don't see a direct correlation.

Last question, could you let me know the debt that you have to repay/refinance by '24 second half, '25 and '26?

We will be happy to look that up and let you know. But for the rest of the year, it's pretty mild through the end of fiscal '24. For '25 and '26, do get in touch, we will take you through it.

Ladies and gentlemen, next question is from the line of Nirali Gopani from Unique PMS.

Sir, from your comments, what I understand is that the debt repayment what we have planned for the next 3 years from the internal accrual is quite gradual. So do we have any plans to raise some capital via equity and repay a chunk of debt at one go, so that we can see the benefit of growth moving on to the bottom line?

The last tranche of equity we raised was about INR 100 crores through an FCCB we placed to the International Finance Corporation in Washington. At this point, there are further plans to raise equity. The speaker had asked me about my views as to how I see the debt repayment or the net debt levels over the next 3 years. And I said we should be below INR 2,000 crores. That's a substantial correction from where we are. And at this point, we have no specific additional, let's say, plans to raise large sums of equity. And should there be such plans, then we'll definitely keep our stakeholders posted.

Thank you. Ladies and gentlemen, we'll take this as the last question for the day. I now hand the conference over to the management for the closing comments.

Thank you all so much for all your questions and queries. I do hope I have shed light on most of them. But those who need to reach out to us offline to seek answers to their queries, please do, and we'll be more than happy to take you through it. And I look forward to catching up with you all next quarter. Thank you all.

Thank you. On behalf of Elara Securities Private Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.