Indo Count Industries Limited (521016) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Indo Count Industries Limited Q1 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinion and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. K.K. Lalpuria, Executive Director and CEO of Indo Count Industries Limited. Thank you. And over to you, sir.

Hello, and good afternoon, everyone. First and foremost, I hope you are all keeping safe and healthy. I hope everyone must have got a chance to look at the presentation and investor deck as well as the press release by now. Let me first explain the business scenario in Q1 FY '21. The lockdown restriction placed on industries with a view to prevent spread of COVID-19 pandemic has impacted the operations of the company in Q1 FY '21. Despite the condition, the company could achieve sales volume of 9.9 million meters. With the gradual easing of lockdown, we were able to process both the order backlog as well as the current orders. We are witnessing month-on-month traction in demand from our customers. As we speak today, the operations have come back to pre-COVID levels. Considering the business momentum across our markets and also the effect of pandemic has not waned, we are cautiously optimistic about this business during the rest of the financial year. Now talking about the demand scenario. We believe that the situation is normalizing and people have adopted to the new norm culture. Brands are selling online or offering store pickup to ensure safety of customer. We, therefore, see traction in demand both in e-comm trade and the brick-and-mortar business. We are also witnessing that for consumers home is becoming a center stage due to the work-from-home culture as well as the social distancing. This is resulting in traction for demand from consumers and customers across. Now let me highlight the opportunity unveiling in our industry. China + 1 strategy. The brands are looking out for a second source in order to reduce dependency on a single geography. We believe the Indian home textile industry is in a sweet spot and likely to benefit due to abundant availability of raw material and skilled manpower, along with our steady capability and capacity available for growth. Atmanirbhar Bharat. Along with the China + 1 strategy, our government is pushing for Make in India as well as Atmanirbhar Bharat programs. These all are expected to help domestic manufacturers. We believe that we are well prepared to seize this opportunity on the back of our healthy balance sheet, financial prudence and our focused approach. We are making a lot of efforts on digital marketing, e-commerce, developing health and hygiene products and other innovative ways to reach out to our customers and thereby strengthening our relationship with them. In the past, we have made investments in building our capabilities and capacities, and we expect these benefits to flow in the next few quarters. Now coming to the financial performance. Starting with the volumes, the company has achieved volume sales of 9.9 million meters for Q1 FY '21. The volume performance was impacted on account of lower production owing to lockdown due to COVID-19 pandemic during this period. Reported consolidated total income. For Q1 FY '21 total income stood at INR 336 crores as against INR 518 crores for Q1 FY '20. The income was impacted on account of lower production during the period owing to lockdown due to COVID-19 pandemic. Reported consolidated EBITDA. EBITDA for Q1 FY '21 stood at INR 39 crores, with an EBITDA margin of 11.6%. Performance could have been better. However, production and sales impact on account of lockdown due to COVID-19 impacted (sic) [ impact ] resulted in lower absorption of fixed cost in Q1 FY '21. Reported profit after tax. Q1 FY '21 PAT stood at INR 18 crores. That's all from my side. I now leave the floor open for question and answer.

[Operator Instructions] The first question is from the line of Ronak Vora from AUM Advisors.

Sir, in case, any volume guidance for the full year?

No. Currently, the situation is evolving and still there are uncertainties around. And we are operating at, say, 85% to 90% of pre-COVID level. As informed earlier, the stores were closed, but now slowly they are opening up and majority of them have resumed operation. So...

So can we say that we'll witness growth in the second quarter -- second half?

July month has been good, and we are witnessing month-on-month traction since the lockdown has eased. The momentum is continuing. As I said earlier, the situation is that we have reached pre-COVID levels in terms of our quarterly run rate. So we feel that going forward, the moment -- if nothing goes in an uncertainty mode, we will be doing our pre-COVID level rates.

Okay. So we can say around [Foreign Language] we can -- for the full year, annualizing last year number of around 61 million. So we can say at least 30 million meters would be intact for the second quarter. And for the first quarter, it should be around, say, 15 million. So around we can do 45 million tonne on a worst come worst scenario, right?

No. See, we cannot -- we are not able to give guidance as such today because there is no clarity going forward. What we are reporting is that currently, we are doing well. In this July month, we did well. And August also, we are doing well. So the momentum is there, but we cannot give you a guidance as such today.

Okay, sir. No problem. But can we say anything on the EBITDA margin front? So we've posted a very good EBITDA margin for the first quarter. At least 12% in lockdown period is pretty decent as of now. Can we say that we can go to the same run rates as we had last year? So last year, first quarter, say, around 13%, 14% for the full year?

See, the margin may improve. Because of the utilization of the assets and capacity utilization, the cost -- fixed cost will be absorbed. And secondly, we have a favorable raw material instance. And also the exchange rates are a little bit positive on our side. So summing up, if the sales revenue increases, and we are able to consume our capacity, definitely, we will be able to improve our margin. So we can safely say that we can be in between somewhere 12% to 14% for this year.

Okay. And thirdly, can you comment on the loans? So has our gross debt number reduced in the first quarter? Have we repaid any loans?

Yes. Our long-term debt has reduced from INR 56 crores to INR 50 crores and our short-term debt has reduced from INR 293 crores to INR 226 crores. We have not gone for any moratorium. We have repaid our loans and interest on time. With cash equivalent of INR 205 crores, our net debt stands at INR 71 crores only.

[Operator Instructions] The next question is from the line of Suresh Saraf from Motilal Oswal Asset Management.

I'm given to understand that the cotton prices have crashed, so that would have a very positive impact on your EBITDA and your profitability for the year?

See, the pre-COVID and post-COVID, the cotton consumption has reduced, and that's why we are carrying higher stocks. Secondly, the monsoons are good and the sowing is also better than last year. So we expect a better crop. Having said that, we should witness the prices when the season comes up, say, in November, December. That will be the right barometer. So we are waiting and watching. But however, the prices should be subdued because the stock to end-use ratio should not be more than last year. So we expect the supply to meet the demand and the prices should be stable.

Okay. I have another question. I attended the investor call for some companies who are in the same business and they are witnessing record performance in this current quarter. Is the same with you? And do you see the continuity?

See as I mentioned, we are operating at 90% of our capacity at pre-COVID level and we are also witnessing month-on-month traction as the situation is improving and easing out. So the momentum is there. And we are also at pre-COVID levels. So we hope the situation continues in similar position. And then we will be able to give you a better clarity, say, in our next call. But the momentum is there. The positive traction is there.

[Operator Instructions] The next question is from the line of Prerna Jhunjhunwala from B&K Securities.

Sir, I wanted to understand the demand trend in the U.S. is [ braked ] to some extent. But just wanted to understand the back-to-school segment where you have a -- which was one of the drivers for first quarter. But how is that demand panning out given the schools and colleges in U.S. are also not operating at that optimal levels?

See we participate in all promotions, whether it is back-to-school, Black Friday or Christmas and all. So we do participate in back-to-school, and we are getting good numbers and a positive trend. So definitely, that is a positive for us as well as the U.S. retailers are also doing well. The big-box retailers are doing well because they were all operational during the lockdown also because they were selling essentials. And now since all majority of the stores have reopened and resumed operations, we expect all this promotion as well as the regular replenishment business to do well.

Okay. Okay. And please highlight on the product-wise, if you could suggest how utility bedding, fashion bedding, institutional bedding, bedsheets. How are these -- how is the demand in these segments? Is there any better traction in some segment or lower traction in some segment that would help us understanding the demand situation there?

See, last year, we did around 15% of combining all these 3 different channels of our product mix. So fashion and utility are doing well, but institutional has a little bit of setback because the traveling and the crews and liners and all those is not happening as such today. But these are compensated by increased distribution in e-commerce and other areas. So going forward, I think if situation improves, we will be doing better because China is a dominant supplier in fashion and utility bedding. And as we all know, that post COVID there is some sensitivity around replacing China to some extent in the long-term by suppliers in these 2 categories. So definitely, we may find some positive trend over there in the long term.

Sir, what would be the size of these 2 segments? And what will be China's market share there?

See, China's current market share is around 80%, 85%, but India is only at around 7%, 8%. So definitely, there is a room for growth in these categories. And definitely, India is gearing up, making all the back-end production facilities for this product line. And slowly, they are also gaining skill in this area. So the U.S. retailers and the other retailers around the world are considering India as a second source. And definitely, that's what looks promising that in the future we will be able to gain some market share from China which will be big enough to fill us.

Okay. And sir, do we need any additional capacity to set up for these products because they are not really, really bedsheets per se, but they have like pillows, comforters, quilts and all this? So do we need any other different machines or mechanism or our facility is equipped to handle increase in growth orders on these products?

So as reported earlier, you see, we have built capacities to service this categories, fashion bedding and utility bedding, and we have made arrangement to add on these machines in the past. And slowly, as we find traction and better volumes, we will continue adding that. So all different machines and production facilities are geared up. And since the fabric is a common use, and where we have enough capacity to service, we just have to add some features and fixtures to gear up our capacity. Basically, it's quilting machines and fabric warring machines and all that. So that's not a big investment. But certainly, the skill part as well as the space and other areas where we need to gear up for big volumes.

Okay. Sir, your orders in the fourth quarter had got deferred due to COVID or they got postponed. Will this 10 million volume that you did this quarter also have a portion of that supplies or they were -- this -- or it's all fresh intake is what I would like to understand?

See, post COVID, these orders are deferred by the customer and they will be supplied across the whole 2, 3 quarters. So definitely, they will be supplied during these 2, 3 quarters because nothing much has got canceled. Only the smaller players have canceled because they could not leverage their finances.

Okay. Okay. Sir, last question would be on price negotiations. Are you witnessing any price negotiations because of declining cotton prices or due to uncertain situation in the U.S. also due to COVID? So any price negotiations happening? I mean directionally will also be fine. I don't want any number to that extent.

Not at the moment. But as and when it comes, we are ready for negotiation, as we are competitive. We produce a lot of cotton and the raw material is in our favor. The ForEx is in our favor. We have a good capacity to service them. So definitely, we, as a country, are well positioned to compete. So as and when it comes, we will negotiate.

Okay. As of now, there is nothing on the table for negotiations?

As of now, there is nothing on the table.

And any change in the credit terms that they are demanding in terms of that -- any days or something?

Earlier, they were demanding in pre COVID level, but now, I think, they are slowly going back to their old terms because as they are also improving their cash flow so they are supporting the vendors. But we, as a company, have a good credit insurance policy in place. So we review each and every customer and then only we supply. So we have got that risk management in place.

The next question is from the line of Mukul Agarwal from Param Capital.

Sir, my question is more on...

Mr. Agarwal, can you speak closer to the handset, please?

Hello? Can you hear me now?

Yes, sir.

Yes. A little bit louder.

Sir, my question is more on the lines of structural shift which you are talking in your commentary also vis-à-vis 1 plus -- China + 1. So like India market share is roughly 11% in home textile, China is 38%, 39%. So going forward in next 3 to 5 years, do you think -- do you see India can gain some substantial market share and whether it will be sticky? And what will be the role of Indo Count in such scenario?

See, certainly because you see India as a country is well positioned. India has that capacity and capability, and India is the largest cotton producer. India has a adequate raw material supply chain as compared to China. India is the only country where it can -- who can compete both in MMF as well as cotton and natural fibers to China. So -- and we are also competitively priced and we have performed better over the period of last 2 to 3 decades in home textile. And the relationship is also good between the 2 countries, between, say, the U.S. and the Europe -- European Union as well as U.K. And so we feel that whatever dominant position which China has gained, all the customers are rethinking of their strategy because earlier they went on to source out of China alone because of their voluminous play. But now they are thinking of bringing India also on the map as India is also quite capable and competitive. China is also focusing on the domestic front rather on the export as a strategy, and their cost has also gone up substantially. Plus the sensitivity post COVID also is in our favor as a country. So we feel that -- and India is well geared up to supply and it has performed well and positioned well, particularly in our category where it has got 50% market share. So it has gained this share from China. So we feel that in other categories as well, like Fashion Bedding and Utility Bedding, in which India was not there on the map, in the future this also will grow in India because India never went ahead to capture this market because India was not competitive at that part of time and neither we had focused. So I think our focus plus our gearing up of capacity plus our exposure to the front-end and our positioning, all these factors will help India in order to gain this market share going forward. So that's what we believe in.

So sir, by when do you feel [Foreign Language] we will see visible signs of this change happening on ground? Because we have been hearing this since very long and COVID has definitely had -- acted as a catalyst to this theme. But when would we see real action on the ground?

See, as you know we had started these categories 3, 4 years back, you must be knowing that fashion bedding and utility bedding and institutional bedding and we have stayed focused on this bed linen sector because we hope that we will be able to gain traction in this going forward. And slowly, we have reached to a level of 15% as reported last year. So I think slowly and steadily we are winning this market. But our synthetic prices are expensive by 30%. We are okay on the cotton side because we are competitive there. And many of these products are supplied in synthetic. Now once we rationalize our duties here and if India builds on certain SPAs -- is able to gather some SPAs with these countries like the U.S. and U.K. and Europe, I think India will be also well positioned as far as the other peers are concerned. So definitely, we will gain traction as we are focusing more and more on these categories going forward. And certainly, we will be able to improve our numbers there. We are quite confident about it.

The next question is from the line of Bhavin Chheda from Enam Holdings.

Lalpuriaji, good to hear that business is recovering back to the pre-COVID levels or close to that. So just a few questions on, particularly, the U.S. business since that's the large part of the business for home textiles. So I think, one question is, are you able to gauge that -- actually, the -- has the market share shifting from China to India or just U.S. demand has grown? Because, I think, if you see the Walmart numbers also, they reported positive sales. And I think, the commentary was that since stimulus-driven impact has been coming so there has been buying. People were sitting at home and so a lot of shopping happened. But I think that July is again subdued. So what's your sense you are getting from clients? Was it a pent-up demand? Or since everyone got stimulus, was it driven? And again, just continuation of this part, how is the order book visibility? Because as I know earlier, 2, 3 years back, there were normally 2 programs in U.S. and each of the players used to get a 6-months visibility. So how is the situation right now? You get 2-months visibility, 4-month visibility, 6-months visibility. How is the visibility of the business? Yes.

See, first of all, on the U.S. market side, we all know that U.S. is a large market for our category, and we are exporting 70% over there. And all the big-box retailers have done well because they were selling essentials and -- during the COVID-19 pandemic. The markets are resuming and majority of the stores have resumed their operations. So that is the first step we should assess that they are coming back to normal. Now whichever stores had issues with their financials, which were a couple of them, so they face difficulty, the rest of them has resumed their operation. And they are doing pretty well because of this stimulus also and because of the confidence. And also, as I mentioned earlier, the home has become the center stage now because work-from-home culture and social distancing and all that has promoted the home products in a good way. And we find positive traction over there, both in promotional item as well as the replenishment items. Now at Indo Count, we are doing replenishment items more than the promotions, which we have already indicated earlier. So we are getting traction when the regular programs are all being reordered at present. Of course, they need to come back to 100%. But they have certainly come back to 90%, 95%. And certainly, the U.S. market will do well because the consumption of the home has increased. These numbers which you are seeing in retail do not just provide the right numbers for home. They provide for all the categories together. So what you assess is that it has tapered down because of the -- all the categories taken together. So we feel that the U.S. market will do well as compared to the European market and the U.K. market. And certainly, there will be traction of reorders. Now we also mentioned that we are working at 90% of our capacity, and we are in made to order business. So certainly, we are seeing traction, positive traction as the lockdowns are eased down. And this momentum should continue. But we are unable to give guidance because of the uncertainties around. But still, we hope and we believe that things should improvise from here going forward. So that's what our take on the U.S. market is.

And sir, one thing, as I said, the order visibility normally is 3, 4 months?

No. Certainly, we have projections for 3, 4 months. The orders are firmed up only for, say, 30 to 60 days. But we have -- because the programs are running continuously, and they are all back wall programs, certainly we have a visibility as they will not be going out of their shelf. So either they sell it through brick-and-mortar or they sell it online or they sell it buy online and pick up in the stores. So it will happen. So that's what we believe in. So I think the orders which are continuous and replenishable are being serviced by us, and we are seeing a momentum there.

And sir, my last question the domestic export benefits, like RoSCTL, duty drawback and the schemes. What has been the outstanding receivables from government? As of now, what's the absolute figure? And on a continuous basis with how many days lag you have been receiving this number?

Pre-March level, it was pretty clear, except for ROSL, which, I think, the government has issued a notification just recently and we will be getting that, that amounts to around INR 6 crores. And pre-March level RoSCTL we received in full. Post-March level, I think, because of the COVID situation and the government is finding challenges on the fund side, I think they are discussing on how to disburse that amount. So our counsel is taking up this appropriately with the government to disburse this, and we hope that we should be able to get this in the next couple of months. So that is about RoSCTL. The drawback is all online. So drawback, there is no immunity.

Sir, any June 30 outstanding number you would like to provide?

That we can provide you off-line, if you want.

The next question is from the line of [ Sagar Parekh ] from One Up Financial.

Yes, sir. I think you mentioned in the -- correct me if I'm wrong, you mentioned that our market share in the fashion and utility bedding segment is about 7% versus 80%, 85% for China. Is that the right number?

Yes, that we believe that, it's like that the...

Okay. So how big is this market in U.S. right now? So let's say that we have 50% market share on the overall -- this segment. How big would this fashion and utility bedding would be out of that?

See, the total fashion, utility and institutional bedding is in a -- is around 10 billion at retail. So at cost, it should be around 5 billion.

For cost, it should be 5 billion. Okay.

Yes.

So that 5 billion market is up for grabs is what you are saying, for us, basically? Are we seeing that traction already, like from the retailers over there?

See, we started this category 3, 4 years back, and we are building the -- both the back-end and the front-end. It takes time to capitalize on this. So definitely, it's a positive trend. And as I mentioned earlier, synthetic in India is expensive to China, still by another 20%, 25%. And most of this product are synthetic based. So I think in time to come, if government recognizes the fact that it should rationalize the duty and reduce it to the levels of China, then definitely, we will be at level playing field. And then we will be able to garner this. But still, we are able to get support in the premium segment and the higher segment product range because we are not going in the lower end of this supply chain. So we find that it is -- because they are -- the retailers and the consumers all are now sensitive about Chinese supply, we feel that long term, and long term, we should benefit somewhere from this.

So in spite of 20% pricing differential between China, you still feel that we will benefit out of that or you think the duty structure can come down?

See in the high end of premium segment, which is cotton based India is competitive. But slowly, it is getting a traction because we also need to gear up the back-end. And plus, we have a business to cater to, sheet set. Our priorities are sheet set where we are getting a good traction. So that becomes our priority.

[Operator Instructions] The next question is from the line of Yogansh Jeswani from Mittal Analytics.

Sir, my question is regarding the export incentives that we are getting at the moment. So there has been a lot of changes. And you did mention to an earlier participant about the RoSCTL that's pending post March. So just to get a broad sense of what all incentives are we getting? And can you share that breakup with us, please?

See currently, we are getting 2.6% of drawback and 8.2% of RoSCTL.

8.2%?

2.

Okay.

And the government has declared that this will continue till December this year, and this will be replaced by RoDTEP, which is the new scheme for which a committee has already been formed and our counsel is already addressing that -- this committee. So RoSCTL will get replaced by RoDTEP, the new scheme.

Right. And sir, earlier, there was a lot of confusion and a sudden stoppage of MEIS by the government. So -- and we had also taken a write-off on sales. So going forward, any further write-off that you expect from MEIS? Or do you see some bit of it getting released because there is still a lot of confusion? I think INR 9,000-odd crores is budgeted -- was budgeted and then it got reduced to some INR 500-odd crore for MEIS. And so is there anything that is due on the MEIS front for us?

No. MEIS, like has been withdrawn for our category of products. So we are not impacted by any MEIS change as such so far. So the government is planning to convert now the entire MEIS and the RoSCTL to RoDTEP. So we are not going to get any impacted on MEIS front as such.

And no more MEIS benefits that are going to -- which needs to be reversed or something like that?

No. No. That we have already written off as an exceptional item last year.

Last year, yes.

Yes.

[Operator Instructions] The next question is from the line of Nirmal Shah from Seraphic.

I just wanted to check, is there some impact on the RoDTEP incentive regime as well because there are various media reports which are talking about a significant cut in the budget of RoDTEP benefits? So right now, you are governed by RoSCTL, but I suppose there also there is a talk of curtailing the incentives. Would you like to give your perspective?

No, as such, we do not hear anything because we have just heard that the committee has been formed which is communicating with our counsel, export counsel, and they are gathering datas at present. So they have across different product range different meetings with all counsels and different industry to really take -- consider what is their central and state levy, and then only they will come out with their plan. So we, as a company, have not heard any definitive things. People may say anything, but we haven't heard anything about that, sir. What we have heard is only from our counsel that they are still working on the data to be provided to this committee.

But sir, looking at the way government finances are right now, do you foresee some kind of a possibility because even last year the withdrawal of MEIS became retrospective. No one expected. And in a situation like COVID, the situation is supposed to be far more -- pretty nervous situation for a government to fulfill even the regular cash flow items, right? So you don't see any risk to that currently?

See we cannot say definitely what the government thinks. But definitely, textile is a priority sector to them. And government has given -- our Prime Minister has given a message about Atmanirbhar Bharat and Make in India both. And we qualify for both. So definitely, they will consider us favorably. Let's wait and watch and see what they do because we cannot be saying anything for the government -- on behalf of the government. We cannot predict anything because it's their policy decision. But I think textile is an important sector where there is lot of employment generation. So government will definitely consider textile as one of the priority sector. So that much we know.

Sir, there was also a talk of textile as an industry going to the Supreme Court about the MEIS withdrawal, the way they have withdrawn retrospectively. Any update you have? Are you all planning to go back to the court to fight the case?

No. As such, we do not have. We also heard those rumors that the Apparel Export Counsel is taking necessary steps to file some petition, but those are all talks which come in the media. So we really need to believe when it happens as a company.

The next question is from the line of Sumit Modi from Arete Investment.

Sir, on -- I heard you saying or rather refraining from giving any volume guidance for the current year, but, however, in one of the slides of your presentation you have mentioned that you see growth for the remaining part of the year. So on one side, you are seeing growth on the remaining 9 months, but then not looking to give any guidance. But then do you see some sort of equal volume of last year that can be doable? That's one question. And secondly, we are among the lowest among the peers in terms of the balance sheet leverage. So in all probabilities, given the completion of FY '21, we mostly will be debt free. So any plans to add any new segment or any CapEx plan? Or how do you wish to use the cash flows in the future?

See, first of all, I've already mentioned that we are witnessing month-on-month traction, as the lockdown is eased and majority of our customers have resumed operation. I've already mentioned that. But what the situation today is, is quite fluid and evolving. And that's why we are saying that we are cautiously optimistic as well. So we are positive on the trends, but -- and the momentum is also there. But we cannot give a definitive number as a guidance because there are so much uncertainties around, both in the marketplace as well as in India as well. So nobody can give like a definitive number to this. As and when we get more clarity, we will certainly will be happier to give. Say, maybe in the next quarter when we will be able to provide you, we are much more happier to provide you with those numbers. So definitely, that answers your first question. And secondly, about the CapEx part, see, we are studying all options as a company, but we should get into a business where the returns are adequate. We do not want to get into a capital-intensive project which are not returning our profits. So we are taking adequate steps into understanding different businesses in textile as well as in other businesses. And we will -- our Board will appropriately take steps in allocating this capital in the near future. Definitely, we are also thinking about it.

The next question is from the line of Aman Sonthalia from AK Securities.

Sir, my question is that what is your current share in the cotton sheeting, sir?

Come again, I could not hear you.

What is our India share in cotton sheeting?

In cotton?

Sheet. Bedsheet.

Sorry, you are not audible fully. Can you speak closer to the mic, please?

Sir, what is India's position in cotton bedsheet?

We are currently at around 50% market share in the U.S. for market share -- India's market share. And that is...

And sir, the balance 50%, which countries are there?

See, China is there, Pakistan is there and then the rest of the world is there. But there are...

And how big China is in cotton sheet, sir?

China is around 21%.

Okay. So there is every possibility that we may get some market share from there also -- in cotton sheet also?

Yes, definitely, because India is competitive and India has performed well, and people perceive India as a good supplier, and we have a good relationship, as I mentioned, with the country. So definitely, the retailers and the consumers across there, the customers will think about India for increasing their share.

And sir, my second question is what -- the coal cost is -- has come down a lot. And I think fuel is a big component of our total cost. So how that is going to benefit us, sir?

So actually, you are not audible very -- it's very -- like low voice, I'm able to get across. So can you...

Sir, the coal cost. Fuel cost has come down a lot.

Yes. Yes.

So how big that component is in our total cost? And how the company is going to benefit out of it?

See, coal utility cost entirely is around 3.5% to 4% of our total sales cost. And definitely, if any improvement in coal or any other fuel will certainly help the country in reducing cost. As I mentioned, we have reviewed all our cost centers and are going in for cost optimization. So definitely, this reduction in cost as well as better utilization of capital will increase -- will reduce overall cost.

So sir, we are using domestic coal or we are using Australian coal?

We are using imported coal, Indonesian coal as well as sometimes some other country's coal as well. Domestic coal, we are not using.

[Operator Instructions] The next question is from the line of Riddhima Chandak from Roha Asset Managers.

Sir, just one clarification. You said that India's market share in the cotton sheet in U.S. is 50%. So that is at the company level or this is at the industry level?

At the industry level. India's total share.

Okay. So India exporting cotton sheet status of approx 50% of total market and China is at 21%?

Yes.

So in that 50%, what is our market share?

Around 12%.

Okay. Around 12%. And China?

No, I didn't get. If you're asking Indo Count's share in that...

Yes, yes. So Indo Count share in that 50%.

12%. So China is -- I already told you, as a country, they have 21%.

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

With good customer base, capital adequacy, wider geographic distribution and extensive sectoral understanding of products and product development as well as relatively under-leveraged balance sheet, we are all well preferred to quickly adapt to the changing customer ecosystem. With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our Investor Relations adviser. Thank you.

Thank you. Ladies and gentlemen, on behalf of Indo Count Industries, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.