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

Ladies and gentlemen, good day, and welcome to Indo Count Industries Limited Q3 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks 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.R. 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 all are keeping safe and healthy. I hope everyone must have got a chance to look at the presentation and press release by now. I have with me Mr. Muralidharan, our CFO; and Strategic Growth Advisors, our Investor Relations advisers. First of all, I would like to take this opportunity to thank each and every employee at Indo Count for their continued support in navigating through these challenging times. Now let me start with a brief on the industry demand environment. The home textile industry witnessed a demand recovery from June quarter, as retailers started opening up, and consumers recognized the value of home as a safe haven. As we had informed during our last con call, home has become a center stage and most important part of our daily life. This has led to increase in the consumption of home-related products. This along with factors like China Plus One strategy, retail consolidation and value-added categories of health, hygiene and wellness led to the increased demand. Retailers extended offers starting from November onwards rather than concentrating on holiday deals around Black Friday. Multiple new avenues of fulfillment have opened up, and retailers are now offering products, not only in stores but through pick up mode and increasingly through digital channels. Despite unprecedented challenges, consumers and retailers demonstrated incredible resilience in the holiday season. Going ahead, we expect this momentum to continue as work from home and more importantly, health, wellness and hygiene has become a new normal, and we believe this trends are expected to stay in post-COVID environment as well. About cotton situation in India. Cotton production has been higher and so has been the consumption. However, mismatch in demand-supply due to COVID and CCI buying at higher MSP prices has created shortage, which in turn increased the cotton prices. Over and above, the ban on Chinese cotton from Xinjiang region has created shortage, leading to an uptick in prices. We therefore believe the cotton prices to remain firm. Coming to our business performance. I'm happy to announce that we have been able to sequentially achieve quarterly volumes of over 20 million meters. On our FY '21 volume guidance of 72 million to 75 million meters, we are optimistic, and we expect volumes for FY '21 to cross 75 million meters. With our current annual capacity of 90 million meters and now with the consistent quarterly run rate of 20-plus million meters coupled with our long-term growth outlook, we are exploring various options for CapEx to increase capacities. Our aim is to enhance our capacities and our market share. In line with our endeavor to grow, we have started focusing on B2C and D2C segments. We have already preempted the benefits of entering this area through launch of our domestic brand Boutique Living, which is a mid-market aspirational brand, and Layers, in the month of October, a value-driven mass brand. Accordingly, our focus is geared towards brand building as well as launching brands as per evolving customer preferences. We have established offices and design studios in key cities of the world to understand customer preferences and create products of the future. We are now focusing on creating more visibility through digital marketing channels. We are also creating a pan-India distribution network through MBOs and LFS formats. In today's world, e-commerce, omnichannel and D2C has become an important channel of distribution. Due to this additional channel of distribution, a wider section of people in Tier 2 and Tier 3 cities have an opportunity to buy products, both off-line and online. As a company, we have taken the right steps towards adapting to the new avenues of sales according to the changing customer ecosystem. Our performance during the period has provided us with renewed confidence in exploiting this new channel of distribution and grow further. We believe there is a large opportunity for a quality brand and product in the Indian market and are confident of creating a strong brand recognition for our domestic branded business. We believe that these are long-term sustainable positives for our company. We, at Indo Count, have a robust balance sheet, our financial prudence and our focused approach to the home textile business, therefore, we are well prepared to seize these opportunities. Now let me share with you our operational and financial performance. I'm happy to announce that we have achieved quarterly sales of 23.86 million for Q3 FY '21. We have inched up from 13 million to 17 million meter per quarter of sales volume in last couple of years to now being at over 20 million meter per quarter. Our order book continues to remain healthy. We are optimistic and expect volume for FY '21 to cross 75 million meters. Total income. INR 792 crores in Q3 FY '21 versus INR 637 crores in Q3 FY '20, a growth of 24% on a Y-o-Y basis. INR 1,852 crores in 9-month FY '21 versus INR 1,743 crores in 9-month FY '20, a growth of 6% on a Y-o-Y basis. EBITDA. INR 143 crores in Q3 FY '21 versus INR 81 crores in Q3 FY '20, a growth of 75% on a Y-o-Y basis. EBITDA margins stood at 18% in Q3 FY '21 versus 12.8% in Q3 FY '20, an increase of 524 bps on a Y-o-Y basis. INR 309 crores in 9-month FY '21 versus INR 235 crores for 9-month FY '20, a growth of 31% on a Y-o-Y basis. EBITDA margin at 16.7% in 9-month FY '21 versus 13.5% for 9-month FY '20, an increase of 316 bps on a Y-o-Y basis. Now PAT. INR 93 crores in Q3 FY '21 versus INR 20 crores in Q3 FY '20, a growth of 374% on a Y-o-Y basis. PAT margin at 11.7% in Q3 FY '21 versus 3.1% for Q3 FY '20, an increase of 864 bps on a Y-o-Y basis. INR 191 crores in 9-month FY '21 versus INR 65 crores for 9-month FY '20, a growth of 195% on a Y-o-Y basis. PAT margin at 10.3% in 9-month FY '20 (sic) [ FY '21 ] versus 3.7% for 9-month FY '20, an increase of 660 bps Y-o-Y basis. The net debt-to-equity at the end of 31st December 2020, stood at 0.06x. That's all from my side. I'll now leave the floor open for question and answers.

[Operator Instructions] The first question is from the line of Hasmukh Gala from Finvest Advisors.

I am unable to hear Mr. Gala.

Sir, his line dropped. We move on to the next participant. The next question is from the line of Jiten Doshi from ENAM Asset Management.

Firstly, congratulations, Mr. Lalpuria, for an extraordinary performance. My questions circle around the long-term outlook of the company. You're already operating today at about 23 million square meters. So does that mean that that's a run rate of over 90 million? So what happens to your capacity? Are you able to outsource? Or are you able to -- I mean are you outsourcing at the moment? Or is it all being produced internally?

No, we do outsource, as we all know, our raw material. And we have 100% processing capacity as well as matching cut-n-sew operations. The Board has given clear directions to roll out the investment plan, which we are working upon. And the run rate we have already indicated that we believe that 20 million plus will be the run rate on a quarterly basis. This year, we will cross almost 75 million plus. So we do have currently a capacity to pull on, but we will come with definite plans ready in the near future and inform all the investors.

So maybe, let's say, if next year, there is a visibility of maybe even 90 million meters, would you be able to supply that much?

Yes, we should be able to. We have already -- we have supplied this during the challenging time, the record volume and value. And as we have mentioned that we have a capacity of 90 million meters, and if we are delivering 75 million plus, then we still have a capacity of 15 million to cater to. And by then, we will definitely have plans to put across on the CapEx side to increase our capacities. And we are very confident of delivering whatever is desired out of us from our customers.

So actually, Mr. Lalpuria, in your opening remarks, we did not get to know much about the China Plus One strategy from your side. Can you tell us that how much has the long-term trajectory changed? Can we, in the next 5 years, let's say, aspire to do at least 150 million to 200 million meters? Is that big an opportunity existing for us?

The China Plus One strategy, we have clearly spelt out in our last con call. And we again substantiate that because the negative sentiments against China is growing. As we all know, the U.S. has banned Chinese cotton from the Xinjiang region. And this is a big blow to them because 87% of their cotton comes from this region. So we are coming to know about the final details. So that is a big blow to the Chinese exports. And that is a big opportunity for India to grow in that segment, which we have been forecasting time and again on the fashion bedding, utility and institutional side. And regarding our like plans for the next 5 years, we have been saying that we have grown in the past. And we have delivered as a team in this challenging times record volumes and value. So this is a testament to our company's capacity and capabilities. It also authenticates our company as a globalized product -- player with a world-class product and services. We strongly believe that we are an established player now, and we have crossed the first level of growth. As a company, we are financially on a strong sound footing. Our vision also is to become a top key player in the world of home textiles, which is also becoming a reality. So we can say that we are entering a new orbit of growth. We believe that in the next 4 to 5 years, we should be able to double our turnover and create value for all our stakeholders. We will suitably leverage our current cash reserves and future internal accruals, along with the low interest rate in the market, and the debt to grow both organic and inorganically. Our strong initiatives in the front end, like branding, distribution, e-commerce, the domestic market and promotion of innovative products gives us the necessary confidence to become a leader in the bed linen segment globally. We also, as a company, are having continued initiatives in the Environmental, Social and Corporate Governance, which is helping the organization to become world-class. This sustainable initiatives undertaken will help the company to contribute favorably to our national growth as well. So therefore, we are taking strong initiatives for growing the company to the next level because we have already fundamentally established the first level. So that is my say, from my side, for our future growth plan.

So I'm now saying that last time you had guided us for a particular range of margins, but now we are seeing that you're able to hit a particular band. Can you tell us what is the new normal in terms of the margin band? Like you said, 20 million plus is the new normal for every quarter. And when you say 20 million you will do, like, for example, in the fourth quarter, you have never crossed 14 million. So is this a new growth trajectory that the company is entering?

See, we have already mentioned that the guideline -- the annualized guideline will cross 75 million. So that shows that we should be able to cross 20 million in the fourth quarter as well. As far as the margins are concerned, we have already given an annualized margin guidance of 15% to 17% in our last con call. And for FY '22, we should be able to provide in our next quarterly con call.

Okay. But if I look at this as the new normal, that means your -- every year, you will be generating at least INR 400 crores, INR 500 crores -- INR 500 crores, INR 600 crores of EBITDA. That means over the next 5 years, you will be generating INR 2,000 crores plus of cash. So why would you need debt to expand?

No, that the Board will figure out. Definitely, we have cash reserves on the book, and we will suitably see how much expansion the Board directs us to make. And accordingly, we will draw in debt. Otherwise, it will be from internal accruals.

The next question is from the line of Hasmukh Gala from Finvest Advisors.

So just my question was regarding the sustainability. There's a surge in demand which we are seeing, based on which you anticipate that you will be able to do, say, quarterly run rate of 20 million. So how good is that the sustainability, the spending spree, et cetera, which you have seen in this particular quarter?

See, as we had informed, Mr. Gala, earlier in our earlier con call, there is a structural shift where home has become the forefront of our life and lifestyle. And the demand momentum is continuing, which we are observing from this quarter as well and what we have given guidance for the next quarter. So there is a strong visibility of sustenance as our order book position is also good for the next year.

Okay. What is the order book, roughly, if you can say?

The order book is normally for 5 months to 6 months. And we are into replenishment business. So we do have visibility on longstanding orders.

Okay, okay. So are we doing the promotion, et cetera, which we had withheld because of the COVID thing, you could not travel to America, Europe, et cetera? So how are those things changing?

So they are also doing well. See, equally, when we supply replenishment, we have also to support the customer with promotion as well. Whenever we see the category is doing good, they also go into promotion. And plus, the e-commerce is also developing. The online, off-line and the direct-to-consumers business is also growing. So these are new channels of businesses. So this also, as a company, we have created a complete strong background for delivering both case pack and pick and pack like drop ship. And those distribution we already have, and we have performed in the past also. So we can always take advantage because we have a faster go-to-market approach.

Right. Right. And sir, one thing we observed that in Q3, our raw material cost has come down and so has in 9 months to 50% from a earlier about 54%, 55%. And you just indicated in your opening remarks that because of these consumption increase and CCI buying at high price, the cotton prices will remain at a high rate. So do you see the material cost or your gross margin getting depleted to some extent as we go ahead?

We have dealt with such situation in the past as a company. And cotton is a global phenomenon. We are closely watching this situation and are covered for 3 to 4 months. We are confident on passing on the price, if necessary, to the customers. And also the demand is sustaining. So when the demand is good, the customer also accepts our request on the price rise as well, and over and above, the product mix also changes from time to time.

Okay. Okay. So current year, we have hardly spent anything on CapEx in first 9 -- I mean first half when the balance sheet was available. So what will be the total CapEx like for FY '21, current year?

No, the current year, we have already given routine capital expenditure of INR 20 crores to INR 25 crores.

Okay. Because we haven't spent that in the first half. So maybe it may come in the second half.

See, it was not needed, Mr. Gala. We already have a capacity of 90 million meters. So whenever the Board decides, we will definitely take that call.

No, correct, correct, correct. That is right. No, it may be some balancing equipment or some upkeep and all that.

That we always do. That we always do, the balancing equipment, the debottlenecking or any modernization, we always take that into consideration.

Okay. Okay. That's fine. And sir, when the new project is being set up, you said that you will come out with definite plan, but what could be the approximate size, the optimum size, which you should go for, for deriving the economies of scale, et cetera?

See, that we are on the drawing board, as what we have said. And the Board has given clear direction already to work out the investment plan. So once that is frozen, we will definitely provide that information to everybody.

Okay. Okay. And sir, my last question is, now this RoDTEP has already come from 1st January. So now what will be our rates like?

See, that is not yet decided by the government. So as and when they decide, it will be an information in public domain, so everybody will know.

So they have not yet done that?

No, they haven't spelled it out.

Okay. Okay. But earlier, we were expecting something like 8% plus 4% from MEIS.

Current rate is 8.2%. We have submitted whatever like refund of duties and taxes through our council to them, and they will take appropriate call. As such, we do not know today. It will be spelled out by the policymakers, and then we will come to know.

Okay. But existing -- under the existing arrangement, what is the total benefit we get?

We get RoSCTL 8.2% and 2.6% is the drawback. So total 10.8%, but the realization is around 9.5%.

Yes, that you had explained in the past also.

Yes.

The next question is from the line of Nihal Jham from Edelweiss.

Sir, a couple of questions from my side. First, when you mention of the China Plus One policy, we did allude to that even in the last quarter, but specifically the Xinjiang issue is something that has come up, I think, only in the last couple of months. And if we look at the OTEXA data also, the pickup in market share for India has only happened in the last month or 2, at least in the bedding segment. So I just wanted to understand that, is this shift right now happening because of the issue with cotton availability or the usage of cotton from Xinjiang or structurally, there is a movement that is in place? And if it is so, it was just that it was not reflecting in the data before that?

No, we have already mentioned that some of the structural shifts which are happening from June onwards, and during the COVID time is that the home has become the center stage. So home textile consumption has gone up, number one. The second was the opportunity to a China Plus One strategy. And the Xinjiang cotton happened almost like 3 to 4 months back, but it scaled up now because the customer has started blocking shipments from Xinjiang cotton area. And Xinjiang cotton area is -- supply is almost 87% of cotton -- Chinese cotton. So it is quite substantial. So that's what the China Plus One strategy. And over and above that, China has been focusing on its domestic business and not on the export business. Their raw material prices like when we compare apple-to-apple cotton is almost 30% expensive than Indian cotton. Their labor cost is like almost triple than the Indian labor cost. So all these factors provide opportunity, India being a large player. And India is at an advantageous situation because India has got -- is the largest producer of cotton. And India also traditionally produces textile and in the last 2 decades, has performed well in the home textile area and have garnered a good market share in the global market. So we feel the negative sentiments which are building towards Chinese supply, will definitely create opportunities for Indian and other home textile players around the globe. So that is what the China Plus One strategy is. We are going into final detail of how the reaction would come across on the supply chain side from this region in the near future and that we will keep informed.

Right, sir. But just a follow-up on that. What is interesting is that, ideally, in a lot of the other sectors, the China Plus One works where China is the market leader and India is at a #3 or #4 position in terms of market share. But at least in the bedding segment, we anyways are a leader by far. So in your interaction with the managers -- purchasing managers of the big box retailers, are they comfortable increasing the share even further because we already have a 50% plus market share in that segment?

Yes, of course, because you see that the market share indicates that India is competitive and performing well. And if India comes out with complete bedding solution, wherein fashion, utility and institutional bedding, China still dominates, and in the MMF sector also, China dominates. So those are the areas, which are like low-hanging fruits for Indian suppliers if they built on the capacities and the capabilities. So that has been mentioned earlier, too. And that's why our company has also since last 3 years has ventured into these new areas and have focused on the bed linen side of the business, and we have grown this to almost 15% of our sales.

Sure, sir, absolutely. That's helpful. Second question on the CapEx part. When you're looking at expanding further from 90 million meters, will we be only adding the processing capacity or we may add weaving and yarn capacity also?

See that the Board will take an appropriate call. We are on the drawing board. And once we freeze how the capacities has to be panned out, we will definitely come back and present to the Board, and then it will be known to everybody.

Sure. And last question from my side. On the incentives part, you mentioned currently, the duty drawback is 8.2%, right? And RoSCTL is at 2.5%. Did I hear that right?

No, no, RoSCTL is 8.2% and drawback -- duty drawback is 2.6%.

2.6%.

It is the other way around.

Sure. And we are expecting that once RoDTEP rates are announced, this should be around 8% at least.

That we do not look here. No, no, as I mentioned to Mr. Gala also in my previous answer that the government has -- will decide, and that will be an information in the public domain, which everybody will know. So we are awaiting for the government to decide upon the rate.

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

Sir, my question is that recently, the cotton price and the yarn price has skyrocketed. So how it will hit our margin in the coming quarter?

See, as I mentioned earlier that we have dealt with such situation in the past, and we are covered for 3 to 4 months already. And if necessary, because the demand is sustaining, we will pass on to our customers.

Okay. This is not a very big issue. They will understand the problem, and they will give the price increase.

No, it is an issue. It's a global phenomena. You see, cotton being a global commodity, it is a global phenomena. So we do have to watch and we have to see how it pans out. But as a company, that's what position as of now we are taking.

Okay. So already, sir, we have got some price increase?

Yes, we'll be able to pass on. As I mentioned to you earlier, that if there is a substantial increase and it impacts everybody in the marketplace, to all categories of product made in cotton, then definitely, everybody will go to their buyers and ask for a price rise, which will be accepted by the customers because they also know about this global phenomena.

The next question is from the line of Vinay Jaising from ENAM Asset Management.

Congratulations on one more good set of quarter and a great quality presentation. Most of my questions, I think, have been answered partly. So bear with me. When I look at your last 2 quarters, and I look at the volumes, and I just multiply the last 2 quarters by 2, so that I get a full year's run rate, we are closing to 92 million, 93 million. And the question is, if at all the last 2 quarters are repeated in the next 4 quarters or next 6 quarters, and we have a capacity of 90 million, and as most of your investors are asking what happens on CapEx, will you be able to outsource your overall -- part of your consumption, so that you can cater to this demand? That's my first question.

Yes, of course, we have been outsourcing, and we can outsource. But as I mentioned earlier, even if we cross 75 million, and today, we are at 90 million, for the short term, short to medium term, we'll be able to maintain our supply chain. So we have 100% processing capacity now. And we have cut-n-sew in-house. It's only the yarn and the weaving fabric which we outsource predominantly, which is available in India in ample quantities.

Would that reduce or increase the margins? Or would that be neutral to the margins if we do something outsourcing?

See, so far, like, it will be neutral. Like, say, we are covered for 3 to 4 months, as I mentioned, we have to closely watch. This is a global phenomena on the raw material side. And we need to keep a close watch.

Sure. Lalpuria-ji, I'm not really bothered about the raw material at all. If -- whatever you've been saying sounds very exciting that the China Plus One strategy, the demand, that seems to suggest to me that your volume growth is back. And if I -- even if I don't assume a volume number, it seems that this quarter's volumes can be just taken and multiplied by 4, and you can cross 92 million, 93-odd million. And so I'm trying to just gauge that is this a one-off quarter? Or this quarter is now -- you kept on mentioning 20 million and not 22 million or 23 million or higher. So I'm assuming that this kind of a quarter, more or less, can be maintained or moved up even forward in the short term as well, right, in terms of volumes and EBITDA margin?

Yes, of course, like, see, we are expecting this momentum to continue as we maintained from our order book position. And we also mentioned that we are on the drawing board. And soon, we will be taking decisions regarding the capacity expansion. And as I mentioned that for short to medium term, even if it goes to a 23 million run rate, we'll be able to supply because we can always outsource as well. So the margins like are what the guidance which we have given already for annualized, and for future, the margin we need to see in our next con call.

Sure. So as far as volumes are concerned, if you get the current volumes, which you seem to be relatively confident on, supply is not a problem. So that's one part of the equation.

Yes.

Moving to the second. You had spoken a lot about domestic markets in the last call as well. If you can throw some light on that in terms of what would be your targets on the retail front? You did speak about online, but any other thing you're doing? Because, obviously, your quality of products, which you suggested on your presentation also seem to be impressive.

Yes. The domestic market is quite upbeat, as we all know, because there are only a couple of prominent players in the marketplace. We had launched Boutique Living 3 years back and our product has been well accepted. And quickly, we have been able to distribute our products to 20 states with almost like 500 point of sale. We are quite upbeat now to grow this business because the online B2C and the D2C business channel of distribution is also growing along with the off-line business. And we, as a strong manufacturer, are able to provide complete customer solution in the near -- in the future. So we are quite upbeat about our domestic brand, and we had launched in October the Layers brand also, which is value-driven, to complement the Boutique Living. And Boutique Living is an aspirational brand. So we are getting through digital marketing also quite positive responses. So we have acquired good talent. We have built in a good team. We have built in good backup processes, systems, wherein we can cater to the consumer demand in the near future in this area. So -- and India is going to become a $5 trillion economy, we all know, home has become the center stage, the buoyancy in the property market, the home like where you spend a lot of time for entertainment, work, pleasure, everything, will provide necessary impact on the pattern of consumption in the home textiles as well. So this -- all this -- with all these positives, we are quite positive about our domestic market, and this Layers brand is catering to a complete range of home textiles, wherein we have found positive responses on the digital marketing side as well. So that's the reason you see this domestic market seems a good visible business model in the future.

Sir, I'm going to slip in one more question. If I look at what you're telling me currently that CapEx is not a problem, inventory is not a problem, raw material cost is a bit of an issue, one last thing, if you can tell us, what do you expect from the government in the budget? Are we expecting something in terms of PLI that we get some -- this industry also comes under PLI and you get some volume numbers where you can build a new plant or something coming there? Or are we expecting just the ROGC platform wherein you'll get a higher-margin there and that takes care of your export incentives? Any thoughts on that, sir?

See, the government has declared -- our Prime Minster has declared Atmanirbhar Bharat. So as a company, we are strongly pursuing this goal. And we, as an Indian company, we think globally and act locally. And that's what our vision is also. And the government is definitely supportive, providing necessary regulation, policies and support from time to time. And it will further provide because textile is a large contributor to the GDP as well as it is a large employment generator. So definitely, the government has got a soft corner to textile because it employs a large number of people. So I think the PLI also, it has been indicated by the government that textile is one industry among them where PLI will be implemented. We are yet to understand the details of it. But we feel that the government will provide necessary support to both the textile industry and exports in the coming period because they also would like our GDP to grow at a faster rate. So that's my input from my side on this question of yours.

The next question is from the line of Chirag from Valuequest Investment Advisors.

Sir, I have just 1 question. What is our hedging policy?

We hedge around 60% of our forwards as per our ForEx policy laid down by the management.

Okay. And at what rate currently we would be having our hedges?

74% plus is the future rate.

[Operator Instructions] The next question is from the line of Vikram Sharma from Niveshaay Investments.

Sir, can you provide breakup of export and domestic market in current quarter and first 9 months?

See, we are mainly an export company. The domestic we have started, it is still at an initiative stage. So we'll be able to provide better guidance in the other 2, 3 quarters later on.

Okay. And sir, what was breakup of home textile and spinning in last quarter? And are we selling cotton yarn toward only final product only?

No, mainly we are captively consuming our yarn, but to some extent, we do sell because the spinning was -- whatever was established in '91 was not forward-looking towards consumption of home textile where we need finer yarn. So some part of it, we do export and sell in the domestic market.

Okay. But not more than 10% -- 5%, 10%?

So like it's not substantial because mostly we are using for our captive consumption.

Okay. And sir, are we able to procure complete requirement indigenously for raw materials? Or are we facing some problems?

No, we are outsourcing, and we are not facing any issues because we have long-time contracts with our suppliers, and we support them and they support us.

Okay. And with current market scenario of cotton, do you think we would be able to manage operating margin at same level going forward?

So we will try to. As I mentioned, we need to observe the situation. We are booked for 3 to 4 months. And we have given our margin guidance already for -- on an annualized basis. From next year, we need to observe. Being a global phenomena like cotton, we need to wait and watch and see how it pans out.

The next question is from the line of Giriraj Daga from KM Visaria Family Trust.

Yes. Hello, sir.

Hello?

Mr. Daga, can you hear us?

We cannot hear Mr. Daga.

So we move on to the next participant. The next question is from the line of Hasmukh Gala from Finvest Advisors.

Yes. Just wanted to know, in our total INR 24 crore other income, how much was ForEx gain?

It's about INR 14 crores.

Okay. Okay. Because in last full year, we had a substantial amount of ForEx gain of about INR 50 crores. So this time, it is only INR 14 crore?

Yes, yes, correct.

Yes.

Yes. Okay. And sir, how is the position regarding the recovery of export incentives? Because as on March '20, we had a big amount, which was to be recovered, something like INR 80 crore plus. So has that situation improved?

The situation has somewhat improved, but periodically, the government funds are getting over. So they extended it. But RoSCTL, we were able to get on a continuous basis. But in some MEIS and ROSL schemes, they are still lagging behind. But we hope that to get much more synchronized in the future because government is focusing on online transaction.

Okay. Sir, as on 31st December, how much would have been outstanding? Any idea? Export incentives to be recovered?

About RoSCTL and drawback together would be about INR 40 crores, of which I think -- this was as of the 31st December, but later on, we have recovered about INR 25 crores. So as on date, this should be about INR 15 crores net. Plus, there will be additions happening as we move on.

Exactly. New claims would have been launched. Correct, correct. Yes, right.

Sir, on the receivables side, as on September, our receivable had increased by about INR 88 crores to INR 330 crores. So now how is the position on receivables?

I beg your pardon, on the...

As the volume moves up, you see, the receivables also will move up, no, Mr. Gala?

Okay. Yes, yes. Okay. But in terms of number of days, we are comfortable, is it not?

Yes.

Yes, yes.

Okay. Because as on September, what had happened, that our inventory has run down by INR 50 crore and receivables have gone up by about INR 88 crore. So we do not know what's the December position, but that's fine.

No, you can -- those are normal business routine. Nothing else. We are well in control of the days.

Okay. And sir, this investment, which is about INR 80 crore as on 30th September, which are the avenues where we have parked this money, they're all mutual funds?

No, we have parked in bank FDs.

Bank FDs. Okay. But then you are classifying it as investment, INR 80 crores?

Yes, that is INR 80 crores, which we have mentioned. We sometimes do in arbitrage funds also, but that is very meager.

Okay. So mainly it is bank FD.

Yes.

The next question is from the line of Giriraj Daga from KM Visaria Family Trust.

Hello, can you hear me now?

Yes, sir.

Okay. So my question is a clarification required. In one of earlier answer, you mentioned that China cotton exports are getting blocked or customs officials are blocking export from Chinese cotton areas. Can you explain a bit more there?

So this is what the information is in public domain and what we hear about is the Chinese cotton coming from Xinjiang region is -- if it is found by the U.S. Customs, they block that particular item from getting access to the U.S. market. So this much we know. And they are asking the Chinese supplier to provide certificate of origin that whether it is produced from Xinjiang cotton or other cotton. So this is the information which is available to us.

The next question is from the line of Dhiral Shah from PhillipCapital.

Congratulations for the good set of numbers. Sir, in your opening remarks, you said, you are targeting double kind of revenue in the next 3 to 4 years. So what is the ideal fixed asset turnover in our business?

Typically, it is 1:1.

Okay. So for doubling the revenue, sir, are we expecting [Foreign Language] do we expect that we have to do almost INR 2,000 crore kind of a CapEx because...

Investment will be substantial. It depends on the value addition also.

Okay. Okay. And sir, currently, what is the proportion of manufacturing and outsourcing right now?

Mostly, as I mentioned, we are doing processing 100% in-house, and we are doing cut-n-sew also in-house. So mostly, we are doing in-house only.

Okay. Okay. Okay. And sir, lastly, when you talked about the cotton which is coming from the restricted area in China, so what proportion is it, the overall Chinese export?

Come again?

Hello?

Yes. Come again, I was not able to...

Yes, when you said that U.S. is restricting the Chinese export, which is coming from the Zuan (sic) [ Xinjiang ] region, right?

Xinjiang.

So what is the proportion of the overall Chinese, which is coming from that region, sir, particularly?

It's almost like 20%, what they say, in the overall cotton production worldwide.

The next question is from the line of Riddhima Chandak from Roha Asset Managers.

Sir, my question is on our domestic market. So as now we are now focusing on the B2C and direct-to-consumer sales in the -- here in India. So as of now, what is our contribution from the online sales? Do we track this data?

So as I mentioned, it is too early to say the number because we have started focusing as of now since last 3, 4 years. We were earlier focusing on the dot-com businesses of the retailers and then drop shipping to some e-platforms as well. But during COVID and post COVID, the online e-commerce, D2C, B2C business has strong distribution -- has developed into a strong distribution channel. So as a company, because we are geared up with the back end, we are focusing on this going forward. But it is too early to give you a number.

Okay. And do we also have our own stores here?

No, we do not have. We are not into retail.

Okay. Okay. And as the total domestic contribution, it is approximately 7% to 8% in our total revenue in FY '20. So -- and we are also focusing very aggressively here. So what contribution going forward, you are looking for India in the next 4 to 5 years or say, 2 to 3 years?

So we -- I think we have not mentioned that we are at 7% to 8% of our sales in the domestic. We have always maintained that this is a new area. We see a lot of growth in this area. We are all geared up with necessary brand distribution, the team, and we see a big opportunity to grow in the domestic market. So that's what we have mentioned also in our investor deck and press release that this e-commerce, B2C, D2C and all this channel of distribution, along with large-format stores, MBOs, et cetera, pan India, and with the Indian economy growing and the home textile consumption growing, we see a big opportunity of growing this business here. We'll be able to provide you with some number say, maybe next year.

Ladies and gentlemen, that was the last question for today. I will now hand the conference over to Mr. K.R. Lalpuria for closing comments.

We remain confident that the next level of growth in Indo Count will be sustainable, brand accretive, margin positive and will strengthen the customer relationship. We would constantly focus on increasing our penetration through B2C and D2C foray. 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 advisers. Thank you.

Thank you very much. On behalf of Indo Count Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.