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

Ladies and gentlemen, good day, and welcome to the Indo Count Industries Limited Q4 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. Mohit Jain, Executive Vice Chairman of Indo Count Industries Limited. Thank you, and over to you, Mr. Jain.

Thank you. Good afternoon, and a very warm welcome to all of you to Indo Count Industries' Q4 and FY '21 Earnings Call. I hope you your family are keeping safe and healthy. I have with me Mr. K.R. Lalpuria, Executive Director and CEO; Mr. Muralidharan, our CFO; and Strategic Growth Advisors, our Investor Relation Advisors. The world is still battling the COVID-19 pandemic. Most countries are in the middle of the second wave with rising cases each day. However, vaccine rollouts should play a major role in the next round of economic recovery and upheaving business confidence. In these challenging times, I'm happy to share that our team relentlessly worked toward the same focus of serving our [indiscernible] customers, which resulted in highest average sales volume and revenue in FY '21. The end markets have been supportive, leading to a record growth in FY '21. However, it is important to note that large part of this growth has been on the back of a lot of efforts by the team that have been shown over the past 2 to 3 years in terms of creating new products to gain market share. Our focus on offering an integrated bedding solution with innovation and keeping customer preferences of the future in mind has resonated well with all our buyers. Having entered the largest subsegment of fashion, utility, institutional bedding in 2016, we have continued to make all around efforts in terms of innovation, service, delivery and capacity to grow our brand equity in these segments. I'm happy to share that these segments today contribute 15% of our revenue. In 2021, our main market, the United States, showed strength with all-time high retail sales; adoption of omnichannel distribution; consolidation towards big box retailers; increasing importance of health, hygiene and wellness products, along with most importantly, home becoming a center stage, have all contributed to the rising trend. We believe India's edge in the global home textile market has led to India becoming a preferred trade partner as the China Plus One strategy rolls out and plays out. We've continued to focus on growing our branded and domestic businesses. For FY '21, branded business stood at 10% of sales, domestic business at 1% and e-commerce at 4%. We are embarking on increasing the contribution of these value-added segments and have accordingly set our target for FY '23. Our domestic business, we are targeting to reach 3% of sales and e-commerce to reach 8% in the next 2 years. Our focus continues to remain on increasing service levels and communication with our buyers to understand the evolving needs and create products of the future to stay ahead of the curve. At Indo Count, we've evolved from being capable by leveraging our knowledge capital to be adaptable by defining capabilities with strong foundation to being reliable by building a trusted corporate house. Now I would like to hand over the call to Mr. Lalpuria to share the business performance. I think you're on mute.

Good afternoon, everybody. I thank Mohit. I'm happy to announce that we have been able to achieve volume guidance of over 75 million meters. FY '21 volume stood at 78.17 million meters. For FY '22, we expect volumes to be in the range of 85 million to 90 million meters. CapEx, in order to address the growing demand, during the quarter we announced expansion of our bed linen capacity by 20% from the existing capacity of 90 million meters. We scaled up to 108 million meters by debottlenecking and balancing facilities. The brownfield investment for adding commensurate cut-and-sew facilities and for enhancing the capacity for top-of-the-bed products would entail a CapEx of INR 150 crores. We are also modernizing our spinning units with compact modern technology. This would entail a CapEx of at least INR 50 crores. These investments are expected to increase the revenue by INR 600 crores over the next 2 years post commissioning. At Indo Count, we have delivered growth amidst challenging environment on the back of flexible balance sheet; continuous research and innovation; accelerated presence in health, hygiene and wellness product; consistent focus on value-added segment of fashion, utility and institutional bedding; and also a quick adaptation of market trends. In order to create a strong B2C and D2C foothold, we have established offices and design studios in key cities of the world to understand customer preferences and create products for the future. Accordingly, we have entered various brands to launch a holistic health and hygiene brand, Sleep Rx, which is our performance brand; Pure Earth on the sustainability side, a brand well recognized; Boutique Living, mid-market aspirational brand in the domestic market; and this year, we had launched Layer, a value-driven mass brand. We are now focusing on creating more visibility through digital marketing channels. We are trying to create a pan-India distribution network to MBOs and LFS formats. In today's worlds, e-commerce, omnichannel and B2C has become an important channel of distribution globally. Due to this additional channel of distribution, a wider section of people in Tier 2 and Tier 3 cities have also got an opportunity to buy products, both offline and online. As a company, we have taken the right steps towards adapting to the new avenues of sales according to the changing customer ecosystems. Our performance during the period has provided us with renewed confidence in exploiting these new channels of distribution and grow further. We believe there is a huge opportunity for a quality brand and product in the Indian market and are confident of creating a strong brand recognization for our domestic branded business. On the ESG side, Indo Count, we will continue to remain ESG-focused organization with well-defined principles, road maps and targets. We are enabling a sustainable approach in all our operations, be it sourcing of raw materials, manufacturing, supply chain and waste recycling. The company has taken various initiatives across ESG segment, as detailed in our investor presentation. Let me now share with you our operational and financial performance. FY '21 volumes stood at 78.17 million meters as compared to 61.8 million meters in FY '20, a growth of 26%. Q4 FY '21 sales volume stood at 21.65 million for Q4 FY '21. Our order book continues to remain healthy. We are optimistic and expect volumes for FY 2022 to be in the range of 85 million to 90 million meters. Total income. INR 705 crores in Q4 FY '21 versus INR 425 crores in Q4 FY '20, a growth of 66% on Y-o-Y basis. For Q4, we have not considered RoDTEP benefits in revenue as the rates have not been notified by the government so far. Our revenues are INR 2,557 crores in FY '21 versus INR 2,135 crores in FY '20, a growth of 20% Y-o-Y. EBITDA. INR 106 crores in Q4 FY '21 versus INR 35 crores in Q4 FY '20, a growth of 200% on a Y-o-Y basis. EBITDA margins stood at 15% in Q4 FY '21 versus 8.3% in Q4 FY '20, an increase of 671 bps on a Y-o-Y basis. Our total EBITDA. INR 415 crores in FY '21 versus INR 238 crores for FY '20, a growth of 74% on a Y-o-Y basis. EBITDA margin stood at 16.2% for the full financial year FY '21 versus 11.1% for FY '20, an increase of 507 bps on a Y-o-Y basis. PAT. INR 58 crores in Q4 FY '21 versus INR 8 crores in Q4 FY '20, a growth of 600% on a Y-o-Y basis. The PAT margin stood at 8.2% in Q4 FY '21 versus 1.9% for Q4 FY '20, an increase of 625 bps on a Y-o-Y basis. The total PAT stood at INR 249 crores in FY '21 versus INR 73 crores for FY '20, a growth of 241% on a Y-o-Y basis. The PAT margin stood at 9.7% in FY '21 versus 3.4% for FY '20, an increase of 632 bps on a Y-o-Y basis. On the dividend front, the Board of Directors have recommended a final dividend of INR 1.50 per equity share, subject to approval of the shareholders at the ensuing AGM. Our face value of the share is INR 2, which is more. Net debt. As on March 31, 2021, total net debt stood at INR 263 crores, implying a net debt-to-equity of 0.20x. The working capital days have increased, primarily on account of increasing debtors due to extension of delivery schedules on account of logistical challenges faced in end February and March. We expect this to normalize in Q1. For FY '21, our ROE is at 19.4%, while our ROCE at 24%. That's all from my side. I now leave the floor open for the questions and answers.

[Operator Instructions] The first question is from the line of Tarang from Old Bridge Capital.

Congratulations for a very strong set of numbers, especially in H2 and having beaten your guidance. Just a couple of questions. One, sir, how the 85 million to 90 million square meter guidance that you've given, what is the source of the confidence to achieve this? And the second question is that if I were to do a like-to-like Q4 versus Q3 revenue, in the sense that if the RoDTEP rates which were eliminated in Q4, but if I were to do a like-to-like, what would have been the like-for-like revenue without RoDTEP for Q3? That is the second question. And the third question about INR 50 crores for the compact spinning capacity. If you could just explain what are the benefits qualitatively of this and how will it help you in terms of profitability.

So thank you for your question. First of all, I would answer on the guidance. We have a strong momentum and acceleration on the order book position, and our order book position is quite healthy as of now for the next 2 quarters and that made us provide you the reason that the guidance is 85 million to 90 million meters. We have capacity. We are debottlenecking the capacity as well as we move forward, which will be coming into play by end of -- by the Q4 FY '22. So we will be able to serve the customers very well. And the U.S. market, in particular, is doing quite well. As you can see, the retails are -- retail sales are almost growing there by almost 7% to 8%. The vaccination drive is also trying to bring in confidence among the consumers. So we strongly feel that we should be doing good volumes as we have added up some new product categories and some new customers going forward. So that explains about the guidance part. The second is the RoDTEP, the rates have not been notified yet by the government. And for that reason, we have not accounted that in Q4. If it would have happened that the government would have notified it, then we would have added up another INR 45 crores to our revenue. So in this year, probably, whenever the government decides this rate, as we are mentioning that in our shipping bill, and the government has also mentioned that it will provide us with RoDTEP on a continuing basis, we feel that whatever which we'll accrue this year will be accounted for, and we will report back whenever it gets notified. So that answers your second question. The third question on the spinning front. As our spinning captive consumption, which we would like to increase with compact spinning and modernized spinning, we would like to see that we make yarn which is usable in our home textile department. So that's the reason we are modernizing the spinning to see that we can provide more quality yarn for our home textile division and gain advantage as we were selling this yarn earlier because the old spinning mill was established almost 30 years back, and at that time, we did not have our home textile division. So this will bring in a value addition because we will save money on the yarn, which we would captively use from our spinning division in the home textile division.

So then, therefore -- so, so far, it's a good part of your existing capacity also?

Come again?

The fact that you'll be deploying a compact spinning -- you'll be making it as a compact spinning mill will, therefore, all the yarn that is coming out of there, will that completely flow into the home textile value-added segment?

Not completely. Some part of it because we are modernizing only a part of it.

The next question is from the line of Praveen Sahay from Edelweiss Financial.

Many congratulations on very strong set of numbers and beating the guidance as well. So my question related to the inventory and the debtors number. So that has increased, both the things has increased, and there is a reason for some logistical issue. Can you elaborate more on that, why the debtor number has increased? What's the challenges in the logistical front you had faced? And secondly, is that normalized now?

See, what has happened like due to logistical challenges, the orders were bunched, and they got extended a little bit from end February towards mid of March. And as we provide some terms to the customers, the realization would happen in this year. So this will normalize going forward, which we will report in Q1.

So just more on that, sir. What's exactly the logistical issue? It's a lockdown issue for internal lockdown, domestic lowdown or something else?

No, no. It is the logistical challenge like not getting containers, freight, movement of trucks, et cetera. And the frequency of the ships also has got delayed at the end of the year, this year, the Suez Canal issue.

Okay. Yes, that's a 6-day of a lockdown because of a Suez Canal. Okay. So that's because of our debtor numbers has increased and now you are seeing the normalization in that?

Yes. This quarter, it will normalize.

Okay. And similarly, for the inventory as well because inventory also we had observed, let's say, some 10 days increase. So that is also because of that only?

No. You see the business is growing, and we have added revenue this year. So in absolute number, there will be an incremental inventory. Secondly, you see because of so many uncertainties in the market: lockdown, restriction of interstate movement of goods, the freight -- the availability of containers, the frequency of the ships arriving from different places. So all these factors considered, what we have done is, we are building a buffer stock in order to serve our customer better for the standardized quality. And that's the reason since we have educated capital with the company in order to serve the customer better and to keep the supply chain intact and help us deliver the customer on time. So all these reasons goes beyond in building up the inventory for the standardized product because you see not only in Maharashtra, there are issues in other states where we source materials from. So we have to be building the inventory levels to a reasonable parameter, where we can serve our customers much better going forward.

Great, sir. Sir, second question is, as you had mentioned about the new product and the new client, can you give any sense on contribution for the -- for those new product or new client in last 9 month or a quarter?

See, as we have been saying that we have ventured into the fashion, utility and institutional bedding, and we are able to attract the brands and the retailers to acknowledge our product and buy from us. And we are building a strong image in the marketplace as well as the backup in India. So we are able to design some new products and sell in the marketplace. We have also launched a couple of sustainable and performance brands, which you have found very good acceptance in the health, hygiene and wellness category. So those are the new products like antibacterial, antiviral as well as some other organic product we have launched to keep up the sustainability flatline, have found good acceptance in the market as people are becoming more and more aware about the climatic change and the sustainability. So those are the new products which we have added. We have also launched Layers this year, in which we have addressed the mass merchant requirement in the domestic Indian market. So this is also a good product launch, which we have recognized in our product portfolio. Going forward, we see that there is a good movement on to sustainable fibers and various other products in organic and BCI cotton, which we will latch up on to. So product, of course, is like our core competent being innovation and product development for the company is providing that competitive edge to promote newer products. As far as new customers are concerned, yes, we always add on new customers and new countries. And as you know, we are exporting to almost 54 countries. So we keep on adding some new customers going forward, and that's why you are seeing the growth.

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

Yes, Mr. Lalpuria and management team for excellent numbers overall and buoyancy and overall company and home textile market. Sir, a few questions on your CapEx. This INR 200 crores will entirely be spent in '22 itself or is it in a phased manner? How is the CapEx scheduled?

See, as I mentioned, we will try to spend during this year only because we need capacity and modernization of the spinning will help our home textile division. And also, we need -- once we increase our capacities on the processing side, we need to commensurate it with the cut-and-sew facilities as well. So it will be our endeavor to invest this INR 200 crores during this FY '22 only.

And is it adding any spinning capacity or it's just modernization?

Modernization.

And what is the spinning capacity right now with you?

We have around 60,000. We'll add up a few thousand more spinning to end up with around 70,000 spinnings.

And what would be the geographical mix of sales like U.S. is how much, Europe is how much and India is how much?

Currently, we are at 75% to the U.S. and 15% to EEC and 10% to U.K. and the rest of the world country.

And what is your expectation in RoDTEP rate since that was a very large number at almost like 10.5% as you are not providing this number now. So how -- what the industry body represented into governments and any update on this?

See, the RoDTEP is basically the refund of taxes, levies and duties, which the [indiscernible] Committee earlier decided upon the rate by taking into consideration all non-GST refunds. And they had recommended to the Ministry that this rate has to be provided to the textile industry so that we don't end up exporting taxes. Our council has represented that the same rate should be carried forward because the taxes have not reduced so far. So we hope that the government will recognize this fact and will provide appropriate rate in the coming year. And we are very hopeful and are pursuing with the Ministry to provide similar rates, what they had declared because the rates haven't gone down. But we will await the government notification for declaring these rates.

And what's the current status? Are your factories operating at full capacity, at reduced capacity due to various lockdown measures from various state governments, if you can update on the thing?

Yes, the district collector has recently in Kolhapur issued a guideline where they had asked us to lockdown for 8 days only. So we are following those guidelines because we are very much concerned about the safety of all our workers and employees. So we are following these guidelines, but we have duly reported to the stock exchange that there will not be any material concerns on our business. And because we have built a supply chain in such a way that to absorb such uncertainties going forward, we will be able to serve our customers and maintain similar revenues as what you have seen in the 9 months, as you can recognize the fact that the first quarter was a washout and in spite of that we were able to maintain the supply chain and deliver to our customers with a growth of 26%.

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

Sir, my question is that, sir, essentially, the industry has shown a lot of price increase, so whether we got that price increase from our customers or it will be gradually you will receive from the customers?

No. See, we have long-term relationship with the customers, and we have joint business plan, whereas they have the retail platform on which we are able to supply the material and that which is to the end consumer. So we both are on the same boat. So they do understand. Whenever there is an adverse situation, they negotiate prices with us, but they do pass on because it's a 2-way treaty. Secondly, in the past, also, we have handled such situations, and we should be able to handle such situation going forward because we do understand that cotton being a commodity, there will be ups and downs, which we need to manage. And with our product portfolio, we have been able to offer the competitive advantage to our customers. So they have agreed to some of our price challenges and have given us the necessary support.

And sir, second question is, how much our total requirement of yarn is from our captive -- we are producing captively?

See, we are producing almost like 25% to 30% of yarn in-house and the rest we source outside. India has got a very big capacity of spinning and plus cotton is available in abundance. So we feel there is a good supply of cotton yarn in India and India exports a lot of good quality cotton yarn to many of the European countries and Japanese countries. So the quality is also appropriate. So we feel that there is a good supply system recognized by everybody in the textile trade that yarn is available in very good quality and very good prices in the Indian market.

So sir, after this expansion and modernization of the spinning mills, the percentage of captive production will be -- that remains same at around 25%?

Yes. So it will be, to some extent. It will go up, of course, by, say, another 5%, 7%. But you see we have flexibilities, which is a large tool because we are using many specialized yarns as well.

The next question is from the line of Lokesh Manik from Vallum Capital.

So my question again is on your guidance. So just for clarification, you did mention before the increase in yarn prices would be passed on to customers within -- with the volume that we are guiding, will we be able to -- I mean the customer would be receptive for that?

No, they're already receptive. And we also need to see that what value addition we provide. See, whenever there is a raw material increase, we have to look for revenue, how we are able to add value to our product and give the customer in their market an edge to sell. So we have to improve our operating efficiency. We have to see how -- what product mix we sell, we need to see how we can realize more or add value or we look for other distribution channels. So these are all the permutations and combination as a company we need to look for. And we have to see that. We just cannot go back if the price has gone up and you just provide us because in their market also, they have similar challenges, but we have to scale up to the occasion and manage it. We have to hedge our raw material properly and see that how we can provide long-term relationship to our supply chain.

Right. So the -- so apart from yarn prices, they would also be flexible in terms of other variable costs like logistics cost suddenly goes up what we've witnessed in the last year. So they understand that and -- yes.

So water finds its own level in the market. The market forces are -- always will be volatile. But then they also know that they have to exist and we also know we have to exist. So it's a 2-way.

Correct. So where do you see average margins for the company, given that it has been quite volatile in the past few years or since almost 6, 7 years? So on an average, where do you see that settling down to?

See, we had given a margin guidance last year -- last quarter -- last con-call of 15% to 17%, and we would like to maintain it.

Okay, okay. And your other businesses in terms of your e-commerce and the new opportunities that we are tracking which fashion, utility, all these things combined, if I'm not mistaken, would be 30% of their business. Am I correct on that, sir?

So we have said we are providing [indiscernible] on the larger base. So if you see, our base has moved up and our percentage is also maintained. So we've grown that business. But you see we want to tread along very correctly and very surely for all our customers because you see it is design-oriented. It's a specialized item. We need to build up a proper backup with skill sets, et cetera. So all this needs to be done and the business has to be learned. So there is a learning curve, which we have done so far. So I think as the China Plus One strategy moves to India's favor, we should do well in this in the long term, like 3 to 5 years with fashion bedding and utility bedding.

Right, sir. Any update on the India-EU FTA, which is supposed to be beneficial and can be a growth driver for us for entry into EU?

Yes, yes, of course. Once the EU FTA comes into play, the whole market will open up. We are at 9.6% tariff in Pakistan and Bangladesh to 0. And I would like to also ask Mohit to just provide you some more basis on the growth and the outlook for...

Sure. So Lokesh, just quickly, you asked a question, I just want to make sure that you get it correctly. Are those 4 categories 30% yarn, not really. I mean, what we've given is the breakup, how much we've done category-wise, but some of that might be interchangeable. So it will not become 15%, but some of it is interchangeable. Like let's say there's a branded business, which is 10%, and some of that would be in e-comm also. So you cannot just run -- play in math and just add it to 30%, just to clarify that point. And just to reinstate to what K.K. said today, that from -- if you look at the U.S. market, India today, as of end of March has a 59% market share in bed linen, which is substantial, right, I mean for the home textile business and 43% on the towel side. So there is no reason that we, as a country and then as Indo Count and other payers, would not benefit as FTAs from Europe and the U.K. get into play. But we are not basing any of our businesses for that to happen. As and when that happens, of course, we will be ready for that.

Okay. So any vision for the company in terms of how do you see your non-bedsheet products or value-add like fashion, utility and institutional segment as a percentage of top line sales going 5 years down the line to what they are today?

Sure. So for us, we're a very, very focused company on the home side of the business, home textile and within home textile on the bedding side of the business. That's where all our growth is going to come from. So as we grow our core business, which is predominantly sheet sets, we will see growth -- or substantial growth coming from fashion bedding, utility bedding as well as institutional. That's why as we augment our capacity of dyeing and finishing from 90 million to 108 million, we're also augmenting our filled product capacity, which is on the fashion and the utility side. As we speak about our branded business, e-commerce, all of these -- last year, we've grown in double -- I mean, 100% in these businesses. Of course, would it remain 100% for each year to come? The answer is no. But I think we have another, let's say, this year, our e-comm business would also grow by more than 50%.

But are you targeting any percentage of sales as a top line for the next 5 years from these businesses?

We haven't set forth an exact percentage, but I would say which one of these would be substantial. Our also endeavor is, as we grow our business, to see that a fair chunk of our business goes from a B2B model to a B2C and a D2C model, which is a journey that we have to go through. We have to credit carefully. And that's the journey that we have entailed for the company, that how do we start selling more under our own brands. That's a B2C or direct-to-consumer.

And overall, we have also given you, in our earlier con call, that in the next 4, 5 years, we would like to double our revenues from here. So that's what the vision is.

The next question is from the line of Ronak Vora from AUM Advisors.

That's a good set of numbers. How do you see your EBITDA margin stabilizing in the long run?

We have already given a margin guidance for 15% to 17% as of now.

Okay. Do you -- so is that including duty or excluding the new tariff that would be given by the government?

Excluding.

The next question is from the line of [ Sajay Gupta ] from [ SC ] Securities.

Congratulations for a good set of numbers. Sir, my question is the kind of percentage growths you people are showing right now, when can we see the organization aspiring a turnover of $1 billion revenue? Can this be achieved in the next 4, 5 years?

[Foreign Language]

I would love to have that.

The company, as we move forward, see, we are taking right steps in the right direction. And we have been duly recognized by our customers. And what we have recognized the fact earlier and which we have mentioned also, that we were catering to $4 billion sheet sets market earlier. We added up around $10 billion target market when we added up fashion, utility and institutional bedding, in which India was having earlier only 7% market share. China was dominant there. And China is losing ground not only in sheet sets, but all these categories. So there is a big opportunity out there because there are only few countries like in Asia, which are supplying textile to the world, 85% of textile is supplied by this country. Now Bangladesh and Vietnam are labor arbitrage. Pakistan, as you know, has got limited cotton, and they are into short staple, basically towels and bedding. Whereas India has got a versatile supply chain of short staple, medium staple as well as long staple. And India also has an established spinning segment. So I think there is a big opportunity out there, and India is well positioned and well -- as the companies, our peer group, ourselves, we are all well positioned because we have performed in the last 2, 3 decades and have served brands and retailers worldwide. So the recognization, the performance and the opportunity, all are there. And that's why we have mentioned in our investor deck that from capability, we have adapted to the situation because the pandemic has shown in some new consumer behavior, which we have adapted as an organization. And now we have proven our reliability that even we can absorb 26% and sweat our capacities. And in spite of all these challenges in the environment, we have delivered to our customers as best we can. We have capital adequacy. We have the design knowledge and expertise for making textiles. So I think the opportunity exists for Indian companies to companies. So I think we can become, and we would become, a $1 billion company in the time to come, both organically or inorganically. We are taking the opportunities as it is coming. And as we mentioned, we have entered the next orbit of growth as a company.

Okay. So it would be safe to assume that next 5 years, we should be reaching this target of $1 billion, if I'm correct?

I cannot quantify. See, I had already given that we will make 2x. And I mentioned that [Foreign Language]

Okay. And sir, another question. What is your thought on the dividend payout policy? As right now, you have given us some around approximately 10% dividend payout is there. But I don't...

I think it is 12%.

Okay. But as a company, do you have any dividend payout policy which you have in mind?

See, so far, the Board decides on recommending the dividend payout and the dividend percentage looking at the situation. What as a company we have done is we are building buffer of resources so that we can do growth. We can serve the customers better. We can absorb technology. We can invest into digitalization. We can invest into supply chain. We can invest into brands and licenses and we can invest into talent and other things. So all these areas, we need to take care and move ahead. We are a global company, and we are having global impacts. So we need to watch that very carefully as an organization and sustain all of this. So that's the reason the Board takes into consideration all these factors into deciding the dividends. But as a company, we have always been a dividend-paying company, and we believe that we should go back to our shareholders all the time, which we will do in the future as well.

Sir, why I'm asking this question because most of the companies today have a dividend payout policy of 20% of the profits or 25% of the policies, all the good companies. And with our company right now, it's somewhere around 12%. So do we see this percentage going up in coming years?

Of course. As I say, the intention is there. And we have a very positive attitude towards this, that we should reward all our shareholders from time to time. But we are building a company. As you said, in order to build a $1 billion company, we need resources. So we need to look at each of these factors to see that how we grow.

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

Congratulations, sir, on strong set of numbers. Sir, I wanted to understand the opportunity when Europe has -- is reviewing with the GSP+ status to Pakistan. What is the kind of opportunity that you are looking at? And how do we stand in terms of competitive advantage when that happens?

See, we all know that the European Parliament has mentioned about issues in Pakistan over human rights and so they have recommended that why we should provide GSP+ preference to Pakistan, where they enjoy lower duties. This we are pursuing strongly with our government to see when they sign up our FTA with them, at least we will come to a level-playing field. Now EU, as we all know, is a very big consumer of home textile, equally to the U.S. market. We have not been able to capture that market because of this duty difference between us and the other textile-producing countries like Bangladesh and Pakistan. Also, we are facing one more issue on the rationalization of duty on the MMF side. We are expensive as a country by almost 30% in MMF. If the government rationalizes and reduces duties in this -- towards this supply, we will become competitive in polyester as well as polyester-blended fiber -- polyester-blended cotton products in this marketplace. So I think once we sign FTA, there will be a huge market open up for our products. And we will be able to grow our market base out there. Also, it will neutralize our entire focus on the U.S. market. And this will give an opportunity to many Indian companies, as well as us, an opportunity to grow business in many product categories over there. So I think this will be a big opening of opportunity for companies like us and all the home textile supplying companies.

Okay. Even if FTA is not signed and only GSP is removed, then also do we come at level-playing field?

Yes, of course, because one of the duty is removed. But this is only with Pakistan. The difference is not with Bangladesh. So Bangladesh will still enjoy. So that's why I'm saying if FTA signed, then we'll be at level-playing field.

Okay. Okay. But Bangladesh doesn't have a huge home textiles exposure. I'm just trying to understand from your company's perspective.

So it is at the lower end at opening price point, and it has got processing capacities where it prints very well. And it supplies to the U.K. market in a big way as well as some European countries. So they are recognized as a supplier to home textile also, some of the products.

Okay. Okay. And sir, in this COVID time, the last 1 year that we have gained huge market share in the U.S. market, can we bifurcate how the demand has been in the low-price segment, mid-price segment and high-end products? Whether it has been driven by some particular segments and other segments can catch up, which can drive the demand for those with reopening or gaining jobs, et cetera? So some color on the U.S. market from that perspective will also help.

No. As we have mentioned, the health, hygiene and wellness sector has grown during the pandemic over there. And there's a lot of awareness about what product to use and utilize. So the consumer behavior has stepped up. They are value addition on products which are intimate to their scheme. And bedlinen is used on beds where person sleeps for 8 hours, and he uses them every day. So the consumption of bedsheets and the awareness of using much more hygienic bedsheet has gone up. So we feel that going forward, there will be value-addition segment, which will increase in time to come as people are also focusing on the sustainability drive. They are recognizing more sustainable products to absorb and use. So we feel that the segment in which we are, there will be definitely value addition. As far as the lower segment, also has moved up because of the affordability because many of the people had lost jobs. So the affordability also has been a prime reason for moving the lower segment as well because whenever a category moves up in consumption, they are all 3 segments, whether it is lower or mid or high. But what we have also seen that the e-commerce has given the brand and the licenses also a recognization. So that segment is also moving up, which will give us a competitive edge to supply as well as to sustain and grow our business to the value-added

Okay. Okay. And sir, how much was the export incentive booked in FY '21? In FY '20, it was around INR 168 crores.

I'll tell you the figure off-line, Prerna.

Okay. Okay. No problem. And sir, employee cost on a Q-on-Q basis has seen a substantial increase, why would that happen?

Muraliji, can you take this question, please?

Yes. Yes. Hello? Hello?

Yes, we can hear you.

Yes, sir, we can hear you.

Yes. So basically, one is that the -- in the last quarter, we had our annual review, so we had increments for the staff end workers, basically. So a partial increase is coming due to the normal reviews. Based on their performance, we will normally check the performance, review the performance from January to December. So this quarter, we have given the performance benefits. The second is also the management, this one, some commission payments to the Executive Directors based on the performance. This is recommended by the Board, that the performance has been good, so they should be rewarded. So this quarter, there is a provision for that.

Okay. So which means at current capacity, around INR 50 crores of employee cost is sustainable?

So I think, yes, maybe around this year. Yes. Correct. You're right. Your assumption is right. Yes.

It will be...

Yes, yes. Your assumption is right. Yes.

Okay. And sir, my next question is also on the job work expenses. You've heard that new job work expenses have increased in the industry due to the increasing the yarn prices and the difficulty in operations due to COVID times. How is the possibility of the same with the customers? How accepted they are on job work charges or it has to be managed by us only?

No, the job work charges, you see, they vary as for the product mix, Prerna. So they have to be seen collectively for the full year. And if you look at our gross margin, you will see that we have been able to maintain and, in fact, better it. So collectively, you should see the overall raw material cost in totality.

May I request [indiscernible] rejoin the queue. We have participants waiting for return.

Sure. No problem.

[Operator Instructions] The next question is from the line of [indiscernible] from Edelweiss.

I have 2 set of questions. Firstly, if we see the overall revenue growth that is around 66%, whereas the volume growth is around 68%, so would there be a realization decline of 2% or so? Is my understanding correct?

No. If you compare our stand-alone numbers, which is our core business, to the volume increase, they are equivalent, like 26% to 26%.

Okay. So this will be more of...

To some extent, like we have one of the subsidiary [indiscernible] this year has discontinued operation. So that revenue of around INR 60 crores we missed out. And there was higher captive consumption of yarn. So we lost revenue there, too. That all added up to -- on the consolidated basis. Whereas on the stand-alone basis, you will see that our revenue, as well as the volume, they match up to about 26%.

Okay. Okay. Okay. My next question is your e-commerce contribution has increased quite a lot. Now it is around 4% of sales, and you're targeting around 8% of sales. So the margin growth or the margin addition from this segment would be how much higher to the overall as compared to the other segments?

See, we have laid down the back end and we have just like growing up on a smaller number. So we'll be able to provide you much better guidance on our next con call as we grow in this business. Because what has happened is the pandemic has provided us this opportunity, wherein we have grown this number substantially like, say, by 100%. But that is on a smaller base. But we expect this business to grow in the future, and we will provide you margin guidance on the same as well going forward.

Okay. Okay. Sure. And sir, outlook on cotton prices, like when do you see the cotton prices being on a downward trend? Like right now, it is on a upper trend only?

See, the cotton crop has been good in India. We are waiting now for the monsoons to pan out. And the sowing is happening, as we speak, will get started. So depending upon the sowing and the monsoons, we'll get to know how the crop is in India. And we'll be able to give you a much better insight on our next con call. Having said that, the cotton prices has remained below INR 45,000 a candy. And whatever surplus cotton was there the Cotton Corporation of India has brought in, in order to maintain the supply chain in India. India has also exported some of the country's cotton. So India is still a surplus country this quarter. And I think coming year as well, the prices should remain in the same range.

The next question is from the line of [ Sunil Agarwal ] from [ Caring ] Capital.

Hello, can you hear me?

Yes. Go ahead.

Congratulations, sir, on your good set of numbers. I have some very specific questions on your trade debtors, basically. You have given a reason that the trade debtors has mainly increased due to your logistic issues and all that, right? So what is the exact number if you -- if the logistics issues were not there, what was the exact number that the trade debtors has increased by for this logistics issue?

Say around...

Around INR 250 crores.

Yes.

Okay. So even if we take out this INR 150 crores...

No, INR 250 crores, INR 250 crores.

INR 250 crores, not INR 150 crores.

Yes. No, no.

Okay, sir. Okay. Okay. And this -- everything will be realized in the next quarter, right? The coming...

As we speak, it's already being done.

And there are no claims from the customer or anything or any dispute or...

Nothing, 0. No, no, no, it's nothing. And all our shipments are ensured by ECGC. So there's no concern at all. And this is a regular course of business. It just happened to be so on a particular date.

Understood. Understood. Understood. I'm on the same apparel business, so I'm aware of these things. Second question is regarding....

Yes, yes. Only good business because otherwise, we'll lose our capital.

Absolutely, absolutely. Sir, another question is on the FTA side. Like -- you mentioned that you have competition, maybe a little bit from Bangladesh and Pakistan, right? So you have never thought of shifting any -- not shifting maybe when you're expanding to put any manufacturing base in Bangladesh because there are a lot of advantages as far as our garment sectors and textile sector goes, like labor, there is no GSP to Europe. So you've never put it on the board that you want to go outside India and do some manufacturing. Maybe your marketing, everything, remains in India because you're already -- you have already a large base and everything just the manufacturing to go out to take that advantage of GSP, which will add on to your margins and everything.

Sure. It's good question. Good question, Sunil, Mohit here. So in our business, a, in the United States, which is our main market, the import tariff is 6.7% on the finished quotes, so which is a pretty low import tariff compared to apparel. As well as when you import bedlinen into the U.S., it needs to be fabric forward. So you cannot put up a cut-and-sew facility in a country and then import it into the United States. So the country of origin goes with where the fabric is produced. So those require very large investments. And if you want to make those very large investments for [indiscernible] as well as savings 6.7% when India is actually growing the raw material, it's -- we've looked at it, but it doesn't make logical sense.

No. My question is mainly if you are exporting into EU countries. So you have a big advantage, GSP advantage. You don't have to pay any duties at all to -- if you are exporting it to Europe. So my question to you is basically for EU countries because there is a big advantage. Just shifting the manufacturing base, okay, everything, fabric, everything -- and you get a lot of advantage. Otherwise, also, you can import fabrics from China. There are new duties into Bangladesh if you're reexporting it. And because China is definitely, as far as fabrics and other accessories and all these things go, they're much cheaper than India because we source out of India and China as well. So my question is specifically to EU countries, not to U.S.

You see having...

Can you explore this opportunity or an idea to do that? Or you want to do that or not, you don't want to shift your base from India? That's my [ problem ].

See, from time to time, we do study all these countries. Even Ethiopia we considered, or Bahrain we considered, where there are duty advantages. But that's not the only advantage which we should look into. And what Mohit said, see, we in India are there for almost now 30 years as an industry. And we have established very strong routes in India, where we know the systems, the processes and the movement of the goods, the logistics part and the people, et cetera. So it's easier that you cannot compare all these advantages just to a commercial advantage at one time. It may happen otherwise in the future that they may be imposed some duty after 2 years, just like how it is [indiscernible] to Pakistan. So just for a duty sake, you do not shift industries out of India to another country, just like how nobody in apparel also shifted to Vietnam. So we do study all the times these different advantages of different countries who are supplying. But I think India, with the kind of raw material, as I mentioned, has a definite advantage producing textile. And in time to come, you will see that the brands and retailers will be very much comfortable in-sourcing, whether it is textile or apparel or any other technical textile to source out of India. Because India, when it goes into a $5 trillion economy with kind of digitalization, with the kind of labor force it has, I think so the textile will mature into a very big industry in time to come out of India and India will become a big sourcing partner to the developed economies of the world. So -- but having said that, we are not closed -- we haven't closed our mind in order to study this. We keep an eye on it. And over and above this, if you look at our positioning, our company's positioning and India's positioning as well, we are into the mid to high segment where Bangladesh and Pakistan are in the lower segment. If you look at our market share also, we have been able to gather almost like 58% in the U.S. of bedsheets and more than 40% in towels, say, in this 2 decades. So I think as a country, we are -- we have a competitive advantage. We are recognized by the buyers and the retailers that we have a good supply chain and a good logistic as well as a good raw material support. And plus the policies also, the regulatory policies in our country, just like Make in India, the Atmanirbhar Bharat or the refund on duties, taxes are all inclined to provide the necessary support to textile. So I think with such a competitive advantage, we will be able to grow our business out of our country very much in the near -- not only in the near future, but also long term.

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

With the recent announcement on capacity expansion, we remain confident to cater to the growing demand for our products and consequently increase our market share. We would also continue to 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 Advisor, our Investor Relations Adviser. Thank you.

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