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

Ladies and gentlemen, good day, and welcome to the Indo Count Industries Limited Q3 FY '22 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, Mr. Lalpuria.

Thank you very much. Good afternoon, and a very warm welcome to all of you to Indo Count Industries Q3 and 9 Months FY '22 Earnings Call. I hope you and your family are keeping safe and healthy. I have with me Mr. Muralidharan, our CFO; and Strategic Growth Advisors, our Investor Relation advisers. Happy to connect with you all once again to discuss the Q3 and 9-month FY '22 performance. Let me first explain the industry and business scenario in Q3 and 9-month FY '22. During the outbreak of COVID-19, the textile sector has seen a substantial resurgence and expansion in both the domestic and worldwide markets. The sector has made the best possible use of the opportunity, as evidenced by increased activity and exports. Our experience with the first 2 waves of pandemic has taught us how to be more resilient in the face of a third wave as well as how to be better prepared for such adversity. Talking about our key market that is of U.S., despite supply chain problems, rising inflation, labor shortages and Omicron variant, retailers delivered a positive holiday experience to pandemic-fatigued consumers and their families. 2021 holiday retail sales grew 14.1%, setting a new record. The e-commerce channel continues to experience elevated growth, as consumers enjoy the ease of holiday browsing and buying in the comfort of their own homes. In December, the U.S. signed into law legislation that bans imports from China's Xinjiang region over concerns about forced labor. As Xinjiang constitutes nearly 20% of the global cotton market, the supply readjustment on account of this ban has led to more demand for Indian cotton products. Along with this, the China Plus One theme, government support by the introduction of Atmanirbhar Bharat, the PLI scheme, competitive labor, abundance of raw material, strong textile manufacturing infrastructure will further help India to be at the forefront beneficiary of this development. Now, on the company's performance. Since late November, December, with the recurrence of third wave across our key geographies, we are witnessing lower demand. The intensity in the current month continues and has been reflected in the demand projections shared by our customers. Therefore, we believe that the offtake is impacted. During Q3 FY '22, in spite of the above challenges, the company achieved a sales volume of approximately 21.1 million meters. Owing to the above challenges, the company revises its volume guidance to 75 million plus meters. The current sales profile has seen a shift to better product mix, and we expect to achieve revenue guidance of approximately INR 3,000 crores for FY '22. While the short-term headwinds may persist, we continue to remain positive on the growth opportunities for the Indian home textile industry on a medium- and long-term basis and our ability to increase utilization levels and thereby increasing our revenue and market share. Now I would like to highlight on our business strategies to address those issues. We are strongly moving towards B2C and D2C segments through high-quality product offerings across varied price points, building visibility through digital campaigns and leveraging omnichannel and e-commerce distribution. Our contribution from branded business has increased from 10% in FY '21 to 14% in the 9-month FY '22. The fashion, utility and institutional contribution has increased from 15% in FY '21 to 19% in 9 months FY '22. E-commerce business contribution has increased from 4% in FY '21 to 6% in 9 months FY '22. And Indian home textile business contribution increased from 1% in FY '21 to 2% now in 9-month FY '22. We continue to remain laser-focused on increasing our share in the e-commerce and branded business, both locally and globally. We are focusing on brand promotion in the U.S., U.K., Middle East and India through our 10 active brands. We believe with innovation and technological capabilities, along with licensed brands, patents, trademark, it will further strengthen our brand offerings to our customers. Update on GHCL acquisition. I'm happy to share that GHCL has received shareholders' approval for transfer of home textile business of GHCL by the way of a slump sale on a going-concern basis to Indo Count Industries Limited. With this addition of almost 50% new capacity, Indo Count becomes the largest home textile bedding company globally with an annual capacity of approximately 153 million meters. The new enhanced capacity will fuel growth for Indo Count to efficiently scale and serve a wider spectrum of customers and markets, thereby increasing its global market share. Update on brownfield CapEx. The spinning modernization has been completed and have become operational. We have already spent INR 109 crores towards the project. Due to the third wave of COVID, delivery of equipment is delayed, and therefore, there is a slight delay in implementation of process house and the TOB facility. These are expected to be operational by Q1 FY '23. Credit rating upgrades. We are happy to announce that ICRA has upgraded credit rating for the company's long-term bank facilities and reaffirmed credit rating for the short-term bank facilities as follows. For long-term bank facilities, ICRA AA- with stable outlook upgraded from ICRA A+ with outlook positive. For the short-term bank facilities, ICRA A1+ reaffirmed. On the ESG initiatives, we continue to remain an ESG-focused organization with well-defined principles, road map and targets. Indo Count is now a member at United Nations Global Compact, and the company is committed to integrating UNGC's principles into the organizational culture and ensuring building a greener sustainable future. We strive to be benchmarked among the best in the industry with respect to ESG performance in the home textile industry space. We have developed the Business Plan 2030, which has identified 6 pillars of sustainability and has also mapped our operational performance against 9 SDG goals. Now awards and accolades. During the quarter, we have received 2 awards for our contribution towards sustainable environment. First one, Sustainable Business of the Year award for contribution towards various sustainability initiatives like emission reduction, water conservation, utilities optimization, power consumption optimization, et cetera, were reviewed by World Sustainability, a non-profit organization advocating for sustainable leadership. And based on our performance, we have received this award. Excellence in Water Management 2021, for our contribution in respect to improving water use efficiency and integrated approach in waste-water management by CII. Let me now share with you our operational and financial performance. I am happy to announce that the 9-month FY '22 performance is the best in the history of the company. Total income, INR 787 crores in Q3 FY '22 versus INR 792 crores in Q3 FY '21. Total income, INR 2,292 crores in 9-month FY '22 versus INR 1,852 crores in 9-month FY '21, a growth of 24% on a Y-o-Y basis. EBITDA. EBITDA of INR 146 crores in Q3 FY '22 versus INR 143 crores in Q3 FY '21, a growth of 2% Y-o-Y. EBITDA margins stood at 18.6% in Q3 FY '22 versus 18% in Q3 FY '21, an increase of 60 bps on a Y-o-Y basis. For 9-month, EBITDA of INR 442 crores versus INR 309 crores in 9-month FY '21, a growth of 43% on a Y-o-Y basis. 9-month FY '21 EBITDA margin stood at 19.3% in Q3 FY '22 (sic) [ 9-month FY '22 ] versus 16.7% in 9 months FY '21, an increase of 260 bps on a Y-o-Y basis. PAT, INR 71 crores in Q3 FY '22 versus INR 93 crores in Q3 FY '21. INR 273 crores in 9-month FY '22 versus INR 191 crores in 9-month FY '21, a growth of 43% on a Y-o-Y basis. Now that's all from my side. I now leave the floor open for the question and answers.

[Operator Instructions] The first question is from the line of Jiten Doshi from ENAM Asset Management.

I just want to understand one thing, that your average realization has gone up dramatically. I now -- if I just look at your revised guidance in terms of the volume growth, that has come down by nearly 15% to 20%, but you're more or less sort of talking about achieving a INR 3,000 crore top line. Is this a structural change in terms of going up the value chain? And is this kind of one, going forward, assume that your capacity that you have created, about nearly 150 million meters plus, can result in a INR 6,000 crore to INR 7,000 crore turnover going forward over the next 3 years?

Yes. We have these strategies 3, 4 years in order to venture into the fashion utility and institutional business in order to build our value addition and plus the margins. And we have taken further many steps in the company as far as raw material hedging, as far as our ForEx hedging and plus marginalizing the expenses, plus getting the price rise and -- with the customers and also working upon the value-added product mix. So all these factors have helped us improving our margins, and this will be the strategy going forward as well. And as we all know, there are challenges on the logistic cost side, there are challenges on the inputs cost side, there are inflationary measures in India and also globally. These are impacting the overall business. So as a company, we have taken necessary steps in order to overcome this. And we are consciously investing into the supply chain to see that we serve the customer much better on the value-added side. So our overall strategy into -- going into the next phase of growth is to see how we can create value for the company from the margin side. And also, that's the reason you see that the revenues and the top line is maintained and is going ahead in the right direction.

So Lalpuria-ji, going forward, that's fine. But I just want to ask you, in the last quarter with a much lower-than-expected volume, have you lost any customers or has there been any big order cancellations?

No, not at all. See, this we had -- we have seen a momentary dip, which we have all observed due to this third wave, both globally and in India as well. So the retailers and the brands were under pressure in order to get their sales up to the level which they expected. And this suddenly brought in this dip. But from a medium- to long-term perspective, the demand still is there because we are into a need-based product. And we have seen that the home has become the center space where people are spending money on the home decor side. So we expect that the things should stabilize in the time to come and the volume should revive. Definitely, this is the dip which we all expected on the lines of the third wave. And that's the reason we have revised our guideline to 75 million plus in this year. And we'll be better off to provide you more guidance on our fourth con call. So we expect things to normalize going ahead in the future.

So one last question, Lalpuria-ji, that the capacity that you have taken from Gujarat Heavy Chemicals, that includes the customer acquisition also, right?

Yes.

Now how many -- is there a very big duplication of customers there or you are sort of getting all new customers in that acquisition?

Fortunately, for us, there is no overlapping of customers in our acquisition of GHCL. So there are new customers, which we will be dealing with. And one more additional advantage is that as Indo Count company has a complete product mix wherein we have sheets and fashion, utility and institutional, we are going to extend these product baskets to this new customer as well. And we are seeing that going forward, there will be good utilization of these capacities and a good resurgence of these customers, both in the volume and the value gain.

So if there's no overlap, you are suggesting that actually you can do much more business with these customers in the future?

Absolutely.

Okay. So when do you think you'll consummate the acquisition? And when will all of this come into play?

We believe that it should get over by March 31. And by April 1, we should be having this under our control and in business, so it will start in FY '23.

So what is the current turnover of Gujarat Heavy Chemicals, top line of that business?

For 9 months, they have reported a revenue of about INR 556 crores, 5-5-6.

Okay. INR 556 crores. So let's say if I annualize that, maybe it could be INR 700 crores, INR 800 crores. So that entire business along with the EBITDA will get added to our turnover in the coming year?

Yes. And there is a scope for higher utilization also. So we expect the revenue levels to go up further.

Sure. And also, margins can improve because they were actually not really doing a good job and hence they sold it out. So margins can improve, right?

Mr. Doshi, may I request you to please come back in the queue? We have participants waiting.

Sure, sure.

The next question is from the line of Kapil Jagasia from Edelweiss Financial Services.

First of all, congratulations, sir, on a decent set of numbers in a tough quarter. Sir, my question again is now on the realizations. Now, in the start of the year or probably last year, it was a volume-led quarter for us. But over the last 2 quarters, the realizations have taken center stage. So if we look at the annual realization per meter it has reached around INR 375 per meter, that is increase of around 20% from last year. Though the product mix will continue to improve, do you believe the realization per meter would continue to increase from here, like towards peak -- towards higher levels of INR 390, INR 400? Or these are the peak levels as per you?

So these are not the peak levels because if you look at our Q1 and Q2 realization, they are much better than this Q3 realization. So the trend will continue because this is the conscious decision by us to trade into higher value addition for us and high value addition product mix overall. Plus as you see that we had consciously taken a decision to invest into inventory levels, et cetera so that our supply chain is not only maintained, but we get the raw material advantage also. So we have hedged our raw material appropriately. That has also paid off. Overall, the ForEx realization also helped us maintain and sustain the realization. Then of course, the price increase, which was reasonably well received by our customers, so that also helped us into improving our margins and realization. So overall, you see we have -- our team has worked hard on all these different distribution base also like B2C, D2C and improving our e-commerce license business, our branded business, our offerings on the domestic front. So everything is moving in the right direction. So those strategies into various business aspects have provided us the advantage of not only maintaining the better realization, but moving ahead, these strategies will definitely prove to be a plus point and will give us better realization in the years to come.

Okay. And sir, in case of the GHCL acquisition, I guess the realization per meter was slightly lower there, right? So once we merge the businesses together, like would there be -- like -- obviously, there will be room for improvement, but wouldn't that dilute or bring down the realization per meter going forward?

Definitely. See, we will be providing that more insights to how they are handling their customer base, what they are offering the product, how they are taking the price increase. This will be all available to us post-April. So we will be better off into telling you how we will do this. And as a home textile player, like we are the largest player...

I have one last question from my side. What is the vision for this branded business in terms of revenue or probably in terms of margins going forward?

We had earlier given indication that we would like to see that the fashion utility and the institutional business and other value-added business are almost like 30% of our revenues. Hello?

The participant left the queue. We'll move to the next question, which is from the line of Prerna Jhunjhunwala from B&K Securities.

Congratulations on a very good set of margins in these tough times of increasing input costs. Sir, just wanted to understand your outlook on how the price increases -- how are the customers taking price increases in this input inflation kind of a scenario going forward? How are your discussions happening on that front?

See, we had earlier informed that we are engaging the customer to give him the real insights into the global commodity, which is cotton and which everybody is well-versed off. And the customers have reasons to believe that our cost has gone up, which is apparent from all the [ highest ] future rate as well as the spot rates worldwide. So definitely, being a business partner to us, they have reasonably accepted our price increase to a large extent. And that's what we see, fortunately, for us improving our margins as well. So we are engaged with them on a continuously basis, providing them not only the reasons to provide us the price increase, but offering them much more solutions either through distribution means or through product mix or through better providing them insights into how they can improve their market share. So there is a joint responsibility between us and our customers to see how we do not lose out on the market share and maintain it. So it's a joint responsibility, and they have responded very well to us.

That's very nice because you're creating a sticky business out there. So sir, in terms of raw material hedging that you have spoken in the call earlier, till when can we assume that this will provide you support if cotton prices remain at the same level?

That is up to 2 quarters. So we have hedged up to May, June as far as -- like as far as this August '22.

Sorry, I missed the period. Till?

Till May, June, this year.

May, June. So Q1 is also sorted, which is a very good news actually in the current...

That has prompted us to providing the revenue guidelines also.

Yes. That's nice, yes. So sir, also with respect to other geographies, could you please help us in understanding, like U.S., we know that the market share is very good. Which other territories will help you grow and utilize your increased capacities faster?

See, India is focusing on the FTAs with lot many developed countries, where home textile is consumed to a large extent. That is EU, U.K., Canada, Australia, and many other countries, India is discussing free trade agreement. And I think once we get this level playing field, the gates will be wide open for us to grab the market share, which is pretty low at the moment, that is 4%. So all these countries where home textile consumption is pretty high, and India is not doing well, becomes an easy target for us to improve our scale there, definitely. And secondly then, India also is a huge market. As our economy is moving from 2.9 trillion to 5 trillion, we expect like to make a good brand play in India as well. And the consumers are expecting inspirational brand like Boutique Living and Layers. And we see a good traction there, too. And that's why we have informed that in a couple of years, we'll move from 1% to 3% of our revenue for the domestic market. Then the e-commerce also growth, which we see across borders. This is helping the company to plan its licensed brand business as well as the brand business much more effectively. So I think all these strategies into different distribution base, into our product mix and, of course, the health, hygiene and wellness, which I forgot to say, is also helping the home textile industry overall to improve their business into the global textile market. And overall, you see one more factor like the cotton from Xinjiang, which has got banned, like 20% of the global cotton has got banned. So that provides a very big opportunity for India to take on the market share, which China has created for itself. As we all know, China today in the global textile trade is 35% of the $1 trillion global textile trade. And even 1% shift of this global textile trade will be almost $10 billion. So it's a huge market share, which will get impacted. And India is so well positioned with its raw materials, labor, et cetera, good government policies on the Atmanirbhar side, and plus brands and retailers looking at derisking India business under the China Plus One strategy. So all these factors, Prerna, will help definitely both India and our company to venture into new territories and areas and to grab the market share.

The next question is from the line of Sumant Kumar from Motilal Oswal.

Yes. So my question is regarding backward integration side. And when we have our -- increasing the -- significantly increasing the capacity, so what kind of -- what percentage of backward integration you are comfortable, considering the current scenario of yarn, when the yarn price was subdued and we were having a better margin or -- and higher ROCE. Now the scenario has changed and overall the yarn price is in the higher side. So how are we going to handle the situation? And what kind of backward integration we will be comfortable at?

See, first of all, Sumant, this situation where cotton has increased from INR 45,000 to nearly INR 75,000, I presume you will appreciate that we have handled the situation very well. If you look at our EBITDA numbers and PAT, it shows that we have handled the situation very well because we are flexible. Because if you have a complete backward integration, you are stuck with your raw material and your operational cost. And in today's world, with the kind of product mix which you need to be flexible with, you need to adapt very quickly to changes happening in the consumer behavior side and the market. So we need to be lean and mean, and that's what we have been following an asset-light model right from the beginning where we have created where the value addition is more. So we are going with this strategy, and that is helping us. And in backward integration, you see we have modernized our spinning currently. So we have already 70,000 spindles. We are adding some more spindles, which we will report to you in our next Q4 call. And we are also having some additional advantage on the weaving side, where on the acquisition, we have got about 192 units from GHCL and an additional capacity of 45 million on the processing and the cut and sew relevant capacities. So I think with whatever we have capacities, which we have built in today up to 108 million, we were able to deliver the business very effectively. So I think going forward also, this strategy would pay off. We are well positioned globally. And we would like to remain with this strategy and see that we are more focused on the front-end rather than on the back-end.

The next question is from the line of Bharat Chhoda from ICICI Securities.

Yes. Congrats on a good set of numbers in a tough scenario, sir. Sir, regarding this volume thing, can we expect our volume recovery to happen from Q1 FY '23? And probably, the volumes could be closer to 110 million meter, expecting 90 million from the -- our own capacity and around 20 million from the GHCL coming in. So would that be possible in FY '23?

We mentioned, Bharat, see, we had seen 2 waves already, and we have overcome that challenge earlier. So since last 2 years, we are seeing the pandemic impact. So we have treaded carefully, but most effectively. And we have provided one of the best results in spite of these challenges. I think the third wave also, which had a larger impact on the U.S. market as to -- and other -- some other developed markets like EU, U.K. and Japan and MENA, like Middle East countries, I think this is a momentary dip. And as I mentioned -- like you see the -- both the midterm and the long term are looking quite positive, because we will return back to normalcy and the markets will stabilize because the retailers have done pretty well on the holiday sales, which is a proof that the scale of sales are improving on the retail side, which we have also observed on the Indian economy as well, where it is expected to grow by almost 9% to 11%. So I think this is a momentary dip. This should improve the volumes going forward definitely. And we are quite positive on to consuming our capacities, which we have indicated earlier also. And the reasons for, in fact, taking over GHCL was to provide necessary services and capacities to our growing customers as well, because the big box retailers have also consolidated their position and the small retailers have vanished from the scene and their market share has been grabbed by the big box retailers, which is also a good thing to see that they will continue to do business because they are selling also essentials. So in times of lockdown, et cetera, their shops are open. But this Omicron third wave impacted everybody globally. And so it's a momentary dip. And once this is over, we hope that we will get back to normalization and we'll report better numbers. But as far as the volume guidance is concerned, we'll be better able to tell you because we are watching this situation in our Q4 call.

Okay. And sir, I had another question on the debt side. Like what is our gross debt after GHCL acquisition? And also, our working capital days had increased in FY '21. How is the working capital days situation? So these 2 things from my side, sir.

See, the debt, of course, as we had mentioned, that we are consciously investing into the inventory, which paid us also well. Because we hedged our raw material well in advance to overcome the raw material challenges and the input challenges. So conscious decision to secure our supply chain has paid well. So that's why the inventory levels went up, which we had explained it in the last 2 calls. As far as the total debt today is concerned, we are at a level of short-term debt of around INR 800 crores and long term around INR 100 crores. So INR 900 crores total debt and the additional debt which will be created once we pay off will be reported on the Q4 numbers.

The next question is from the line of Abhineet Anand from Emkay Global.

Yes, sir. Sir, on GHCL, I just wanted to know that 9 months of the sales number that you gave was [indiscernible]. What would be the utilization and margin levels?

The utilization is today at around 50%, and the margin level is around 11%.

At the EBITDA, right?

EBITDA. Sorry, sorry. EBITDA.

And what could be the debt on their books of this assessment?

So debt, we haven't taken up. It's a slump sale on the asset side.

Okay. And what could be the PAT margin for that business?

PAT, we do not know yet because we know only the figures in the public domain, and we'll be able to better guide you in Q4 call, which I already mentioned.

Okay, okay, okay. Secondly, sir, just wanted to understand that we have done very well on the margin front, and that may be because of the prompt and judicial decision by the management on the RM side. So what typically is our RM and ForEx hedging strategy, if you can just spend a minute on that?

See, raw material strategy hedging is based upon our order book position, which is normally 5 to 6 months. And since we are into -- more into replenishment business rather than promotional business, there is a visibility of the projections on the order, which are confirmed 60 days or 90 days in advance. So accordingly, we hedge our raw material. And secondly, because of the COVID pandemic also, we have taken conscious decision to secure our supply chain because there was a volatile situation where there were lockdowns, there were border blockages and a lot of like dyes and chemical companies were not getting raw material import. So all these factors impacted the supply chain time and again. So we took a conscious decision to invest into it to see that how we can secure the supply chain and still service the customer very well. So I think that also paid us very well. So that is the raw material hedging strategy. Secondly is about the ForEx strategy, which is also approved by the Board that we have almost 60% to 70% hedges from time-to-time on our order book position and looking at the overall business. So -- but it is a part of our overall income. This is -- we have to report the -- whatever gain on the other income side, but it is a part of our overall ForEx strategy. Now, also to say that on the -- some of the items, the containers also were not available on time. So that also has impacted our business to a large extent on the logistics side. So with all this, the raw material security in order to provide a committed quantity at times to our customer, we had taken a sound raw material hedging policy way forward.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Yes. One clarification. You mentioned that we are acquiring a GHCL plant, it's around INR 575 crores, and there will not be any debt coming in from there?

Yes. There is no transfer of debt.

I'll answer. Maybe the INR 576 crores is what is the consideration -- estimated consideration, of which partially we'll use our cash in the books, and partially there will be a debt, mainly on account of working capital.

Okay. And this debt would be, what, around INR 250 to INR 300 crore approx?

Estimate is around INR 200 crores.

Okay. Okay. Now sir, my second question is regarding this exceptional item of e-Scrips. So how much more e-Scrips we would be having at our balance sheet as of today? And this INR 20 crore write-off, how much would be the book value of those scrips over which the INR 20 crores has been written off?

The book value is around INR 180 crores roughly. And 15% is market deposition we are seeing in terms of value. But these are expected to come up. This is a momentary -- this one, discovery which is going on, because people have not understood the use -- still the market has not felt the use of digital e-Scrips. Government is trying to facilitate the usage of scrips. We expect this to come back to about 98%, 99% over a period of time, which is normally the case.

The next question is from the line of Aman Madrecha from Augmenta Research.

Yes. Sir, actually, I wanted to ask, as we have revised the guidance from earlier 90 million meters to 75 million meters. So -- and given that in this quarter we [indiscernible] of this Omicron spread going on -- virus going on. So in this quarter conference, the volumes that were affected due to Omicron, will they be accounted in the next quarter or they have been already accounted in this quarter. And also, where are we seeing the realizations going forward? Can we expect the same realizations that were in Q1 and Q2 going forward? Or are they going to normalize [indiscernible]?

No. As far as the realization is concerned, we have already answered that the trend is positive for us because we have taken adequate steps on the product mix side and the various other distribution channels where we are promoting the B2C, D2C businesses. So margins tend to be on the positive side for us going forward. So that, we will try to maintain and sustain. And it seems to be that with proper hedging of raw material, with proper price increase, availability with the customer and the ForEx sustenance rate, this will all help us in order to maintain our -- to some extent, the realization going forward. Now, what was your second question?

My second question was that because of this Omicron spread in the third quarter, so the effects on volumes have already been accounted or it will be -- we will bear the brunt in this quarter 4 of the volumes? Because of that, we have to [indiscernible]?

No. We have already revised the guidelines to 75 million plus that indicates that the -- whatever the volume, which is balance, apart from the 3 quarters, that -- we will perform.

The next question is from the line of Kapil Jagasia from Edelweiss Financial Services.

Thank you sir for taking my question again. Actually, my line was disconnected. Sir, just wanted to know, on your branded business, like you have provided in your presentation, like how big can we become in terms of revenue here and how can be the margins going forward from this business?

See, the branded business also always helps you to derive better margins, and that's the objective of promoting a brand. Because on the retail space, like we all know, the positioning of the product like in good, better, best, premium and brand, the brand is the highest margin driver for the -- both the retail and the vendors who supply these brands to the retailer. So I think the branded business, as I mentioned, like we all aspire to at least be at a more than 30% level approximately to our overall increased revenue going forward. So that's our strategy, which we had built earlier also, and we are building that strategy to see that we achieve this goal going forward. And plus, you see the distribution base like e-commerce, et cetera, and the other channel of omnichannel distribution is helping the licensed brand to get more visibility. Plus, you see overall, India also is a very big market, which is improving the brand outplay, as I mentioned. And we expect the Indian brand also, to improve dramatically going forward. Because as our economy is becoming pretty strong of [ IT ] Indian economy, we will see more aspiring consumers, the consumers spending more on home textile, which is growing at almost like 11% CAGR. So we expect a very big uptick on the domestic brand side as well. So both globally and locally, we see brand expansion. And because of our strategies on the B2C, D2C side through all the various distribution channels, we hope this traction will help us make more visibility for our brand outplay and thereby adding on to both our volumes and margins.

Okay. So sir, if 30% we are aspiring from this segment, like in fashion, utility and institutional business also, we are expecting around 30%. We are aspiring for 30%. So that would take the entire contribution to 60% in the near future or probably in the medium term. So like this will eventually turn to a much, much higher margins, probably, upwards of 20% if we aspire in the next 5 years. Would -- am I understanding this correct?

No, no, no. See, you are adding up that 30% and this -- because the brand outplay is in fashion, utility and institutional business as well. So when we reported 14%, it means some of it is going on the e-commerce side, some of it is going on the fashion and utility side, and some of it is going on the domestic front side. So our overall brand is like 14%. So that's what we reported. So we aspire this to get increased to 30%. Of course, there are some other long branded items in fashion and utility, which we have to see from a different point of view.

Okay. Great. Sir, that clarifies. And sir, one bookkeeping question. Like you have done a provision of around INR 20 crores towards lower realization of RoSCTL scrips. Sir, is this for 9M FY '22 or only for this quarter?

No, no. So this is for whatever scrips we are holding till September. And for the quarter, we have already provided in the books for the quarter. From the...

From the revenue only.

From the revenue only, yes.

Okay. And would the quantum of this provision be similar in next quarter? Like we are already into Feb, so would there be another provision in the coming quarter?

No, that, I think, will be the -- whatever scrips we'll have, at that time, we'll have to assess.

The next question is from the line of Kirti Dalvi from ENAM Asset Management.

A couple of questions from my side. How much is cash currently we have? You said INR 900 crores is our total debt? That's a gross debt, I am assuming? Yes.

So approximately, we will be having around INR 280 crores of cash and investments [ to date ].

Okay. So INR 900 crores gross debt and INR 280 crores is the cash available on the balance sheet, right?

Right, right, right.

Okay. Just one more question on the GHCL. When you said INR 576 crore payout will happen in the Q4 because of the acquisition part and we'll be taking roughly around INR 200 crore kind of debt, so our total debt will go to around INR 1,100 crores, or am I missing something?

Yes, yes, yes. Correct, correct, correct.

Okay. And the payout will happen...

Overall debt. Overall debt will go to -- yes, correct, INR 1,100 crores.

INR 1,100 crores, is it?

Yes, yes.

Okay. Third question, what's the volume GHCL has done? You said 50% capacity utilization they are working. So for the year as a whole, out of 45 million, so 22.5 million or 23 million meters is something we can take it for the year as a whole?

Yes, around 20 million.

Around 20 million. Okay. Okay. Yes, that's it from my side.

[Operator Instructions] The next question is from the line of [ Marshall ], an individual investor.

Yes. I have a couple of questions regarding GHCL. As you mentioned that -- like you will be -- as you mentioned, the capacity utilization of 50%. I wanted to know that in terms of products being entered to the GHCL. How does it complement our products? Means what are they producing different, what are we producing different? So is the different kind of products [indiscernible] our overall books of offering will be very good. So can you explain this, number one? Number two, how...

Your voice is not clear.

[indiscernible] of GHCL capacity. Currently it is in the 50%. So for example, in Q1 FY '23, how much is your target line [indiscernible]?

I'm sorry to interrupt you, sir, but your voice is not clear.

No, no. We cannot hear the question only.

Okay. Let me repeat. Pardon me. In terms of GHCL [indiscernible] what are their currently products, which are being [indiscernible] by GHCL? And how does this complement our products? I need to say that whether the products of GHCL are different than our products, so kindly explain a little bit. number one. Number 2, currently the GHCL...

First, I'll answer your first question, okay? So because otherwise, your voice becomes non-audible. So that's why let me complete your first question and answer that. So the customer base is different. And today, they are into sheet set. They are not into fashion, utility, institutional business. So their customer base is accordingly, which is not overlapping with our customers. But the product base, which we are exporting, is into the mid- to high range. And definitely, there is a room for improvement, which we will implement in our strategies going forward. So that answers your first question that the product mix, which they are selling currently, we tend to improve going forward so that there is a better margin and better realization.

Okay. And second thing that what is our quarter-wise target to increase the capacity utilization for [indiscernible] once we took it over in March 31 [indiscernible], say, Q1, Q2, Q3, Q4 of FY '23? How are you targeting to increase the capacity utilization from 50% to 90%, 100%?

So certainly, like this we will be able to better answer you in our Q4 con call because once we take over, we have already plans in our mind, which we will communicate in our next con call, clearly, that how we plan to better utilize the capacity, how we plan to improve the product mix, how we plan to improve the margin, how we plan to utilize more capacities by bringing in more customers, how we plan to increase the product basket. So all these questions, we will be better off into once we get hold of this in our next con call, we'll be able to give you better guidance.

Really good. And what about our brownfield expansion? Like can you just explain that like what is our month-wise or quarter-wise target to complete this -- our 18 million tonnes -- sorry, 18 million meters.

See, as I had informed, like the modernization of the spinning is over. There is some delay due to the machineries on the processing and the fashion bedding unit, which we are implementing under this brownfield CapEx, and it has got delayed a little bit. So hopefully, by Q1, we should be able to provide you in our next con call about this capacities also. And as informed earlier, we have already made strategies and plans how to utilize this capacities as well, irrespective of the new capacities, which we have taken over.

The next question is from the line of Abhineet Anand from Emkay Global.

Thanks for the opportunity again. Sir, so as you said, we are hedged till May or June from the raw material side. Going into May, June, cotton price has obviously been on the rise. What can -- if we don't have a price hike then, can we have an impact -- a negative impact on the margins?

See, just like how we maintain this rise, we as a company are volume [ growth ] driven, we are seeing...

Yes, please go ahead. Please go ahead.

See, we are in this business for the last 30 years into spinning and in home textile business since last 14 years. We have handled this global commodities very well, and we have the desired experience to handle going forward also. And our performance into capacity expansion and business since 2010 to in this last decade has been 300%. So whatever strategies, which are laid down towards the sourcing of raw material or handling the price increase, has paid dividends. So definitely, going forward, if the prices is a challenge, which it would be to some extent, which we all know, then we will cross the bridge as it comes. Because you see, we have handled this situation earlier also. Cotton being a global commodity, its a very open situation for all the retailers and the brands to understand that there is an increase. And this is a universal increase, not only for me, but for my peer group also and for other countries as well. So the entire competition, when it moves into one direction, definitely it is a good case to be presented towards price increase. And we are hopeful that since we are engaged with our customers in a better position, we will be able to address this as and when it comes. So we will be better off in our fourth con call to provide you more insight into what that situation would be.

Okay. But hypothetically, what could price hike today, if you look, we needed to offset any -- the current cotton price increase?

See, those are all depending -- we are into made-to-order business. So we are going by cost-plus strategy. And if we get a reasonable price increase on the raw material side and if the customer obliged, we have done our job. So definitely, if the -- hypothetically also, if the prices, example, in June goes up, we will present the case, we'll engage with the customer. So we'll see how we offer the product mix also because there are certain times, the way how you offer the product mix. If the consumers are unable to absorb, finally the consumer has to pay. So if the consumers are unable to pay, then there would be tweak in the product also. So those are the challenges, which we will definitely cross once we arrive at them. But be rest assured that as a company, we have a very favorable raw material hedging policy. We are flexible in our both approach as well as we are ready to market approach with more consumer-centric approach, we should be able to address this.

The next question is from the line of Komal Maheshwari from Anubhuti Advisors.

I want to understand on increase in the debt limit, which is about INR 1,600 crores, and which we increased to INR 2,500 crores. May I know the reason for that?

No, no. So we have taken enabling -- this one, powers of the Board and the shareholders for increasing the -- this has nothing to do with the -- this one -- take acquisition or so. This is just to facilitate ourselves for future business.

Of growth.

Okay. Okay. Okay. So is this like that -- I mean you need to have this much of limit for you to have this much of -- I mean -- so let's do an example. If you have INR 2,500 crores of debt limit and then you can borrow like INR 1,500 crores or maybe INR 1,600 crores of debt, it is like that?

No. Under the company regulations, we are required to get the certain permissions, approvals from the shareholders also. So that's the reason why we have to -- yes, we had taken that.

Yes. Okay. Okay. So there is nothing with GHCL and any other...

No, no, nothing to do with that. This is for future -- enabling for future benefits also.

We have cash also -- we have cash on the books also. So that also we will utilize for the pay off.

Ladies and gentlemen, this will be the last question for today, which is from the line of Praveen Sahay from Edelweiss Financial.

[indiscernible]. Based on the realization...

Sorry to interrupt you, Mr. Sahay, but your voice is breaking, sir. Can you please...

Yes, you're breaking. I can't hear you, Praveen.

Can you hear me now, sir?

Yes, go ahead.

Yes. So my question is on the realization, which has improved in a good amount. So that's one of the reasons you had given the product mix, like for fashion, utility, institutional contributions have increased. So is it the end user market there the traction of such products has increased itself? Or it is a phenomena for a company who is more focused on selling these kind of products to their customers? So how is the situation?

No. The end use -- see, finally, the consumer has to absorb this cost increase in commodities, whenever it happens. Globally, the consumer, at the end of the day, has to shell out more money to buy that product. So definitely, at the end user only, the price has revised at the retail level also and some costs the retailers have absorbed, just like how they have absorbed the logistic cost to some extent. And the -- sooner or later, the commodity pricing will find its own level, like how the water finds its own level. So what will happen is the end consumer has to pay more. And definitely, the companies which are demanding whatever the price increase is realistic and is sustained. If it goes down, then definitely there will be more competitiveness, of course, to increase further the market share as well.

Right. So -- but the question, what I am asking, the realization improvement is also because of product mix, high realization products, sales has increased in your overall revenue.

Branded, yes, yes.

So the trend is what -- end user industry or the retail level in the U.S., these kind of product is selling on the higher side, and that's why your sales in that particular segment has also increased? Or you are just gaining a market share as India or you can say that India is gaining market share in these kind of products, and that's why you are benefiting? What's the scenario?

No, the trend only is going up. As we know that home has become the center stage of our life and lifestyle. Work-from-home culture has developed. So people are spending more money on the home decor and improving their home lifestyle. So particularly in home textile, we have seen this happening. And that's the reason, too, this product upgradation, I would say, has happened to some extent. Of course, there are price pressures and challenges on how the product mix in the mass market is, because the inflation is also there. But I think we are into need-based products where people have understood that cotton being a sustainable fiber, they should embrace it much more. And that's why we see traction into more organic products and BCI cotton and more sustainable fiber-related products getting a good traction. So I think the overall market is looking at -- towards -- being more aware on the health, hygiene, wellness side, spending more money on the product upgradation. And that's the reason we see that the market going forward also will embrace a higher-value product much more.

Right, sir, right. That was my question.

I hope you got my answer.

Yes, yes, sir. I got it.

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

Thanks. With the recent announcement on the acquisition, we remain confident to cater to the growing demand of our products and consequently increase 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 the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or SGA, our Investor Relation 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.