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

Ladies and gentlemen, good day, and welcome to Q4 FY '22 Earnings Conference Call of Indo Count Industries Limited. 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. Statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. K. R. Lalpuria, Executive Director and CEO of Indo Count Industries Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, and a very warm welcome to all of you to Indo Count Industries Q4 and 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 Q4 and FY '22 performance. I am pleased to inform that the Board of Directors has selected Price Waterhouse Chartered Accountants LLP as the company's statutory auditors in place of the retiring auditors. Let me start with the industry and business scenario in Q4 and FY '22. We ended FY '22 on a good note as we constantly improved our performance despite a wide area of external challenges. Given the conditions, we focused on building our brands and executing efficiently, resulting in constant double-digit revenue growth over the past 2 years and a significant market share and penetration gains throughout our portfolio. We have clearly strengthened our product portfolio and customer connect. Despite ongoing cost pressures on a global level, we are choosing to increase our investment in brand building rather than sacrificing the long-term health of our brand equities to manage short-term challenges. Now let me talk about the market scenario. The logistic challenges have amplified due to the COVID situation in China and the Russia-Ukraine war. Not only the cost has gone up substantially, but transit time to the market has increased by almost 2 to 3 weeks. The retail ecosystems mismatch supply and excessive inflation have hampered sales in the key regions. Due to this pressure, we expect the sales to be challenging in the current year as people are cautiously buying discretionary products. Cotton prices have skyrocketed because of the drop in domestic output and current geopolitical crisis. Further, the consumption of meals has increased, leading to good demand in international markets post Xinjiang cotton ban. The government's decision to remove import duty on cotton till September is a positive step. Additionally, free trade agreements with Australia and UAE will further open up opportunities for Indian textiles. Similar discussions with U.K., Canada and EU are progressing very well. More importantly, in the discussions with U.K., textile is part of early harvest discussion, and therefore, quick resolutions for Indian textiles can be expected. Now on the company's performance. We have recorded 17% revenue growth in FY '22 despite the above challenges and have achieved the volume guidance of 75 million meters. We have also achieved the margin and revenue guidance overall. This is despite the logistical and inflationary pressures faced throughout the year. We have been able to meet the margin guidance for FY '22, and we have followed a disciplined hedge policy for raw materials. Additionally, we strategically moved towards value-added products, which is at a better margin and overall value propositions to our customers and business. Other contributors to our growth in FY '22 include branded business, e-commerce and our domestic business. The combination of this allowed us to weather the storm. At Indo Count, we are [ market ready ] with strong capabilities. then we can capitalize and stretch our assets further. We are strongly moving towards B2C and B2C segments through high-quality product offerings across varied price point, building visibility through digital campaign and leveraging omnichannel and e-commerce distribution. Our contribution from branded business has increased from 10% in FY '21 to 14% in FY '22. Fashion, utility and institutional contribution has increased from 15% in FY '21 to 19% in FY '22. E-commerce business contribution increased from 4% in FY '21 to 7% in FY '22. And the Indian home textile business contribution increased from 1% in FY '21 to 2% in FY '22. We continue to remain laser focused on increasing our share in the e-commerce and branded business, both locally and globally. Now update on our GHCL home textile business acquisition. I'm happy to share that we have completed the acquisition of GHCL home textile business. And with this acquisition, Indo Count becomes the largest home textile bed linen company globally with an annual capacity of approximately 153 million meters. We are confident that this foray will successfully meet our long-term aspiration and create value for our global customers and all stakeholders. We see synergies with respect to supply chain, procurement and enlarged customer base in developed countries with respect to this acquisition. With this acquisition, we have added new brands to our existing portfolio. And we believe with innovation and technological capabilities of the acquired brands, patents, and trademarks will further strengthen our brand portfolio and offering. We are leveraging joint capabilities of design, innovation and products to improve the go-to-market strategy and look forward to adding an untapped customer base that will help us gain more global market share. Now let me update you on the brownfield CapEx. We announced modernization of spinning capacity with compact spinning technology. This project is completed. The increase in home textile capacity from 90 million meters to 108 million meters, this capacity will be operational by Q3 FY '23 as we have to add balancing utilities equipment. The CapEx for commensurate cut and sew facilities and Top of the Bed capacity is under good progress and we expect the facilities to be operational in H2 FY '23. We have -- we now -- we have also announced new CapEx to enhance our spinning capacity at our subsidiary Pranavaditya Spinning Mills Limited. The proposed CapEx will be towards additional spinning capacity of 68,000 spindles. We plan to spin value-added specialized yarn products. We would incur a total CapEx of INR 270 crores, which will be funded through a mix of internal accruals of about INR 95 crores and a debt of INR 175 crores. The project will be completed by Q4 FY '23. Now information on the ESG initiative. Talking about sustainability, our team's commitment and efforts helped us release our first ESG report, which is a big milestone in the direction of a sustainable world. We are constantly working to contribute to the global sustainable development goals through initiatives in energy efficiency, waste management, water management and maintaining the highest standard of governance and conduct in this endeavor. Indo Count is now a member of the 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. During the quarter, Indo Count has received two awards, The Best of Bharat Awards 2022. Our brand Boutique Living has been chosen by the Editorial Board of exchange4media and impactonnect as a winner of e4m Pride of India - The Best of Bharat Awards 2022. This award was given to the brands that have demonstrated leadership, strategic accomplishments, creativity and constant innovation in their product, processes and marketing practices. Export Award by the state of Maharashtra, we received a gold trophy from the government of Maharashtra towards our exports. Now let me share with you our consolidated financial performance. I'm happy to announce that the FY '22 performance is the best in the history of the company. Total income, INR 690 crores in Q4 FY '22 versus INR 705 crores in Q4 FY '21. Total income, INR 2,982 crores in FY '22 versus INR 2,557 crores in FY '21, a growth of 17% on a Y-o-Y basis. EBITDA margin. This increased 411 bps on Y-o-Y basis. Accordingly, margin came at 19.1% in Q4 FY '22 versus 15% in Q4 FY '21. EBITDA grew by 25% on Y-o-Y basis. Accordingly, EBITDA came in at INR 132 crores in Q4 FY '22 versus INR 106 crores in Q4 FY '21. For FY '22 EBITDA margin of INR 574 crores versus INR 415 crores in FY '21, a growth of 39% on a Y-o-Y basis. EBITDA margin stood at 19.3% in FY '22 versus 16.2% in FY '21, an increase of 305 bps on a Y-o-Y basis. Tax. We witnessed a growth of 48% on Y-o-Y basis and therefore, achieved INR 85 crores tax in Q4 FY '22 versus INR 58 crores in Q4 FY '21. For FY '22, we recorded highest ever profit at INR 359 crores versus INR 249 crores in FY '21, a growth of 45% on a Y-o-Y basis. PAT margin stood at 12.4% in Q4 FY '22 versus 8.2% in Q4 FY '21. However, PAT margin FY '22 annually stood at 12% versus 9.7% in FY '21, an increase of 228 bps on a Y-o-Y basis. Net debt. Net debt as of 31st March 2022, stood at INR 906 crores. This debt increased during the year as we had made a conscious decision to invest into supply chain to ensure the security of supply to our valued customers. For FY '22, our ROE stood at 22.6%, while our ROCE at 21.4%. The Board of Directors have recommended final dividend of INR 2 per equity share of the sales value of INR 2 each, that is at 100% dividend, subject to the approval of shareholders at ensuring Annual General Meeting. Now considering the near-term challenges owing mainly with the end customer and the logistic issues, there are many moving pieces, and therefore, we believe it will be more prudent to drive down sales volume in subsequent earnings call. Similarly, on margins, there are headwinds around raw material, energy and logistic costs, which refrains us from giving you guidance. Needless to say, it will be our endeavor to continue our work of healthy profitability on back of hedged raw material and currency and our continuous efforts to improve the overall product mix and our customer base. 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 Kapil Jagasia from Edelweiss [ Financial Services ].

First of all, a big congrats on a decent set of numbers. Sir, my first question is, one of your competitors had mentioned that demand shift from home textiles to apparel since the economy has now opened up and there's a visible decrease in this work-from-home scenario, which was earlier the case. So in this scenario, how confident would be with this increased capacity of 153 million meters? And where we would land up in terms of capacity utilization for FY '23 and thereby in FY '24?

See, the demand has deferred only in home textile, it hasn't shifted. So there is no structural shift as far as demand is concerned that we are observing. It will continue. Only, it's a matter of time that once the inventory gets released and the geopolitical situation improves and in India, once you see that the raw material prices stabilize as the new season starts, I think the home textile will certainly have a good demand going forward. And over and above, you see we, as a company, are also working upon very bullishly about the home textile front, where India is positioned as a country very strongly. And that is clearly visible from the past data, how China is leading market share. So definitely, India is strategically well placed. We as a company are strategically well placed. And we hope that once these situations improve, in the key regions, definitely, it will help us to grow our business over there and sweat our assets. And we have worked down long-term and medium-term both strategies to see and -- how we can grow our business through various marketing strategies.

Sir, just one related question to this. Like in your presentation, the home textile market share, especially for the cotton sheets, has declined from 57% in previous year to 50% now on a YTD basis. So if we look at the breakup here, Pakistan and also China has gained market share, whereas India's market share has actually declined. So even they would be facing the same supply chain issues as ours. So like any reason of the share being shifted to those geographies?

See, first of all, you see India is positioned into the -- high market segment, but they are positioned into the lower segment. And whenever there is inflation, whenever there is a blockage, we [indiscernible] product. The mass merchant does well over the departmental stores and specialty stores at retail. So definitely, if we think they were [ turning ] these product categories in that market, we are [indiscernible] the absolute number. Our absolute numbers have gone down, therefore, their percentage seems to be higher.

Okay, sir, sir, got this. And my next question is EBITDA margins for this full year FY '22 is at 19.3%. So would this be the peak margins for us? And would we be able to maintain these going forward? Or like we [ foresee it's flatting ] down to the range of 17%, 18%, which you used to achieve earlier. So your inputs on this?

As I mentioned, we will refrain from providing to you any margin guidance so far because there are so many moving pieces. But we are, of course, we are quite bullish because we have acquired this home textile business of GHCL and we are looking at medium-term to long-term strategy, we are not looking for this year alone. So in 3, 4 years, we will set our assets and see to it that even we achieving lower milestones in businesses because all our strategies are towards value addition, like B2C, D2C, e-commerce, domestic brand. So there are a lot of opportunities. And once India signed with FTA's, with U.K., EU and Canada. And now it has already signed with Australia and UAE, which we will be put in place in the next 3, 4 months, I think India will have a very good market share getting developed in these countries where we have been [ leading ] our market share because of the level playing field. So I think the opportunities are huge. India is well positioned, as I mentioned. We have our strategies in place. And that is performing well from us, which is apparent from our both the years' financial numbers. In FY '21, we grew by 26%. And this year, we grew by 17%. So if we have proper growth, definitely, we'll be achieving lower milestones in both value and margins.

That's great, sir. One last question from my side, and it's a bookkeeping question. The spinning division revenue and EBITDA for FY '22, if you can provide?

We'll provide you offline.

Okay. And sir, with this expansion in this spinning facility, like what would be the potential revenues from this division?

So it will be for captive consumption. And I mean, I was going to add because we have a very -- like even the -- currently, what we are spinning, we are utilizing most of it is in-house. So there is very negligible volume in that spinning business left over. And in this new spinning wheel also, we'll be utilizing 100% in our -- for captive consumption.

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

Sir, just can you elaborate on like what is the current demand scenario in U.S.? And also like one of your competitors mentioned that despite the ban of Xinjiang cotton, there are suppliers of Xinjiang cotton into the USA and demand from China -- demand for China product is again back. So can you just highlight upon the same?

See, first of all, you see we need to understand that this is a momentary mute as far as demand from the large U.S. market is concerned. The reason because we all know that there is a mismatch in demand and supply, that the goods [ reach out ] there takes almost 8 weeks' time. And so retailers is unable to plan their buying or sourcing properly. And so the inventory levels have gone up. And that's the reason they are not reordering very quickly. And secondly, because of the inflation in this area due to the geopolitical situation and the price rise on the raw material side as well. So once this gets released, I think the markets we do in need-based products will normalize and the demand would start accelerating. And we have a holiday seasons to -- incoming fourth season. So we are all expecting that the holiday seasons to be good. And the retail [ as such ] in April in the U.S. has increased by almost 4%. So as per -- like the demand is like we feel that should get back. Now about the China situation, as I explained earlier, China +1 strategy is clearly visible. And now with the Xinjiang cotton ban, it will only amplify because they will not be able to utilize their cotton towards exporting to the developed nations like U.S. and U.K. and EU. Many of the retailers are projecting that they will not use cotton coming out from this area. And one of the reasons for the cotton raw material prices to go up this season is also because a lot of demand is coming from China towards both raw cotton and cotton yarn. So I think things should stabilize. And we clearly see that the buyers and the retailers are derisking their business to a second source, which is happening. Only this is a momentary phase where we need to work on all these different challenges, which have accumulated at one time. So once they get released, I think we are back to normal.

The next question is from the line of [indiscernible], an individual investor.

Am I audible?

You're audible, but not very clear, sir. I would request you to come on the handset mode and come closer to the phone, please?

Well, I'm on the handset still. Sir, I hope the new acquisition has been consolidated by now.

Yes. [indiscernible]

Sorry?

The acquisition is completed by now on 2nd of April 2022.

On 2nd of April. So in the balance sheet, which has been released, it would not be included, right?

No. It will not be included.

Okay. I had that discrepancy because in the balance sheet at 31st March '22, it shows INR 342 crores of noncurrent assets as against INR 7 crore on March 31, '21. So I was just thinking whether this was the goodwill of any sort or what...

I'll explain. Some advances have to be given for acquisition. So we had given some advances to GHCL that is reflecting there.

So right, then in that case...

This is a part consideration and the entire deal got concluded on 2nd April.

Right. So the PPE, which is shown as INR 598 crores, how much do you expect to jump up to with the new acquisition?

It will go up on gross basis by about INR 300 plus crores.

And on net basis? Rough -- I just want a rough number.

On what -- net basis?

Net basis.

On a net basis, maybe around 2 -- say, 300 -- roughly around INR 300 will be there, about INR 20 crores is the depreciation, okay?

So this INR 600-odd would become INR 900 odd, right?

Right, right, right.

Okay. And second question, sir, just wanted to understand, in this scenario of high rising cotton prices, how do we defend our margins going forward?

So we feel because the -- currently, the season would start in September and because of the overseas demand, because of lesser cotton crop, because of the higher consumption of the meals, all these factors have -- and the mismatch of demand and supply overall, and the government also has imposed 10% import duty, so all these factors have fueled in the prices, and they have skyrocketed to almost more than 110% increase as compared to last year. So -- but going forward, I think the government has realized that the prices are high. So they are coming out with some [ relief ] on the duty side, and also treating maybe cotton as an essential product or on an actual user -- actual user basis. So there are discussions going on where the government also feels that we should get the raw material at a reasonable price. And so what we believe is that once the season starts, we will be able to see that -- how the crop is there, how the rainfalls are there and how the total crop numbers come up as compared to last year. Because this year also earlier, they projected [indiscernible] then they changed it over to [indiscernible], which created a panic, and that's why the prices skyrocketed. And the [indiscernible] were not having proper stock. So everybody was demanding cotton and it was not available. So the prices went up. I think with the new seasons and the government stepping in and providing some relief, we should see that the cotton prices should stabilize to some extent in the next season. And that will help us to tide over this problem on the raw material side and maintain our margins and...

Do you expect pressure on margin in coming quarter, at least for 1 quarter?

Couple of quarters where they are painful. But yes, we have held our raw material for 2 quarters, and we are watching the situation very closely. But there are so many other factors playing out, like the energy cost and the logistic costs, which are still -- and the prices -- time taken to deliver the material to the buyer's doors. So those are the other challenges which we are facing. So we feel that a couple of quarters there are pain due to all these reasons, which are accumulated in both these quarters and they should get released.

Okay. But then the -- it is in domestic market that the cotton prices are high. In international markets, the cotton prices are relatively better than that of ours -- lower than that of ours. So how do we compete at international levels with [indiscernible]?

I'm sorry to interrupt you, Mr. [indiscernible], but your voice is breaking. We could not hear your question clearly.

So I mean to ask you, this -- we are having high cotton prices in India. So that is what our competitors will also be. We will be at par with them as far as pricing is concerned. But the international cotton prices are relatively lower. And there's ample supply to given that China would not be importing outside their country. So what -- from outside their country. So how do these -- what are -- how do we defend that against our international peers?

So first of all, the international prices are not low. They are at same levels now. In fact, some of the -- otherwise, everybody would have imported between once the government has removed their duty on importing cotton till September, and now it has extended till 31st December, everybody would have called for cotton imports, but nobody did because the prices are at similar levels to India.

Okay. Right. Okay, sir. That's helpful. And just...

It's a global phenomena. Cotton is a global commodity. So we need to take that into consideration. And some of the countries which are cultivating cotton do not have an established spinning segment and the industry to supply. And as I had mentioned on my earlier con call, both Vietnam and Bangladesh have labor arbitrage. They don't have raw material. Pakistan has got limited supply. China is more focused on man-made as well as the lower segment of the market. So India does have a very good cotton base. Only thing is because of the mismatch of demand and supply, this situation was created. Once we have the new season because every time we have seen that whenever the prices go up, the [ sowing ] is better and the crop is better because the farmers get good realization. So [ we go in ] for this crop rather than the other cash crops. So that's the reason there is a hope that the prices should stabilize once the season starts, and we are also watching that situation to happen.

Okay. Sir, last question. Regarding GHCL. So in this quarter or in this year, what was the top line and margins for GHCL? -- GHCL textile division, I mean.

So whatever -- from what our results, they have published, the top line was around INR 828 crores and the EBITDA was around 12.1%. About INR 102 crores is the reported EBITDA.

[Operator Instructions] The next question is from the line of Abhineet Anand from Emkay Global.

And a decent set of numbers in these difficult times. So on GHCL financials itself, I think Muralidharan sir told INR 828 crores of sales and EBITDA of INR 102 crores. What are the PAT number, sir?

INR 83 crores, if we -- yes, around INR 83 crores.

And by any chance, would have F '21 numbers because I think '22 numbers for them also are quite high compared to '20?

We'll provide you offline. Abhineet, we'll provide these numbers once we get hold of it [indiscernible].

Okay. Second thing is, sir, in terms of when we consolidate GHCL this year, [indiscernible] fixed assets you were saying around INR 330-odd crore will get added, right?

INR 350 crores -- [indiscernible].

And what could be there -- on this, what could be the working capital or net working capital?

Around INR 240 crores is the net working capital.

Okay. So around INR 600-odd crores. So the corresponding debt that we will be taking for this?

These are finance out of our internal accruals only entirely. The deal is entirely funded through internal accruals.

So as of today, whatever was our situation on debt side on March 31 is same post the deal you are saying?

Yes, yes, correct. Correct. Correct.

So every -- the INR 600-odd crore oddly is totally equity funded?

Yes, from internal accruals. Yes.

Okay. And just wanted to understand from Lalpuria said that we earlier used to talk that the investments mainly will happen on the value-added product side, not much you're spinning. But this new CapEx that you had talked about, any thought why this is -- this has been -- I thought more of the investments would happen on Top of the Bed or et cetera. But this new CapEx of subsidiary that you're talking about, can you throw some more light?

Yes. So Abhineet, we acquired 192 looms with our GHCL acquisition of home textile business. And earlier, this was supported by GHCL [ owned ] spinning unit at Madurai. So now in order to have captive consumption for these 192 looms, which is our always strategy to support whichever asset we have, we need to support it through captive consumption. That's the reason we are going in for value addition. And we'll be spinning in time to come high value-added yarn. And this will also be from our customer side, a compliance wherein we can ensure them of total traceability and accountability of the total supply chain. So that's the [indiscernible] also going forward, whatever assets which we have should be having internal supply chain. That's the reason we have gone for this investment. Secondly, the spinning segment as you all must have seen that in the last 2 years are performing quite well with a decent EBITDA return. So now that's the reason we have gone in and lastly, you see we are also sweating out the asset of our subsidiary at the end of the day, and we are planning to merge it with our parent company. So that also is the last submission from my side.

Okay. And just on this FTA that the -- India signed with Australia and UAE. And -- I mean, how do you think the demand for us, obviously, because this -- what was the earlier entrenchments or anything of that sort that we are not able to sell in Australia and UAE? And what advantages that you have, if you can explain on that?

So certainly, you see an FTA always helps you to export in that country because then you are at a level playing field because some of these countries had bilateral trade among themselves, and where we were at loss at not being at level playing field. Now the consumption of -- per capita consumption in Australia is quite high for home textile, particularly. And UAE is a reexport port, where it exports to almost 80 countries. And in GCC, also the focus was not there because there was an import duty of 5%, whereas some other countries were not having to pay duty. So I think with the opening up this, and the intent of both the nations who have a bilateral trade among themselves with a 0% duty that itself helps in motivating all of us to see and have an insight into the market and see that how we can develop it. Plus, UAE, logistic-wise, also is closely located. So all these factors will help India in the future to grow their market share in this large market out there. So definitely, it will help us to gain some more market share from others.

[Operator Instructions] The next question is from the line of Komal Maheshwari from Anubhuti Advisors.

One question on the balance sheet side. Just want more clarity on the borrowings that we took, I mean it is under the current liabilities, so which was INR 553 crore that increased to INR 1216 crore. So almost INR [ 650 ] crores that incremental borrowing [indiscernible]. So can you inform that for what purpose that we have -- we took this?

The borrowings have been -- the short-term borrowings have been for working capital only.

Okay.

We increased -- our inventories also increased as earlier we have been mentioning. So strategically, we have been increasing our inventory. And investments have been to support that.

Okay. So inventory that, that increased -- I mean, it was also increased by maybe INR 300 crores, right?

Yes, yes.

So current liability actually increased by 6 -- on an incremental [ term ] that is INR 600 crores. But in the inventory that we see that INR 320 crores have done -- INR 340 crores. So another amount that where we spent?

No, sir, some of these is in the cash, actually. So if you see the cash position has also improved, so what has happened is that at the -- towards end of the year, we had some collections, which we didn't go to reduce the borrowings. So these are -- we see the cash position as it has gone up from INR 33 [indiscernible]. So post that, it has gone to reduce the debt towards the [indiscernible].

Okay. So cash and cash equivalent that what I see [indiscernible] we are going to [indiscernible] going to span for the working capital requirement, right?

Yes, yes. So that is [indiscernible] at the end of the year, some collections have come from exports. Those could not be immediately used to reduce the borrowings because of the year-end acquisition. So post that, we have used to reduce the borrowings. And it is going on an ongoing basis. There will be some borrowers, and there will be some adjustments. This will keep going like that.

Okay. And if -- like for the FY '23, what is your guidance in the volume term?

We are refraining, as I mentioned earlier from providing any volume guidance because you see today's world, there are so many moving pieces. Basically, the logistics have amplified and containers are nowadays reaching U.S. ports taking almost 2 months. Quarter-wise guidance has become very difficult for us to provide. But yes, we are quite hopeful that we should be able to provide you some guidance when things improve, say, maybe on our subsequent call.

Okay. And will we be able to maintain the EBITDA margin like we posted 19% in FY '22. Renewable or...

The margin guidance also, as I mentioned, we are not providing currently. We are working upon it. And as I mentioned earlier in my speech also that again, there are raw material, energy and logistic costs, which refrains us from giving a guidance overall. But our endeavor is there to work on healthy profitability on back of our [ health ] raw material as well as a positive currency and our continuous efforts to improve overall product mix. So midterm to long term, we are quite positive and India, as I mentioned, is very well positioned and things should subsidize -- subside going forward. and we should do well.

The next question is from the line of Jiten Doshi from ENAM Asset Management.

Mr. Lalpuriaji, many congratulations for achieving a very strong result in a very challenging environment last year. Our simple analysis that you are not able to give a guidance. But assuming if you're even at the same level, I'm sure you will grow, right, because you're going to add the -- you're going to add something from the acquisition. Obviously, you can't be 70 million or 80 million meters like your last year. You always be something plus. Assuming even if the challenging environment, there will be a good cash flow during the year, plus how much of your money is blocked up in the government receivables that government scripts that you have received as benefits, but could not encash?

So presently, we have only about INR 60 crores as on date. Most of the scripts have been received post March.

Post March -- as on 31 March, what was the amount?

Around INR 170 crores -- INR 170 crores or INR 172 crores.

So of which we have received about 110?

Yes, yes.

Right. Now assuming that -- Mr. Lalpuria, assuming that your inventory normalizes, you will release about INR 200 crores to INR 250 crores of minimum cash from there?

Yes, yes.

Okay. So given that your government scripts get liquidated, you have an operating profit as well as you, let's say, are able to reduce inventory and curb your working capital, there should be an easy debt reduction of at least INR 300 crores to INR 400 crores that we are seeing. Is that correct?

Yes, we are quite positive on that.

Okay. Okay. So you are seeing a good debt reduction -- a good cash flow and a good debt reduction. So -- and the other question is that when we spoke last year, obviously, you had done the acquisition purely because you were looking at the next 3 to 5 years with great optimism. Given whatever is happening currently, and let's assume that the world stabilizes and brings back -- comes back to normalcy, how do you envision the next 3 to 4 years? Is there any change in your long-term outlook on what you plan to do for Indo Count?

Well, certainly -- we have acquired this asset because we are always looking at long-term as a strategy, 3 to 4 years. And definitely, we are quite bullish about the Indian home textile, as I mentioned earlier. And we, as a company, are also well positioned. Our fashion bedding has increased to 19%. Our branded business has increased to 14%. Our e-commerce exposure where we are healthy, licensed brand has increased to 7%. Our domestic brand is doing well. So all our value-added businesses wherein we have strategized 3, 4 years back, are paying off and that is reflected into our performance and our EBITDA and profit margins. As you can see, we have reported a PAT of 12%. So I think going forward, as we had mentioned earlier that we, as a company, are aspiring to utilize this capacity, which we have acquired and also which we have currently in the next 3 to 4 years and become almost like 2x from here on the value side. So definitely, we are bullish about the whole situation about -- going forward. And these challenges are what we feel are in the business because of see the geopolitical situation or the logistics side because of the COVID in China, all the ships should reduce and diminish going forward. So...

So let's say, if you look at 3-, 4-year outlook, you still maintain that you can be a $1 billion company with that 18%, 20% EBITDA margin in 3 to 4 years?

Yes, of course, like why not. We mentioned that we should be aspiring to become a $1 billion company always. And because we are a focused company on the bed linen side, where there are so many opportunities not only in the U.S. but with all these [ FTAs ] coming with all these advantages of raw material, which India has, we -- with our capabilities, capabilities as you have seen that we have responded to all these disruptions so well. So we are proud of our team that our team will certainly do well against all odds and see that take the business to the new level and new milestone.

Sure. Now in the second half, if there is a correction in cotton raw material prices and all of that, would you believe that it could be advantageous to us?

Definitely, because that's what we are all hoping for is the raw material [ eases out ], we are hedged for the next 2 quarters and we see that that's the reason you see on our numbers that our inventory levels have gone high, but those inventory levels are high for all positive reasons. In today's world, not only the cost is important, but having supply chain security, providing that security to the customer is also equally important. So we need to service the business very well. And that's why we have been saying that we are consciously investing into the inventory levels so that we can service the customer very well.

So what's your cost of debt?

See -- around -- working capital is just less than 4%.

Less than 4%. Okay. Okay. Okay. Fine. Fine. So there's no change...

I would add here [indiscernible]. See, even if our inventory level and working capital is higher, where we are seeing that we have consciously done it. We are providing an ROCE of almost more than 20%. So taking finance at 4% and making 20%. It is not a bad job.

Sure. That makes sense. Sure, sure. So probably, you're saying that once things settle down, you will be able to give us more clarity as the first quarter results are behind us?

Absolutely.

Sure. sure. Okay. We look forward to that guidance from your side sometime in middle of August, so that we have greater visibility to the year ahead. Wishing you all the very best, Mr. Lalpuria.

The next question is from the line of [ Amit Kumar from Determine ] Investment.

Just 2 questions. One is the spinning capacity that you're planning to add. Yes. Is this part of the PLI scheme in the textile PLI in any way? Or is this not part of that?

No, no. It's not part of that because the PLI scheme is only for technical textiles as well as manmade fiber so far. The government is trying to see how it comes up with a PLI-2 scheme, where in it can make it more broad-based and include cotton and other areas also in it. So we are waiting for those things to happen. But currently [indiscernible] under PLI.

I'm sorry, you have in the past talked about entering into newer segments, fashion bedding and so on and so forth. And our understanding is that that's more oriented towards manmade fibers and towards blended fibers really. So that's why I was just sort of checking on that. So just to sort of understand this CapEx also a little bit better. When you say -- I mean, could you just explain what do you mean when you say basically value-added fibers, basically, if you can just explain maybe a minute commentary on that, that will be really helpful.

So basically, when we say value addition means a better cotton like, say, organic, Egyptian, Supima, BCI, all that, number one. Then also spinning certain special yarns like linen, hemp, et cetera. So all this can be added up towards more branded -- be capable of doing more branded business, more specialized business, more value-added business. So that we do not give away our margin to someone else, and we keep that margin in-house towards the integration.

Understood sir. That's useful. My second question was, you sort of mentioned that in fourth quarter, you had sort of relatively muted sales. So one is obviously the demand issue in the U.S. And the second one you mentioned was on the supply chain side as well. On the supply chain side, just wanted to get a sense what you are seeing now because at least the sense that we are getting from the market is the China-U.S. link is also because of what is happening in China, that sort of remains fairly congested. But otherwise, on the other links, the supply chain issues are coming down and to that extent, the freight rates are also sort of coming down. If you can just sort of tell us what's happening on the logistics and supply chain side right now that will be really helpful.

So, you are right. To some extent, we have seen that the freight rates have softened out because the port at Shanghai [indiscernible] has started. So there are some containers getting released as well as time has improved for the containers to get. And also the cost has come down to a certain extent, but you see it's also the demand and supply on the Indian side as well. So if there is a more -- like a lesser frequency of vessel and more demand of the container, the prices goes up. So vice versa. And you see on the logistics side, also the time taken is killing because the retailers are not able to plan their business well, whatever inventory they have is not relevant to their today's consumer. And the consumers are looking at more essential because of the [indiscernible]. So it is like a double whammy out there. And once that gets released to a certain extent and your inventory gets reduced in the pipeline, we strongly feel that the business should normalize. And there are reasons to believe because they have holiday seasons in front of them. Only thing what has been hit is also the promotional business. Like just imagine like today, Valentine's Day or Mother's Day and if they want to promote certain product in those days, they are unable to plan sourcing this from India or anywhere else because they are not sure when they -- when it would reach [indiscernible] and if the goods reach after them, there is no use of it. So this is happening particularly on the inventory side and the logistics side as on date.

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

And congratulations on strong set of numbers. Sir, I had a question on GHCL numbers. Could you just help us how much was the GHCL volume for FY '22 and the revenue and profit? Get some idea on your overall profit numbers on an annual basis.

Yes. So the numbers like [indiscernible] INR 828 crores, which Mr. Muralidharan has reported earlier. And the volumes are around, say, 19 million to 20 million.

Okay. Understood. And sir, just wanted to understand the composition of your inventory with respect to -- I mean, how much of it will be finished goods and how much would be RM or WIP?

So the overall inventories, what I've been given -- we can give you offline the split between this [ season ].

Okay. Okay. And third question is on interest. The interest outgo for the quarter has reduced, though our debt number on an annual basis have increased. So just wanted to understand the interest cost, why it is so low?

So the subvention -- so there is subvention of interest that is we get about 2% subsidy on interest. If you see the last quarter, we didn't receive it because the scheme was not renewed, but now government has come up and said that this scheme -- subvention is there. So we have got the Q3 and Q4 also in one place.

So how much would be the quantum of the same?

I'll give the numbers maybe to you, specifically, yes.

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

Thank you. With this, I would like to thank everyone for joining on the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our Investor Relation advisers. 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.