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

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '25 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 the date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Jain, Executive Vice Chairman, Indo Count Industries Limited. Thank you, and over to you, sir.

Good afternoon, and a warm welcome to all of you joining us for the Indo Count Industries Limited Q3 and 9 Months FY '25 Earnings Call. I'm also joined by our Group CFO, Mr. Muralidharan; and Strategic Growth Advisors, our Investor Relations adviser. We hope you had the chance to review the financial results and investor presentation available on the stock exchange and on our company website. Before we dwell into industry and our performance highlights for the quarter, I want to begin with a significant update in our leadership team, one that reinforces our commitment to building a stronger future-ready Indo Count. At the corporate level, we are pleased to announce the elevation of Mr. K. Muralidharan to Group CFO. He has been associated with the Indo Count Group for close to 3 decades, has recently played a key role in our strategic acquisitions of GHCL Home Textile division, the Wamsutta brand, Fluvitex USA and Modern Home Textiles. With multiple new investments underway, he will now spearhead financial strategy, capital allocation and performance management across the group. To fortify our finance team, we welcome Mr. Manish Bhatia as our CFO. A seasoned financial professional and a chartered accountant, Mr. Bhatia brings with him over 3 decades of expertise across accounting, taxation, audit, legal and financial management. He has served as Group CFO at Trident Limited and held key leadership positions at Prism Johnson Limited and Apollo Tyres Limited. We strongly believe Mr. Bhatia's presence at Indo Count will strengthen the finance, commercial and accounting functions. For our U.S. operations, we are excited to welcome Mr. Chris Grassi as CEO, U.S. Operations. With over 40 years of experience in the home textile industry, Chris is a visionary leader, known for driving innovation, growth and strong industry relationships. In his career, he's known to have leveraged his expertise in merchandising, global sourcing, product development and market strategy to expand the product portfolio and customer base. His leadership will be invaluable as we expand our presence in the U.S. market. Additionally, we have strengthened the senior management team with key hires across business functions in the United States. These strategic appointments reaffirm our commitment to building a world-class leadership team and ensuring Indo Count is well positioned for its next phase of growth. Coming to industry performance. The textile industry continues to navigate with momentum. During Q3 FY '25, U.S. retail sales have shown strong growth, fueled by holiday spending, reinforcing market confidence. On the supply chain front, while elevated freight costs have had a marginal impact on profitability, we are actively implementing strategic measures to mitigate these challenges and sustain operational efficiency. Meanwhile, in the domestic market, the outlook remains encouraging. Also, the resumption of India U.K. FTA discussions signals potential opportunities for the sector, fostering optimism for trade expansion. Additionally, the government's cotton productivity mission announced in the recent budget is a crucial step towards enhancing cotton yield, sustainability and fiber quality, particularly for long -- extra-long staple cotton, further strengthening the industry's foundation. Lastly, the China Plus One strategy continues to drive growth, positioning India as a key player in the global textiles. Given these developments, we remain optimistic about India's growth trajectory and are committed to capitalizing on emerging opportunities. Now coming to our quarterly performance. I'm pleased to share that Indo Count has delivered a strong performance despite challenging market conditions with revenue growing by 61% and profit after tax increasing by 30% in Q3 FY '25, demonstrating our strategic execution and market outperformance. We are happy to inform that our core bedding business remains on a steady growth path, targeting approximately 110 million meters for FY '25 out of the total 153 million meter capacity. With a clear strategy and disciplined execution, our core bedding business operates within the guided 16% margin range and will continue to drive performance. Backed by strong momentum, we remain committed to maximizing stakeholder value. Our recent acquisitions, Fluvitex USA, Modern Home Textiles, U.S.A., and new licensed brands have started contributing to revenues, achieving approximately INR 100 crores in Q3. To build on this momentum, we have made significant investments in expanding our team, reinforcing our foundation for future growth. With Wamsutta's market positioning strategy now in place, we are gearing up for a successful launch in Q1 FY '26. Having invested approximately USD 72 million in brands and acquisitions, we anticipate an additional revenue of approximately USD 275 million over the next 3 years. The near-term investments in U.S. will impact margins by 150 to 200 basis points till March '26. However, these strategic moves are set to fortify our foundation for sustained long-term growth. Now coming to our greenfield project. Continuing our Indo Count 2.0 journey, we are taking another step in the utility bedding business. Indo Count Global East, Inc., a step-down subsidiary of our wholly owned U.S. subsidiary, is further strengthening this business with a strategic greenfield manufacturing facility in North Carolina, U.S.A. This reinforces our commitment to deepen our presence in the U.S. market, ensuring speed, scale and efficiency in serving our customers. The new facility will have a production capacity of 18 million pillows with a total investment of $15 million, financed through 75-25 debt-to-equity structure to start with. With a gradual rollout and revenue buildup targeted from September 2025, this facility marks a transformative leap in our global manufacturing footprint. With this addition, Indo Count's total U.S. manufacturing capacity will expand to 31 million pillows and 1.5 million quills annually. We want to reiterate that at a consolidated level, we aspire to double our revenues by 2028, driven by our core business, utility bedding and brands, including our recently added licensed brands. Awards and recognition. I'm proud to share that Indo Count has been honored with the Home Excellence Award by HFPA, New York, recognizing our exceptional growth in business expansion. It is a moment of great honor for Indo Count as our Executive Chairman, Mr. Anil Kumar Jain has been awarded the prestigious Vastra Ratna, Global Achiever's Award by Texprocil for his outstanding contributions to the Indian cotton textile sector. And further strengthening our commitment to sustainability, Indo Count has also won recently the CII 18th National Award for Excellence in Water Management for the year 2024. These achievements reflect our pursuit of excellence and responsibility. That is from my side. Now I request Mr. Muralidharan, our Group CFO, to share financial highlights of the company.

Thank you, Mr. Mohit. Good afternoon, everyone. Happy to connect with all of you once again on Q3 FY '25 earnings call. On the financial performance, starting with volumes. For Q3 FY '25, we achieved a sales volume growth of 42% year-on-year to 27.7 million meters. It's important to note that last year, the same quarter was impacted on account of Red Sea challenges, which led to a subdued Q3 FY '24. For 9 months current financial year, our volumes stood at 80.8 million meters, a growth of 18% over year-on-year. For full year FY '25, we will be at the lower end of our volume guidance of 110 million to 115 million meters. Total income. In Q3 FY '25, our total income stood at INR 1,168 crores, up by 61% year-on-year from INR 727 crores in Q3 FY '24. For 9 months FY '25, our total income stood at INR 3,162 crores, up by 26% year-on-year from INR 2,507 crores in 9 months last financial year. EBITDA. Our EBITDA for Q3 FY '25 was INR 165 crores, a growth of 40% year-on-year with an EBITDA margin of 14.2%. For 9 months FY '25, our EBITDA stood at INR 485 crores, a growth of 11% year-on-year with a margin of 15.3%. In Q3 FY '25, there was a product mix impact along with product promotions to end customers, which impacted gross margins. This will partially continue in Q4 FY '25 as well. Further, our upfront investments in team building resulted in profitability impact, which we believe will improve as we scale up the U.S. business for utility bedding business and brands. Higher shipping costs also led to higher expenses. However, this has started to rationalize in Q4. For the full year FY '25, we will be guided -- we will be at guided EBITDA margin range of 15% to 16%. PAT. Our PAT for Q3 FY '25 stood at INR 75 crores as against INR 58 crores in Q3 FY '24. Similarly, PAT for 9 months stood at INR 235 crores compared to INR 246 crores in 9 months FY '24. Higher interest costs during the quarter impacted our profitability, driven by 2 key factors. Firstly, the absence of interest subvention benefit, which was available last year, but discontinued from Q2 of FY '25, led to higher financing expenses. Secondly, increased borrowings to support business growth and fund acquisitions in the U.S.A., further contributed to the rise in the interest cost. EPS. Our EPS for Q3 FY '25 is at INR 3.81. And for 9 months FY '25, it's at INR 11.86. This is the roundup from my side. Now I open the floor for question and answers.

[Operator Instructions] We have the first question from the line of Jatin Damania from Svan Investments.

Sir, first, on the opening remarks, Mr. Jain alluded that due to increase in the overall freight cost and the volatility, company has taken some initiatives in terms of the improvement in the operating efficiencies and the other sorts of things. So can you help us in details what are the initiatives that company has taken to insulate ourselves from the higher increase in the freight cost?

Jatin, this is Mohit here. So I mean, as an organization, we are always looking at sharpening our pencil and how -- to see how our operations can be more efficient. So if there are increases in some other costs, we can save at other places. So my statement was a little bit generic that -- so across any of our facilities on the operating side, we are like trying to see how do we leverage them further to save any exigency in costs that can go up in the future.

Okay. And as far as our U.S. operations is concerned, now with this brand acquisition, which has contributed INR 100 crores of the revenue, and we are targeting $275 million over the next 3 years, so I just wanted to understand how does the margin profile for that branding business will evolve? And second thing, in the near term, as you indicated that till FY '26, there would be an impact on -- of overall 150 to 200 bps on the margin front. So is it fair to assume that the current level of 15% to 16% EBITDA margin that we are guiding for FY '26 will be at the -- will be the lower than the 15% margin?

So for next year's guidance, we'll come back to you at the end of our -- along with our Q4 results. And also at that time, we'll be able to guide you a little bit more on how the new businesses, both utility bedding as well as the branded business will play out specific for next year. From a 3-year perspective, we don't -- we would expect our new businesses to be slightly higher in margins as we go forward. But of course, there's a scale-up that is required and maturity to achieve like in any business.

So, I mean, I think for initially investment, there will be some impact on the margin, but once we're able to scale up, then time, we'll probably get a higher, better profitability?

Absolutely. And we've been quite transparent in saying what the impact is, as we are seeing of 150 to 200 basis points.

Sir, last question from my end would be on the domestic market front. Where -- I mean, what is your total revenue contribution coming from the domestic market? And what are the steps we are taking up to ramp up or increase your market share?

Sure. So we have 2 brands in the domestic market. Our opening price point brand is called Layers and our aspirational brand is called Boutique Living. At this point of time, we are roughly at around 2.5% of our overall revenue comes from our domestic business. So although our revenue as it's grown, we have -- even last year, we had 2.5%. So we've sustained the 2.5%. We have great aspirations from our market in India. India is a growing country, growing GDP. Income of individuals is growing on a year-on-year basis. So of course, this is -- I mean, a lot of effort that we are putting in as an organization to grow this business in the years to come. So this is a very high focus area for us as a company.

The next question is from the line of Palash Kawale from Nuvama Wealth.

Congratulations on good set of results. Sir, my first question is again on new acquisitions, which have contributed INR 100 crores. So like could you help and throw some color on how these would be contributing in upcoming quarters like next 3 or 4 quarters? That would be helpful.

I think, Palash, we've been given a guidance with the new investments being done and the acquisitions done that our target is to achieve $275 million in revenue. Of course, you cannot take $275 million and divide it by 3 each year, right? We don't have visibility to how it would happen each year, but we are seeing -- we see each year being added on to the other one. These new facilities that we have already in Arizona and Ohio are already today, as we speak, touching 50% capacity utilization. So we expect quarter-on-quarter better results from new businesses to come.

So yes, sir, you said that directionally, the utilization should pick up, right?

Yes, yes. And hopefully, it should grow sequentially every quarter, as we are starting from a small base.

That's helpful, sir. And sir, how do you see this Red Sea issue panning out now? Do you see relief -- prolonged relief to continue? Or you see some disturbances again?

Honestly, we don't have a crystal ball. But at this point of time, the freight issues seem to be behind us. We see much better availability of containers across the world as well as prices of freight rates have stabilized, I would say, on the lower side. So we are very hopeful that this should continue.

Okay. And sir, you are guiding for like reaching the lower end of your guidance. So still in Q4, you'll need to reach the highest quarterly volumes. So are you seeing a demand and shipments are there and everything is on the right path, right?

Absolutely, that's our effort and endeavor.

Okay. And sir, what is the debt level after the Q3?

Q3 debt levels are around INR 1,200 crores, INR 1,300 crores overall. This is the gross debt. This is including working capital and long-term loans.

And what is the net debt?

Net debt would be about INR 150 crores less.

Okay. And sir, how do you see these debt levels for next year?

Next year, still our expansions are happening. So I think we'll be able to address that in the Q4, when we give out the results.

The next question is from the line of Surya Narayan Nayak from Sunidhi Securities.

So sir, just to understand -- I just missed the gross debt figure, if we can repeat it?

Number is around INR 1,300 crores roughly. Consolidated basis -- this is on a consolidated basis, yes.

Correct. Okay. So sir, just to understand here, so in the spree of expanding to the U.S. market, we have done 3 acquisitions, and we are doing also another greenfield one so -- I mean, including brands, I'm saying. So will it be kind of full stop or still there will be still more in the pipeline? What is the aspirations of the management? Because the leverage also is going up, although it is -- I mean, it is not that alarming, but below EBITDA, the interest portions are taking away much of the amount so that's why the translation of the top line to bottom line is not happening.

I think -- Surya, Mohit here. I think we have to keep in mind that all these investments have been done in the last 6 to 9 months. So you have to give us some breathing room, right? So I think for now, we've announced whatever needed to be done in terms of investments, keeping in mind the top line growth. Of course, we are always looking at opportunities. So I think we have a very strong balance sheet as we move forward. But we are very, very conservative in our approach. We will take very calculated calls.

So Mohit ji, my humble submission is only to understand whether the acquisitions or let's say, inorganic or organic expansions are done with, that is only clarity required.

Yes. So as I said for now, for whatever we've guided, we kind of feel we are in a good space. I can never say that we are done. We always are looking at opportunities, opportunities keep coming to us as an organization. So we evaluate each one of them. Of course, we are very prudent in our financial allocation of capital, and we wait. It has to be in our core business. We are very focused on the home textile side of the business. So whatever makes sense from a customer perspective to grow the business where we can get more wallet share of the customers. So we look at businesses that way and then take those decisions. But I would say, in general, for now, we are at a good space here.

And secondly, Mohit ji, will you be reporting the pillow as a separate section because going forward, the revenue contribution will be closer to maybe INR 2,000 crores going forward. So it is a substantial portion. So will you be reporting separately because the margin profile of U.S. operation and the Indian operations would be different?

Sure. So we will come back to you on this. We will report at the revenue level, but not at the unit level.

Okay. So but the margin profile of U.S. operations will be lower at par with the Indian operations after the maturity level there?

In fact, we wanted to be -- expect it to be slightly better.

Okay. Okay. So any plan on the expansion on the Indian side after the '27 or so when we'll be [ expanding ] the Indian operations?

Not at this point of time. We are always evaluating, as I mentioned before.

[Operator Instructions] We have the next question from the line of Narendra from Robo Capital.

So sir, my first question is regarding the revenue guidance that we have of doubling the revenue in 2028. So is this including the U.S. business? Or would it be 2x of the current revenue that is around INR 3,800 crores plus the $275 million?

Yes. Narendra, the revenue guidance that we've given as an organization is on a consolidated basis. $275 million is from our utility bedding business and the brands. And then we have extrapolated our 110 million meters to full capacity. And that's how we've said that by 2028, we expect to double our revenue.

Okay, sir. Understood. And when can we see the utilization at the U.S. greenfield facility to reach the 70%, 80% kind of revenue utilization?

I mean I think we are already in 2025, and we've said we'll do $275 million by 2028. So it's not too far away, right?

So we'll be doing it in the next 2 years...

It will take us 2 years from now, 2 years at least, yes.

Okay. Great, sir. Understood. And...

I think this is the quickest that any company can expand in a new area in such a short period of time.

Yes, totally agree. Totally agreed, yes. And regarding the borrowing, sir, so are we at the peak? Or do we see the borrowings going up still? What could be the guidance on debt?

Yes. I think the gross debt should remain more or less at the same level. We expect the working capital to come down a little bit, which will compensate by the increased investments we're making in the greenfield. So overall, I think INR 1,300 crores gross should be the same -- should remain.

[Operator Instructions] We have the next question from the line of Vikram Vilas Suryavanshi from PhillipCapital India Private Limited.

Just to continue with the debt figures, if you look at, how is the working capital in terms of inventory pressure which was there. So if you can give breakup on working capital debt within that and long-term debt and comment on your working capital going forward?

I think about INR 1,000 crores is in the working capital, which is expected to come down still, okay? On the long-term debt, we have about INR 300 crores roughly.

So this quarter, I think we had around INR 100 crores revenue from the acquired entities in U.S.A., but that could be because of partial revenue. So full quarter next -- in fourth quarter would be how much approximately revenue expected from these acquired entities in U.S.A.?

It should be slightly better, but we would not be able to spell out the exact numbers.

Okay. But is there any -- for how many months it was consolidated or added in this quarter? Or will it be like a full quarter impact?

I mean the Fluvitex acquisition we did in September. The Modern Home acquisition we did mid-October. So I would say that we got 90% of the quarter benefit.

Understood. I think that's helpful. And I think the margin you have talked about, but does it also have some impact of advertising brand promotion, which can taper down going forward or probably that will as a percentage of sales remain same going forward as well?

When we said the 150 to 200 basis point lag, we have factored all of that in.

We have the next question from the line of Prerna Jhunjhunwala from Elara Capital.

I joined in a little late. I don't know if this has been asked earlier. Just wanted to understand the opportunity for this utility business that we have acquired 3 -- we acquired 2 entities and we're also setting up one greenfield expansion. Could you please highlight some details on the opportunity in this space? What is driving this aggressiveness in this business?

Sure, Prerna. Mohit here, I'll take this question. So like our sheet business, which is our core business, the business size in the U.S., for example, is between $4 billion to $4.5 billion in revenue at the retailer side. Similarly, utility bedding is a similar category with $4 billion to $4.5 billion in revenue. Utility bedding consists of pillows, mattress protectors, mattress pads, down alt comforters. A lot of these are very bulky products. So the freight component is extremely important. That's how we've decided to go for multiple manufacturing locations, one on the West Coast, one in Midwest and the new one is in the East Coast. At Indo Count, we had a lot of feedback from our customers to increase with whatever service we've given them over the years, over the last 15 years or, to increase the wallet share with the customers. So this is a category that we identified. And our reason to acquire 2 companies were to shorten the gestation period of ramping up the business. So we did that. And then we've also got some very capable team members across board, product development, sales and marketing, finance, supply chain to be able to run this business for us. So when we felt comfortable, then we've taken the call on the third location, which is on the East Coast, which will start coming up, and we should start seeing revenues from September of this year onwards. So that's the premise of getting into the business, and we have a strong belief that we've taken the right decision.

And how is the profitability in this business as compared to cotton sheets business that you're doing?

As I said, in both the utility bedding and our brands, we should do slightly better. That's our estimate. Once the business goes through the gestation period, we should be able to do slightly better.

Okay. Understood. And how do we see the cotton prices, which are at very low levels currently impacting or affecting our business positively, negatively over the next 6 to 9 months? Plus how is rupee depreciation likely to impact our performance given its very sharp in a short period of time?

Sure. So cotton prices are at around INR 55,000 to INR 56,000 a candy, ex-gin. Of course, at Indo Count, we use multiple types of cotton. We import cotton, we use domestic cotton. So in our product mix, cotton prices have not made that much of a difference. So the current cotton that we had in our warehouse before the new season started will take us up to Q4. And maybe Q1 onwards, we could see some benefit in terms of domestic cotton prices. That could -- we could see that happening in Q1 because we are procuring that cotton in the month of December, January. That will only get into shipments after April, May onwards to customers. In terms of ForEx, we are 50% to 60% hedged at any point of time. So of course, our hedges, which have already been taken place are at around 55 -- INR 85.50 levels. So we'll have to, of course, execute those. Nobody expected the rupee to depreciate in the last 4 to 6 weeks. But as and when we go through those hedges, it should be a benefit. But of course, we have to look at other countries around us and how does a country like Bangladesh play out, Pakistan, China. So we have to look at it in totality and not only from an India perspective, from a competitiveness point of view.

Okay. And one last question, sir, from the greenfield plant that you are building in, this one is also for pillows? So all 3 factories are for pillows? Or how is the capacity divided between the 3 in terms of product mix?

So the plant that we are building right now will start with only pillow manufacturing on the East Coast, which is under our company, Indo Count Global East. The Modern Home Textile facility is again with 8 million units, is again a pillow facility. Both these facilities can do multiple types of pillows. There's a type of pillow called garnet pillows, shredded memory foam, blow fills. So there are different types within that. For ease, we are just calling it pillows, but there are different types of products within pillows that we can manufacture. And our facility in Ohio can do both pillows as well as quilts.

Okay. And last question on geographical diversification that you're trying to achieve over a period of time over the next 3 to 4 years, given that U.S. for cotton sheets for sure is -- our market share has surpassed 60% as a country. So where in other geographies are you seeing opportunities? Or is it still U.S., which is going to give you the bulk of the growth going forward?

As we look at our 9-month results, our growth in rest of the world has been at the same level as the U.S. So we've grown in countries across -- I mean, we shipped to 54 countries so right from Australia, Japan, Middle East, Europe, U.K. So all of those businesses for us is also growing. But of course, from an overall consolidated basis, once our utility bedding and branded business take off, then U.S. will become a slightly larger share compared to other businesses. But having said that, for our core business, which is sheets that we are manufacturing in India, we are growing in all the other countries also as we speak.

The next question is from the line of Raman K.V. from Sequent Investments.

Yes. Sir, what is the CapEx plan for this particular -- this financial year?

So this financial year, we -- apart from the normal CapEx, which we had estimated of about INR 65 crores, we intend about another INR 50 crores in the new plant basically of -- for USA. This is the estimate, and we have, of course, incurred part of the expenditure. So I think against INR 483 crores is the estimate, which we have made.

INR 483 crores?

INR 463 crores to be precise. INR 463 crores.

Okay, sir. Sir, and also, you said you are planning to double the revenue in 2 years. Sir, is it like from -- are we considering this from FY '25's revenue like assuming we do around close to INR 4,000 crores in FY '25. So from there, you are planning to double the revenue?

Sorry, can you come with your question again, Raman?

Okay. My question was the management said they are planning to double the revenue in the next 2 years. So assuming the base year revenue of FY '24 or FY '25?

So what we are saying is FY '25, wherever we end. We want to double our revenue by 2028, not in 2 years.

Yes, yes. Okay, 2028. So by 2028, you aim to do INR 8,000 crores of top line?

Yes.

Okay. And sir, I just wanted to understand the new business which you acquired, one is the utility business and another one you said was a branded business. Can you please explain both the dynamics and market?

There are 2 areas of businesses that we are focusing on. One is utility bedding, which is basically pillows, quilts, mattress pads, down alt comforters. So for that, we acquired 2 locations. First, we acquired a facility in Ohio in Columbus and the second -- which is a company by the name of Fluvitex USA. And the second one we acquired is in Arizona -- Phoenix, Arizona, it is a company by the name of Modern Home Textiles. So that's our utility bedding business. On the branded side of the business, in April of this year -- last year, 2024, we acquired a brand called Wamsutta, which is Bed Bath & Beyond's #1 brand. It's been there from 1846, and we acquired global trademarks and IPs for it globally. And last year, we also took the license of 2 other brands called Fieldcrest and Waverly. So that's our brand portfolio for now under new brands.

[Operator Instructions] We have the next question from the line of Sneha Jain from SKS Capital.

I want to build up on the last participant's question. And towards the worldwide, specifically, I want to talk about U.K. and Europe. We had a very good like sale over there. And any progress with the U.K. FTA that you pointed out? Or I mean, are we planning to build up our position even there because they are good margin businesses?

Sure. So, Sneha, we already have an office in Manchester and a team there with the team heading at design, warehousing, showroom, all of those capabilities. So the India U.K. FTA negotiations have just resumed at the beginning of this year with a focus of finalizing this agreement as a part of U.K. government's broader goal to strengthen bilateral trade between the 2 countries. There is, of course, no definitive update on the conclusion at this stage. So we are all hopeful that hopefully, it will conclude this year, and that should be good for Indian businesses.

Okay. And any impact of Bangladesh? Or do you think it's maybe some of the market share that we've gained from that?

Bangladesh is a predominant apparel-driven business, I mean, and they play on labor arbitrage. In home textiles, they have a smaller role to play. But yes, I mean, even with that, we see customers wanting to not come out of Bangladesh, but spread their risk slightly more across countries rather than be very focused on Bangladesh as a country.

And sorry, sir, I might have missed the -- is there any impact of the dollar thing?

No. At this point of time, as I mentioned, most of our dollars were hedged in the short term. And from a long-term perspective, it should be slightly helpful to the organization, keeping in mind competitiveness of other competing countries.

The next question is from the line of Anant from Mount Intra Finance.

Congratulations on a good set of numbers. I just have one question related to your greenfield expansion. I think it's mentioned you would do a total investment of $15 million. Is this going to be annually? Is this going to be a onetime investment? How is it different? On your PPT, one side says total investment of $15 million. And on another side, it says $15 million annually. If you could just clarify that for me.

Anant, this investment is in our North Carolina facility, out of -- which will -- I mean, $15 million will happen, let's say, starting now to September of 2025. So it will happen in stages because -- but between now and September is when it will take place.

But this is a total investment, right?

Sorry?

It's not going to be -- this is the total investment you are doing? In one side, it says $15 million annually. So I'm just clarifying that.

It's not a $15 million annually. To put up this facility, it's a $15 million investment, which is spread over 2 financial years or 2 accounting years, whichever way you want to call it. And that we'll invest starting now up to September. And this will get us a capacity of 18 million pills. If tomorrow, we decide to do further capacity there, we'll have -- we have enough space to further expand, but that -- those calls will be taken much later on. So it's the initial CapEx in this location.

The next question is from the line of Pankaj from Affluent Assets.

I have 2 questions. One, we are expanding heavily on -- in U.S. in this specific field, I mean to say, the pillows and pillow covers. So where do we stand as a percentage of market share at this moment? And going forward, what would be the situation as and when we come up with the complete facility? And second thing, as you have guided that we will be doubling our revenues by FY '28 or 2028 my calculation just gives INR 8,000 crores of top line, 15% EBITDA margins and around INR 800 crores to INR 900 crores of PAT. Am I assuming -- I mean am I on the same page as with you?

So Pankaj, your first question as to the U.S. is a large market with -- once, I mean, this investment is complete. It should put us in the top 5 players in the utility bedding business in the U.S. Of course, execution is going to be the key...

I just wanted to understand whether we have very small market share or we have too big a market share that it will be difficult for us to expand?

No, no. It's a new business for us, right? So with the new business, we'll have to -- we take one step at a time. So with this capacity that we are creating now, we've been the top 5 players in this space. So it's a reasonable capacity. It's not a very small capacity nor that it is too big. But directionally, we are in the correct place. In terms of your question about revenue, I think -- I mean, directionally, whatever you said, probably your thought process is in the right direction, but we would like to leave it to that.

The next question is from the line of Amit Kumar from Determined Investments.

My question relates to Slide 6 of your presentation. So I understand the acquisitions, I understand the branded business. But in terms of the utility greenfield expansion that you are doing, you kind of mentioned a $15 million investment resulting in a peak revenue potential of about $90 million. And you also mentioned that margins are going to be slightly better than the 15% average for the company right now, let's say, around 16%, 17%. I mean that results in almost 100% pretax return on capital. So I'm just sort of trying to reconcile this. And I mean, the U.S. -- textiles business in U.S. slowly and steadily moved away everywhere. I mean the opportunity for us just seems a little bit too good. So could you just -- I mean, is that your expectation to begin with, I mean, 100% pretax ROCE in this expansion?

Sure. Amit, on a call, I would like to avoid discussing specific numbers right now for competitive reasons. There's a lot that goes behind executing a business of this. It cannot just look at capital invested to the revenue. Otherwise, everybody would be in it. So I think there's a lot in terms of execution, team, focus that's required. So I think you have to look at it in totality. And of course, there's a gestation period. So it's not that we'll achieve those revenues in year one. So there will be a time lag that we're able to build on and get to it over the next 3 years.

So that's what I'm just trying to understand. As you sort of yourself said, I mean, it sort of seems too good to be true. And if this was the case, pretty much everybody, including your Indian peers, would be clamoring to develop these facilities yourself. So I mean, is there an element -- I mean, when you're sort of talking about a 16%, 17% margin, which is sort of pretty high, as it is given that it's ahead of your margin. I mean, is this sort of divided between -- I mean, some processing will happen in India, you will sort of send something...

It is slightly higher than our brand business. So I gave an overall average of our utility bedding and brand business. At this point of time, we are not breaking it up. But as I mentioned again, that it's not -- you cannot just look at investment to revenue in a business like this. the customer relationship, execution skills, supply chain, a lot of factors come into account, labor costs. So there are so many factors that one has to keep in mind to be able to run this business at an efficient level.

Okay. Probably, I'll take this offline. And just a second question, which you also mentioned on the brand side. So again, brand side also, we are looking at a fairly heavy $100 million peak revenue potential. And so again, margins, whether on the brand side or on the utility wedding side will be sort of slightly better. But specifically on the brand side, there is always a manufacturing component and there is a brand component. So manufacturing you are doing in India for bed sheets and other products within your brands and then exporting it to U.S. and there now you have control of the brand also. So when we are looking at 16%, 17% or slightly better than current margins as whatever they may be, are those like core brand margins? Or does that sort of include the manufacturing component, which principally happens on the India side? Is that a consolidated margin that you're looking at? Or those are above average margins are like pure brand margins?

No, it's a consolidated number when I'm giving you. You got to keep in mind also in this consolidation is we are producing the products that we produce at our manufacturing facility like fashion bedding sheets, will all come out of our own facilities. At the same time, these brands going to sell window, curtains, bath, any soft home textile. So things that we do not produce, those will get sourced from vendor partners.

The next question is from the line of Sandeep Baid, an individual investor.

Just wanted to clarify that the 1.5% to 2% hit that you're going to take over the next 12 to 15 months because of your U.S. investments. Is that factored in, in the 15% to 16% EBITDA margin guidance that you have given?

For next year, as we mentioned, Sandeep, that we'll come out with our guidance at the end of Q4, looking at what the business looks like. So we'll be in a better position to say that. So this year, our Q3 results have already factored that into account. And it's on that basis also that we've given the Q4 and the full year guidance.

Okay. So for Q4, 15% to 16% is after the 1.5% to 2% hit that you are currently taking?

The 15% to 16% is the full year guidance that we do for the -- on a consolidated basis.

Yes, you are at 15.3% for the first 9 months. So broadly speaking, for fourth quarter also, you are seeing that you'll be in a similar range?

Yes.

Okay. And from FY '27 onwards, you're saying that this 1.5% to 2% hit that you are currently taking will not be there?

That's our expectation, as we see visibility to business. So it's the ramp-up -- it's all dependent on the ramp-up of the business of the new manufacturing locations, and we built a very extensive team. So the team is more or less in place now. So of course, as the assets sweat, the overheads get divided, including salaries over a larger base. So once that happens, then the margins improve. We've given ourselves 15 months for that to take place. The good thing is that because we had 2 acquisitions, that has allowed us to go into the market and also start pitching to customers. And now everybody has taken it seriously that we are in the business. So now we hope that we be able to ramp up production at the earliest, as we get machines on stream, train the workers and move forward.

Right. And on Wamsutta, so the planned launch in the first quarter of FY '26, is this as per the time line you had in mind when you acquired the brand? Or there has been some slight delay in that?

You can say more or less 1 quarter here or there. When we acquired it, it was not -- we wanted to do it properly. So we wanted to research what does the brand mean to the consumer. It's been a heritage brand. So we really wanted to get to the nitty-gritties of it. So that took a little longer than we would have expected, if I have to say so. But -- I mean, we are looking at this from a 5- to 10-year perspective. This is not a short-term thing that we have in mind. So it really doesn't matter.

The next question is from the line of Surya Narayan Nayak from Sunidhi Securities.

Yes. Mohit ji, just to understand from your side because we have actually so far as sheeting is concerned, we are from India and for the utility bedding or it is pillows or ancillaries, we are procuring from the U.S. operations. So just to understand the complementarity of the business and especially the logistic issues are also there in between, so how they correlate each other?

Surya, can you come again because I'm not able to follow your question 100%?

Okay. So because our sheeting operations is from India and the pillow operations from -- pillow and utility bedding from the U.S. So there could be at times logistic issues or some issues could be cooking up. So here -- just I wanted to understand the complementarity of the business of the utility bedding, what is the relation it has exactly with the sheet business? And two, whether -- I mean, whether in future, when we expand, then the similar kind of expansion would be required for sheeting, I mean that is -- the equation just to understand. Is it clear, sir?

Yes, I've understood broadly what your question is. So firstly, these are 2 completely separate businesses for us in 2 separate countries. They are both manufacturing businesses. So like India, when we manufacture, we have to keep in mind that we have enough raw material in our warehouse, whether it's cotton, cotton yarn in the back end to be able to produce. Same way the U.S. business keeps in mind shipping lead time, issue at a port, transit times, how much time does a manufacturer take, a couple of weeks of inventory in their warehouse for raw material, all of that into account. So it doesn't matter tomorrow, if the lead time goes up from 10 to 15 days or 15 days to 20 days, it does not really hinder the business because there will always be material in the supply chain and in the warehouse. So hopefully, that answers your question.

But sir, for Wamsutta, it has historically legacy a lot of brands and they will be sent a set of designs. So we could be having in a situation where there could be, let's say -- for a particular, let's say, batch of sheeting, there could be a requirement of -- that may not be fulfilled or vice versa. So will that situation arise, if at all?

Maybe I'll answer your question in a different way. We run a very strong e-commerce business from a U.A.E. warehouse, U.K. warehouse, U.S. warehouse, and we ship to almost every single e-commerce customer. And in that case, we are carrying the inventory in those warehouses and then shipping to customers. So same thing like will happen for these brands. The product gets produced, will go to a warehouse. There will be weeks of supply in that warehouse and then gets ultimately delivered to individual customers.

Okay. But -- so shall I mean that the pillow business or utility business can stand on its own irrespectively of the sheeting business?

Absolutely. It's a separate manufacturing business. There are synergies with the parent business, but it can stand on its own for sure.

Okay. And just a bookkeeping questions because we are actually planning for INR 463 crores of CapEx this year and solar generality will be spilling over to FY '26. And maybe we could be adding another INR 10 crores towards the maintenance CapEx, towards INR 75 crores. And the greenfield project, INR 80 crores will be spilling over to next year. So putting together INR 255 crores odd figure is coming out. So apart from that, any other -- any CapEx that is lined up for FY '26, known CapEx?

No, nothing as of now. And again, with our Q4, we'll give the exact plan for next financial year for '25, '26 also.

Ladies and gentlemen, due to time constraints, we will now take one last question, which will be from the line of Prerna Jhunjhunwala from Elara Capital.

Just wanted to check with you on this $10 million strategic investment. Is it anything new that you are planning? Or is it part of already done investments? It must be Slide #6.

So Prerna, we put that as a kitty as a placeholder for any other debottlenecking or any other opportunities in these locations that we've just invested in. Any location might require something going forward as we run these businesses or customer requirements. So that's why we've kept that as a kitty in there.

This brownfield is what it would mean? I'm just trying to understand whether it will be a brownfield or a new acquisition also that could be on the card or something like that or how it could be?

It could be a mix of anything in that, $10 million.

I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Indo Count is progressing firmly in its version 2.0 growth phase, with strategic investments in utility bedding, branded business and deepening our presence in key end markets. While these initiatives have a short-term impact on margins, they are building a more resilient and diversified business. Our focus remains on driving operational excellence, strengthening market leadership and enhancing shareholder value as we seize new growth opportunities. Thank you once again for joining today's call. In case you have any more questions, you can get in touch with us or Strategic Growth Advisors, our Investor Relations advisers. Thank you.

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