Sangam (India) Limited ($SANGAMIND)

Ladies and gentlemen, good day, and welcome to Sangam India Limited Q4 and FY '26 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Mehal Gogia from Go India Advisors. Thank you, and over to you.

Thank you. Good afternoon, one and all. It's my pleasure to welcome you on behalf of Sangam India Limited. Thank you for joining us today for the quarter 4 and financial year ended 2026 Earnings Call. This call is being hosted by Go India Advisors. Please note that today's discussion may include certain forward-looking statements. Therefore, they must be viewed in conjunction with the risks that the company faces. Today, on the call, we are joined by Mr. Anurag Soni, Managing Director. I now invite Mr. Soni to present the company's business and outlook, after which we will open the floor for Q&A. Thank you, and over to you, sir.

Good afternoon, and thank you for joining us today. FY '26 has been a defining year for Sangam. We've crossed INR 3,200 crores in revenue. We more than doubled our PAT to INR 83 crores. Our domestic business remains strong and our exports hit an all-time high. And perhaps most importantly, every single quarter this year was better than the last. Q1 to Q2 to Q3 to Q4, revenue, EBITDA and PAT all moved in one direction. To put that in perspective, in Q4 alone, we delivered INR 880 crores in revenue and EBITDA of INR 98 crores and a PAT of INR 33 crores. Our quarterly PAT was nearly what we earned for the full year in FY '25. That consistency is not accidental. It reflects disciplined execution, deeper operational efficiency and an organization that is generally getting better at what it does. These results reflect work that has been building for some time. The last 2 years were demanding for Sangam and for the industry. FY '26 was the year we rebuilt. We stabilized our operations, sharpened our execution and earned back the momentum this business is capable of. What you are seeing in these numbers is a result of that work, and we are just getting started. This year, we have embraced a simple principle, better than before. Every quarter, every process, every metric, one question, are we better than last time? That is what you saw play out in FY '26. And it is what I'm confident you will see play out over the next 4 quarters as well. Our balance sheet is in good shape. We are carrying roughly INR 200 crores in treasury. Our working capital cycle improved dramatically from 80 days to 55 days in a single year. Interest coverage is improving. We are maintaining a net debt-to-equity ratio of about 1.1x, ensuring a prudent and stable capital structure. On the energy front, we are doing significant work to secure our energy costs through renewable solutions. And this will remain a consistent theme for us going forward. This is a structural reduction in our cost base that will show up in our numbers in the coming quarters. Our backward integration into recycled polyester fiber is also a point of quiet pride. We are now meeting approximately 50% of our polyester fiber requirement through in-house recycled production, processing close to 40,000 metric tons of plastic waste annually. This is sustainability and cost leadership working together. Across all our segments, we have built a deep understanding each with its own customers, its own dynamics and its own room to grow. Our job is to keep making each of them better. That is what drives us. Last year, we doubled our PAT. We aspire to do that again in FY '27. I use the word aspire deliberately, and I mean it in that way. What I can say with confidence is that the journey from here has a clear direction. We are a manufacturing business and capacity is a foundation of growth. The investment cycle that we undertook to build capacity is now largely behind us. And those assets are running at very high utilizations across all our segments. That's a good problem to have, and it tells you where we are in our journey. The next leg of growth will require investments, and we are preparing for that. We will share more as plans mature. Sangam is at an inflection point. The global supply chain is reorienting. Buyers, both domestic and international, are looking for reliable, integrated and quality manufacturers with the scale and credentials to deliver consistently. Sangam is exactly that. The opportunity in front of us is significant, and I believe we are well positioned to capture it. I want to close by thanking our employees, our customers, our partners and our shareholders. Your trust is something we take seriously, and we intend to keep earning it. I'm deeply confident in our ability to keep improving quarter after quarter. We are not chasing a single number or a single event. We are building a business that compounds. With that, I'm happy to take your questions.

[Operator Instructions] The first question comes from the line of [ Saransh Gupta ] from SVAN Investments. Sorry, but your voice is not audible. The next question comes from the line of [ Rehan ] [indiscernible] from Pit Asset Manager.

I have a question on the export side that we have seen that exports have reached an all-time high this year. So could you help us understand which geographies or customer segments are driving this growth and how sustainable this momentum is [indiscernible]?

So you said Two questions. I think this is -- you asked regarding the exports geography. Is there another question?

I have more questions we can go one by one.

No problem. I can answer this. So export geographies is quite diversified. So we are exporting to, I think, about 50-plus countries. So we have a very balanced export portfolio. And so we are not really heavily dependent on a particular geography as such. To answer that sustainability part, I think so I believe that I think our exports are pretty sustainable. And we are seeing a continuous uptick there. So every quarter, we're improving our export numbers and markets. So it is a very sustainable number.

And if you want to hear more which geographies we are getting more traction?

See, this depends across segments and products. So like some products, the East side, like Bangladesh and China are big geographies. On some products, Africa, Egypt, Turkey are a big geography. Some products Latin America, South America are important. So it depends on product to product. So it's not like there is one particular country where we are heavily dependent on. It is across geographies.

Okay [indiscernible] renewable energy with solar and hybrid projects. So the ballpark number by FY '27, what percentage of total power requirement do you expect renewable resources? And how should we think about the impact on EBITDA?

Well, I think as far as the renewable are concerned, I think a lot of things are under process as we speak. And so currently, there are about 10%, 15% of our needs are coming from renewables. Probably I think in a year's time, let's say, June next year is when we expect that about 70% plus of our power will be renewable. So we've also put that in our presentation. I think the cumulative benefits to the EBITDA once everything is commissioned would be about INR 50 crores to INR 60 crores. So for all benefits to kick in, it will take about 4 to 5 quarters from now.

You are saying it will take time to transfer at least 4 to 5 quarters going forward, right?

No, because we've taken undertaken CapEx somewhere. We have done some PPA somewhere. So for everything to commission and come into effect. So currently, we have about 15% of our power needs are coming from renewable. This will be 70% plus in 5 quarters from now. So every quarter, we will have some kind of addition.

Okay. My next question is around the segment still contributes a relatively smaller portion of revenue despite being a high value-added segment. So what are the key bottlenecks in this segment going forward? Is there any [indiscernible] evaluating here?

Well, if you see our segment, I think operationally, we are doing a lot better. We are at highest capacity utilization compared to the last 6 to 8 quarters that -- so we are operating at better utilization levels. We are almost at 50% now, and we expect that number to further go up. So we have addressed a lot of challenges in the business over the last year. And I think we are in a good space today to further improve on the utilization. So both sales have picked up significantly over the last quarter. If you see our numbers, it's again in our presentation. And the utilization levels have also gone up. So I think I would imagine that, that would continue happening on the upward side.

Booking question from my side and then I question your company has built a strong integrated model from fiber to that we have seen. So are there still any gaps in the value chain where you see further backward integral going forward?

See, I think as I mentioned in my opening remarks that there will be certain segments where we have to improve upon and there will be some investments that we will have to plan. So both on the backward integration side, there will be things on the -- so today, we have about 50% of our polyester comes from in-house production and 50% we are still buying from the market. So we would like to build on that to have better control on costs and raw material security. Same for our denim fabrics, I think 50% of our raw material is in-house and about 50% buying from outside. So we'll probably increase some more capacities there. And on the energy side, we have to -- the work is already on. So as I mentioned earlier, the question when you asked about energy. So that work is on. And then probably to -- there will be some capacity additions that we will do across the segments. So a lot of things are under discussions and planning since you can see our capacity utilizations are pretty high. So I don't have anything concrete to say now, but there will be something. And as and when that comes in, we will announce that.

Our next question comes from the line of Saransh Gupta from SVAN Investments.

So I have a couple of questions. Basically, I wanted to first go in the PV yarn. Like in this quarter, we know that there were some disturbance in the shipments that came through. So how has the spreads improved and what are they currently?

Sorry, I think your voice got disturbed in the middle. If I can capture the question correctly, you asked something about the PV yarn margins and how that business is going with regards to the current disturbance. Is that correct?

Correct. Correct, correct. And like in this quarter or probably in the month of March, how are like in the terms of volatility?

See, PV yarn, about majority of our business actually comes from the domestic market. About 10%, 15% comes from the export side. So there was probably some delays in shipments. I think 10% or 15% of our exports might have been delayed in March on the shipment side and some costs also freights have also increased. However, it's not a material impact on the overall business since that volume is not very high in the region where disturbances are there. So we've had a decent quarter on the PV yarn side. And even the month of March was very decent. So until now, we are being able to manage the situation and things are under control.

So for the inventory, we are not facing any issues?

No, I think probably on the inventory side, we might be at a multiyear low. So no, that's not a challenge.

Do we have sufficient demand in this segment for the domestic, as you said, 10% to 15%?

Yes, there is sufficient demand. There's no challenge.

But I wanted to understand how the customer probably how has their mindset changed? Like are they pulling up as of...

See, I think for the yarn business, while domestic demand is strong and see exports to markets like Turkey and in that region, see the costs for production are going up there. So I think in any case, like year-on-year, that business will shift towards the domestic side because domestic manufacturing is cheap. So instead of exporting yarn, we'll probably start exporting fabrics more. So yarn side, exports is not a very big worry. And anyway, like by strategy, that number is reducing year-on-year anyway. So domestic demand is okay. And since instead of yarn, the shift is more towards fabric on the export side. So this is not a very big issue.

What do we have that [indiscernible]...

Sorry, your voice disturb. I could not understand the question. Can you repeat again?

Yes. Basically the question was like in the garmenting segment, [indiscernible] so like what do we need to make it reach to do that?

So I could understand the first part. I think you were asking about the garment capacity has improved. But can you repeat the last time again, what do we need to do for?

Again, you are not able to hear you properly. Join the queue again. Our next question comes from the line of Atar Sayed from Smart Sync Services.

I first wanted to understand like we saw revenue side [indiscernible]? I would probably attributed to two things. One, capacity that led to the volumes with capacity and better operation PAT [indiscernible]? Okay. And sir, I wanted to know right now, our capacity utilization for yarn is 95%, if I'm not wrong.

Yes, that is correct.

So going forward, do we have any CapEx in pipeline like...

Yes. So I did mention earlier in my call that there is something -- there are discussions that are ongoing. So I don't have anything concrete now. As and when we finalize something, we'll announce that.

And do you also have a plan how you will finance this through internal accruals also that by preferential issues...

See, that is a problem to discuss probably once we are sure what we want to -- and how much we want to invest into new CapEx. But yes, as of now, we have no plan for any kind of preferential issues.

I'm asking because as of now, we already achieved around 95%, so [indiscernible]. I want to understand if I am not wrong this time because we significant growth in our PAT because of this U.S. understood the prices of yarn and cotton and all of these prices gone up. So those players who have a good inventory, good benefit. That's why yarn players and other players. So if I'm not wrong, is growth basically mainly because of inventory like we have inventory and we pass on the prices, basically high prices, we took a benefit of high price, if I'm not wrong.

Well, so first quarter due to the war prices have gone up and then they are going up. That is correct. However, we are discussing March quarter results. So war actually started probably think 1st of March, 20th of February. And you normally operate on an order book of 60 to 75 days at any point in time. So I would not agree that the current quarter PAT is driven by any kind of onetime inventory gains because you always have an order book as well. And that order book is getting serviced these are orders that were probably booked in January, February, that was pre-war situation. So Prices are going up. There's no doubt about that. However, I will not say there is any kind of inventory gains that have come into the PAT for the March quarter.

I'm sorry to interrupt you, Mr. [indiscernible], please rejoin the queue for more. Our next question comes from the line of Rahul [indiscernible] from Sapphire Capital.

Firstly, this aspiration you've given about doubling the PAT again in FY '27, I would like to get a flavor on what sort of revenue growth are you targeting? And given your utilization at a peak level in almost all your major segments. So what will drive this growth which you...

I also mentioned along with that, that, yes, this is our aspiration. And we started my statement from that we have better every quarter in the last year. So if we are continuing on that same theme that we have to keep getting better every quarter. So it's a very simple math that you multiply with that number and some kind of gains on the energy cost and some kind of gains on the operational efficiencies, and it will take you somewhere close to that number.

So fair to assume a strong mid-teens growth or maybe more in terms of top line in FY '27?

So top line, I think growth will be similar to what we did last year. Again, like what we did in Q4 and similar capacity utilization, there will be top line growth. And however, there cannot be abnormal growth on the top line because capacity utilization already in the March quarter are high. So probably whatever the March top line is, we probably multiply that by 4 and some kind of inflation because prices are going up. So there will be some top line growth for sure.

Okay. So is it fair to say that FY '27 will be a big year in terms of your bottom line and the margin where top line will not be exponential. And then this CapEx you're expecting to conduct in FY '27 [indiscernible] across now?

See again, mentioning that we want to get better every quarter. So we will probably celebrate every quarter as and when it comes. Definitely, FY '27 should be a good year for us. As far as the CapEx is concerned, we've kind of come at the back of a big CapEx cycle 3 years ago. And today, we are at high capacity utilization. So we'll probably take a quarter or something to plan further that what we want to do over the next couple of years. and then take that into action. So any kind of CapEx that we undertake, any kind of financial benefits will not come in the coming financial year. It probably -- there will be some benefits on the energy cost side. But any kind of new CapEx growth, the benefits for that will probably start flowing from next year, nothing in this year for sure.

Next question comes from the line of [ Kamal Jeswani ] from [indiscernible] First Capital.

I just wanted to know the margin outlook for the current quarter, if you can give us whether we'll be maintaining or growing the margins...

For the June quarter?

Yes.

See, difficult to give a number on that, but I did say that we'll get better from the last quarter. So definitely, we would like to maintain the margins. And see, very short term, very difficult to say anything because with so many uncertainties around in the world. So difficult to give an exact number. But yes, I think we should be able to maintain or better our margins from the March quarter for sure.

And the second question is how do you see that there's still some more capacity utilization scope left in the garment business. So are we also planning to increase the capacity utilization this quarter on the garments? And what is the second question -- second part of the question is regarding the brand, our brand C9 brand. What percentage of total garment capacity is coming from the C9 brand and how much is coming from the contract manufacturing?

See, I think we can expect better capacity utilizations going forward as far as the manufacturing side is concerned. Now on the C9 brand, about 40% to 45% of the garment business is contributed by the brand and the balance is contributed by contract manufacturing.

Our next question comes from the line of Rohit Ohri from Progressive Shares PMS.

Congrats on this good execution for the quarter under review as well as the entire year. Sir, I have some questions. Continuing with the export question, which earlier participant had. Is this due to some sort of temporary order shift? Or is it because of China Plus One or maybe some currency tailwind that has come through?

No, I don't think that there is any kind of like a onetime jump in any kind of sales numbers. So this is probably like over a period of time, you are working to grow on markets. And so there's a continuous growth that is happening. So it is not that some kind of onetime shift is coming from somewhere or it's due to China or I would not attribute it to those reasons. I think probably there is a supply chain that you build. And once you get into established developed markets, it takes time to get into the bigger brands. And once the confidence builds, the orders flow better. So I would say that -- it is a continuous process that is happening. And if you see our numbers on the export side, probably every quarter, we are doing better on that.

True that. So is it because you have added new customers? Or is it because of the old customers are giving you a higher wallet share?

I think both are happening together because with volume growth, old customers where we already have a significant market share, it's difficult to grow a lot on that front. So there is some addition on new customers as well and trying to maintain our market share with the existing customers.

Anurag, you mentioned about utilization recovery, and we can also see that there is some recovery in the margin also. So is this because of restocking of the inventory? Or is it the real demand that is coming to?

See, I think we've done some work on -- internally on planning and forecasting inventory better. So we've had a reduction in inventory now. This has again been a continuous process over the last 4 to 6 quarters, continuously, we are ramping up capacity and reducing our finished goods. So that is then as far as some kind of demand uptick or restocking in the market is concerned, definitely, demand is better. Over the last probably 6 months, demand is getting better. Demand is stronger than it was probably last year at similar times. So I think both are playing out.

We also noticed that some of the customer count has declined a bit. Is this because of some strategic pruning from your end or the management side? Or is it due to some loss of market share probably to some of the competitor or somebody?

I'm not actually aware of where the customer count has gone down. If you can probably explain me better on that.

I'll take that offline. It's there in the presentation. I'll take that offline. But then if you can.

Maybe you can just -- yes, you can probably ask a question over the e-mail and probably reply on that.

And in terms of the strategy mix, while we are also looking at CapEx, what do you think would be the strategy for manmade fiber versus the synthetic since you have shown some good interest in green fiber as well, which is probably at 7% capacity utilization. So what is the strategy going forward?

As far as strategy is concerned, we would like to have more control on our raw materials and costs. So we'll probably -- as I mentioned earlier that both on our denim side and synthesis fabric side, we have about 50% control on the fiber side. So we'll probably want to increase that, maybe take that to 75%, 80% in-house production levels. So that is something that we are working on, both polyester fiber and for denim fabric, we are working on raw materials there. And since capacity utilizations are high, so we don't want to actually go into a new site or do a greenfield anywhere. We are looking at our existing plants where some kind of incremental capacities can be added. So we are looking at that. And energy costs because that is our biggest cost driver. So energy cost is something that we are looking at very aggressively by how to bring that down. So that plan is actually on the priority list. So we are doing that first and then working on the backward integration side and then some capacity utilization. So strategy over the next 6 to 8 quarters for CapEx would revolve around these points.

My last question before I fall back in the queue. Considering your commentary, which was quite strong at the beginning and the current market scenario also, do you think that by FY '29, we could have blended margins of more than 13% plus and have a top line of approximately INR 4,500 crores or something with ROCE maybe inching towards 20% or so by FY '29?

Right. So I think what I can tell you is that over the next 3 years, FY '29 is about -- I think 12 -- 8 to 10 quarters is what you're talking about. So the team will continue on the same direction, that better than before. So if we are better than before every quarter, we'll probably be at numbers indicated by you, I think maybe at that level or even better than that.

Our next question comes from the line of Madhur Rathi from Counter Cyclical Investment.

Sir, I wanted to understand how has the spread for polyester fiber changed post the quality control order. And sir, our strategy to increase the captive sourcing to 75%, 80%, sir, how does this fit versus just buying the PTA and MEG from China and like processing it in-house? Considering normalized spreads like excluding the war situation, how should we see this segment?

See, the idea of getting a 75%, 80% control of raw material is two fronts. One is obviously on the cost side and more importantly, on the quality side as well. So we have felt that over the last 6 months, when we made this acquisition of the polyester fiber plant we've been able to reengineer a lot of products, work on our bill of material costs and on the yarn side. And I think that is aiding us in increasing our margins for yarn. So it is -- from that point of view, we feel that we need to have more control and more in-house production levels for fiber. So the strategy is both on the quality and the cost front. And then see, we are actually recycling plastic waste and recycling waste is a very localized subject. So you can't really work on cost with importing a lot of raw materials for the polyester fiber. You have to work on localized waste that gets generated. And I think that anyway is enough waste that we can collect locally to enhance our capacities.

Got it. Sir, I was asking more on the front of the quality control order removal on the -- our raw materials for manufacturing this yarn, how has the spreads improved post that -- the quality control order removal? Have we been able to get better pricing for our raw materials versus what we were sourcing from Indian or IOCL or Reliance?

See, frankly, we hardly source anything from Reliance. So probably 5% of our polyester fiber actually comes from Reliance. So it has kind of not made any kind of effect on our raw material costs.

Right. And sir, how much would be the CapEx for increasing the sourcing capacity? And what would be the CapEx for our renewable -- the 30-megawatt renewals that are in pipeline currently and additional that we plan on adding over the next 4 quarters?

CapEx renew already announced is roughly around INR 150 crores, INR 160 crores. And then there are some PPAs where we have some equity infusions. So that another INR 30 crores, INR 35 crores. So about INR 200 crores is something we've already committed on the renewable side. As far as any kind of new CapEx or further numbers are concerned, as I mentioned earlier, we are still working on that. So we are working on what kind of strategy we want to move forward. So it will be a 2-year cycle for the new CapEx that we want to plan. So I don't really have anything concrete to say on that today. And -- but as and when we plan something, I will get back on that.

Sir, just a final question from me, sir, how much is gross margin better for polyester yarn that is manufactured through recycled PET versus like buying raw materials from outside and manufacturing it? What would be the gross margin difference between both of these?

So is your question regarding that if we have our own in-house fiber versus buying fiber from outside and making yarns. Is that the comparison you're asking for? I think I've not really made a comparison. I don't have the number on top of my mind. Is it okay if I can respond on that maybe later.

Our next question comes from the line of Ankur Kumar from Alpha Capital.

Congrats for a great set of numbers. Sir, I wanted to understand, I think you said yarn spreads are going up. So can you comment how much was yarn spreads in Q3 and how much in March? And how are they now? If you can please share?

I did not say yarn spreads are going up. I did mention that due to having our own in-house control over the raw materials, we've been able to increase our margins on the yarn side, and that is why we want to have more capacity in-house for our fiber production.

But you said due to what prices have gone up and are going up. So what is this?

This is a very evolving situation, right? With the war every day, there's a big movement on the crude oil prices. And so this is something that you have to actually not take that into consideration that what the prices are today, right? It is a dynamic scenario, and we have to probably let it settle down more and see probably a month from now once things are under control that actually what kind of movement has happened on the cost front, how much the price has been factored in, how much we have been able to pass it on to the customers, what kind of impact that has happened on margins. What I would say that as of now, if nothing changes the way it is, we've been able to pass on a significant portion of the cost on the prices. And we do feel that the effect of on the margins are minimal as of now. But it is a very dynamic scenario, and we'll have to keep watching how this evolves.

But in terms of Q3 versus Q4, can you share what -- how much was the difference?

In Q4, again, I would say that there is not a big impact of the war on the prices in Q4 itself because the war actually started end of February or the first week of March and the prices movement actually started happening from the 10th or 15th of March on the upward side. So very little impact of anything on the pricing front has happened in the last quarter.

Got it, sir. And sir, if crude stays somewhere near here, do we expect some gains in the Q1?

Again, I would say it's a dynamic scenario because inventory gains are one side of it, there are dyes that we use, there are chemicals that we use. There is export freight shipments, domestic freight, packaging material costs are -- so everything now. So today, I think we are -- the strategy only is that plan for a week or plan for maximum of fortnight and see how things are moving. So very difficult to comment. And this is a very temporary and out of control kind of a scenario, right? So we cannot really say that anything that Q1 will be better or because of this, right? As far as operational efficiencies are concerned, our own utilization are concerned, I can comment on that, that we are getting better. without any external factors coming in, I think operationally, we will be better. Now if there are some onetime gains or losses that come due to these crude prices being elevated, difficult to comment now.

Our next question comes from the line of Kamal Jeswani from [indiscernible] First Capital.

What is our current order book? And regarding the shipments, you just mentioned that how are the -- I mean, the freight rates have gone up or insurance rates? And I mean, are we doing FOB billing or...

So see, as far as order book is concerned, across our segments and divisions, I would say that our order book is anywhere between 50 to 70 days. So we have a healthy order book that is in place. Secondly, as far as the export shipments are concerned, I think about majority, at least 2/3 or maybe even more of our exports are on FOB basis. And any new bookings that we are doing today that are on -- where the freight is borne by us is actually factoring today's freight cost. So maybe some orders -- some old orders, we'll have to bear some losses on the freight, but it is again not very significant and material.

Okay. And second question regarding the U.K. FTA you had mentioned in the presentation, have the benefits of this started flowing to us already in the pipeline?

I think this is still under process, S. We do feel that this is going to be beneficial in general for the Indian textile industry. But I think it is still -- the benefits will still take time.

Our next question comes from the line of Igram [indiscernible], an individual investor.

Sir, I have a couple of questions. I'll just quickly go through them that you were saying you're going to invest in extra capacity utilization. So where would that go? I mean garments, you already have a lot of capacity. So is it going to be in garments or you would probably think of value addition somewhere else?

See, again, I would say that any kind of capacity addition or new CapEx plans are still under discussion. I can tell you that the thing that we are working on is energy, more having our own security on raw materials. And capacity additions, we will have some kind of capacity additions planned for all the segments, except not really garments because that we are still at 49%. So that is something that there is room there. However, garments for our tanning business or the fabric business, there is some kind of thoughts on that, that should we have -- should we try with smaller capacities and look at that. So that is still under discussions. Apart from that, capacity additions will come across all our segments, but we are not looking at some big additions or greenfield projects, maybe some kind of additions in our existing plants wherever whatever is possible. The evaluation is on. So as I have some concrete, I will come back on that.

Sure. Sir, I have another question regarding garments. You have a lot of PLI in this garment scheme, but I don't see any other income. So you were eligible for garment if you had incremental turnover. And since you are going for incremental turnover, do we see any kind of PLI benefit coming in the next 2 years, '24, '25 probably because incremental turnover was not there, that is not showing in your -- I'm not seeing it in the other income.

Actually getting the benefits of the scheme that we are part of is there are some complications there. However, we are not really factoring in any benefits that may flow from that front. If anything comes in, it is great, but our business model is based like we are not really considering PLI incentives in any of our daily workings or operations. So we want to increase the utilization anyway with or without PLI. So there will be growth there. If any kind of benefits taken, it is great. Otherwise, there's no plan on that.

It is like a bonus that comes in. But I'm just wondering because 2024, '25 and your incremental capacity is going up, so probably you would be eligible, right? And if that is so, how much would that be?

Right. So then if anything like that comes, we'll just consider as a onetime gain, right? So let's not really.

[indiscernible] INR 300 crores?

No, no, nothing like that.

Other thing that I wanted to understand is that to real estate. So I saw a real estate development Sangam India from the road in the next 2 years, some project of INR 400 crores, you probably would have got the land. Is that in Sangam India or it is in some other promoter entity?

No, it has got nothing to do with. Sangam India. That is a separate entity altogether. Nothing to do with this business.

Okay. Your name as Sangam India was mentioned there. So I'm just wondering if there's any.

I would not say -- I don't think Sangam India would be mentioned, maybe Sangam, there will be some, it has nothing to do with this company.

I understand. No, just to clarify. Sir, I have one more thing that your inventory is not 80 days. I mean like your inventory, you are revolving money very fast. Where do you think -- is there any scope for further reduction there?

See, I think we have worked a lot on reducing our inventory on the finished goods side. The reporting normally happens with overall inventory. So we've kind of ramped up inventory on the raw material side. Finished good inventories are, I think, at very controllable level. So I don't see a lot of inventory numbers going down from here. There may be some work that can be further done on the debtor side. I think our debtor numbers are still elevated in terms of number of days compared to 2 years ago. So that is something that would be a focus area in the coming year. So we'll probably work on that number coming down. But inventory side, I don't see a lot of downside there.

I think I get everything. So I have just one more question is that if I were to ask you between energy savings and your garment volume scale up, realization management, which would you think will really be the earnings driver for 2027?

Right. See, energy is actually just plug and play. So as and when the plants get commissioned, so the EBITDA starts flowing from day 1. So that is something that is -- you just have to say to the CapEx, right? So that is the easiest part. Everything else is something that we work for when we come to office every day. So both things are actually independent of each other. I think I would imagine that we would have improvement on both sides.

Our next question comes from the line of Madhur Rathi from Counter Cyclical Investment.

Is the realization premium that we get on the yarn manufactured through recycled raw material?

No, I would not say that there is any kind of a premium that comes on that. It is probably a good to have ESG initiative on that front. So it helps you to sell better. But there is no premium on the pricing that you get because of that. See. Again, India domestically is a price-sensitive market. So it is hard to actually imagine that you would get a premium for any ESG initiatives in the domestic market. Probably there are some European markets that could pay a premium for that. But again, the volumes there are not that high as what we do domestically.

Our next question comes from the line of [ Dekal ] [indiscernible] an individual investor.

Just wanted to ask like what percent of the company's revenue contribution comes from the cotton yarn business? And considering India is spinning one of the cheapest cotton in the world, has that contribution increased in this quarter? And have we also experienced a blend shift from polyester to cotton in overall scheme of things?

What percentage of our revenue comes from the cotton yarn? About 50% of our revenue comes from the yarn business and about I think we have an even mix of cotton and PV there. So I think it will be a number around 25% of the total revenue comes from the cotton yarn business, I would say that. As far as the shift between PV and cotton are concern, there are two very distinct markets, and I think both are coexisting for a long period of time. So we don't really see it from that point of view that -- we have both products in our portfolio, and we have teams that work on selling products from both segments. So no, I would not read too much on to that, that shift from PV to cotton or vice versa.

Okay. And just one last question from my end. Like what is the cotton inventory the company is carrying? I mean what is the coverage ratio?

For raw materials?

Yes. I mean how [indiscernible] the company...

In general, I think what we are focusing right now is that because there is an inflationary movement in prices. And so we are not -- across all our divisions, not just cotton, we are -- we have more coverage of raw materials than the finished good orders in hand. So we are working on that strategy as of now. But any of these calls are probably limited to 10, 15 days or maximum 30 days additional inventory in hand. So we don't really work too much on gains from that front that stock for a higher number of days or taking calls on inventory because it can actually work both ways. So as of now, because of the inflationary nature of prices, across all our divisions, we are more covered on raw materials than orders of finished goods in hand.

Okay. Okay. And how much of cotton yarn is sold in forward contracts? I mean, how many months, if I want to ask one last question.

So there are no forward contracts. It is -- I would say that I think the question you're trying to ask is the order book of cotton yarn. Is that right? Right. Okay. So order book, again, I mentioned earlier that across all our segments, we have order book between 50 to 70 days. So again, cotton would be somewhere there.

Next question comes from the line of Avinash Nahata from Parami Financial Services.

Okay. Can you specifically talk about from the start of the year till the end of the year and into the new financial year about spreads in absolute both for synthetic as well as cotton yarn spreads as well as for synthetic. How -- where we were at the start of the year, how did we end and into the new fiscal adjusted for onetime gains, if any?

So first and foremost, I think we will say that from the start of the year to now -- see, I don't have the specific answer to your question regarding the yarn spread movement from quarter-to-quarter. But I would say what we have done at the company level is that from Q1 to Q4 and or moving into the new financial year. Across both cotton or PV side, we are working on a product mix continuously that is yielding better contribution margins in the company. We are working on our bill of material costs for all the products that we make that can we have any kind of alternate raw materials or cheaper alternatives to improve margins. We have improved our capacity utilization. operations are more efficient across divisions. So I would probably talk more on that. And as far as any kind of movement in yarn spreads are concerned, onetime inventory gains, I've mentioned that earlier as well on the call that there are no onetime inventory gains in the last quarter. So the margin improvement is due to better capacity utilization and operational efficiencies.

Yes. Directionally, I understand. But if you can talk about specific numbers on a per kg basis.

I don't have that handy now, I'm sorry.

Ladies and gentlemen, due to the time constraint, that was the last question for today. I would like to hand the conference over to Mr. Anurag Soni for the closing remarks. Thank you, and over to you, sir.

I thank everyone for joining the call today. And I hope I've been able to answer all questions to your satisfaction. Thank you again for your time. Thank you.

Thank you so much, sir. Ladies and gentlemen, on behalf of Go India Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.