Sutlej Textiles and Industries Limited (SUTLEJTEX) Earnings Call Transcript & Summary

Good afternoon, everyone. I welcome you all to the earnings conference call of Sutlej Textiles and Industries for the quarter Q4 FY '21 and year ended March 2021. I hope all of you and your families are safe and healthy in the second wave of COVID-19. I have with me Shri Updeep Singh Chatrath, President and CEO of Sutlej Textile and Industries Limited, and Stellar IR Advisor, our investment -- investor relationship team. The result presentation has been uploaded on the exchanges, and I hope everyone had an opportunity to look at it. I will take you through financial performance highlights, followed by industry and business insight by Shri Updeep Singhji. We successfully commissioned Sutlej green fiber project on 1st March 2021, and majority of CapEx as planned in FY '21 has been completed, including routine CapEx. As you know -- as you would be having seen our performance during the quarter has been very encouraging. Our units were operating at full capacity in Q4 FY '21, backed by bouyant demand for the quarter. While our yarn business has performed very well, I would also like to highlight that we saw some improvement in home textile business in terms of export and cost optimization initiatives, which helped to reduce overall cost and also some losses to some extent during the quarter. The company has also declared dividend of 30% that is INR 0.30 per rupee (sic) [ per equity share. ] During the quarter ended March '21, the company reported consolidated total income of INR 688 crore against INR 545 crore in Q4 FY '20 and INR 557 crore in Q3 FY '21. The capacity utilization stood at around 93% on an average for our yarn business in Q4 '21 as against 85% in Q2 FY '21. EBITDA during the quarter was INR 82 crore as against INR 23 crore in Q4 FY '20 and INR 52 crores in Q3 FY '21. Net profit during the quarter was INR 28 crore against loss of INR 14 crore in Q4 FY '20 and a profit of INR 12 crore in Q3 FY '21. As far as leverage and borrowing is concerned, despite COVID-19 pandemic situation since March '20, the total consolidated debt has increased only by INR 36 crore to INR 907 crore from INR 871 crore. I'm happy to inform that despite increase in overall debt, the interest cost has still come down by 17% to INR 38 crore in FY '21 with better working capital management, reduction in interest rates and other initiatives taken by the company. Moreover, the debt-to-equity ratio has continued to remain below 1, even during such challenging year. We also have -- we also could maintain sufficient liquidity, and unutilized working capital lines are over 40%, 45% of my sanction limit. We continue to monitor and ensure that there is sufficient liquidity, and we are able to meet all our obligation in time as we see a revival in demand going forward. That is all from my side. Now I would request Shri Updeep Singhji to share the business outlook and industry scenario, and then we can open the floor for question-and-answer session. Thank you, and over to Shri Updeep Singhji.

Thank you very much, Bipeenji. Good afternoon, ladies and gentlemen. My sincere thanks for joining this earning call. And I do hope you all, your colleagues, your families are fine, and I pray that we are able to bear what we are passing through all this what is going on, responsibly, with empathy, resilience and composure. The last year had been a challenging year. And in my opinion, most of the organizations had been designed for a more stable environment, and year 2020 taught us all that this doesn't and won't exist anymore. The year made every organization reinvent not only by having a new strategy, but also understand and shape our work settings, how the work is coordinated in order to inspire our colleagues, employees, serve customers, exhibit social responsibility and above all, delight our investors. As for the statement given by our Executive Chairman, as you would have gone through in the press release, I just quote him, "The company has successfully navigated the challenging market dynamics that prevailed in fiscal 2021 due to COVID-19 pandemic. The successful commissioning of the green fiber plant in March 2021 will further help in our cost optimization efforts through backward integration and margin enhancement. Our operations continue to run normally so far in the midst of second wave of COVID-19, which has disrupted economic activities in India and globally. However, the company is conscious about the future outlook in near term, and we continue to focus on cost optimization and its diversified product portfolio." Sutlej, as I said, had been no different, and we all strive hard to be agile and adapt in evolving scenarios week after week. Our leadership and the teams exhibited strategic agility, mindset, positioned to win in future. For example, on the front end, I mean, we did not only concentrate on penetrating existing markets, but also created new and uncontested markets. We did not think of meeting the competition, but moving ahead of competition by focusing on customers. In short, our teams did well in environment of volatility, uncertainty, complexity and ambiguity. Am I audible?

Yes, yes, sir.

Okay. The entire textile and apparel industry, specifically the yarn manufacturers witnessed huge revival in demand since second half of the year and Sutlej was no exception. There was strong domestic demand, particularly for hosiery sector, and in the last quarter, to some extent, the weaving as well and even stronger export demand from China, as U.S. put ban on imports of garments made from Xinjiang cotton led to a shortage of yarn resulting in very fast and steep increase in yarn rates. There was even a good demand for home textile sector that is bed, bath and carpet sector. And China Plus policy -- China Plus One policy of brands also resulted in shift of orders to India and increased demand from the U.S. and other developed countries on account of work and -- work from home and increased requirements of hygiene, wellness led to home textile sector doing exceedingly well, especially in bed and bath. During the quarter, we at Sutlej have been able to work out at almost full capacities. As Bipeen said, I mean, it was about 93%, 94%, and it was backed by a very buoyant demand. I'm pleased to say that during the year, I mean, on 1st March 2021, we commissioned commercially our production for a green fiber plant at Baddi with a capacity of 120 metric tons per day. This was a Herculean task because we did not have the physical support of the manufacturer and technology givers from China. I mean, at any point of time, we would have expected almost 30-plus engineers from Chinese technology suppliers to be there for the commissioning of the plant, but we did not have any. So our teams did well to do this online with our Chinese supplier support, and they supported us very well. So thanks to them as well. Now coming on the raw material front. I would say the cotton is going to be stable, though we looked at international prices, as for the future, [ ICs ] have softened in the last few days, but overall price outlook remains bullish on weather concerns in Texas as major growing area in U.S. is reeling under drought conditions. However, COVID-related developments have been playing spoilsport forcing arrivals of raw cotton to slow down, closure of ginning and pressing factories on account of shortage of labor and slow movement of goods and reduced consumption. Arrival of cotton have dropped significantly as COVID situation aggravates across different cotton growing regions in the country. Daily arrivals have come down to around 15,000 to 20,000 bales from a peak of 2 lakh Indian bales with the cumulative seasonal arrivals reaching around 336.4 lakh, that is approximately 93% against the crop of 360 lakh bales as on 30th April '21. Domestic prices for some time now are stable, but have remained firm and are likely to remain stable to higher for the rest of the current season 2021. The current prices of J34 cotton from north and Shankar6 from Gujarat are going to be range bound. New crop sowings in North are already underway and sowing in the rest of the country will largely depend on timely and adequate onsetting of monsoons, which have so far been predicted to be normal for the year 2021, 2-0-2-1. However, the yarn production cuts, if any, will impact the consumption of cotton fiber leading to higher ending stocks in the current season. Coming on polyester. Polyester prices and PSF are likely to see a stable to firm trend on the back of high international prices and weaker rupee. PSF, being most versatile and one of the cheapest of the man-made fibers and its ability to run in 100% and in blends and replace other fibers, the adverse impact on its consumption is limited. Hence, there's a little pressure on prices. On recycled fiber, the prices are likely to remain under pressure due to COVID-related developments and poor domestic offtake. However, there is a strain on the availability of PET bottles because of this COVID situation as well and as a feedstock, and this might keep prices range bound. Viscose seems to be stable to range bound. Acrylic, the price sentiment for acrylic remains weak on the back of declining feedstock of ACN prices, which have substantially corrected in the last 15 days or a month. Acrylic yarns are being highly local product. The current poor offtake in the wake of COVID-related developments in different markets is weighing down heavily on the prices. We're also aware that there might be impact on the demand due to recent second wave, which has gripped the nation. We are making all efforts to minimize the impact by exploring alternative market segments, territories and reallocation of production capacities. There is a movement of labor as well. I mean, the workforce has moved out of the fear as well, and those who had gone on leave pre Holi, they are a little reluctant to come back. We are making all our efforts to get our people back to work. While there might be some challenges in the short term, owing to the second wave of COVID-19, we are confident that we'll be able to sail through with our dedicated and collaborative efforts with all our stakeholders. Thank you very much, and now we can open the floor for Q&A session.

[Operator Instructions] The first question is from the line of [ Hitesh Gandhi ] from Discovery Capital.

Congratulations on your numbers. I just wanted to understand from your own perspective, these high spreads, which we are seeing on cotton yarn and even on the polyester side, how sustainable do you think these are? And if you could also give us your own perspective on the rationale behind why these have gone up so high? And how you see this playing out over the next kind of, let's say, 2 years or so?

Thank you, [ Mr. Gandhi ] for a very pertinent question in the times. See, cotton yarn has seen a surge over the, I would say, last 2 quarters, especially. And this surge has come by way of the high demand in China and also in other countries, especially even in U.S., where the yarn has been exported and because of the ban on the Chinese particular province has been banned. And this demand has given impetus to export from India as far as the yarn is concerned on one side. Second, in the domestic market, also I mean because of the garmenting which has increased over a time because of the exports, I mean, the cotton yarn demand had increased in the last 2 quarters. I mean, this has -- in fact, the prices have gone really up, and now the prices are undergoing some correction in the cotton yarn as well. I think in my personal view, that the cotton yarn prices were exceptionally high in the last 2 quarters. This would see correction and the present state of affairs in terms of prices would be almost sustainable at this level over the next couple of quarters or 3 quarters. I don't think I should be able to give you a horizon for 2 to 3 years because this is something which is difficult to say as of now because we see these fluctuations every day. But we feel that in next at least couple of quarters, subject to COVID thing, the cotton yarn should be at these prices, if not lower than these.

Got it. Got it. Got it. And effectively, could you also comment then on the polyester side of things?

Polyester, we feel that the polyester prices would be stable to range bound. I mean we don't see any much increase in the polyester prices going up.

Ultimately, it is a spread. Look, I mean I understand that cotton prices have gone up and they have kind of corrected slightly now, right? And same with the polyester. Ultimately, it depends on where oil is and I mean, chip prices are -- and chip spreads are, right? But where do -- where is actually -- how is the spinning spreads looking?

I would say that there is definitely a pressure on polyester yarn, especially in dyed, the segment we are in. So that way, I mean, gray polyester, in terms of polyester cotton blends have been doing exceptionally well in the export market. But the sentiment in domestic market for polyester blends and dyed blend of polyester, I mean it's quite low because, for example, even the formal wear is not working today. The school uniforms are not working today.

But is this all a COVID impact effectively?

Yes. As you see that these formal wear and school uniform, that is a clear COVID impact. And today, the polyester blend yarn, which goes in the weaving sector, in domestic market, and even in export to some extent, has been, I mean, highly impacted -- adversely impacted, I would say.

Got it. Got it. Got it. And so no, this is when you are comparing right now compared to Q4, is it?

Yes. If you look at the fiber prices, in -- the difference in fiber prices between, say, from November to Q4, I mean, the polyester prices of fiber increased by 32%. And this was due to various reasons. There are internal reasons in terms of the raw material, oil prices, the freight, because this is in parity with the imports. So the freight in the last 2 quarters have gone up substantially from $0.02 to almost $0.11, and these are [ concurrent CIF basis. ]

Understood. Got it. So if we were to look broadly speaking of where -- of the -- the kind of EBITDA we'd expect to do into, lets say, '22, what is the sort of a number which you would be able to sort of give us some sort of guidance to work?

I would say that, that guidance, it is too early looking at the second wave in India. And the way this migration in the workforce is also happening and little bit of volatility in terms of what you say that what is the capacity utilization and the demand. See today, almost whole of India is, I won't say under complete lockdown, but yes, it is in a near state to that. So the malls are closed. The front end is almost down. The retail is almost closed. So therefore, I mean, it is little early for us to say that what numbers we would expect. We are doing this on a week-to-week and month-to-month basis.

Let me put it to you in another way. In a non-COVID environment, what should we expect normalized quarterly EBITDA to be? Because obviously, like last entire 1 year, 1.5 years or maybe even 2 years after the old inverted duty structure, all of that has all been tricky. But I'm saying now given where we are, what would a normalized EBITDA be in your view after COVID ends? Maybe I mean, is that on a quarterly basis or annual basis, however you look at it.

I would say that we can expect to do something better than what we have been doing. So to give you any number at this stage, I've...

But in the Q4, the number, actually which is obviously extremely attractive, is that -- should we be seeing that as a slight anomaly?

Yes, in terms of the pent-up demand because -- there was a pent-up demand over the last 3 -- of the last 3 quarters. Of the last 2 quarters, I mean, I would say, quarter 1, quarter 2, the pent-up demand all across the world, that was there, that led to this performance of the companies in the later half of Q3 and the full quarter 4. So I would say it is a little bit of anomaly, but the company should strive to -- I mean, to turn it as not an exception, as a rule.

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

Congratulations, sir, on a strong set of results after a very long time in the industry. This is really getting back on track kind of a performance. I would just like to understand that despite the strong pent-up demand in the industry and favorable demand supply metrics driven by export markets and improving demand in the domestic market, why are we still below our normal? So prior to FY '18, we used to be at EBIT margins in the yarn segment of around 10%. That was looking sustainable in that period. So how much do you -- what are the challenges on coming back to those margins? And when do we see that coming in and -- organically without the support of this new plant that you have commissioned in March. Just trying to understand the industry and your performance in line with that.

Okay. Thank you, Prerna, for the question -- good question. So I would say that we expect that we should be on right, what you call -- what you say that the performance before 2000 -- I think, '17, you said?

Before FY '18, you were consistently making around 10% EBIT margin in the yarn segment.

Yes. So I think going forward, I mean looking at what we have developed some products in yarn as well, developed some market and trying to, I mean, go across the competition, I think we should be able to do that. In near to distant future we should be able to be, I mean, there with the help of certain measures which we are taking, and we have been taking in the past as well. I mean the industry -- this is a cyclical industry and it's based on -- typically on man-made fiber, because we are predominantly in the polyester spinning. I mean most of our spindles are for polyester spinning. So I mean, it is basically, we are looking at innovation and the conversion costs. So I think we should be able to do that, to reach there in -- or to better this in the future quarters to come or a year to come.

What will be the triggering factors, sir? Actually, what I'm trying to understand is we had pretty strong demand in fourth quarter also. I will -- expecting that we should reach, if at all in the fourth quarter, if this demand scenario is sustainable, then maybe this should happen in near future only, if possible? And what are the challenges to the same? I'm just trying to understand why you're saying 1 to 2 years and not in near term?

No, no, I'm saying in near term only. Now the second wave came in, otherwise, I mean, we were -- still we are. We are hopeful that we'll be able to maintain that of the quarter 4 going forward. But the second wave, this was, I would say, I can't say unexpected, but yes, it has a far larger -- far-reaching impact, so which is going to impact us. Minus this COVID situation, we should be able to do this in near future.

Okay. Okay. And there should be -- beyond this 10%, there should be margin accretion even from this green fiber plant that you've set up. What kind of margin addition it can do to your normal margin range?

I think we were looking at almost 0.5% to 1% level, Bipeen, if I'm right?

Yes, yes, yes. You're right. At EBITDA level, right. Yes, we are talking about EBITDA level.

EBITDA level, yes.

Okay. So EBIT level, it will be around 0.7-odd that it can add.

Yes, yes, yes.

So which means we will be between 10.5% to 11% sustainably or maybe when things normalize and things become better?

Yes, I mean, we should be. I mean that is what we expect to be. yes.

Okay. Okay. And sir, as you said that the demand in the home textile space is very strong in the U.S., could you just highlight on your home textile company in the U.S.? How has been its performance? And what kind of integration levels we are seeing in the domestic and -- in the Indian capacity and U.S. front end?

Very good. Thank you for this question because I didn't touch upon this point in my opening remarks. So I thought I'll have only the question-answer session. So as I said, home textile business, which has really gained impetus world over is in bed, bath and hygiene, right? So our type of business in upholstery, curtain and made-ups is at discretionary spend. However, having said so, we have done better this year as compared to last year in terms of exports, especially in U.S. Thanks to our teams that we created virtual showrooms, there was no traveling, and this is some category which has a long gestation. The first sample you show to a customer to the first PO you get is about 8 to 9 months. However, I mean, during this period of lockdowns and pandemic last year, we did everything virtually. We had virtual showrooms. We created a cut service in India where we named as Nesterra, where we launched a website, nesterra.com. This is on the domestic front. I'll first touch upon the exports. Export, we did better in U.S. market because they were open for a fairly longer period of time. And we had already done homework over the previous year, so that we got business in this year. So we had good export and we had new door openings both in U.S. as well as U.K. and also in Middle East. So [indiscernible] performance, that is why if you look at our numbers, of course, there is a loss, but still it is less than what we have been doing in the last year. So export, we have got traction during this year. And going forward, with this brand coming in as a cut service, Nesterra, we expect that in few -- I think in about 3 to 4 quarters, we should be doing better in this cut service as well. As far as the domestic market is concerned, there have been a lot of challenges during the last year as well and now also when we are facing almost a lockdown situation everywhere. No retail is working. So in domestic market, we have a challenge, but we are putting all our energies on the exports, and we expect to do better in exports in the coming quarters. If you look at -- if you want to know more, so we've launched almost 90 new SKUs in furniture manufacturers in U.S. as well, and the synergies with our American Silk Mills have really gone up during this pandemic period.

Okay. Okay. Understood. And sir, my last question on dyed versus gray that you mentioned in your opening remarks that gray yarn continues to remain strong and dyed has seen some challenges due to COVID resurgence. Could you please highlight now what are the -- what is the margin difference as a category, not for you, but as a category. And you were utilizing -- you were earlier waiting -- in earlier calls, you have mentioned that you are not utilizing your capacities for gray yarns. So what is the scenario right now with your company? And what are the industry margins in gray versus dyed? If you can help there?

Yes. There are a couple of things in this. Number one, the application of dyed is, say, in case of synthetic yarn comes mainly in the formal wear, right, where we are in. So we have to shift to knitting sector. That is one. On the cotton, I mean, the delivery times of the cotton yarn are much lower than the dyed yarns. For example, in any dyed yarn, you need a delivery time of at least 45 to 60 days in India. Whereas in case of cotton yarn, this is a commodity so the deliveries could be immediate in terms of, say, 5 to 10 days or whatever because you can store as well. There are no shades in that. This is a gray cotton yarn. So the pent-up demand which has come after this COVID period, the first COVID period, is mainly in gray yarn, where I've been -- there was less, I would say, competition from China, and the demand in China was too much. So that is why the gray yarn, you would have seen, the gray yarn companies are showing EBITDA margin of almost 15 plus, right? Some of them going to 18 or whatever. So in gray, it is -- it has been there in the last quarter. But in dyed yarn, these margins would not be more than, say, anywhere between -- if you look at EBITDA levels, what we have in terms of, say, synthetics would be in the range of 10% to 12%, and in case of mélange, it could be more.

Okay. And the demand for mélange yarn continues to remain strong, sir, in current scenario?

In current scenario, demand for mélange yarn is good, I would say. The only thing is there is a time lag between gray and mélange. So mélange yarn today is okay even in the COVID situation of second wave. However, I mean -- because this all goes in the brands. So once it comes to the brand level, then this may be -- there may be some pressure on the demand as well. Today, demand is, I would say, it is stable what it was in the month of April. So we are not seeing much adverse impact so far, but we don't know anything what happens in next month. But certainly, it's better than synthetic. Yes.

Sir, my last question is on -- is whether the -- you mentioned this gray versus dyed for the cotton yarn, is it similar for branded also?

Yes, yes. When I was talking about dyed, it was blended. The polyester, viscose and all that. Cotton dyed is mainly mélange.

The next question is from the line of Ritesh Poladia from Girik Capital.

Sir, a couple of things on macro. Have you seen any spinning capacity getting closed down because of this pandemic and demand supply has gone under since?

I would say in quarter 1, quarter 2, yes, of last year, but quarter 3, quarter 4, no. In fact, quarter 3, quarter 4, we did not see much -- I mean, we see, in fact, the companies or the smaller companies, which were facing this working capital issues, they came back in quarter 4. So we didn't see much closure in terms of the spinning capacities. There may be some capacity reduction, in the sense that if a mill has 1 lakh spindles, they would be running, say, utilization could be only up to the extent of 70%, 80%. But the closure, I don't think that we have seen much closure in the last 2 quarters. But first 2 quarters, yes, definitely, yes.

So there is no permanent closures?

I don't think so. There is too much of -- see, that happens every year, which goes unnoticed. So this year, people were noticing it, so it is coming in the forefront. But I don't think there was too much of permanent closure of spinning mills.

Okay. Sir, on your 93% utilization, it's really great to see this kind of utilization in challenging times. But sir, how would you rate your mix of productions? Like is it at the optimum level like before pandemic or still there is a scope for improvement?

I would say if you look at 93%, 94% utilization in dyed yarn, because in case of gray, this could be higher. For any gray cotton yarn company, this utilization should be in the range of 96%, 97% plus, right? In dyed, it is in the range of, say, 94% to 95% or in certain cases, maybe 95.5% because there are changeovers. There are smaller lots. So the utilization is impacted by these things. So I would say that there is always scope for improvement. I would not say that there is no scope. There is always a scope for improvement. So we strive to do that.

Sir, what I mean to ask was, is this a very optimum production in a way that whatever high-value yarns you were producing, is the demand back on that side? Or it's still you are doing low to medium kind of yarn?

See, in the last quarter, we did have much more value addition than we are having now in this quarter, especially this month, right? So because your domestic demand is very low now, it's almost negligible, therefore, you have to venture into the territories outside India, or, I mean, you have to take some business, which is a little low margin business. So I would say that this month and this quarter is impacted because of this.

You mean to say April, May, June quarter?

I hope so, yes.

Okay. And the March quarter was optimum according to you?

Yes. I mean I would say it is on the -- I would -- not optimum, it was aggressive. Above optimum.

Okay. Fair enough, sir. Sure sir. And sir, on your home textile, sir, as you said that the company is on one side of a business that's upholstery and bed sheets and all such cases, but not in the bath and towel side. Do you have any case to have the full range of home textile business? Or do you want to focus only on this?

See, as a strategy, we would like to focus on the adjacent categories because for upholstery and drapery, bath is all together a different category. And it is a different -- it's an all together different ballgame. So we would like to be in home textiles, expand in adjacent categories, for example, made-ups; for example, very specialized sheeting, not the -- I mean, mill of the run -- I mean, run of the mill sheeting. No. So these are the adjacent categories we can think of. But as far as bath is concerned, I don't think we have immediate plan on our [ mind ] to do that.

Sure, sir. Sir, now that American Silk Mills' 3 years of acquisition is done, how would you rate the acquisition and go forward plan?

I would say this is -- this will be a very strong case for us going forward because see, any acquisition you do in the, I would say, in the distant territories and with the motive to have a footprint in -- foothold and footprint in those territories, I think that purpose has been served well over the 3 years, because you need -- I mean, this is a legacy company. We took over a brand which is since, I think, 1896 or something. So we took that company. We have invested in terms of time and money over the last 3 years. And now I think next couple of years are going to be where we are going to take off from this brand. And we have a team in place. We have product line in place. And above all, we have a very high level of synergy between India and the American Silk Mills in U.S. in terms of the product development as well.

Sir, is there a case of American Silk Mills plus India home textile business can take up INR 500 crore turnover in the next 3 years?

I think it all will depend on the COVID situation. If it persists, it may or may not. But otherwise, we are confident in next few years we will go to that level.

[Operator Instructions] The next question is from the line of [ Nitin Agarwal ] from [ Shreya Investments. ]

Congratulations on your great set of numbers.

Thank you.

You said the dyed yarn and the gray yarn, so gray yarn manufacturers are showing 14%, 15%. Normally, my understanding is that dyed yarn should have a better EBITDA profile. So do you think that the market scenario will change going forward?

Sorry to interrupt, [ Mr. Agarwal. ] Sir, there is a slight disturbance coming from your line, sir.

Is this line clear now?

Yes. I think so. Yes, go ahead, [ Mr. Agarwal. ] We are able to hear your question.

Sir, my point was that you said the gray yarn people were making 14%, 15% EBITDA, whereas in the dyed yarn, the EBITDA contribution is less in the present market scenario. Do you see this improving going forward?

Hello? Updeepji, are you there?

Sir, the line from Mr. Singh is disconnected. Kindly stay on line till I reconnect him.

Yes. Yes. Yes. His line got disconnected.

Ladies and gentlemen, we have Mr. Updeep Singh connected to the call. Thank you, and over to you, sir.

Sorry, I think the call got disconnected. [ Mr. Nitin Agarwal ] was asking the question on dyed yarn and gray yarn, on the profitability, right?

Yes.

Okay. So see, if you compare like-to-like, the dyed it often would be better margin as compared to the gray. But when we talk of dyed yarns, we talk of as a basket with synthetic -- I mean with the blended yarns. So definitely, the blended yarn margin is lower than the dyed cotton yarns or the mélange yarns. So therefore, when we see as a -- EBITDA of a company as a whole, I mean, this is what the difference is.

And do you see this scenario changing going forward? Or does it remain constant like this?

To be very honest with you, I mean, dyed yarn in case of -- in the present scenario, I don't think because -- see, the demand in [ leading sector ] is decreasing. So the dyed yarns in case of synthetic, I don't think there'll be too much improvement, but definitely, we can go for the value-added yarns, which goes in the various sectors, including the home textiles or the automotives. So that is one area where we could focus on.

Okay. Sir, second point, are you planning to sell your home textiles in U.S. and in India through these platforms like Flipkart, Amazon, et cetera, or you have no plans as of now? Because I don't see any mention in your PPT.

Yes. Because the reason being that we are -- as of now, we are in the fabric. So the fabric is sold to the converters or the [indiscernible]. So now we might think of going in for, what you call, stitch [ case, ] which is more prevalent in U.S. rather other than in India because there are standard sizes available there. I mean the window sizes are very standard. So that could be sold through the e-com. However, in American segments, we have started the e-com business. In India, we are doing e-com to the extent of B2B, that is retailers ordering on us for the customers, but that is only through our own website.

The next question is from the line of Hiten Boricha from Joindre Capital.

Sir, my first question is on the realizations of the yarn. So can you give the realization number per kg in Q4, Q4 FY '21 versus last quarter versus last one? And I have one more question after that.

Okay. The realization of the yarn on an average will be in the range of, say, 230, 232 in the last quarter. And I think it has improved a little bit from the third quarter.

Okay. And what was it in Q4 FY '20, sir, last year?

Last year, I think, it was in the range of 210, 212 if I remember correct.

Around 217.

Yes, 217. Yes.

217, 1-7, right?

Yes. Yes, around that.

Okay. Okay. And one last question, sir. Sir, my second question is on the CapEx side. What is the CapEx we have spent in FY '21? And what is the CapEx spend for FY '22, sir?

Bipeen, you would have -- yes, so routine CapEx, what we have done is around INR 50 crores, INR 51 crore in the current year, what we call as a debottlenecking of CapEx, and similar CapEx is planned for the next year. It could be sometimes -- so what we consider that INR 50 crores to INR 60 crores is a routine CapEx what we consider as of -- so last year, it was INR 51 crore, maybe in the same zone or maybe slightly there.

It would be between INR 50 crore to INR 60 crore in FY '22, correct?

Correct. Correct. Yes, that's what -- that is what the right now estimate is.

The next question is from the line of [ Harish Jaat, ] an Individual Investor.

Hello? Hello?

Yes, please?

Yes. Sorry for the delay. My question is regarding your green fiber plant, which you have put up recently. I know it is in initial stage and the environment is also not good. But during the optimum production in this plant, what is the cash -- cost advantage per ton of using these fiber vis-a-vis the buying from outside?

See, [ Harish, ] I would say that to quantify advantage in terms of the cost per kg or per ton is not the right thing when you would backward integrate it. See, there are things like in terms of the consistency in quality because this is recycled. This is not something which is fresh, which is blended by 2 raw materials that -- I mean made as fiber. So the advantage of this backward integration would be right from the raw material stage, what type of bottles are we buying and what type of consistency in quality we are giving to our spinning product. So that is 1 advantage, which will give us advantage in the spinning operations. That is when, when we say that EBITDA level will be 0.5% to 1% of EBITDA level. So that advantage is that, number one. Number two, we can develop various different type of fibers in terms of the [indiscernible] in terms of the cut lengths and also in terms of finishes. So in my opinion, giving a cost advantage would not be the right thing in case of integration. Had it been a stand-alone project, then we -- I could tell you what would be the price or the cost [indiscernible ] of the fiber.

Okay. Okay. Fair enough. What is the CapEx on this plant?

I think, Bipeen...

Yes, the CapEx is around 220.

Okay. And what is the rate of return on this investment?

So rate of return when we conceived the plant, it was around 12% to 13%.

Okay. Okay. So approximately payback period will be 5 to 6 years?

Slightly, slightly more. 7 years.

Okay. Okay. Okay. Any major CapEx cycle we want to take away in the next future when the normal environment comes in? Because in textile, as I understand, the spinning mills always run above 90%, so there's no -- wear and tear maintenance, you do with that all this, we can achieve maximum 90%, 93%, 95%. So what is the next CapEx cycle we are planning?

So currently, we do not have any major CapEx, as I mentioned a few minutes back. We do not have major CapEx for the project, which is planned. As you rightly said, there is always a debottlenecking and routine CapEx required in textile industry since we also have 4,20,000 spindles. We typically have planned, as I said, INR 50 crores to INR 60 crores for the next year. Now it depends on slightly, it may move up or down depending on the situation because it also depends on the delivery time lines of some of the suppliers, which has got elongated.

Okay. Okay. Okay. In terms of the size, we are 4,20,000 spindles. So how big we are as compared to the other peers in the India? How big we are in terms of ranking or whatever maybe you can tell?

See, I mean, this spindles is a little -- I would say, in terms of only the spindles if you look at, we are at a good level in India. Because if I remember correct, the highest level in India could be almost 1.2 million or so. I mean, 1 or 2 [indiscernible] companies. But at a level of 4 lakh plus and that too on the dyed and mélange, I think we are one of the highest.

The next question is from the line of [ Rishabh Makhija, ] an Individual Investor.

Congratulations on a good set of numbers. I just have one small follow up from one of the earlier participant's question about the margin addition from our green fiber plant. So if I'm not wrong, earlier than earlier quarters, we had guided of a margin addition of 1% to 2% over the next 1 to 2 years. And now that has come down to 0.5% to 1%. So just wanted some color from you on why this guidance has come down.

See, number one, because we have to look at what is the present situation in the recycled fiber today, right? So recycled fiber today is almost, I would say, the lowest of the prices as of now, right? So the only -- what we are getting to [Technical Difficulty] are not, I mean, giving that much margin today to the spinner because of the various reasons. In the COVID situation when your utilization is less, so you cannot -- EBITDA is affected because you [indiscernible] less production. So that is one reason. And if you look at today, this margin is reduced to almost less than 1%. In a steady state, this would definitely give us more than that, to the extent of 1.5% to 2%, as we said in the earlier call.

Okay, understood. So in the long term, we are still hoping for 1.5% to 2%?

Of course. Of course.

I think it was about 1.5% to 1.7%. Yes.

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

Is there anything which you are planning to adapt from our competitors like RSWM and ICIL?

What -- sorry, [ Mr. Jain, ] your question is, is there anything we are wanting to...?

Learn from our competitors, and we want to adapt the same like from RSWM or ICIL, any competitor which you're planning towards?

Yes. See, we always look at -- we are always open, and we are always ready to learn and imbibe good things from anybody, maybe the competitor, may be adjacent category player or whoever. So we are always open to that, and we would like to do that. There's no harm in that. In fact, we would love to do that.

[Operator Instructions] The next question is from the line of Riddhima Chandak from Roha Asset Managers.

Yes. Sir, just one question. In our total portfolio, how much revenue contribution is from polyester yarn and the cotton yarn? And how it was 2, 3 years back?

If you look at in terms of the capacity lines, we are almost, I would say, 35% to 38% on the cotton, and the rest is on the polyester and blended yarn.

Okay. Okay. And 3 years back, means in terms of revenue as of now?

3 years back?

I mean, like what it was earlier, the ratios, was it the same or?

No, no, no. The ratio, I think, it changed in the year 2017. Earlier, it was much more on the blended yarns as compared to cotton, mélange.

As there are no further questions, I would now like to hand the conference over to Mr. Updeep Singh, President and CEO, Sutlej Textiles, for closing comments.

Thank you so much. And I would like to thank you all for attending this call and taking time off. And I'm also thankful to the Board, the Executive Chairman team and all my colleagues and the team numbers and all my -- all of our esteemed investors for giving us encouragement for the management team to perform in these situations of COVID as well. I mean the plants across have done exceptionally well to get us to the utilization level of what has been in the quarter 4 and going forward, and we say that we keep it up. Also, I would like to comment in my remarks that we as a company, we are going ahead aggressively on the vaccination program, which give us confidence that we'll be able to wade through this COVID situation in the best possible way. We wish all of you safety and healthy season going ahead. And thank you very much for taking your time out.

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