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

Ladies and gentlemen, good day, and welcome to the Sutlej Textiles and Industries Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. This call may contain some of the forward-looking statements, which are based -- which are completely based upon our beliefs, opinions and expectations as of today. These statements are not a guarantee of our future performance and involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statement to reflect developments that occur after the statement is made. I now hand the conference over to Mr. Rajib, Whole-Time Director and CFO. Thank you, and over to you, sir.

Thank you. Thank you very much. Good afternoon, everyone, and welcome to the earnings and conference call for Sutlej Textiles and Industries Limited for the first quarter ended 30th June 2024. I trust that you are all doing well. With me on the call today is Mr. S.K. Khandelia Adviser to Chairman; and Stellar IR Advisors, our Investor Relationship team. We have already uploaded the investor presentation, and I hope everyone has had an opportunity to go through the same. Let me start the call by giving you the financial highlights of the quarter, after which Khandelia-ji will fill you in with the business highlights as well as the industry highlights. Geopolitical tensions have disrupted the global supply chain and caused significant volatility in raw material prices impacting the man-made fiber industry. The sector is grappling with several challenges, including subdued demand, the Red Sea crisis, labor shortages due to elections and rising energy costs. For Q1 '25, our consolidated total income came in at INR 665 crores. Gross profit stood at INR 293 crores, which was higher by 9% on a quarter-on-quarter basis. Gross margin for the quarter stood at 44%, which is higher by 4% on a quarter-on-quarter basis. EBITDA for the quarter was INR 25 crores as against INR 13 crores in Q4 '24. We are witnessing a slow and gradual recovery in our operations. Total long-term debt further reduced by INR 22 crores and working capital borrowing also reduced by INR 27 crores in Q1 FY '25. Our debt-to-equity is maintained constantly below 1, around 0.81 as of now. Those are my opening remarks. I will now request Khandelia-ji to kindly take it forward with the business and industry updates.

Thank you, Rajib. Good afternoon, everyone. And thank you all for joining us on this conference for today. The recent developments of heightened geopolitical tensions in West Asia, political turmoil in neighboring Bangladesh, increased ocean freights, supply chain disruptions and recession fears in USA have exaggerated the already challenging business environment faced by the textile industry in general and spinning industry in particular. While the Indian domestic story remains largely intact, we are witnessing a lower-than-expected increase in demand ahead of the festival season. We are focusing on improving our efficiencies, cutting costs and fine-tuning our product mix as per evolving consumer preferences in domestic and export markets. While we remain cautious, we are confident of weathering all the challenges, led by our strong foundation and agile organization, a strong balance sheet and our customer-centric focus. Thank you.

Sir, should we go forward with the Q&A session?

Yes, please.

Yes, please.

[Operator Instructions] The first question is from the line of [ Akshay Malani from MA Investment ].

Sir, I have a couple of questions. So to start with, we have been reducing losses for the past few quarters from INR 26 crores to INR 11 crores and we expect positive numbers in coming quarters?

See, we have been improving, because we have been tightening our -- as I mentioned, that we have been improving efficiencies, cutting cost and market conditions has been continuing to be challenging. So far as your question that going forward, of course, we do hope, but the situation continues to be very challenging. As I mentioned say in export markets, say in cotton and cotton blended melange, Bangladesh is one of our important market. Similarly, for exports, we are about 1/3 always in the exports. So ocean freights are very high. There are so many geopolitical challenges. In domestic market also overall textile, whether it is from yarn to finished fabrics and garments, there is about significant quantities being exported. And if that is under challenge, then naturally the pressure comes on spinning also. So challenges are there, visibility is not there. So it is very difficult to say. But we hope that we will -- it may be a matter of time or something like that may be a quarter or 2, but we'll never know because visibility is not there. So as we have been improving quarter-on-quarter, let's see how does it work out.

And also, sir, as you mentioned about the Bangladesh recently, there have been a couple of things happening about Bangladesh, so many international buyers are looking for alternative supplier. So what do you think how this can help us?

So I think Bangladesh has already started. Factories have already started working and things are getting normalized there. And temporarily, some -- you see when China One Plus policy came and such type of things, so the diversion is not so easy. It takes a lot of long time. And then you need to have larger capacity and Bangladesh is definitely much more efficient in terms of the cost. They have been doing particular type of garments and India has been doing specialty type of garments. So there is some difference. So temporarily, there can be some benefit, but I think Bangladesh's major revenue is from the garment and textile industry only so they will come back. So there is not going to measure benefit immediately. But of course, whenever any buyer is there, he always thinks that what alternative I can have. And that way large garment manufactures of India and entire textile industry to some extent, may benefit, but not very big.

Okay. Okay. And sir, also now to our business part. So can you give us -- give me some update on our home textile business, and how much revenues are we expecting going ahead?

See, home textile business, as you know, in home textiles we have curtains and upholstery and something like that. So 3 years back, we had started our own cut service, and that is picking up. As you might have seen from the 3 years, if you take 3 years data, you will find that our losses have been going down, and now we are EBITDA positive in that business also. So then -- because it takes little time because it's a cut service, it is a specialty type of business. So but that is improving bit by bit. And hopefully, going forward, it will improve further.

And sir, have we seen any extended demand on the export front?

About home textile, yes. In exports, so far, our products, which we manufacture curtains and upholstery, our exports are growing little bit there. We are seeing better demand in there.

So any number are you expecting or you are just going with the organic growth?

The number I may not be having right now here. But say exports, if I say, say about 5%, 10% growth in export numbers.

5%, 10% growth in export numbers?

In the home textile, in home textile.

[Operator Instructions] The next question is from the line of [ Akshay Malani from MA Investment ].

So sir, to continue with our discussion. So last quarter, you mentioned you have roughly 36 collection in the market for Nesterra, right?

Yes.

So have you increased any new collection or what's the status on it? How are we seeing the numbers on those 36 collections?

See, we already have launched 36 collections and every year we are launching new collections. So this year also, we will be launching 2 -- 12 new collections and normally one collection has a life cycle of 5 years. So up to 60 collections, we will continue to launch, and we will continue to launch every year. But the first one, second one will be withdrawn, say, normally after 4, 5 years those are withdrawn. And new collections are always there. So always about 50, 60 collections will be in the market. So as we are going along, as I mentioned last time, we have opened a warehouse at Panipat also, so that the -- for the North markets, delivery is faster from there. So that is also showing improvement. So that is there.

And also, sir, as we are backward integrated and forward integrated and recently, we are going to get subsidy on a green fiber unit as well. So any update on that?

No, there is no subsidiary on green fiber, except that it is preferred fiber because of sustainability. So that is already there. Plant is already working. So there is nothing, no new initiatives there. So we are only consolidating whatever we have right now.

[Operator Instructions] The next question is from the line of [ Shruti Vasani ] from Stellar AMC.

I wanted to know the overall what is the outlook on the sector now. And what are the growth drivers that we should track further for Sutlej?

What is the outlook of the industry and what is the growth drivers you can foresee?

Yes. Yes. At present the outlook is little bit for the short term, short term outlook is little heavy. As I mentioned in my opening remarks, there is a lot of geopolitical tensions are going on. And about 1/3 of our products are being exported. And for the textile industry as a whole also, a lot of products are being exported. So if the exports are facing challenges and due to that there is pressure in domestic market also. So this is as of now, the position is a little bit challenging and hazy, visibility is not there. But definitely, India is -- at present from the fiber to fashion for India, I hope that India should have a good future in the textile business.

[Operator Instructions] The next question is from the line of [ Akshay Malani from MA Investment ].

I had 2 more questions. Sir, as we were planning for additional CapEx, so any update on that? Have you decided anything how much are you going to spend and anything like that?

No we have not -- earlier, we had planned for one new project and that we had already dropped and that was informed in the last meeting itself. And without -- there is no visibility as of now. So for the time being we have dropped that and whenever the opportunity will come, we will again look into that and we keep on exploring. So routine CapEx is going on as per plan because we have to keep our plant always updated. So that is a normal regular process. But any new plant is not being put up right now.

No is there just any specific reason for not continuing that plan or?

See, we have already dropped that because it was INR 800 crores, INR 900 crores project. And since the visibility of the textile market is not there, and we may think of something else, we keep on evaluating. On evaluation we found that it is not the right time to go ahead with such a huge project. So that's why we dropped it.

[Operator Instructions] Ladies and gentlemen, as there are no further questions, we have reached the end of our question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Yes. Thank you very much. Though there may be temporary challenges in the textile industry and spinning industry in particular, but I am hopeful that going forward as in the past, things will be better. And again, we will get to the earlier level of EBITDA and the profits. Thank you.

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