Vardhman Textiles Limited (502986) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Vardhman Textiles 3Q FY '21 Post Results Conference Call hosted by Batlivala & Karani Securities India Private Limited. As a reminder, this conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. Statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Ms. Prerna Jhunjhunwala from Batlivala & Karani Securities. Thank you, and over to you, ma'am.

Thank you, Vikram. Good afternoon, everyone. On behalf of B&K Securities, I would like to welcome you all for 3Q FY '21 results conference call of Vardhman Textiles Limited. Today, we have with us the senior management including; Mr. Neeraj Jain, Joint Managing Director; Mr. Sushil Jhamb, Director, Raw Materials; Mr. Rajeev Thapar, CFO, Mr. Mukesh Bansal, Senior Vice President, Fabric Marketing; and Mr. Akshay Jain, Finance Head. I would now like to hand over the call to Mr. Akshay Jain for initial comments. Thank you, and over to you, sir.

Hello. Good afternoon. Welcome to all investors and I will just take you through the financial highlights before handing it over to Mr. Neeraj Jain to take us through the performance -- operating performance for the quarter. This was the first quarter after the COVID crisis where we have sort of come close to our pre-COVID performances. Total income was comparable to quarter 3 of FY '20. EBITDA was significantly higher at INR 303 crores, an EBITDA margin of 17% as compared to roughly 15% in the same quarter of last year. The PAT was lower. This was on account of the one-time tax adjustment that took place in the quarter 3 of last year. Even on a Q-on-Q basis, we saw the income rise by about at 8.5% from quarter -- in quarter 3 over quarter 2 of the same year. EBITDA went up from about INR 180 crores to INR 303 crores. PAT went up to INR 144 crores compared to INR 50 crores as operations normalized from the September to December quarter. To give more insight into how and what circumstances led to this, I would now like to hand over the call to Mr. Neeraj Jain.

Good afternoon, everyone. Am I audible?

Yes, sir, you are. Please go ahead.

Okay. Okay. So this quarter has been a little better compared to the previous times. The overall confidence of consumer was there, the demand was normal as far as selling is concerned, the fabric kept on improving. The -- most of the countries the lockdowns are over, and people started traveling also partially, offices also started, and there was a huge consumption because the pipeline was relatively dried in our opinion. And the overall spinning started improving or started showing good results. On the spinning sector, our feeling is 3, 4 things happened. One, during lockdown, the pipeline was -- the inventory pipeline was finished. So people were -- people started refilling a part of the chain. So the demand was better. Two, the homes textile from India was doing very good. Most of the bed sheeting back players, they are running at a full capacity. As a result of that, they wanted more yarn and generating the bed sheeting, it's superfine count, 60s, 80s, 100. So lots of spinners got engaged in the country on those counts. As a result of that, the spinning availability for the medium counts or the count times where most of the spinners were 30s, 40s, there was a shortage of yarn. And this shortage of yarn fueled prices. Also the raw materials was increasing, the raw cotton capital increasing both internationally and in the domestic market. So there was a cost push also. There was demand-pull also. And as a result of that, the overall margin, the delta available in the spinning that improved in a good way. Most of the spinners, they were running full capacity. And another factor I still feel as per our assessment, almost 3 million spinners in India are still not started. So it's either permanently closed or maybe in a condition where they may not restart, so 7%, 8% capacity gone, and textile improving, people buying more. Export of yarn was higher by about 10% in the last 6 months, leaving the first 3 months of lockdown. So exports from India has been in the range of about 90 to 95 million kg against 84 million, 85 million kg per month in the previous year for the last 6 months only. So as a result of that, almost 10% increase in exports, increased demand, domestic market, increased demand home textiles, cost push, is the reason where the spinning margin started improving. We were running at a full capacity even before COVID, starting of the quarter as I mentioned during my previous investor call also, and we continue to work on that. And I think overall volume has been good. On the fabric side, Mukesh will give more insight, but to just to give an idea, we are there in the women fabric only and slowly we kept on working and slowly the capacity utilization has improved on the fabric side also, and we have reached almost 80%, 85% of our capacity -- rated capacity in the month of December and so. And I'm sure if things goes well, it can enhance -- it can be increased further, which will definitely give some advantage to the company. There has been -- so this is on the brighter side, where the customer was there, the demand was there, the prices of raw material was increasing, but still the margin of the spinning side was good. So overall, things were working well on the spinning side. Having said that, there has been some challenges, which still continues. One, the trade cost increased in a big way internationally. It was not for only spinning, but I think all across various commodities. As a result of that, the cost of transportation increased in a bigger way for most of the players who are -- engages import, export activities. But I think since -- as of now, because of the demand, most of this could be passed on to the customer, but I'm not very sure if this continues to drive, how the things will be taking shape in next couple of months. Two, still Europe is under question mark as far as the lockdowns are concerned. There are sometimes issues and concerns from various parts of the world. So still people are not very sure of how the things will be going, going forward. And to that extent those concerns, which is not much now, but at the same time, because the vaccine is already initiated and started, but still I think practically some part of the world are still not fully operated. So as a result of that, I think sometimes the order delays from here and there still continues to happen. That's the second uncertainty, which is still there. Third, the work from home is still very, very prevalent as of now. So when the offices starts, when people start traveling in a bigger way, and the events, marriages, function, exhibition starts happening, I think still people are waiting for some more time before they start, but I'm sure, once they start, then the normality may happen further. Fourth, though the prices of yarn has been increasing because of the cost push, both raw material, the other costs, but at the same time, there is a strong resistance from the brand finally to increase the prices. So 2 brands could increase, 2 brands could increase in some dollars. But at the same time, I think the challenge of passing on the prices finally to the consumer are still there. So as a result of that, most of these cost push has been absorbed by the supply chain as of now. So how things will be shaping up, whether brands will be in a position to increase the prices of garments or it is only the supply chain management players who are going to absorb it or it comes back to the spinning. So those are a few challenges, I think which the time will tell how the things reshape. So yes, everyone is trying, and some part of cost, which has already [indiscernible] has already been passed on to the consumer but not fully to that extent. New York future continues to be higher either because of better demand or because of the stimulus given by the various governments or because of the [indiscernible] in the system. So whatever we may say, but that continues to be still driving and increasing on a daily basis. As a result of that, the overall sentiment is good as of now. But whether that can sustain or how long-term that sustains, I think those are the issues where it's already on a very, very high level or high side. But I think those are some of the challenges, which we will have to take and look at how the industry reshapes finally to that extent. So these are some of the views on the industry level as of now. Remaining we can discuss when we discuss the question and answer. Before that, I'll ask Mukesh to give some more idea on how he's looking at the fabric and our fabric utilization facilities.

Hello. Thank you, Neeraj ji. Good afternoon, everyone. Q3 fabric business, we saw a demand rebound coming into the retail sector as well as corresponding demand coming to the mill sector. The India market, in the quarter 3, we saw there were festive seasons and also a lot of marriages took place. So people had dressing occasions, which we were missing in the Q1 and Q2. So a good retail sale happened. Correspondingly, the supply chain, there was not much of the inventory in the supply chain. So good demand was there for the fabrics also. And in the international markets, U.S. and Europe, those markets are also started opening in the month of June and July. So there was also a good demand, good retail sale happened. The clearance of the goods in the supply chain, that was very, very robust. So wherever the material was stuck whether at fabric stage or at garment stage, there was good lifting that has happened from the U.S. and European markets. So from those markets also the order flow was good. In any case, Q3 and Q4 are high season for Indian textiles because of the production takes place for spring and summer retail. So good order placement happened. And same thing happened with our operations also. So that is why, as Neeraj ji mentioned, that our capacity utilization is now touching at about 85%. We see that in the times to come, if the market remains the same, there is no big threat coming from the lockdowns and the vaccine rollout is smooth. So we see that in the times to come, the capacity utilization will further improve. That's all from my side. Thank you.

[Operator Instructions] We have a first question from the line of Nihal Jham from Edelweiss.

Sir, my first question was on our cotton yarn spreads. If I look at the industry data currently, my assessment is that the yarn spread has reached around $1.40 to $1.45 by December. What I wanted to get a sense from you is ideally, you've mentioned that $0.85 to $0.90 is a sustainable level ideally for the spread in the longer term. So just wanted your thoughts that how do you see this evolving over the coming few months? And what is a sustainable level? I'll take the next question after this.

Yes, the spreads has been increasing in this period, but that's not the spread which has been actually realized by the spinning mills because we are selling the yarn at a level, and generally, you are always sold for about 2 months or so. So theoretically if we go by the market price of cotton and market price of yarn, December end, yes, this spread was available. But practically, since you are sold already for 2 months, 3 months, most of the spinning mills or all spinning mills, so actual realized spread was not the same what we are looking at as on December end. I've already mentioned the -- it's one of the good spread available as of now, one of the highest we have seen in the last couple of years. But again, the resistance is coming from the retail brand where they are not in a position to pass on the same fully to their consumer. And as a result of that, as of now, the full yarn absorbance has not happened by the supply chain, the entire -- all the partners. So I think we'll have to look at how does it goes in the next 1 to 2 months.

Sure, sir. And just any sense on the longer term, what would be the ideal spreads that you think would normalize back to? And how much time you think that would happen?

It's very difficult for me to predict because the way things are going up, everything has been sorted. Financial levels are very good. So it's very difficult for me to predict whether this is a long-term change or it's only the short-term change or it's going to be -- by when it's going to be correct. So we just have to keep on working with the market and look at whatever is best possible, but very, very difficult to predict. If the brands are in a position to pass on to the consumer, yes, this can be sustained for a longer period. But I think unless that happens, still those questions are there.

Absolutely. So just moving on to the outlook on cotton prices. There also there has been quite a spike. And still I think the domestic cotton is at a discount to global cotton. So is there a possibility that cotton exports could continue and the price gap reduces? And consequently, the cotton prices in India could see a further spike?

That's possible. Because if you look at the New York picture today, it's almost $0.82, $0.83 and the cost look is almost close to about $0.90. Indian cotton is still at $0.76 or so and this kind of gap generally would not be available. And once the export starts happening in a bigger way, probably, this gap can reduce. So there can be 2, 3 scenarios. One, this gap is sustained as it is. Two, the international prices come down, but the Indian prices may not come down in the same way, so these spreads can come down so that this difference can come down. Three, the export starts happening and the spreads can further reduce. So these 3 options are all -- I mean, these are the already 3 options and one of them can be possible. But still, our belief is going by almost last 1, 1.5 year situation, it looks like the gap may be reduced to some extent, but there may still be available until the time the cotton arrivals are there. After the season, our belief is game will be in the hands of Cotton Corporation only, but there'll be the only stockist available. And it will depend upon their policy how do they decide to sell in India. I mean that's totally their call. They will be deciding to determine the cotton prices going forward after March or April. You can hold on for a second, Mr. Jhamb is with us, who is our Director, Raw Material, in case he wants to add something more to this.

Sure.

So what Neeraj ji said is correct. But otherwise availability of cotton in India is fine. [indiscernible] now the projections are that the consumption is going up, therefore probably bank stocks would get reduced by few lakh base, that's all. The availability of raw material for the next season would also be comfortable, that there would not be issue as far as raw material is concerned. There would be no spiking of stock. Stocks and production both will be available with us.

We have next question from the line of Kirthi Jain from Sundaram Mutual Fund.

Congratulations for good improvement in the performance. Sir firstly, our yarn capacity has got fully utilized. And to the extent of the gray fabric also, our utilization has improved, and Mukesh sir has also highlighted that utilization will furthermore improve. Have we started for the next phase of the -- have we started to plan for the next phase of the CapEx, sir? Anything you want to highlight?

Yes, we are looking at now -- in fact, as the capacity utilizations are becoming better and as our customer base, product base has also improved in -- has been improving continuously, so we have started planning for adding some spinning capacity. So we are planning to add close to about 100,000 spindles, equivalent both in the robotics and the spinning capacity and maybe if things goes well, in the next 12 months or so, this capacity will be operational.

So 100,000 spindles you would be adding, sir?

Yes. Yes.

Okay. Sir, any inorganic acquisition we'll be looking for, given the balance sheet and near-term outlook being positive? Anything will be inorganic also?

If we get the right asset as per our choice, we can -- we are open to look at the same. But I think considering the number of constraints we create for ourselves, it looks difficult, but we are open to the idea.

Okay. Sir, earlier, you were answering to the [indiscernible] Nihal that the current spreads don't really get realized in a full way. Sir, like how it works, sir? Like today, if you -- if today -- when will we get like today's price or near -- like December, January price, whatever is existing, when we'll get to realize? We get to realize the today's price in April/May or in June/July? How much time it takes to get the real price because...

Generally, 2 months.

Okay. So today what is the price, we will get in March or April, April would be the right time when we will get today's price, correct, sir?

March, I would say.

Okay. Okay. Sir, you had told about 85% utilization in your opening remarks, utilization. So was it in regard to the process fabric utilization or with regard to gray fabric, sir?

Mukesh?

Sir?

Mukesh?

So sorry, sir. What is the question?

They're saying, 85% capacity utilization when we say, you're talking of gray or you're talking of process or both?

No. Actually, gray fabric, we are almost at 95% plus capacity utilization. 85% is the processing.

Okay. So we have added new export customers, sir, that has been the key thing which has helped in process fabric utilization picking up sequentially?

Yes, yes. That is a continuous process because we keep on working on addition of new customers. And there are a couple of new customers added during the last 6 to 8 months that has helped in reaching this capacity utilization.

Okay. Sir, within the process, is the mix moving towards a more value-added product, sir? Or how it is happening in the process within the process segment?

Actually, current -- many parts in the world are still working from home. So demand is for a more basic product than a value-added product. So the retailers are also cautious that they do not want to invest a lot into value-added or new products. So the demand for the basic products is higher than the high-value items.

Okay. Sir, my last question is with regard to our MTM losses. Have -- has all our hedges got completed? Or should we expect some more in Q4 also such MTM losses, sir?

We have unwind most of the position, but there is something is still open. And I mean, I'll not say we have wind up 100% domestic. Other -- some of these new additions also has been taken during this quarter. Because as we are buying cotton and accumulating, we have to balance ourselves in terms of the risk strategy as well. So some small positions are still there in the books of account.

Okay. Sir, given these positions at New York or at MCX?

No, No. Only New York. MCX volumes are not there.

We have next question from the line of Pavan Ahluwalia from Laburnum Capital.

Two questions. One is, if we look at the margin this quarter and we adjust for -- you mentioned that the spread that you were getting was not the spread you look -- we would see theoretically. What was the actual spread we were getting. And net-net, as we move into a more normalized environment, is this the kind of spread you expect to maintain? Or would it be higher or lower? And the second question is, if you had 100% utilization on the fabric side this quarter and no mark-to-market losses in cotton, what would the blended EBITDA margin have looked like?

So let me take up because it's a [indiscernible] question which we can pass and answering it. Given that the fixed costs of the company remains similar. Let me take sort of -- you have multiple questions, so let me just take them one at a time. Had the fabric utilization been 100%, I think we -- our blended EBITDA margin would have been in the range of 20%, which is the middle of our guided range typically. Since Mr. Bansal -- as he pointed out that gray fabric is running at almost full capacity but the real business or the majority of the EBITDA of that business comes from the processing side of things. So given that we could have maybe within the range of 20, please take these numbers [indiscernible] this is just the back of the envelope kind of a calculation. Given that we budgeted or we provisioned for about INR 30 crores in MTM losses, that straightaway adds roughly 1.75% MTM EBITDA margin on a top line of INR 1,700 crores. So that takes it to about 21.5%. As Mr. Jain said that today's spread that are available will be realized 2 to 3 months down the line as we are sold in the market for roughly 2, 2.5, 3 months. The spreads we are currently realized or would have realized in the quarter was the spread that would have been prevailing from, let's say, July, August to October. So -- and since spreads have really strengthened over the last 3 months, I think there is some -- maybe some scope of improvement in capturing those spreads still available. I think today's robust position of the market will be more visible when our Q4 results come out. I think that's about all I can say to the question.

And the July to October spread would have been in the normal $0.85, $0.90 range or above that?

Yes, in that range.

No. Rather less than that...

Maybe slightly less than that also.

Less than that because at that stage, we had bought cotton, which was bought last year, which was at a much higher prices. So I think over there, it was less.

Got it. One last question. We hear continued talk and action around the desire for China plus 1 and the U.S. taking a fairly hard stance on China politically. And there seems to be considerable evidence that U.S. companies across sectors are really looking to derisk themselves from Chinese production. The Xinjiang cotton thing appears to have become a really big issue with buyers in the U.S. and in Europe. Net-net, is this plus for us, a minus or neutral?

This is definitely a plus for India. There are lots of inquiries which are coming in from various brands. Lots of people are interested in coming to India. But I think India will have to work on a -- holistically on the entire value chain because it's not only we are talking about spinning. So the spinning, fabric, woven, processing, garmenting, everything is required in case we want to capture to those markets. But there are lots of interests wherever -- at least in our business on the spinning side, we are finding more and more customers approaching us, coming to us where we have started some business also. So I think the opportunity is there. Whether as a country the full supply chain will be in a position to take advantage or not, the time will tell. But it's not only theoretically as of now, and more and more brands are surely approaching Indian companies for the same.

And even if the country doesn't benefit, let's say, the big U.S. buyers want to shift from China to, I don't know, Bangladesh, Vietnam, Cambodia, et cetera. Would a lot of those producers, including maybe even some of the Chinese producers say, look, rather than get into this whole hassle of where does your yarn come from, we'll just buy the yarn from outside China, and then at least we don't have this Xinjang issue?

No. In fact, it's happening even in China also. So if you look at the export from India to China, it has increased. And most of the garment exporters from -- in China, they are looking at to import yarn so that at least from the visibility perspective, they are very clear. It's import of yarn from India or different countries, and they are exporting it to the U.S. or to Europe. So I think that's partially in my view already happening even today also.

We have next question from the line of Siddharth Rajpurohit from JHP Securities.

Sir, how do you see garments as an opportunity, sir? And how do you want to grow in that business?

It's a very small plant we have and it's more of a formal shirt. Still that business is not doing well because the -- still lots of companies are working from home only. So I think in the overall scheme of things, it's too small, which is -- which can have an impact on the overall business of the company as of now. So there is no clear direction, what we want to do with this business. So we are only looking at, incase this business survives, then only we will make up some plan. But as of now, I don't see any major contribution to come from that business or any major plans to increase that business till the time we find a clear direction, yes, this business is profitable. So we're just running it to ensure that the business sustains on its own. But at the same time, I don't expect next couple of years any major growth to come from that formal business to us.

Okay, sir. And is the sourcing from other countries like Vietnam and Bangladesh moving to India? And if that channel -- if this new channel is established, do you see it sustaining for many years?

Bangladesh will continue to grow. So there is nothing which is going to come from Bangladesh or to Vietnam. So it's only the -- most of the companies are talking of China plus where this business would come to India, partially business would come to India. And as I mentioned earlier, there are lots of inquiries, there are lots of companies which are interested to come to -- source from India. The challenge will be whether we'll be in a position to capture those opportunities as the country, as a full value chain. The time will tell. But yes, people are interested and those inquiries are coming to India.

Okay. And it will be sustainable, means which will not completely be dependent on U.S. policies, do you see that channel will be sustainable?

No, I don't think it's only because government is saying them. I think it's most of the companies are taking those positions. So in case, the companies are -- the brands are looking at this, I'm sure this will be a sustainable model.

Okay. So -- okay. And if the overall demand becomes normal, which was pre-COVID, do you see the yarn spreads further improving?

Very difficult. I've already answered this. It will depend upon whether the government or the retailers are in a position to pass on those prices to the customer or not. If the entire value chain -- supply chain is absorbing that, then this may not be sustained. So someone will have to take the hit, either a consumer pays for that or the entire supply chain pays for that, which is not possible in the medium or long term. So some adjustment will happen either in -- coming back or it will be passed on to the consumer.

Okay. And what is your margin, sir, in the yarn and fabric business?

We don't give out these individual margins since we consider them to be one business.

Sir, but some indicator, sir? Would be -- could yarn be higher than fabric by 2%, 3%?

Sorry. As a policy, we don't give out those breakups.

Okay, sir. And what is our overall CapEx plan for this year and next year, sir?

Our normal CapEx, we do about INR 250 crores to INR 300 crores per year. That's the normal CapEx. But this year, since now we are looking at a possible new investment of spinning also in case we decide to implement the same over the next 12 months, it could be in the range of another about INR 700 crores, INR 800 crores.

For next year, sir? For FY '22?

Next 12 months.

Next 12 months. Okay. And this 100,000 spinners would add 20,000 tonnes of capacity, right, sir?

So yes, almost a little close to about 20,000.

We have next question from the line of Chetan Thacker from ASK Investment Managers.

Sir, just wanted to understand this hedging a little better. So we procure -- because we procure cotton all together, it is just to protect us from that price that we go ahead and hedge?

The first consideration is in the season, you get the right quality of cotton, so we want to preserve the same. Now -- I mean, one is that we take the entire risk on our books. Two is that we try to have the risk hedged somewhere. The MCX volumes are too -- MCDX volumes are too small in India, so you can't hedge on MCX. So the only way is that you sell some calls outside or maybe buy some puts. And typically, you buy some puts, but since the cost is too high, so to hedge that, generally, the companies will be selling some calls also. So that's the way it is hedged in Indian context because there is no other way Indian company can hedge themselves if you want to buy stock more than what you can keep on their books.

And a part of this is still left in terms of MTM, which will close through in Q4?

No, the MTM on December 31 is already provided.

No, sir. For fourth quarter also, this will come through based on whatever hedges from the book given right now?

Yes. So whatever is the outstanding position, depending upon it goes up or down, that will be provided in the fourth quarter. In case there is any loss or there is any gain, then that will be returned back.

And typically, how much percentage do we hedge?

No. That depends upon the view we take. So last year, we have taken almost the -- we hedged almost close to about 20% of the cotton we had. So this year, as of now, it's small. But yes, that view could be taken because in case we decide to buy more cotton because of the availability of good raw materials, it could be financed as well.

We have next question from the line of Saurabh Patwa from HDFC Mutual Funds.

I just wanted to have some thoughts on -- so historically, we've been -- the blended margin -- the spread between cotton and yarn in dollar terms used to be around 1.5, 2 if I'm not correct -- if I'm not wrong. But the dollar has continued to depreciate. So how is this thing working right now, sir? So does this -- is this calculated in rupee terms and then converted to dollar? Or is it vice versa?

No, generally, the yarn price will always be determined by the international market. So the cotton is also becoming but international market. So the Indian cotton will get converted into the U.S. cents. The yarn [indiscernible] spread available that gets converted into the Indian rupees.

So in dollar terms, the current spreads are at historical, how would they trend compared to the past, sir? Maybe on a longer term average?

For the Indian cotton, yes. Because Indian cotton is close to about $0.76 as of now, whereas the U.S. cotton is in the range of almost $0.97, $0.98. Generally the gap between Indian cotton and U.S. cotton is about $0.12, $0.13 which is much higher as of now.

Which is much higher as of now. Okay. Okay. Another question, I think you already highlighted that the impact of ban on XLCC by -- you have already highlighted. Anything sir -- sir, does this impact -- sir, just -- what is the risk which India would have in this case? So can it result in the cotton moving and the -- because the Indian -- current year and last year, I think CCI was buying, that's why the cotton has remained in the country. But can this result in a situation wherein the exports of cotton takes place and then subsequently the prices move up and the Indian players actually -- because most of the other players in this country will not be having a balance sheet, which can support to have cotton for the whole year. So any thoughts on that, sir?

Two things, the closing stock of Indian cotton last year, cotton season was one of the highest because CCI loss -- we had a good loss of cotton and because of pandemic, the consumption was much less. So as of now, there's sufficient stock available in the country, including the stock kept by the CCI. But yes, in case the exports happen in a big way, which as of now it's not happening. So as of now, going by the current situation or the current pace of exports, till we feel there should be decent quantities available for the full year -- this full year, but if New York future keeps on increasing then to that extent the export of India -- of cotton from India will keep on increasing. And in that scenario, there could be a possibility that the closing stocks may come down in the country. But still, the closing stock will be negative or will not be available, that situation as of now doesn't look like.

Just can I add one more question? What would be the share of the blended man-made yarn in our total volumes currently? And how was it maybe 3 years back?

We are -- I mean our -- if I look at our other consumptions, we will be -- the non-cotton would be in the range of about 20%, 22%. And this has been our percentage for the last couple of years because last year, we expanded some capacity on the spinning side. So some more cotton spinning was added. So I think as a percentage -- raw material as a percentage -- the man-made as a percentage in total consumption would be in the range of about 20%, 22% only.

Our next question from the line of Abhijeet Dey from BNP Paribas.

Congratulations on a good set of results. So 2 or 3 things. One, you talked about 100,000 spindles spenders over the next 12 months. By when will you finalize that CapEx, sir?

No. I think we are just started compensating this new project, and we are applying to -- for the banking sector as well as to the government for their approvals and all. And generally this process takes 2,3 months, once it's there, then the implementation period will be anything between 9 months to 10 months.

Okay. But you've decided to go ahead? You don't need any further board approvals for this?

No, it's only the management view as of now. So depending upon the technical and the economic difficulties, what -- how the various governments will give some incentives, we are sorting. Once we get that only, then we will take a final view. And thus, normally, unless we get the loans, et cetera sanctioned, we generally do not undertake any project as a very, very conservative thought.

Okay. So this 100,000 spindle will cost you about INR 700 crores, INR 750 crores, is what you've said, right?

Yes, roughly.

Okay. And this will be in which locations, have you decided on the location?

I think in all probabilities, we go -- it will be Madhya Pradesh only.

Madhya Pradesh. Okay. Sir, anything on the fabric side, dyed or -- sorry, gray or processed, anything on that side you are thinking about?

Fabric side already, we have enough capacity. So our first attempt is to digitize it fully. Once we are in a position to do that for a year or so, we'll consolidate and then only we look at something else.

Okay. Right. And so what would be your net debt level sir, as of December 31?

0.1 net, and I think gross will be 0.3.

0.1 would be the net debt? In rupees, crores, sir? It would be great if you can just highlight that?

INR 500 crores to INR 600 crores.

That will be the gross number?

No, net number.

INR 500 to INR 600 crores, okay. And sir, one last thing on cotton purchasing. There have been previous questions also on this. But as you have been highlighting that it remains being what the Cotton Corporation done -- does after gain of arrival season is over. And given the fact that they have been buying cotton last season and even this season quite actively. So there is a possibility that they can come in the market to offload, at least some of that cotton. So as a strategy, are you generally continuing to buy cotton as of today or will you be willing to wait for the arrival season over, and then you can also do some purchasing after that. Can you just throw some light on that?

We generally take our own calls. And based upon the quality and commercial viability and our view on the crisis. So we are not stating that the CCI material is available. So it's purely a commercial call which we are taking. And based upon our view, we'll decide to buying cotton. Not only this constraint that the cotton is available, so we keep it open. So it's more of a decision or a call which we are taking or which we will be taking. And accordingly, we'll decide on our cotton purchase.

We have next question from the line of Deepesh Agarwal from UTI Mutual Fund.

Most of my questions have been answered. Just a few follow-ups. Sir, you mentioned INR 700 crores, INR 800 crores as the CapEx -- this is including maintenance CapEx or is purely an expansion CapEx?

This is expansion plus INR 200 crores, INR 250 crores is generally maintenance expenditures.

Okay. So broadly, we would be looking at some INR 900 kind of -- INR 900, INR 950 crores kind of a CapEx number?

Yes.

Okay. And sir, on cotton procurement. In the -- given the cotton prices are at high globally and in India, would we stick with our cotton procurement policy of 6 months this time around? Or is yet, would we increase the kind of hedges, we typically take, say, in the New York Stock Exchange?

No. I think my view will be we will take call over a period of time depending upon how the quality is available and the commercial risk involving within. So as I mentioned earlier, one view could be that the cotton is available with the CCI, so one can postpone talk of the buying decision. Two is a pure technical quality and commercial call. So we're looking at all these aspects and accordingly we will decide how do we go on the time strategy.

Okay. So we would be open to the idea of not holding 6 months of cotton inventory? The final call will be taken later, but we would be open to this idea, right?

Yes. Yes.

Okay. Okay. Sir, also, we have been hearing a lot of PLI in the textile sector. So what role would Vardhman have in that PLI in the textile space?

No, we will be the resident of this scheme only. So we have no role to play in textile space, but whatever government gives me, it will be the same.

Okay. Okay. And sir, lastly, just a clarification, you mentioned typically with cotton spread with a 2-month lag, so something which was in January kind of a spread, we will be getting it in the March, right?

Yes.

We have next question from the line of Samir Rachh from Nippon AMC.

So over the last few years, you've been really conservative on CapEx front, and that has really helped the company. And today, you have one of the strongest balance sheet in textile sector. And it's good to know that you already announced INR 700 crores or INR 800 crores CapEx on expansion. I just want to understand Vardhman has always been the leader in textiles and in the past, when the balance sheet was not as strong as it's today, we have been much more aggressive on CapEx front. So what all factors you would want to like converge for you to become more aggressive on CapEx in future?

It's only the opportunities which are available and the right margins availability. So in case the kind of margins we are talking of, if that gets sustained over a period of time, I'm sure company will start looking at more and more CapEx. So our peer is only whether this margin is available on a sustainable basis or it's a shorter margin. Because for the short-term margin, we were thinking of a project which is going to be there for next 20 years, will not make sense. But if we feel the there's a basic shift in the margin and the margins available are more sustainable on a medium-term basis, I'm sure, we could look at expanding the business on a faster pace as well.

Right. Are you getting some early sense that like, finally, things are converging and textile industry once again, could have much better days and it will also take some time for you to get approval to get land, et cetera? So you will have to start preparing in advance. So just curious how we are preparing for those kind of scenarios?

As all commodity cycle is on an upturn, basically because of lots of stimulus available in the world markets. So my belief is next 3 to 6 months' time, the direction would be there where the commodities are going and where the stock market commodity all these cycles are going in. I'm sure if that continues then things would be more stable and probably it may be easy for the companies to take a call on the business side. But as of now, since it's increased in a big way, especially in the last 3 to 6 months' time. I think it's always better to wait for some time, but nevertheless since we found opportunity because of our product mix and customer base, so that's there, I've decided to look at the possibility of going in for this 100,000 spindles. And then once we are sure the margin sustainability in the medium-term time or we get opportunity or a good customer base or any product which can give a better margin, we'll look at it otherwise.

Right. And sir, one last thing from my side. So we're hearing that there is certain increase in interest in-sourcing more garments from India. Historically, what demand has always -- I think been avoiding because of a large amount of labor, it requires. So any like change in our thought process, looking at opportunity or we would want to be, by and large, avoiding in that segment?

On the garmenting side, will take some more time to make our view. As of now, there is no change in the thought process.

We have next question from the line of Gagan Thareja from Kotak Investment Advisors.

First question is around the household textile demand, which you said you've seen a...

Sir, I'm sorry to interrupt. I would request you to repeat the question. We're not able to hear you properly.

Yes. So my question is around the demand for household textiles, which you said had moved up well. Could it have something to do with the increased demand of bedsheets, et cetera, for hospital requirements due to a higher inflow of COVID patients? And therefore, do you see that seasonally sort of peaked out now and softening thereafter?

Yes, partially, the demand increase is there as of now because of the COVID and the hospital demand. But at the same time, I have a very strong feeling once the COVID is over, people will start traveling. So the demand -- equal demand will come from the hotel industries as well, which is, as of now, it's very, very less. So maybe the hospital demand may come down. But at the same time, the hospitality sector, will start looking at a better demand.

Okay. So second question is around the cotton price and cotton inventory, if you could give some idea of your assessment of -- at a global level in cotton inventory. I think you indicated last quarter that China stocks were running very low and China might be a big buyer of cotton in the coming time. I'm just trying to understand because yarn prices, you say, is a function of international cotton prices. And if that means that yarn prices are on an upward trajectory. And you're in season to procure cotton net at the most economic prices that you've been able to get in the last maybe couple of years. Does that mean that you are entering into a phase of sustainable including threats for the coming year?

Let's look at the total cotton consumption worldwide. So the total consumption are in the range of about 24, 25 million tonnes a year. Out of that, almost 8.5 million tonnes is in China. And the China local cotton availability is only about less than 5 million tonnes. So there would always be buying close to about 2.5 million to 3 million tonnes from the world market. So this is the 1 big factor, which is where this demand would be there. So there are 3 biggest countries. Second would be, let's say, look at U.S.A. So their crop is almost in the range of about 4.5, 5 tonnes -- 5 million tonnes. And their local consumptions are less, but it's mostly exported to the China, Indonesia and India, Bangladesh, other countries, Pakistan. Third biggest country is India, where our crop size is almost close to about 6 million tonnes. Out of that, and if you look at in terms of the base, so our total crop size is close to about 36 million base in India, and our consumption is 31 million base. So we'll have a 5 million based available to us, which are generally get imported to different countries, neighboring countries. Earlier Pakistan used to be the biggest -- one of the biggest user. Now since the trade between India and Pakistan is not happening, Bangladesh, [Foreign Language], Vietnam, China, they are the countries which will be taking the cotton from India. So the overall availability of cotton is not going to increase more than 40 million, 24 million, 25 million tonnes. And the consumptions are also likely the same. So I think the word balance sheet because it's a natural product grown in the field and you can't increase it artificially or like a synthetic fiber, so there will always be an issue of increasing it in a bigger way. So the availability may not increase more than 24 million, 25 million tonnes in any case. And the consumptions are also likely to be same rather if the consumption increases in countries like India, China, which are continuously increasing. So scenario may come there, more and more. And if you look at the trend in last 10 years, more and more synthetic fibers are replacing cotton because cotton is -- the constraint is coming from the supply side as well. So to better understand, this balance sheet will always be 24 million, 25 million, 26 million tonnes.

So what I can infer is that the situation is reasonably either benign or favorable for you as you go ahead. And as you improve your utilization and also come out of the MTM loss phase, it basically means like next year, you could actually be hitting even somewhat in excess of your -- of the upper band of your guidance of 20%? I mean it would seem to me that if you put all these 3 factors together, that's not very unachievable unless something dramatically changes from where we are right now?

It's up to you to make those calculations.

Okay. Next question is around the MSP. I think the government is brought out the -- at least proposed and implemented loss on MSP. And I think cotton also falls under MSP, at least for the procurement and by Cotton Corporation. If these farmers strike that is ongoing right now is resolved and status quo prevails on the laws as they had in the past. Do you see that as a favorable development for the industry?

No. As far as cotton is concerned, earlier also, CCI has been buying to support the farmers on the MSP, and they continue to be same. So with this bill, whether it's passed or not passed, I don't think there's any major difference between -- to the industry because CCI this year also out of the 2, 31 million base, which have arrived till now, it has already bought 8.5 million base as of now during the current financial year -- current cotton year. So CCI has been pretty active in supporting the farmers when it comes to the prices going below MSP. So whether the new bill is there or it is postponed, I don't think it's going to really make much of difference as far as our industry is concerned.

Okay. And finally, the transition from MEIS to RoDTEP, any details on the contours of RoDTEP and what it could mean for exports or exporters in the domain?

No further news or information on that. Everyone is getting the government decision that how much do they allow. So we're just waiting and watching.

We have next question from the line of V. Srivatsa from UTI Mutual Fund.

Yes. Sir, my question was related to the spinning capacity that you have announced. So in the past, in all our interactions, you have clearly indicated that we are not in favor of putting stand-alone merchant spinning capacity, but would look at a composite mill. So what has caused this change? I mean, are we more comfortable on the long-term spinning -- the spreads or is there any kind of decent incentives by the state government, which has prompted us to go for a stand-alone spinning CapEx?

First of all, I'd like to make it clear that we have never gone in for any expansion based upon the incentives only. So our first call is always on a business call. If you find there is a business need or there's a business merit, then only I look at the incentive. So that's a second or additional factor. But only because of the incentives, generally we'll not go in for any expansion. Two, yes, there has been improvement in the overall product market, overall customer market for us. And we feel the kind of customers we have where they want to consolidate their position and what is this number of supplier. So in case, we do not support them, it's going to be difficult for them also to have their consolidation. So it's a win-win situation, means if the customer wants more material and in case we can supply to them. So it's a win-win situation. So I find the kind of customer base or the kind of product base, which we have been widening in the last couple of years is making us a case now that some spinning expansion could come in. Three, I've never said I'm not interested in a spinning business as such to expand. We only said at that stage where we expanded the last business, that's the time where we are adding the capacity so that we can have the overall growth in the company. Also, I have always been emphasizing that we want to implement a project. And then after that, wait for 2, 3 years to consolidate the company. Make some money so that the balance sheet continues to be strong enough. I think last 2 years, within the 3 years, we didn't expand the business, and we added some money in the system. The balance sheet is quite strong. That's where we took a call. Then why not to look at to expand some business? And yes, wherever we'll be expanding, some incentives would be available from those governments as well.

Okay. Okay. And sir, my second question on this Chinese cotton, which has been banned by both U.S. as well as some part of U.K. So do you see any kind of sharp structural improvement in the demand, especially by Vietnam and Bangladesh players? Because apparently, they are big users of this cotton?

The demand, if it comes -- when it comes to Vietnam and Bangladesh, my belief is rather than the import of yarn, they will be looking at import of cotton from India. So ultimately the cotton which is available. So the China consumption is close to about 8 million tonnes. Out of that, the total production is 5 million tonnes. And out of that, 4 million tonnes comes from Xinjiang. So my personal belief is slowly their domestic market, which is using -- I mean they have a very large domestic market also for clothing and garmenting their textile product. Slowly, the people who are supplying in the domestic market will move more and more towards that cotton and all the exporters, they will prefer to import either cotton or yarn to have a clean balance sheet where they can show that this is an imported material and not Xinjiang's cotton, and then they'll be exporting their textile products.

Okay. And sir, finally, I mean, on that -- I mean reorganization of our subsidiaries, so we have done our wholly owned. So sir, any color on when we would complete the deorganization with Vardhman Acrylic, which you had postponed it a couple of years back. So any call on that, sir?

We haven't taken a decision as of now because the earlier scheme of merger is still on, and I expect by the end of March, we should be in a position to merge it. So we haven't taken a call after that. And it's only once this is completed, then we'll take it as a fresh look, whether to do or when to do.

Okay. And sir, we are still holding the stake in our associate company, Vardhman Yarns and Threads. So any call on when we'll be exiting that completely or whether we'll be integrating it or whether we'll be buying it back? Is there any call on that?

We have got 11% stake in that company, and it's an associate company as of now. So there is already a time line defined to asset or to continue that business. So both the options are available with both the players. They want to buy, they can buy, we want to sell, we can force them to sell or if both the parties mutually agree, that the things can continue in the same fashion, we can continue also. So I think as of now, we'll wait for some more time before we decide which direction we have to go, since it is only 11% stake. So -- and in any case, the question of buying back from them is not there as of now.

[Operator Instructions] The next question is from Keshav Garg from Counter Investment.

Sir, my question is regarding our subsidiary, Vardhman Acrylic. Sir, recently, the government has removed anti-dumping duty on acrylic fiber imports. So what kind of impact do you think will it have on our subsidiary?

Theoretically, the -- once the anti-dumping duty is not there, the imports will become cheaper for fiber. So it has an inverse converge impact on Vardhman Acrylics to that extent. But fortunately, this period [indiscernible] overall shortage of fiber was there, so it is good. But purely from the anti-dumping's perspective, it is negative for acrylic fiber company.

So overall, like we used to do around INR 40 crores to INR 50 crores of EBITDA in that company. So you think that we'll still be able to reach that figure?

It's very difficult for me to say what is -- what will be the profitability. So because it all depends upon the guidance of fiber, prices of crude, prices of APN and so on. So I can only say that since the anti-dumping duty was there. So the fiber prices in India were inbuilting a part of the anti-dumping duty, which once is not available, so -- and the imports are available at a cheaper price. So to some extent, the pricing will get diluted.

Okay, sir. And sir, finally, sir, please consider a liberal dividend in Vardhman Acrylic since last year also, we got 0 dividend.

Our next question from the line of Ujwal Shah from Quest Investments.

I just wanted to understand the conversion from gray to our fabric has been going down a bit. Usually, we try and produce gray fabric only to the extent where we can go forward into our fabric business. So any thoughts why this has happened? And are we expecting the spread to improve going forward?

Mukesh?

Yes. Yes, that has been always the strategy. Our endeavor is to sell as much finished fabric as possible. And additional gray fabric capacity is kept only for some strategic markets who are -- which are long term. And we need to -- in any case, we need to keep some buffer for serviceability for the finished fabric. So your point is well taken, and it is the strategy also to utilize as much as finished. And gray should be, to the extent, which is surplus capacity or the strategic deals. Gray is maybe a little higher for the time being because of the special circumstances that we are undergoing.

Sure, sir. Secondly, sir, just wanted to understand our stands on costs. So normally, we go for expansions. Considering just as an example, power is such a big cost for our company. Any point of time, we are looking to probably add captive or look at renewables, just to cut down on those costs? Or how do you see the cost metrics per se at company level?

We are looking at definitely the option of solar. We already have a capacity of close to about 50, 55 megawatts, which is the captive. And we are looking at solar also as one of the option. We have implemented the first project of 7 megawatts, which has started, another project of 7 megawatts is likely to start in a couple of days. So we are assessing all those things. And hopefully, wherever the visibility would be there, we would be taking up these projects in the times to come.

Great. And lastly, sir, can it be safely be assumed that margins in 4Q and probably 1Q as well would be closer to 20-odd percent, right? Looking at current scenario?

Looking at current scenarios, yes, but any change happens, things can change in a different way. But as of now, going by the current situation, yes.

We have next question from the line of Ritesh Gandhi from Discovery Capital.

I just wanted to understand your own hypothesis as to the reason for the increasing spreads in spinning. I know it's probably a combination of a whole host of factors, including pent-up and the China ban and the poly price are going up, but just wanted to understand what you see as being the reason how sustainable it is? And is the fact that you guys are going to be engaging in actually CapEx and indication that we should read that you see this being -- I mean, sustainable over a longer period of time in terms of spreads?

Yes. As I mentioned, if you look at the 3 million spindles, which are closed in India. I think, by and large, that's a decision where the restarting of this capacity may not be there because today, the margins are good. And if someone is not started it till now, it will be difficult for them to restart even in the times to come. Two, the demand from the home textile has been good. And even if the hospital demand come down, my belief is hospitality will start in. So that demand will continue. So this means the yarn requirement over there would also increase. Three, because of the Chinese factor or the Xinjiang factor, in case China continues to import which they are importing almost 30 million kg from India, 25 to 30 million kg per month from India, in case they continue. So to that extent, the yarn availability in the country will come down. Fourth, I think my belief slowly as our income -- we have been talking on this for the last many years, our per capita consumption in India is one of the lowest, almost 4 kg per person, whereas it is much higher in the developed countries. So as we -- as per capital income will increase, I'm sure the textile demand over here will also increase in the medium terms. So as a country, there could be opportunities available, which has not happened in last many years, but my belief itself as per capita income increases, the consumption, because the first demand is always eatables, second demand comes from the textile. Of course, nowadays in between there are electronics and cellphones as well. So in case, we are in a position to increase those demand because the population, the average age of population is very young. And the consumption pattern could be definitely better going forward. So in the medium term, it looks like a reasonable opportunity. Still it's a commodity. It's a very, very competitive industry. So we have to keep on struggling and looking at the good and the bad cycle comes, every 4 years, 5 years in this industry and whoever survive after the bad cycle, probably in the next season, they are in a position to make good money as well. I think that's what is happening even today also [Technical Difficulty].

Sir, I am sorry to interrupt. We are not able to hear you.

So I'm saying the opportunities are there. Both because of the home textile and exports from this country, China plus 1 factor, Indian population growth and the possibility of further increase in the per capita consumption in India. So the overall medium-term perspective looks good for the industry. So that's where we also decided to expand a part of the capacity.

We have next question from the line of Saket Kapoor from Kapoor Company.

Firstly, there have been cases in the NCLT where as per information, some assets in the spinning and the even value addition segment of garment data was -- were available. Have the management taken a look at the same that I'm talking in the same in the vicinity if you're vicinity is.

So we haven't looked at it very seriously till now. But yes, we still keep on evaluating, and it's always been looked at in terms of the technology available, the location and the various factors. So we are open to the idea in case we get something of our choice, I'll definitely look at the same.

Okay. So I was hinting towards self-manufacturing there at Ludhiana. I don't think whether NCLT has concluded or not on. If we look at their assets also, they had assets in the state of Maharashtra and in Punjab? As we look at -- self-manufacturing?

No, self, we are not really looking at it.

We have not looked at it?

No.

But we have not evaluated even when it was placed...

Because we have too much of different plants and the different locations and the machine parts are very different. So we are not looking at them -- this asset under acquisition figures. The home textile is the different segment, which is not our cup of tea.

Okay, sir. We -- our specification does not matches, and that is a thought point of view?

No, no, no.

Okay. And sir, lastly, the trend which has been established in the yarn segment currently over the last 3 months. Sir how confident are you that this is a -- this could be a sustainable trend for a longer period of time. And if the sector, which have enabled the same, how sustainable are those sectors? Or is it just a flash in the pan that due to which these trends have emerged, sir?

It is very difficult to predict or to say this is sustainable or not. So I can only share what is happening and why these changes have happened, which I've shared so whether this continues, the entire cycle of commodities continues, so it's really difficult for me to say. So yes, whatever is happening, whatever changes happened in the industry in terms of demand, consumption, supply side that I've shared. So margin sustained or not sustained, I think we'll have to wait and watch.

Right. And what are the ways in which you are looking to reward your shareholders, sir?

It's up to the Board to decide. So I think I'll not be in a position to comment anything on that.

We have next question from the line of Siddharth Rajpurohit from JHP Securities.

Sir, what is our fabric utilization currently?

Mukesh ji?

Fabric utilization?

Currently, sir?

Yes, fabric, on the -- at the loom stage, the gray fabric stage, the capacity utilization is to the extent of 0.95%. And processed fabric is about 85%.

Okay. And sir, as there are 6% to 7% of spinning capacities out of business and around 10% increase in production or sales, is the industry now at 95% utilization?

Other than the spinning capacity, which is closed, I think by and large, they are fully utilized.

Okay. And what is the asset turn in the yarn and fabric, sir?

So the blended asset turn is [indiscernible] the business is working fine.

Okay. And what does export contribute to yarn and fabric, sir? 35%, 65%?

Separately, we don't give out but roughly...

40% export, 60% domestic.

Okay. And sir, are you seeing any new PLI scheme coming for the cotton as it was not announced? Any incentive schemes for the cotton players?

Any?

Any production linked incentives coming from the cotton industry, sir?

No, it may not be PLI, but the government has already announced that they are likely to give a refund of all the -- all the duties which are not getting reimbursed under the GST regime. So we are only hoping that once they are in a position to clear the RoDTEP scheme, probably it could be beneficial for all the textile sectors.

So this will add another 2%, sir, to the incentive -- to the existing incentive?

They have not announced any percentage. They have only made an announcement in the last budget that they'll be working on this, and they'll be coming up with a scheme.

We have next question from the line of Prerna Jhunjhunwala from B&K Securities.

Hello, am I audible?

Yes.

Sir, just wanted to know the current yarn prices in dollar terms, which used to be around $2.5 at the time of pandemic first quarter?

As of now, [indiscernible] general market prices will in the range of about $3.60, $3.65, $3.70.

That is very good. And sir, I wanted to understand your cotton procurement strategy also. Currently, like, for example, from the news?

Sorry, but let's not look at the pandemic prices. The prices pre-pandemic were close to about $3.

Okay. Okay. And around 20% higher than the pre-pandemic levels as well? And our cost of cotton is -- would still be around pre-pandemic levels is what I could...

The cost of cotton pre-pandemic and now is higher by about 10%.

Okay. Okay. And sir, you have answered this many times whether this thing is sustainable or not is a difficult thing to tell. But at least just -- can you just help us understand the export of yarn as a contribution in this quarter, which was 80% in first quarter for us?

No. Now, I think we are back to our normal range of about 40%. So the domestic market is doing good, our captive utilizations have improved. So we are back to a normal of about 40% export.

Thank you. Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to Mr. Neeraj Jain, Joint Managing Director, for closing comments. Over to you, sir.

Yes. Thank you very much for the support, you have always been given to us. I have always been mentioning the 2 factors, external and internal. So pandemic happened, we were very, very concerned about the overall business scenario. But I think as management, we have tried to look at all aspects, what could be the best possible actions to be taken by us. And I can rest assure on behalf of management, that whatever is possible for us to do, we are looking at all the efforts so that the company becomes strong, and we can come up to the expectations of the shareholders. Business is good, bad, markets are good, bad. I think that's a phenomena, which is being driven by the market and not only Vardhman can do anything. But internally, in terms of our cost, internally in terms of our product mix, our service levels to the customers, quality levels, that's where we have done lots of jobs, and we'll continue to do the same. And I'm sure the customer service available or the support available from all of you will remain, all our team is very, very agile. People have really put in lots of hard work to see to it even in spite of the pandemic where we have reached today. And I think that's the strength of the organization. And I'm sure we'll continue to do good, and we'll come up with the expectations. So thank you very much for joining this call today.

Thank you very much, sir. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.