Vardhman Textiles Limited (502986) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Vardhman Textiles Limited Q3 FY '25 Post Results Earnings Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Roshan Nair from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and welcome to Q3 FY '25 Earnings Conference Call of Vardhman Textiles Limited. On behalf of B&K Securities, I welcome all participants and management of Vardhman Textiles to the call. We have with us today, Mr. Neeraj Jain, our Joint Managing Director; Ms. Sagrika Jain, Executive Director; Mr. Sushil Jhamb, Director-Raw Materials; Mr. Rajeev Thapar, CFO; Mr. Mukesh Bansal, Head-Fabric Marketing; and Mr. Varun Malhotra, Head of Finance. Without further ado, I would like to hand over the floor to Mr. Neeraj Jain for his opening remarks, post which we can have a Q&A session. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Welcome for Q3 conference call on the -- our quarterly numbers. So we had a Board meeting today, and I'm sure the numbers you would have seen by this time. So the business continues to be -- there are all ups and downs in the business. On one hand, spinning business still struggling with the higher raw material compared to international prices, whereas the fabric business is doing better. So as a result, the overall results of the company compared to the Q2 are a little low. But if we compare it with the corresponding quarter, we are definitely far better than the corresponding numbers. So in terms of the utilization, I think both businesses, we are doing good, both the businesses in terms of the customer base, product base or the utilization, the company is doing pretty good. We have announced lots of capital expenditure last 2 quarters. That's all in place. And I think, as per -- that's all going as per the plan only. So there are a few fresh CapEx, which has been announced for the modernization as well as for some sustainability, et cetera, et cetera. So we can straight come to the Q&A, and we can deliberate and we can discuss all the issues, which comes by way of Q&A one-by-one. Thank you very much.

[Operator Instructions] The first question is from the line of Awanish Chandra from SMIFS.

Congratulations to the whole management team on decent performance continuation. Sir, my first question is on the margin front. I mean, I understand that a spot spread and the company performance cannot be related to one-on-one, but cotton prices has gone down in quarter 3 and yarn prices, whatever industry data we look for, and there was a good spread versus quarter 2, there was a good improvement in the spread. But that is not getting reflected at all in sequential margin improvement. So could you, sir, highlight this thing that whether we will have better improvement in quarter 4, sir, with some delay or any other reason?

Yes. So if we look at quarter 2 versus quarter 3, when the quarter 2 started the New York Future was also far better and the international prices are also better. Over a period of the last 2, 3, 4 months, the New York Future continue to come down, and it is now ruling in the range about USD 0.67, USD 0.68 per pound. About the Indian prices, your point is right, that Indian prices have come down from -- because if you look at 2, 3, 4 months back, it was almost in the range about INR 58,000, INR 60,000 a candy, which has now come down to INR 54,000. So from that perspective, definitely, there is an improvement in the Indian cotton prices. But as far as our company is concerned, that was not the case, because we had bought the cotton last year, and the cotton which we were using in the second quarter was bought almost around a year back. And our average cost was in the same range of INR 53,000, INR 54,000 only. So though the market prices of cotton was higher, so people were losing money, whoever was buying cotton at that stage, we were not losing money, but at the same time, the margins improvement did not happen for us, because our actual cost was almost same in the second quarter versus third quarter. So that's why this is not showing the big improvement. Two, the overall yarn prices also tumbled to some extent, because of the New York Future. So I think, since the yarn prices did not increase, cotton prices remain same, I think that's the reason the numbers would not be improved.

But we can hope for quarter 4, right, because the lower cotton prices, which is now, that will get reflected somewhere in our number, right?

It's not really, not really, because if you go by the -- let's say, last 6 months versus next 3 months going by today's cotton position, there is no change in our cost of raw materials. So we were -- we bought the cotton. As I mentioned in the last season at an average cost of INR 53,000, INR 54,000 a candy, which we have been using for the last 6 months. The current prices are also same. So whatever we are buying today, even if we continue to use in the next 3 to 4 months' time, there is not likely to be any major improvement in the margin, unless New York Future increases or the yarn prices improves.

Okay. And last thing on this front, how much cotton inventory we are carrying?

So, it's starting of the season in India start somewhere in October, November only. So I think, it's only about last 2 months, 2, 2.5 months where the cotton is coming to the market. So to that extent, I think, we have started buying it slowly. I'm not -- I mean, generally, typically, we have a 6-month stock or 7 months stocks by the end of 31st March. So it looks like going by today's pace, we may be close to that figures only.

Okay. And sir, you have talked about CapEx in various conference calls and various press release also, you have highlighted all the CapEx in bits and pieces. Just for clarity purpose, if you can just talk about this much CapEx in yarn, fabric, and modernization, and at what state all the projects are, that will be very helpful.

So the total CapEx announced by the company is almost in the range about INR 3,400 crores. And out of that, all the schemes we are working in, except one of the projects where the government approvals are still not there, that's close to about INR 400 crores, INR 500 crores. So the work which is going on as of now is almost close to about INR 2,800 crores. And that's all, I think, I'm going as per schedule only, and we expect that within this calendar year, maybe by November, December, this CapEx will get completed.

[Operator Instructions] The next question is from the line of Keshav Garg from Counter Cyclical PMS.

Sir, I'm trying to understand that you alluded to the fact that yarn prices also declined quarter-on-quarter. So if you could quantify that on a per kg basis, what was the average yarn realization in the third quarter? And what is the average yarn realization at present? And what is our cost of cotton, I think, you've already answered that it's around INR 54 kg, if I understood it correctly. So that's the first question.

So if you look at 6 months back, the yarn prices were almost touching in the range of about USD 3.25 or so per kg. And slowly depending upon the position of the company, it kept coming down. And as of now, the current prices of yarn are in the range of about $3 per kg of yarn.

Okay. And sir, how has it changed quarter-on-quarter?

Second to third quarter?

No, sir. Sir, from third quarter till today, that is fourth quarter.

No, no. So this prices -- third to fourth is only 15 days, 20 days has gone. So the prices are almost same today.

And sir, so how is the demand situation -- how is the demand supply situation for yarn, I mean, basically globally and as well as in India? And sir, by how long you think that the demand will take care of the excess supply, so that our yarn spreads can go back to the pre-COVID level and where we used to do around 20%, 16% to 20% EBITDA margin, which has now come down to 13%.

I don't know where have you seen the 13%?

No, sir, I'm saying that right now, our stand-alone EBITDA margin is around 13%. And sir, pre-COVID, if we look at FY '16, '17 FY, so it used to be around 20% operating margin even in FY '19, it was 18%. Sir, so, what I'm trying to understand and then this margin shot up during FY '22, which was an aberration. And now it has come down to low to mid-single-digit -- low to mid-teens. So what I'm trying to understand that when will the -- our yarn spreads, when will they normalize?

Okay. So first question is on the demand and supply. Overall, demand is okay. There is not much of a concern on the demand side. So I think, in terms of international demand or domestic demand, it's reasonably okay. On the supply side, because of the very bad margins in last 2 years, I think, there are lots of small capacities, which we understand as the industry estimation has already stopped. So as per the estimation done by one of the large textile player, it is understood that almost 6 million, 6.5 million spindles have already stopped in India on a permanent basis, which is almost like 15% of India's capacity. And to that extent also, I think, demand-supply is getting adjusted. So from that, the demand side, I don't think there's really a big issue as of now. Coming to the margins, while margins are lower for Indian textile players, our raw material cost today is much higher than the international prices. If you look at the Indian -- the cotton costs in India for the last 15, 20 years, will always be on an average, $0.04 to $0.05 higher than New York Future. But this is the time, even today, New York Future is at $0.67, $0.68, Indian cotton is available at USD 0.80. So we are $0.12 higher than the New York Future. The yarn prices get established based upon the New York Future, that anyone who is getting a cotton, let's say, in Vietnam or in Bangladesh or in Indonesia, what is the cost of cotton for them and how do the pricing happen. So to that extent, Vietnamese spinner is still making money. But when it comes to India, we have two issues, which we have explained or discussed earlier also. The one issue is, our cotton prices have become higher because of a minimum support price, where the CCI is buying the cotton at a minimum support price from the market. As a result of that, our cotton cost today or the market price of cotton is today INR 54,000, which is equivalent to USD 0.80. So these situations once in a while have come earlier also, but at that stage, we used to import cotton in India and which will utilize all the excess cost over here. Unfortunately, we have an import duty on import of cotton almost 11%, which was imposed by the government in the budget 2021. As a result of that, the import of cotton in India is going to be 11% higher. These are the two reasons. The Indian cost today is much higher compared to the world market. So the situation will not improve by demand and supply only till the time our raw material prices comes down to normal. And this is the reason our margins are low. The moment the raw material price comes in line with the international markets, I think, the margins would improve immediately after that. So it's nothing to do with the demand supply. It's more to do with the raw material cost, which is much more expensive in India compared to any other part of the world today.

So, if we see pre-COVID, sir, so then was the situation different? Like, I mean, then what is today is, sir, because I understand the MSP used to be then also and Cotton Corporation used to buy cotton then also. So sir, basically, what has changed from pre-COVID to now?

So there are three things which have changed. One, New York Future used to be in the range of about USD 0.75, USD 0.80. So, even if the MSP was increasing over here, the Indian MSP was still lower than the international parity. So as a result, it was not impacting us. Today, New York Future is at $0.68, whereas the Indian cotton or the MSP of Indian cotton is almost equivalent to $0.80 today. So our cost has become higher. So one, New York Future has come down. Two, India is increasing the MSP every year from 5% to 7%. So 3 years, we have increased it almost by 18%, 20%. And with the international prices not going up, we have become costlier compared to the world markets. And the only course for -- corrective course for the Indian spinning industry was to import cotton so that our cost is not higher than the world market, even though the MSP could be higher. But unfortunately, 2021, there is an import duty, which was imposed by the government in the budget of 2021. So we can't import also. So last 3 years, our situation of raw materials has actually gone against us. So all three factors are forcing spinning is still not to do good in India.

[Operator Instructions] The next question is from the line of Pankaj Bobade from Affluent Assets.

Am I audible?

Yes, yes.

Sir, how is the situation in Bangladesh? Is the Indian textile industry benefiting from the turmoil out there?

So Bangladesh condition is okay. There have been some instances where there are some disturbances in different parts of the country. But if you look at their export figures, their overall production or our sales, the Indian yarn going to Bangladesh, there is no reduction in that. And we understand from our various customers, they are running full capacities. So as such, there doesn't seem to be any major concern from the Bangladesh perspective.

The next question is from the line of Vikram Suryavanshi from PhillipCapital.

Obviously, we understand the impact of very high cost of raw material for cotton. How it has impacted our yarn export, which you used to give on a monthly basis, how is our export volume? If you can share that, I think, that would be helpful. And second, should I ask a second question now or after that?

So Indian yarn export, we used to do almost 100 million kg of exports from India as a country. So in this period also, if you look at last 10 months, 15 months, our average export from India is in the range of about 100 million kg only. So there's no reduction as far as the export is concerned from India.

Okay. So basically, volume has remained, but margin is under pressure.

Correct. Correct. Correct.

And in terms of capacity utilization in fabric, how much it is and how we can look at our export opportunity in fabric going forward?

One second. Fabric utilization. Currently going forward.

So currently, our fabric utilization is at almost 100%. And as you rightly know that we've already plan for our line 4, another production line expansion in plant -- in our plant. And the expansion should be coming at around September this calendar year.

Okay. And would it be possible to share what would be the mix within fabric in terms of raw material between cotton and, say, synthetic?

New production line -- our expansion, the one that I just spoke about would be more cotton and cotton-based.

Okay. Expansion is for cotton. And within our spindle, is there an ability to convert some of the spindle into synthetic blends the way we are seeing demand is growing for particularly some of the blends and all?

We are already doing that. But unfortunately, even on the blended yarns, there is a problem, because we have a law in India now where any import of polyester or viscose, we require to get approval from BIS, Europe, Indian standards. As a result and which has to be certified by the government or BIS even for the factories, which are situated outside. As a result of that, there is no registration the government is doing. As a result of that, there is no import of polyester or viscose is coming in India. So today, the Indian prices of polyester or viscose are almost costlier by about 10% to 15% compared to any spinner which is getting it either in Vietnam or in China. So unfortunately, the non-tariff which has been imposed and as a result of that, we are not really very, very competitive on those products also in the world markets.

Understood, sir. But sir, I think, while listening to you then, if you look at when we are talking about the increasing the export for India, and we have disadvantage of almost 11% in cotton and again, 10% to 15% disadvantage in synthetic. Won't you think it will be a major bottleneck for our target for export and how the industry is looking to address this issue?

It's a big concern, because exports can happen only if the manufacturing sector keeps improving. So on the spinning side, we are very clearly looking at there's no expansion happening. And if you look at the machinery manufacturers today, they are all running at an average utilization of 40%, 50% only. So one, there is no expansion happening. Two, as I mentioned earlier, as per the industry estimate only, almost 6 million, 6.5 million spindles have stopped and remaining also since we are not making money, most of the spinning sector, the modernizations are also not happening. So I think as of now, there seems to be a concern until the time the government decides on the basic raw material.

Okay. And last question on, how is the cotton production outlook?

So production cotton -- the cotton cultivation came down by about 7%, 8% last year. And -- but at the same time, I think the weather has been favorable. So it looks like last year, the total crop was almost 31 million bales in India. It looks like though the government has given or the CAI has given an estimation of 29.8 million bales, but there could be a possibility just going to almost 31 million bales as well. So in terms of crop size, we can be comparable to the last year, it looks like as of now.

Understood. But because the prices are below MSP, is there any fear of diversion to -- farmers can divert to other crop next season?

Not really, because the prices are lower than MSP, the farmer doesn't have any impact of the same, because CCI is buying. So for example, today, this season, the total 17 million bales have come to the market till now and almost 50% has been -- if not 50%, 45% has been procured by the CCI only. So farmer, there is no issue or a concern to the farmer, because they are in a position to get the MSP, whether the market buys or CCI buys. So CCI has been buying and today, they'll have one of the biggest stock available to them, almost 7.5 million bales or so. So out of 17 million bales, which have come, CCI procured 7.5 million, and they are all holding it into their stocks as of now. That itself shows the market is not ready to buy at these prices.

[Operator Instructions] The next question is from the line of Rupam, Investwell Agents Private Limited.

Hello.

Yes, Rupam, please go ahead.

Actually, I missed the part regarding the CapEx plan. So could you just provide in detail what kind of CapEx and what is the ongoing CapEx and upcoming CapEx plan, and with the timeline?

So, we announced a normal CapEx of INR 850 crores, one of the schemes, which is going on as per schedule, and we expect it to be completed by September this year or maybe June this year. In addition to that, we announced a 100% fabric -- synthetic filament-based product. That's about INR 350 crores. That's also as per the schedule, and we expect it to be commissioned within this calendar year itself. In addition to that, we have announced almost INR 600 crores for the sustainable or the green power. All that CapEx is also likely to be completed within this calendar year. In addition to that, we announced a fourth line of our fabric processing with a cost of almost about INR 400 crores. That will also get completed within this calendar year itself. In addition to that, today, we have announced another CapEx of some almost INR 400 crores. And that also we are expecting it to be completed within this calendar year. So except one open-end project of almost about INR 450 crores where we yet to get the approvals from the government. I think, all remaining INR 2,800 crores is going as per schedule. And within next 8 to 9 months' time or 10 months' time, most of this will be completed.

The next question is from the line of Nirav Savai from Abakkus. Nirav, please go ahead.

Hello.

Yes, Nirav. Please go ahead.

So my question was the total CapEx, you said is about INR 2,400 crores, right?

INR 3,400 crores.

And of that INR 850 crores is -- can you just give us a break up, as in you said, green power is about INR 600 crores? And filament, yarn, you said about INR 400 crores, right?

So the normal CapEx of yarn and fabric is almost about INR 1,200 crores. INR 600 crores is the green power. INR 400 crores for the fabric expansion of within the existing lines. Another INR 400 crores for the 100% synthetic fabric business. And another about INR 500 crores on the open-end project, which I said as of now is on hold.

Okay. If I look at this ongoing INR 1,200 crore CapEx, which is behind fabric and yarn, what kind of capacity do we see this post completion? Or is it replacement of existing machines?

So on the spinning side, it's all replacement of the existing machines, except maybe some marginal improvement can come into that. On the fabric side, the weeding capacity of INR 400 crores will add about 30 million, 31 million meters per annum capacity and the 100% synthetic product will have 15 million meters per annum capacity.

Okay. So synthetic is about 15 million meters, right?

15 million meters synthetic, 31 million cotton line.

Cotton. And this fabric expansion, which you said separately INR 400 crores. So how different is this?

No, that same. Existing...

It's part of the INR 1,200 crores only.

Right. But it is only modernization CapEx.

The next question is from the line of Mohammed Patel from Care Portfolio Managers Private Limited.

Sir, I just wanted clarity. You said procurement cost of cotton for current year is almost similar to last year at INR 53,000, INR 54,000.

Yes.

Okay. My next question is related to margins. So with the ongoing CapEx, which is focused on modernization and green energy, which is going to lead to cost benefits. So can this lead to the margins improving from current 13% to 15% by FY '27?

We are hoping because all this CapEx, which is being done, definitely, there should be an improvement in the margins on two accounts. There will be cost reduction because of the modernization. And also since that, we will be more flexible, and there could be a possibility for us to do more value-added products as well. So hope is this only that with this kind of modernization, our EBITDA should improve by 2%, 3%. Let's look at that.

It should happen starting FY '27?

Yes, yes, certainly.

[Operator Instructions] The next question is from the line of Ritwik Sheth from One Up Financial Consultants Private Limited.

Sir, just one question. Sir, what is the cotton yarn spread in Q3 versus Q2?

So it can be -- the spread, if you look at the Indian cotton, almost in the range of about USD 0.70 per kg of yarn.

USD 0.70 per kgs of yarn for us in Q3.

Yes.

And that would be -- Q2 would be closer to USD 0.60?

So, Q2 was almost -- I mean, a little better or I'd say, almost comparable.

Okay. So around $0.70 only.

Yes. Yes.

And sir, earlier, you had mentioned that at $1.

Yes. So if you look at pre-'21, it used to be -- the benchmark always used to be about $1.

Okay. So basically, at $1, you would make enough money to expand in spinning capacity, right? You would be incentivized to -- and that would get corrected if the cotton prices are in line with the New York Future as they were earlier?

Correct.

[Operator Instructions] The next question is from the line of Monish Ghodke from HDFC Mutual Fund.

Sir, in opening remarks, you highlighted that polyester prices in India are expensive 10% to 15% as compared to global prices. And since we are doing a CapEx in manmade fabric, so how do you plan to price this product? Will it be at par with global prices? Or it will be higher? And what kind of segment are we targeting here?

So, regarding raw material for our filament -- for our synthetic project. So yes, as compared to the rest of the world, prices in India can be higher. So we don't plan to have a local base and an import base as well. So we are currently exploring what options are like Taiwan is there, China is there, Korea is also there, Japan is there. So that exploration is happening. At the same time, we will be working alongside the domestic players and developing certain products, which may not be available. What was your second question?

So what kind of segment are we targeting? Is it for export? I mean, garmenters who will be exporting or it will be for domestic? And I mean, many times, when we speak with garmenters, they say that good quality processed fabric is not available in India, which is at par with global standards. So are we striving for that kind of segment, may be athleisure wear or something like that?

So woven synthetics would more be outerwear. So the jackets that we have wind sheeters, that would be the segment. And it will be a mix of domestic and export both.

Okay. But the pricing will be at par with the global prices, right?

30% is out of BIS. So we should be okay. And also, apart from that, there is weaving and there is processing. So we will be selling high value-added products. So we will try to counteract and mitigate the impact of raw material prices.

So pardon me, if you have answered this question before, but this modernization CapEx of INR 330 crores, we are doing, are there any spindles addition which is happening?

Not really. So some small changes, it is more of a modernization where the existing machineries are being replaced with the newer one, to take advantage of utility costs or maybe automation, reduction of manpower, reduction of power, et cetera, et cetera.

But sir, this will be a part of your regular maintenance CapEx, right? I mean...

Normally, our regular maintenance CapEx do about INR 150 crores per year. This time, since it was much larger than our normal CapEx, so that's why we have disclosed this to the stock market also.

So this is like our maintenance INR 250 plus this is INR 330 crores, right? So you don't -- hello?

Yes.

Okay. No, I'm saying, is this continue to be there? I mean, is it expected to be -- like could you throw some light like what is the average age of our spindles and how much maintenance CapEx now we have to do going forward due to modernization?

Average age of our spinning machine part would be in the range about 10 years now. So normally, I think going forward, the normal CapEx, the replacement CapEx to my mind, should not be more than INR 150 crores, INR 200 crores per year.

[Operator Instructions] The next question is from the line of Prerna Jhunjhunwala from Elara Capital.

I just wanted to understand what will be the revenue addition and profit addition that you're looking from this entire CapEx of around INR 3,400 crores?

So on the spinning side, I don't think there's any revenue addition which is likely to happen. Even the green power, I don't think there's any top line increase will happen. So the top line increase will happen only with the 45 million, 46 million meters capacity which will be throw to our existing capacity. So INR 150 per meter versus 45 million meters.

Okay. So 45 million meters, is the processing capacity that we are adding?

Yes.

31 was the number, right? Or it is...

No, 31 plus 15 of synthetic.

Okay. Okay, synthetic. Okay. Understood. Understood. And sir, with this replacement, what kind of efficiency improvement or margin improvement, 200 bps margin improvement that you mentioned earlier in the call, is it doable or eventually because of market forces, it will be -- it can be passed on to the customers?

Prerna, that's -- and it was guess. I can't really comment on that, that what would happen with the market courses. I'm showing it that today's circumstances had whatever we are doing, had that been available today, just our margins would have been better by 200, 300 basis points.

300 basis points is also possible?

200 basis points is surely possible. But what will happen to the market, we really comment -- we can't really comment on that. It can be better. It can be worse also. So that's beyond our control.

Okay. Understood, sir. And sir, at current -- in the synthetic business, what kind of margins are we looking at? Because this is a specialized product that we're doing for outerwear jackets and all. Is the margin better than the existing fabric business? Or is it in line with that?

What I understand, there are two segments to that. One is the basic replacement of apparel fabric, second is the specialized products. If we are going to be the new entrant in this, and we have to learn this business as well. So my feeling is, as we keep understanding the business, we will start moving towards more and more value-added products. And on the technical textile, definitely margins can be 25%, 30%, 35% as well. But it will take us some time to learn it, develop it, create the market for that, and it's only beyond that. On the basic products, it could be in line with our additional -- our existing margins of the fabric apparel business.

The next question is from the line of Mohammed Patel from Care Portfolio Managers Private Limited.

Sir, do you expect cotton yarn spread to improve in near term. So are there any factors which can turn favorable?

So basically, there are only two, three factors which can help us. One, if the New York Future goes to about $0.74, $0.75, things will start improving in India. That could be one trigger. Second is rupee goes to -- the rupee goes to, let's say, INR 90 and in U.S. cents our cotton prices comes down. That could be another trigger. Third is government take any view on allowing the import of cotton duty-free, even then our margins could be better. Other than, -- our overall demand improves bit much better than the existing demand. So these are all macro level issues. Two are macro level and two are related with the government of India. So it's really, really very difficult for me to comment. I think, the only doable or a possible thing looks like if the New York Future improves by about 500, 600 basis points, definitely, things will start improving in India also.

[Operator Instructions] The next question is from the line of Anik Mitra from Finnomics.

Am I audible?

Yes, you are.

Sir, what is the current yarn and cotton spread in Indian currency term?

So the -- even in the Indian cotton or the yarn spread is, what I mentioned, $0.70, $0.72. And if you calculate it with the rupee of INR 85, it will be close to about INR 60.

INR 60. Okay. Sir, considering the current Bangladesh situation, so do you think that the garmenting opportunity, like the Bangladesh is a major player in the garmenting. So is it, -- like is there any opportunity if Bangladesh loses market share in U.S., Indian companies can capture that market share?

First of all, as I mentioned earlier also, if we go by the Bangladesh numbers of exports, there is no reduction and rather they are improving it only. So it looks like there doesn't seem to be any concern on a macro level basis, maybe some ideas, some companies, the issue could be there. But if you go by their numbers, I think it's not reducing at all. Two, Bangladesh has become a very big player and their export is already touching almost $40 billion, $42 billion as of now, whereas the Indian garmenting export is only about $15 billion. It looks like Bangladesh next 5 to 6 years can touch maybe about $75 billion, $80 billion also because of two major reasons. One, they have an advantage of GSP, where the Europe allows them to -- for the duty-free exports. Two, in garmenting, the labor cost plays a very, very important role, and it is almost about 25% in the garmenting, 20% to 25% is the labor cost only. Indian labor cost today is close to about USD 200 per person per month, whereas the Bangladesh is still ranging about USD 100 or so. So there's a huge advantage of much less labor cost. As a result, they are competitive compared to India. Third, for any business to create capacity, one is the opportunity, second is the margins. I think, we do not have those capacities which are required by the world markets as of now. So if there is a major concern happens in Bangladesh, probably that opportunity can come to India. But as of now, they are continuing to grow in a big way, because of the two advantages, which I mentioned to you. But yes, if situation goes out of control or goes very bad over there, and so the brand starts looking at the different countries. And amongst those countries, India could also be one of the participants to take advantage of that. But that's not visible as of now at least.

The next question is from the line of Awanish Chandra from SMIFS. Please go ahead, Awanish. Kindly unmute your line.

We are hearing a lot of good sound right for the textile industry in the budget. People are talking about the budget at 10%, 15% higher budget for textile and then government may reduce some duties on manmade side raw material. So any assessment on those budgeting and any benefit that Vardhman can draw from the budget?

I think, it will be too premature for me to comment on what the government is going to do in the budget. We are left with only less than 2 weeks as of now. So let's wait and watch please.

[Operator Instructions] Ladies and gentlemen, as there are no further questions for today, I would now like to hand the conference over to the management for the closing comments.

So, thanks all the investing community, which have shown confidence in us and being a part of the company for a long period of time. Though there is concern on the overall spinning industry specifically, but at the same time, our Fabric division is doing very, very good, both in terms of utilization and the profitability also. We are also hopeful, going by the industry situation, government will take some decision sooner or later. And in the meantime, whatever best can be done in terms of the internal efficiencies, operational efficiencies or the customer base or the product base, the company is really, really working very hard to achieve that, so that even in these kind of difficult times, we can pass through this time profitably or with better margins compared to the industry peers. I'm sure as the situation improves or as any favorable decision comes in, certainly, we look at a better improvement in the margins also. But in the meantime, we are preparing ourselves notwithstanding with the difficult situation. Our CapEx is one of the highest this year, because we believe that sooner or later, things will be better. And definitely going by the patronage of our customers' products, we are surely much more hopeful for the future, and we believe we can add lots of value for the overall textile chain in India. So thanks once again for your patience as well as your stability in the company with our shareholding. And I'm sure, as management, we will not leave any stone unturn to pass through this difficult time also. Thank you very much.

Thank you, ladies and gentlemen. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.