Release Date: May 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The recently signed FDA between India and the UK is expected to eliminate tariffs, providing a 12% duty advantage for Indian exporters, which could significantly boost Banswara Syntex Ltd (BOM:503722, Financial)'s market share in the UK.
- The Indian textile and apparel sector is projected to grow at a CAGR of 10%, reaching USD 350 billion by 2030, presenting substantial growth opportunities for Banswara Syntex Ltd (BOM:503722).
- The fabric division showed strong momentum with a 19% year-on-year revenue growth, reaching INR 540.5 crores, supported by healthy demand from both domestic and international markets.
- The company's brand business, including Simone, Federico, and Philly, achieved profitability in their first year, indicating potential for future growth.
- Banswara Syntex Ltd (BOM:503722) is well-positioned to capitalize on the global shift away from China, with the potential to increase its market share in the US due to favorable tariff differentials.
Negative Points
- The company's EBITDA declined by 2.8% year-on-year, with an EBITDA margin of 9%, indicating pressure on profitability.
- The yarn division experienced a 10% revenue drop due to modernization efforts and labor shortages, impacting overall performance.
- The garment division faced a revenue decline of 3% year-on-year, with additional costs from structural changes affecting margins.
- Net debt increased by INR 100 crores, primarily due to investments in machinery and modernization, raising concerns about financial leverage.
- Labor shortages and subdued domestic demand contributed to a marginal decline in Q4 income, impacting overall financial performance.
Q & A Highlights
Q: Can you explain the rationale behind shifting the garment segment from SEZ to DTA and how it will impact capacity utilization?
A: The shift from SEZ to DTA was driven by two main reasons: an additional 3-4% export incentive in the DTA area and the flexibility to cater to both domestic and export markets, which stabilizes average utilization over the year. (Ravindra Kumar Toshniwal, Managing Director)
Q: With the India-UK FTA, will there be a significant improvement in the garment segment's utilization?
A: We expect utilization to improve as we build relationships with export customers. The FTA provides favorable tailwinds, and we anticipate the garment unit to contribute more to our bottom line next year. (Ravindra Kumar Toshniwal, Managing Director)
Q: What are the expectations for EBITDA margins in FY26, and can they return to FY23 levels?
A: We aim to improve margins, but FY23 was an exceptional year with a 15% EBITDA margin. We hope to be close to those levels and potentially surpass them by FY27. (Ravindra Kumar Toshniwal, Managing Director)
Q: How is the company positioned to benefit from the global shift away from China, particularly in the US market?
A: Despite short-term challenges, we expect long-term benefits due to tariff differences. India's cost competitiveness and supply chain capabilities position us well to capture market share from China. (Ravindra Kumar Toshniwal, Managing Director)
Q: What are the plans for the brand business, and how much investment is being made?
A: We are investing INR3-4 crores annually in advertising to build our Simone & Federico brand, targeting INR50 crores in sales this year. The focus is on leveraging our existing capacities without additional CapEx. (Ravindra Kumar Toshniwal, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
