Q1 2027 Himatsingka Seide Ltd Earnings Call Transcript
Key Points
- Himatsingka Seide Ltd (BOM:514043) is strategically transitioning its business model by adding three new product verticals (yarn solutions, fabric solutions, and apparel solutions) to diversify revenue streams and reduce reliance on the US home textiles market.
- The company is leveraging its existing infrastructure and capacities for the new verticals, with no significant capex required, keeping capital expenditure limited to maintenance and organic requirements.
- The yarn solutions business, which operates the world's largest plant under one roof with 211,584 spindles, has already started generating revenue and is being ramped up, targeting a potential revenue of INR1,000 crores.
- The fabric solutions business has also commenced operations, with combined sheeting and knitting fabrics processing capacity expected to reach approximately 90 million meters by year-end, targeting a potential revenue of INR1,000 crores.
- Management expects a reduction in net debt by the end of the fiscal year, with leverage remaining range-bound and initiatives underway to strengthen the company's equity base.
- The company is well-positioned to benefit from India's free trade agreements (FTAs) with the UK and EU in the medium term, which should open up new market opportunities.
- The new verticals are expected to offer better pricing power and tap into a much larger market universe (approximately 20x the size of home textiles), with India expected to become one of the top two jurisdictions for the company.
- Consolidated total income for Q1 FY27 declined to INR634 crores from INR661 crores in the previous year, impacted by geopolitical issues in the Middle East leading to shipment deferrals.
- Consolidated EBITDA margin fell to approximately 16%, driven by lower revenues, a tweak in product mix, and inflationary headwinds on raw material costs.
- The company faces significant challenges in its traditional home textiles vertical, particularly in the US market, due to tariffs, pricing pressures, and market share losses, necessitating a rightsizing exercise.
- Capacity utilization remains low in key divisions, with the sheeting division at 52% and the terry division at 63%, indicating ongoing operational underperformance.
- The transition to new business verticals is expected to cause volatility in financial numbers over the next couple of quarters, with some existing home textile revenue streams, especially sheeting, expected to taper down.
- The company continues to face an uncertain demand environment due to US tariff policy flip-flops, which has created an inflationary environment and altered demand scenarios.
- The benefits from FTAs with the UK and EU are still under process and have not yet materialized into concrete revenue pickups, with the EU timeline remaining uncertain.
Ladies and Gentlemen, Good day and welcome to Himatsingka Seide Ltd Q1 FY27 Result and Business Update. (Operator Instructions) I now hand the conference over to Prerna Jhunjhunwala. Thank you, and over to you, maâam.
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Thank you, Atmarva. Good afternoon, everyone. On behalf of Elara Securities India Private Limited, I would like to welcome you all for Q1 FY27 post-result conference call of Himatsingka Seide Limited. Today we have with us the senior management of the company including Mr. Shrikant Himatsingka, Executive Vice Chairman and Managing Director, Mr. Sankaranarayanan M, President Finance and Group CFO, Mr. Bankesh Dhingra, Senior Vice President and CFO Operations, Mr. Bimal Agarwal, Vice President Corporate Finance, and Mr. Harikrishnan Balasubramanian, Associate Vice President Finance, Banking and Compliance.
I would now like to hand over the call to Mr. Shrikant Himatsingka for opening remarks. Thank you, and over to you, sir.
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