KPR Mill Ltd
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Earnings Call Analysis

Q1-2024 Analysis
KPR Mill Ltd

Company's Financial Performance and Outlook

Yarn sales reached 14,600 tons generating INR 391 crore, while fabric sales hit 2,000 tons at INR 69 crore. Margins stood at 12% for yarn, 27% for garment, and a promising 25% blended margin for sugar. An investment of INR 200 crores is already spent, gearing towards production volumes of 2 lakh tons of sugar and 12 crore liters of ethanol. The quarter's revenue approached INR 10 crores with expectations to double soon. Inventory at 3 months is valued between INR 50,000 to 60,000 per unit. Vortex spinning contributes INR 120 to 150 crores annually at a steady margin of 15-16%. The company forecasts 10-12% growth and is prepared to enhance garment manufacturing by 10 to 20 million pieces pending market improvement.

Steadfast Amidst Global Uncertainty

K.P.R. Mill Limited, despite a challenging global environment characterized by geopolitical tensions, inflation, and banking issues, has demonstrated resilience thanks to solid economic fundamentals at home. Facing a sector-wide slowdown, the company has held steady through vertically integrated operations and a sugar segment benefiting from favorable ethanol markets.

Investing in Growth and Efficiency

The firm is executing growth initiatives with an investment of INR 500 crores, aimed at enhancing various segments of its portfolio, including the completion of exclusive OpEx spending mills, a rooftop solar plant, and the expansion of ethanol capacity.

Performance Maintained, Europe a Key Market

Despite market unpredictability, K.P.R. maintains a steady performance with a minor potential impact on realization rates in international markets, with Europe noted as a significant buyer.

Yarn Realization Declines, Focus on Cost Efficiency

The company has observed a decrease in yarn realization stemming from falling cotton prices. Despite this, a focus on operational efficiency during tough market conditions suggests an optimistic outlook for maintaining competitiveness.

Ethanol as a Revenue Stream

K.P.R. is banking on its ethanol capacity expansion to generate additional revenue, approximately INR 100 crores net, contributing significantly to its growth trajectory.

Core Concentration on Textiles

While there is an expansion in ethanol capacity, K.P.R. underscores its primary focus on the textile sector. The company is closely monitoring market conditions to ensure a balance between crushing capacity and ethanol production, indicative of a strategic approach to investing across its portfolio.

Margin and Revenue Expectations

With yarn margins at around 12% and garment margins at about 37%, the company is expecting volume growth to include 2 lakh tons of sugar and 12 crore liters of ethanol. The sugar segment operates at a healthy margin, significantly above the break-even point.

Tapping into Online Potential and U.S. Expansion Efforts

K.P.R. is exploring the digital realm with an online presence, alongside extending its customer base in the U.S. with hopes of significantly amplifying its percentage of sales in the coming years.

Improving Margins and Conservative Growth Outlook

The management remains cautiously optimistic about an improvement in margins and is projecting a 10% to 12% growth rate. This forecast, while conservative, reflects the present market conditions and ongoing strategic efforts.

Strategic Decisions on Expansion and Technical Textiles

Current plans do not include a move into technical textiles due to the market's limited size in India. As for expanding capacity, the company is considering brownfield expansion, which could take approximately 2 to 3 months to set up, and greenfield projects, which would require 14 to 15 months from conception to ramp-up.

Stable Margins Expected from Vortex Spinning

The recently added vortex spinning technology is anticipated to contribute INR 120 crores to INR 150 crores in annual revenue with stable margins aligning with the current yarn margins of 15-16%.

Earnings Call Transcript

Earnings Call Transcript
2024-Q1

from 0
Operator

Ladies and gentlemen, good day, and welcome to the K.P.R. Mill's Q1 FY '24 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. Abhishek Nigam from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

A
Abhishek Nigam

Thank you, Nijan. Hi, everyone. Thank you for joining us for K.P.R. Mill's First Quarter FY '24 Earnings Conference Call. Today, we are joined by Mr. P. Nataraj, Managing Director for K.P.R. Mill; Mr. P. L. Murugappan, Chief Financial Officer; and Mr. P. Kandaswamy, Company Secretary.

And now without any further delay, I just hand it over to management for any opening comments. Over to you, sir.

P
P. Nataraj
executive

Thank you, Mr. Abhishek. I'm Nataraj, Managing Director, K.P.R. Mill Limited. Good evening to everyone. I welcome you all for the K.P.R. Mill Limited first quarter earnings call for the financial year 2023-'24.

The global economy is facing uncertainty due to geopolitical tension, elevated inflation and banking system interruption in certain countries. That should be above the Indian economy remains resilient, supported by its strong economic fundamentals, retaining fastest-growing economy status. Currently, all sectors of textile industry are going through a rough patch. The main causes are the sluggish demand in major importing countries on account of inflation, unstable price of domestic cotton, low arrival of cotton in the market during peak season, import duty on cotton, increase in energy cost, piling up of inventories, severe competition from competing countries, et cetera. But going forward, the situation is improving as exporters are slowly but steadily getting orders.

However, we are happy that irrespective of the difficult market scenario, K.P.R. could maintain its performance because of its vertically integrated facilities, increased revenue and profitability from sugar segment, stimulated by the favorable ethanol markets have been supporting our growth trend continuously.

As announced in the earlier calls, to generate additional revenue and exclusive OpEx spending mill at an outlay of INR 100 crores is established, that will we completed in the current quarter. The processing and printing expense at INR 50 crores will be over in the current quarter. The rooftop solar plant at INR 50 crores has been commissioned already. The ethanol capacity expense of INR 150 crores will be completed before the coming season. And also to improve the quality and productivity of spinning, we are modernizing the spinning division with a total outlay of INR 150 crores. All these growth initiatives at a total outlay of which is INR 500 crores will result in improving our performance here.

With this opening remarks, the floor is now open for question-and-answer session. Thank you.

Operator

[Operator Instructions]

First question is from the line of Pratik Kothari from Unique Portfolio Managers.

P
Pratik Kothari
analyst

So my first question on the government, if you can highlight where is it that we are signing new orders? What will be the realization for the new orders that you'll be getting?

P
P. Nataraj
executive

RF is steady only. We are giving -- as you know, we are in Europe, U.S. and Australia mainly. We have a small share in Asia also. Currently, our realization -- average realization is about INR 185 per piece.

P
Pratik Kothari
analyst

New orders that would be coming in would also be at similar gains or lower?

P
P. Nataraj
executive

Expected to be similar thing. We cannot be the ramp rate reduction. There will be some impact, maybe INR 5, INR 10. Otherwise, is it to be in the same level.

P
Pratik Kothari
analyst

Right. And what would be our production target for this year? And we stated about [ 150 million ]?

P
P. Nataraj
executive

Yes, we are hoping to reach [ 150 ] million.

P
Pratik Kothari
analyst

Correct. And M.D. sir spoke about some improvement and some early signs of improvement in demand, we had spoken about some brownfield CapEx that we intended to do. So I mean, is the improvement good enough for us to go out and do that CapEx or not yet?

P
P. Nataraj
executive

We have not yet decided. We are just waiting for the things to improve.

P
Pratik Kothari
analyst

This is for the brownfield, right?

P
P. Nataraj
executive

Yes, correct.

P
Pratik Kothari
analyst

Right. And sir, what would be the cotton yarn spread currently?

P
P. Nataraj
executive

It's about 12% now.

P
Pratik Kothari
analyst

12%. And usually, we have mentioned that a sustainable average...

P
P. Nataraj
executive

[ 18% ]. Now it's about 12%.

Operator

The next question is from the line of Biplab Debbarma from Antique Stockbroking.

B
Biplab Debbarma
analyst

So sir, I'm just calculating, I'm in garment production. So we handle the production of 35.36 million pieces of garments in the first quarter. And if we assume at this stage you will produce, then we'll be polishing around 141 million pieces for the entire year. And if you see our capacity, minus the [indiscernible] is around 147 million pieces. That passes to our capacity utilization of more than 90%, around 95%, 96%.

So should not we be investing in expanding the garment capacity? Or are or our future order book is weak. Are we anticipate muted growth in garment? What is the reason that despite such high capacity relation, we are not taking many steps to increase that capacity in garment segments?

P
P. Nataraj
executive

As [indiscernible] has explained to you in the opening remarks itself, market is saving a lot of issues, especially the European and the U.S. markets. So just we want to settle in these markets to reach some extent to take further call.

U.S. I think it is more or less coming out of this position. But Europe being a large buyer of our product. we want the teams to settle. It is not a matter of question of investing. It's a matter of taking a decision based on the [indiscernible] garments.

B
Biplab Debbarma
analyst

Okay. Okay. And sir, we saw the textile segment, which we see lower revenue q on q and year-on-year. Sir, what could be the reason of that? Is it because of lower volume or lower realization?

P
P. Nataraj
executive

So basically, the lower realization in yarn.

B
Biplab Debbarma
analyst

Lower realization in yarn?

P
P. Nataraj
executive

Yes, yes. Quality of yarn is the same, the realization from yarn is lower because the cotton prices has come down sharply because realization has come down.

B
Biplab Debbarma
analyst

Okay. And what would be the revenue potential from this new capital [indiscernible] assumption? And from when do you think this new capacity will start generating revenue?

P
P. Nataraj
executive

Sir, OpEx [indiscernible] to be some time in the second half of this year.

B
Biplab Debbarma
analyst

And what would be the revenue potential at full capacity?

P
P. Nataraj
executive

It would be somewhere around INR 140 crores to INR 150 crores per annum. Solar already started its production processing and billing will take another [ INR 50 crore ]. It's more of a value addition from our own consumption. Ethanol capacity will generate revenue of close to about INR 200 crores. That will be asset molasses that is sugar and molasses production when we are after that against ethanol production. So net revenue will be around INR 100 crores.

Operator

The next question is from the line of Rishab from RBSE Investment Managers.

U
Unknown Analyst

I just want to understand for the next 2, 3 years regarding your CapEx plans. How are you looking at textile versus ethanol segment, sir? Is there a policy? Because now currently ethanol has been very good for us. So will you be investing more there? Or how would you look at investing in both segments as a policy?

P
P. Murugappan
executive

Sir, I see our core business is textile. So we are concentrating more on textiles, and the present situation is a little bit [ vital ], particularly just before what we said about the European, the market has to improve. So we are waiting for that.

And by the way, the ethanol also that we have that's why -- we are expanding our capacity in the first unit of the sugar, where in the beginning, we put a small size. And we have doubled the capacity now. So further, again, to -- we have to balance this -- how much we are crushing and how much sugar output and this much X amount of investment and how long we can run the factory with the molasses to produce ethanol. So these all technically, we have to assess these things.

So once this existing -- the ongoing project is completed, our capacity will be around 5 lakh liters per day and put both the units together. So it means approximately 250,000 liters each unit. So then we have to see this balancing the other ethanol production with the molasses output.

So based on that, maybe like once it's completed, we can technically be steady. And what could be that there's some further increase in ethanol, of course, ethanol is more margin in the south of the sugar, ethanol, molasses. So we will decide at the end of the next season.

U
Unknown Analyst

Is there any interim benchmark for get sort of INR 100 of CapEx? I understand as per the market condition is there any benchmark where in maximum limit, you might be ready to put an ethanol segment. Is there any -- you follow anything?

P
P. Murugappan
executive

No, no. There is no benchmark in fact. We have the study that if you produce the ethanol and then these molasses and after the crushing is because we are producing ethanol from the sugar syrup also.

And how much syrup you can utilize and how much the ethanol, we can run it? Till the next season, because producing more molasses, and we cannot run the ethanol till the next season. We can not intersect that. Then they are crossing of the next season will be affected. So we have to calculate accordingly. This is something technical issue we have to study. What is the crushing capacity of the sugarcane? So that we have to study. So based on that, we have to calculate and invest.

U
Unknown Analyst

Okay. So just one last question. On the government realization, if I have to take a 3- to 4-year view, currently, we are at INR 180, INR 190 per piece. Can you take -- go to INR 250, INR 300. Or is that trajectory that we look should we look for K.P.R., the high-value rate segment?

P
P. Nataraj
executive

[indiscernible] we are working on 20% margin in the business, not [indiscernible]. So more quantity also we will do. But basically, we are looking at 20% margin in this business.

Operator

The next question is from the line of Prerna Jhunjhunwala from Elara Capital.

P
Prerna Jhunjhunwala
analyst

Sir, what would be our garment order book today?

P
P. Nataraj
executive

It's about [ INR 17 crores ] madam.

P
Prerna Jhunjhunwala
analyst

Okay. And if -- what will be the breakup between yarn and fabric business revenue and volume?

P
P. Nataraj
executive

Yes. Yarn sales is [ 14,600 tons ], fabric sales is 2000 tons.

P
Prerna Jhunjhunwala
analyst

Okay. And value?

P
P. Nataraj
executive

Yarn revenue is INR 391 crore and fabric revenue is about INR 69 crores.

P
Prerna Jhunjhunwala
analyst

Understood, sir. And sir, how was the margins in various segments, yarn and fabric versus garments?

P
P. Nataraj
executive

Yarn and fabric is about 12%. Garment is about 27%.

P
Prerna Jhunjhunwala
analyst

27%?

P
P. Nataraj
executive

Yes.

P
Prerna Jhunjhunwala
analyst

Sir, what led to this increase in the garment business margin? Because if we look at...

P
P. Nataraj
executive

The lower inventory tax because in [indiscernible] and the yarn prices are low, our margin from garment would be high.

P
Prerna Jhunjhunwala
analyst

Okay. Understood. So going forward, we should look at sustainable margins only and not these margins? That is...

P
P. Nataraj
executive

Regular margins in, yes, yes.

P
Prerna Jhunjhunwala
analyst

Okay. And sir, it's not margins, if I want to see this time the EBIT margin of 26% in 1Q. Is it fair to assume that ethanol margins are around 35% EBITDA level?

P
P. Nataraj
executive

We are not calling separately for around margin. The sugar margin expected a little bit around a business margin expected to be around 25%.

P
Prerna Jhunjhunwala
analyst

25% blended?

P
P. Nataraj
executive

Blended, yes.

Operator

The next question is from the line of Preethi Choudhary from Green Portfolio.

U
Unknown Analyst

So a couple of questions. So first one is so India has signed the FTA with Australia. But if I look at our numbers, our percentage of business from Australia has been falling. So I just wanted to know, has it grown in absolute terms? And has the company taken any steps or are in talks with customers in Australia for the into business in the country?

P
P. Nataraj
executive

We are supplying to the major players in Australia. Our business is to Australia is more or less in [ live ]. So there is no [ garment ] business. If you read the last quarter in this quarter, it's about [ 12.3 ] so kind of.

U
Unknown Analyst

Okay. All right. And the next question is, so what is the update of sending the machineries from our Ethiopia plant?

P
P. Nataraj
executive

We are trying to bring it back if the process is done.

Operator

The next question is from the line of Monish Ghodke from HDFC Asset Management Company.

M
Monish Ghodke
analyst

Sir, ethanol sales volume, what is the split between syrup route, B-Heavy route and C-Heavy route?

P
P. Nataraj
executive

This quarter is more or less a small we have done maybe all B-Heavy route.

M
Monish Ghodke
analyst

Okay. And sir, after the expansion, will it be the B-Heavy only?

P
P. Nataraj
executive

No, no. During the season, it is done with syrup, the off season it will be from the B-Heavy syrup..

M
Monish Ghodke
analyst

Okay. So how will the split look like for full year?

P
P. Nataraj
executive

Here it is 50%-50%, 50% from syrup and 50% from the B-Heavy molasses.

M
Monish Ghodke
analyst

Okay. And sir, how easy or difficult is to expand our crushing capacity in terms of regulatory approvals and all?

P
P. Nataraj
executive

It is depending on the area where we are situated. Presently, the areas are more or less saturated with demand to expand the capacity at it. So we are fully running now.

M
Monish Ghodke
analyst

Okay. And strategically, like is it our focus area that over time, we have to increase the crushing capacity? Maybe if I see 5 years down the line, will our capacity be more or it will be the same?

P
P. Nataraj
executive

Because lot of the business decision has to be taken. Depending on the availability and other things, we will take a dividend based on the book of there is other areas big.

Operator

The next question is from the line of Ken Maisha, an individual investor.

U
Unknown Attendee

Am I audible?

P
P. Nataraj
executive

Yes.

U
Unknown Attendee

So my question is our current quarter inventory levels, how much it is? I mean in terms of...

P
P. Nataraj
executive

[indiscernible]?

U
Unknown Attendee

Okay. So now we see for the 3 months. And sir, now for our Europe sector, do you think in current after the July month, is this some good inquiries or something like that?

P
P. Nataraj
executive

So are interior. We are having a reasonable position. We hope that has been improved in some from here on.

U
Unknown Attendee

Okay. Because generally, we book half yearly, I mean...

P
P. Nataraj
executive

More or less we book that.

Operator

[Operator Instructions]

The next question is from the line of Roshan from B&K Securities.

U
Unknown Analyst

Sir, do you expect the input is on content...

Operator

Sorry to interrupt, Roshan, your audio is sounding very muffled.

U
Unknown Analyst

Is it audible now?

Operator

Yes, sir.

U
Unknown Analyst

Yes. So do you expect the import of cotton to be remain anytime soon?

P
P. Nataraj
executive

Not normal...

P
P. Murugappan
executive

We have represented through the association. We hope that [indiscernible]

U
Unknown Analyst

Okay. And after the signing of FTA with Australia, are you seeing any increase in traction in terms of new orders from Australian markets?

P
P. Nataraj
executive

As of today, the business is good. We hope that it will improve.

U
Unknown Analyst

Okay. And can you provide some clarity on the U.K. [indiscernible]?

P
P. Nataraj
executive

U.K. [indiscernible] you can advance stage there, we hope it will happen during this year.

Operator

[Operator Instructions]

The next question is from the line of Biplab Debbarma from Antique Stockbroking.

B
Biplab Debbarma
analyst

Sir, on the CapEx that you have planned, on the planned CapEx, how much CapEx has to be incurred? I think in an yet to be incurred. How much to be incurred going forward?

P
P. Nataraj
executive

Approximately about INR 200 crores need to be spending.

B
Biplab Debbarma
analyst

And remaining have been spent, right?

P
P. Nataraj
executive

Yes, already been spent.

B
Biplab Debbarma
analyst

Okay. Okay. And sir, I need the margin -- yarn margin this quarter. How much was this?

P
P. Nataraj
executive

It is 12%.

B
Biplab Debbarma
analyst

12%.

P
P. Nataraj
executive

Yarn margin is 12%. And the garment margin is about 37% and the [indiscernible] 37%.

B
Biplab Debbarma
analyst

Okay. And one final question based on the ethanol and sugar, so sir, once this new intimal capacity stance is commissioned, so on a steady-state basis, what is the yearly total sugar production and ethanol production in terms of volume?

P
P. Nataraj
executive

Volume-wise, we are looking at to 2 lakh tons of sugar and 12 crores liters of ethanol..

B
Biplab Debbarma
analyst

How much, sir, in ethanol?

P
P. Nataraj
executive

12 crore liters.

B
Biplab Debbarma
analyst

12 crore liters?

P
P. Nataraj
executive

Yes.

Operator

The next question is from the line of Pratik Kothari from Unique Portfolio Managers.

P
Pratik Kothari
analyst

So if we look at overall garment sales globally for the last [ 5 ] always used to be a 2%, 3%, a low-growth market. But because of our internal efficiencies, because of our cost and cost efficiencies that we could bring to the people, we have captured a large part of market share and we grew much, much faster globally. So in that context, what are we -- I mean we understand that the demand is sluggish. But from our side internally, what is it -- or what are the actions you are seeing to be able to capture the global market share?

P
P. Murugappan
executive

See, we are continuously our -- updating our -- the quality parameters and whatever we have. The integrated facility, we are adding the value addition wherever is requirement. That's why just now we have increased our processing capacity at printing and all these things. So wherever customer requirements based on that, we not only study the market and customer requirements, even where new customers are coming in, whatever they suggest on accordingly.

Almost it's called a balancing the percent capacity. So not only the capacity, wherever it's possible, like adding the equipment supportive valuation, so like that kind of thing. There is some more interesting for the customers. So once they come in, they see the facilities and all the things even during the lean time also, like we are able to procure our require orders. So that is why we are very closely monitoring the market, the global scenario and within the factory itself, what kind of the facilities, what we have to create.

So all these things, we are continuously monitoring over all the teams like our marketing team, technical team, quality team. So all hand-in-hand, they interact. So we have to be on the job. We have to be on the market on a daily basis 24 hours, around the clock, so like that. So this is the way we are working. So that's why we are able to run with in this situation also with a better efficiency and better productivity.

P
Pratik Kothari
analyst

Right. And in terms of cost efficiency or the price point at which we are able to cater to the customers, I believe you will be one of the best globally, right?

P
P. Nataraj
executive

You're right.

Operator

The next question is from the line of Jinesh Shah, an individual investor.

U
Unknown Attendee

Sir, my question was regarding FASO. Can we have some numbers like quarter-on-quarter, how we've been growing FASO, like over the last few quarters? And what are your future plans for FASO? How are we planning to scale it up?

P
P. Nataraj
executive

Yes. Currently, quarter on quarter basis we are close to INR 10 crores for the quarter. We [indiscernible] from the current year onwards. We are putting all our efforts. We are launching the product across India now. It will be completed during this year. We will reach double digit in the coming period.

U
Unknown Attendee

All right. Any marketing plan that we have for FASO that in place.

P
P. Nataraj
executive

So all the efforts are made. We are on track, sir.

U
Unknown Attendee

Right. Are we present online as well with FASO, someone like Amazon or Repaint, et cetera?

P
P. Nataraj
executive

Yes, yes.

Operator

The next question is from the line of Sameer Deshpande from Fair Deal Investments.

We'll move onto the next participant on the line of Awanish Chandra from SMIFS.

A
Awanish Chandra
analyst

Congratulations, sir, on a good set of performance in a very difficult situation. Recently, we have heard many negative news, especially from the south market where spinning companies say they are facing so much issues. So how much -- how is the situation now? Any commentary on that?

P
P. Murugappan
executive

So generally, we see that the mills, particularly stand-alone spinning mills, of course, what you are saying is right, we're suffering because of the cotton price where the highest the last year reached more than 1 lakh. And suddenly, within a couple of months fell down below 60,000.

And those who have a larger inventory or even according the size of the mill. The spinning sector fragmented. Our mills are having even 5,000 spindles to 5 lakhs spindles. So the small mills when they have the more inventory, they're borrowing money from banks. So once the cotton price becomes half of that, so half of their working capital just vanished. So those mills, those who are financially running with a tight planning, they are all suffering. So this is a fact.

And the other thing is that -- and during that time, some people as they expand from more also the small or large. They are in the expansion mode, where they are further invested in construction work and then the missionary they bought and all these things. So because of that, then suddenly, the price become half of what it was, around 1 lakh. So people have to suffer for want a working capital other part.

So these kind of situations never happened. In fact, in the last, we can say 1 or 2 decades. So it was totally unexpected. And also, there was a concern by the turn the import, but the import duty also imported 11% on the import of cotton. So that there also close. So because of that, the mills are really suffering. And some people -- anyway, they have trying to come out and some people are already still suffering. So this is the situation now.

A
Awanish Chandra
analyst

Okay, sir. So sir, when we see this kind of news and when we look at the R&D export data for several months, it is you're on declining each and every month. And when we see your commentary also that you are wait-and-watch mode before making a firm decision on the CapEx. So all it indicate that we are going for some slowdown because your numbers are very good as compared to what we see generally in R&D export data, and still you are not deciding. So anything which we are not able to understand this...

P
P. Murugappan
executive

Sir, see, that's why I said, everybody is suffering, and we are with hard difficulty and with all our strength, what we have in here and strength with that, we are able to stand. But we don't want to take risk by investing through some at this situation because it is not only the cotton. I told particularly about the stand-alone spinning mills.

But because of the -- maybe the various things happened in -- globally, particularly because of the war, our major export is to Europe. And European market is really, really suffered heavily due to the war. And we all know well about even there, even the power cost, that is electricity costs, have gone a very high, 5x, 6x. So people slowdown in their purchase also. They are concentrating only on the FMC requirement, like food and all the other things. They saw stopped slowdown there, even the fashion -- on fashion boots.

So all these things are -- we are also very closely watching on these things. So at this kind of situation, we don't want to -- we want to keep ready for the next stage, and we don't want to throw the money bought in hand to somewhere, and we should not struggle. So that's why we are -- we want to be -- maybe we are being extra cautious.

But this is the -- it's not in our hand or it is not tennis a global market. So it's better to wait and see. So that is maybe -- think we are conservative, but we want to be a little more cautious. So that's why we are looking for.

A
Awanish Chandra
analyst

Understood. Sir, one last thing, sir. Our cotton inventory last time you added 4 months. It is still 4 months inventory?

P
P. Nataraj
executive

It is 3 months inventory now.

A
Awanish Chandra
analyst

Okay. And average price of that 3-month inventory?

P
P. Nataraj
executive

It will be somewhere around [ INR 50,000 to INR 60,000 ].

Operator

The next question is from the line of Prerna Jhunjhunwala from Elara Capital.

P
Prerna Jhunjhunwala
analyst

So this year is again going to be a difficult year as per your commentary given the uncertainty in the global scenario as well as the volatile cotton prices. So how do you see? I know don't be guidance, but just qualitatively just help us understand how we should look at it from this year or from next 2, 3 years point of view, how we should look at the average.

P
P. Nataraj
executive

I mean so far the operative a little difficult as we go to improving from hereon. We see good opportunities this year also in the second half of the year. We are seeing some improvement in the market. And going forward, we are very well to go.

P
Prerna Jhunjhunwala
analyst

Okay. Sir, could you give me some color on the customers? How they are -- new customers, existing customers, look at some addition, I mean, to just understand how we are grabbing the opportunity of global apparel market.

P
P. Nataraj
executive

Yes. We are having some clients in the U.S. and the slowly, we are improving the potential from [indiscernible]. This year, we are from 10% to 23%, 24% per year. And we hope that it will improve in the coming years.

Operator

The next question is from the line of Monish Ghodke from HDFC Asset Management Company.

M
Monish Ghodke
analyst

So this quality control order, which will be effective for cotton bale procurement. So what impact will it have on your cotton procurement strategy?

P
P. Nataraj
executive

Now government has announced, we have to wait and see kind of the policy or the system or the control, any checklist. Our government is going to monitor all the things that we have to see. It's only just a week before government has announced. So still very -- already the association has wrote letter to the ministry. Because in India, it's not fully organized. If you see the spinning factories are located in the villages and so far, so many years. There is no system like that, and summon bringing like this if there was what kind of the system, it will be what kind of the quality control satisfier.

So that all the things we have to wait and see is there any parameter on this based on that. Now it's almost like of the half season now. We see some starts in October and say almost like next couple of months is there. So we have to wait and see. And how the system works out even -- generally, it's not -- not only the announcement came. There is no what kind of -- who is going to monitor, how will this certified all these skills, we don't know.

M
Monish Ghodke
analyst

Okay. Okay. And sir, one more question on this PM MITRA Park, in amendment state, it will be in wiring. So assuming -- I know the demand is sluggish now. So -- but assuming the demand improves over time, and if you want to set up excess capacity, will you be looking at PM MITRA Park?

P
P. Nataraj
executive

We are looking for that also. But still, again, the announced previously 2 years back, I announced it. And just 6 months back, they announced the location. But still the land is not identified and the government said that at all infrastructure facilities. But so it seems it also will take a long time. Only the locations are identified. And procurement of land and creating facilities, I think it may take us maybe at least a couple of years. So we have to wait and see.

Operator

The next question is from the line of Akshay Chheda from Canara Robeco Mutual Fund.

A
Akshay Chheda
analyst

Sir, just one question on this yarn side. So how is the market shaping up? I mean you did explain the challenges that the smaller players in the south are facing. So does it benefit us in any way? I mean, can we expect the margins to improve in the second half to, say, 16, 17? Or it's a farfetched target? Just this was one question.

P
P. Nataraj
executive

We hope that the margins will improve in the second half. And we are seeing some improvement now before that it will reach to all of margins in the second half.

Operator

The next question is from the line of Deepak Patel, an individual investor.

U
Unknown Attendee

Am I audible?

P
P. Nataraj
executive

Audible, sir.

U
Unknown Attendee

Yes. My question is sir, I have heard that Tamil Nadu government insist all textile industry to enter in technical textile. So are we around that?

P
P. Murugappan
executive

No, technical textile sales still the market is very small, and a few people have invested in that. And they're still not big way, improving in India. So we are not having any idea of going into technical textile presently.

Operator

The next question is from the line of Biplab Debbarma from Antique Stockbroking.

B
Biplab Debbarma
analyst

Sir, I'm looking at the outlook that we have in the outlook just wanted to know. Because on the growth number in the previous quarter comes from you say around double-digit growth in FY '24. So do you think you would be able to achieve that double-digit growth in FY '24 then?

P
P. Nataraj
executive

It is very early to defend, but the growth will be there. We are hoping that it 10% to 12% growth will be there. That's what we hope.

B
Biplab Debbarma
analyst

Okay, okay. And one final question on this is that in the textile CapEx that you have done, and -- what would be the incremental revenue that we expect from this Vortex spinning and CapEx in textile segment?

P
P. Nataraj
executive

Vortex spinning is giving a revenue of close to about INR 120 crores to INR 150 crores on an annual basis.

B
Biplab Debbarma
analyst

And that would have a similar kind of margin like yarn?

P
P. Nataraj
executive

The margin is more or less stable base on. Yes, yarn margin is resumed, but it will be a stable margin.

B
Biplab Debbarma
analyst

So that means 15%, 16% kind of margin but stable?

P
P. Nataraj
executive

Yes, 15%, 16% kind of a margin but stable.

Operator

[Operator Instructions]

The next question is from the line of Abhishek Nigam.

A
Abhishek Nigam

Sir, for FY '24, you said you've given a target of, say, about 150 million pieces odd for garmenting. So for FY '25, is there a number that you have in mind, like say, 170 million ballpark? So that's my first question. And the second question is, can you go up with existing capacity? Or do you really have to set up something like some kind of brownfield expansion to do that?

P
P. Nataraj
executive

We are waiting for the things to improve. If we are doing it, it will be done through the brownfield expansion.

A
Abhishek Nigam

Okay. So with existing capacity, you can only go up to 150 million or so?

P
P. Nataraj
executive

[ 150 or so ], yes.

A
Abhishek Nigam

Okay. And in case you do a brownfield expansion, how much time does it take to set it up?

P
P. Nataraj
executive

Maybe 2, 3 months.

A
Abhishek Nigam

In 2, 3 months. And we already have like the location announced?

P
P. Nataraj
executive

Are a factor on the existing factory, we need to hit line and increase for the first year.

A
Abhishek Nigam

So 2, 3 months for setting it up and then another 3, 4 months maybe to sort of ramp it up?

P
P. Nataraj
executive

Yes, yes.

Operator

The next question is from the line of Sundar from Avandis Park.

U
Unknown Analyst

One clarification that I needed very specific to the last question that was related to terms of brownfield. We mentioned that we are doing a brownfield which can add about 10 million to 20 million pieces. Will that not come through FY '24, sir?

P
P. Nataraj
executive

Sir, is on pipeline is waiting for the market to improve. Once it improves, we can do [indiscernible] we can do it.

U
Unknown Analyst

Right. And then the required amount of labors, that's also [indiscernible].

P
P. Nataraj
executive

That can be added.

U
Unknown Analyst

Right, sir. And just one hypothetical question here is that last time when we took the additional tenders of 42 million pieces, we did it at about a 14-month time frame. Now should we assume a similar time frame if we agree on the greenfield?

P
P. Nataraj
executive

Greenfield, maybe it will take time.

U
Unknown Analyst

It will take about 14, 15 months, sir?

P
P. Nataraj
executive

Yes, yes. Because the concession will take around 6, 7 months. The ramping up will take about 9 months, 12 months.

Operator

[Operator Instructions]

As there are no further questions, I now hand the conference over to Mr. Abhishek Nigam for his closing comments.

A
Abhishek Nigam

Yes. Thank you so much, everyone, for joining this call. And many thanks to the management for their insights. And sir, if you have any closing comments to make, then that would be great. Hello?

P
P. Nataraj
executive

Hello?

A
Abhishek Nigam

Yes, go ahead, sir.

P
P. Nataraj
executive

Yes. Thank you. Thank you, Abhishek, once again. K.P.R. has a positive outlook for the future with its key strength, and we believe that we will be able to deliver better performance in the years to come with the strong support from all the stakeholders. Thank you. Thank you all once again.

Operator

Thank you, members of the management team. Ladies and gentlemen, on behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.

A
Abhishek Nigam

Thank you.

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