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KPR Mill Ltd
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Hi, everyone. Thank you for joining us today for K.P.R's Fourth Quarter FY '22 Earnings Conference Call. We are joined today by Mr. P. Nataraj, the Managing Director of K.P.R.; Mr. Murugappan, the Chief Financial Officer; and Mr. Kandaswamy, the Company Secretary. And now without any further delay, I'll hand it over to management.
Yes. Thank you. A very good evening to everyone. I'm Nataraj, Managing Director of K.P.R. Mill. I welcome you all for the K.P.R. Mill Fourth Quarter Earnings call for the year 2022. We are glad to report a good financial results, driven by solid performance from all segments during the quarter as well as for the whole year. K.P.R. achieved an all-time high turnover and profit after tax during the year. The textile business continues to be good. The demand for apparel products is also on the uptrend. The historical high demand for cotton resulted in spiraling its prices, both at domestic and the international markets due to which the yarn prices have also gone up. The expansion projects of garment capacity and sugar, cogen and ethanol capacity have been successfully implemented. The outstanding HR practice has ensured a smooth mobilization of labor for our expanded capacities.
Currently, the domestic product with [ potential ] are sold through more than 3,000 retail stores. With the support of all stakeholders, K.P.R. could continue the better performance. With these opening remarks, the floor is now open for question-and-answer session. Thank you.
[Operator Instructions] The first question is from the line of Kapil Jagasia from Edelweiss Financial Service.
Congratulations on good set of numbers, sir. Sir, firstly, can you help us with your production numbers for yarn, garment and sugar and ethanol?
Yarn, 21,185; fabric, 6,000; garment, 34 million; sugar, 1 lakh 22,000 tonnes; ethanol, 115 lakh liters.
Okay. And, likewise, the volume numbers?
Yes. Yarn, 489 crores; fabric, 86 crores; garments, 593 crores; sugar, 144 crores; ethanol, 55 crores.
Okay. Sir, earlier you were giving the production numbers, right?
Yes, production and received.
Okay. And the volume numbers would be?
Volume, you're asking?
Yes, yes, volume.
Yarn, 14,000 tonnes; fabric, 2,200 tonnes; garment, 38 million; sugar, 45,000; ethanol, 88 lakh liters.
Okay. So garment we have achieved significant numbers this quarter, 38 million, like 38 million basically?
Yes, yes. The garment sales during the quarter is a little higher than the previous quarter because last quarter, we had some container issues. Those stocks are also cleared during this quarter.
Okay. So going forward, there won't be any issues with container shortage?
Some small disturbance are there, but we feel we can manage it.
The line for the participant dropped. We move to the next participant. The next question is from the line of Biplab Debbarma.
Congratulations on the good set of numbers. Sir, first is, in the -- from the new capacity [indiscernible], you have produced around 124 million pieces in this financial year of garments. And you have 150 million capacity, and there is a new capacity addition right, sir? So from the new capacity, how much you have produced in this financial year? And what is the -- how much ramp-up happened? This is my first question.
The ramp-up is about 23% now, not significant production happened during the quarter. A small production happened. It was added into the production.
So how you have produced 124 million in garment, sir? That's a huge number.
The 124 million in garment, basically, the capacity is measured in the basic garments, basic T shirts. When we are doing something else, some plain garments kind of thing, the quantity will go up.
Okay. Okay. That's fine. That's fine. And sir, what would be the -- your order book in garment now?
It's about INR 900 crores.
INR 900 crores, okay. And sir, on the sugar ethanol segment in the new capacity, is it now at full capacity? I mean, has it been totally operational also? What is the status of that?
Can you come again?
I mean, sir, the new capacity that you have added -- the sugar ethanol capacity.
We have commissioned to the sugar from power plant during the March. We are commissioning the ethanol plant in this quarter.
The next question is from the line of Mulesh Savla from Shah & Savla.
Congratulations on a good set of numbers, sir. My question is in continuation with one of the previous questions where you said that because of container problem, the garment of previous quarter was -- garment sale of previous quarter was shifted to the current quarter. And when I look at the export numbers, our export in the overall revenue has come down from 65% to 62%. So how do you read that number, sir?
Can you come again?
Our export has come down in the overall revenue. Previously, our...
That is not depending on the -- percentage wise, you cannot calculate. If you look at the total exports of garments during the year, it's about 1,876 crores.
1,876 crores, okay.
So it is almost -- it's almost to 30% more than the previous year.
So maybe because our sugar and ethanol division has started contributing more, and that can be one of the reason for increasing the domestic sales?
Yes, that is -- domestic sale has gone up because of the sugar business and the increase in the yarn realization.
Okay. Okay. Okay. And sir, how much is the cotton stock with us as we have noticed that in the recent past, government has reduced the import duty on the cotton -- will it have any impact on our valuation?
Sir, currently, we are getting a cotton stock of about 3 months. And the import duties actually did not have much of impact because it was removed after the season. So whatever duty has been removed, it did not have an impact as the price was increased due to that.
So basically, we may not expect any reduction in the closing stock valuation in coming quarters?
Yes, price may not go down, but the only benefit happened to us was the availability of cotton has increased.
Okay. So that's a good part for the industry as a whole?
Yes, yes.
The next question is from the line of Cheragh Sidhwa from ICICI Securities.
Congratulations for a very good set of numbers. Sir, my first question pertains in terms of CapEx. So we had charted on the CapEx worth [ INR 750 crores] towards garmenting and sugar in this year. And if I'm not wrong, we had already incurred INR 235 crores in the previous year as well. And the balance, INR 500 crores was supposed to be incurred this year. But sir, when I see the cash flow statement, the CapEx, which I can see is close to around INR 890 crores. So why is it significantly higher? Can you throw some right on the same? What is included in that INR 890 crore CapEx?
Your line is not very clear. Can you come again?
Sir, when you see the cash flow statement for this year, it is showing a CapEx worth INR 890 crores, which is significantly higher than what we were expecting close to INR 560 crores, INR 570 crores. So can you throw some light on the same? What does this CapEx include with INR 890 crores?
We have done 2 projects. One is a garment project, another one is sugar and apparels.
Correct, sir, but that was INR 750 crores.
All together, we have estimated somewhere around INR 800 crores. Since we have done some modernization in the plant, it has gone up to INR 900 crores.
Okay. Okay. And sir, CapEx number for this year, any major CapEx coming up in FY '23?
We are in the process of ramping up the existing projects that we have completed recently. We will decide the further CapEx during this year.
Okay. So ballpark will be our modernization, maintenance, which is close to INR 100 crores to INR 150 crores, one should consider for this year? You have no major CapEx [ in the house ].
Yes, modernization generally happens in the existing mills, both garment and textile. That will continue. That will be somewhere around INR 100 crores to INR 150 crores will be there.
And sir, the other question pertains to the cotton inventory, which we have in the next 3 months. What will be the average costing for the cotton inventory which we have currently?
Somewhere around INR 80,000, INR 85,000.
Next question is from the line of Sunil Kothari from Unique Portfolio Management Service.
Congratulation Mr. Nataraj and team for such a wonderful performance for -- continuously during every year. Sir, my question is year-on-year, I'm talking about full year yarn realization, which has gone up from around INR 220 to INR 302, roughly INR 80 per kg higher realization compared to last year. And our garment realization per piece has gone from just INR 5, which is INR 154 compared to last year's INR 149. So I would like to understand, sir, this to compensate for this higher raw material costs, which is cotton, yarn and fabric, what type of price increase we are taking with a new customer or new order? And which are the price which we are expecting to get? I mean how type -- what type of percentage increase in the garment realization should compensate for this higher price of yarn and fabric?
Actually, the cotton -- sorry, garment prices are fixed based on the current yarn prices. Whatever yarn prices prevailing during the time, we have taken it as input costs and the prices are [ arranged there ] and the negotiation will happen. Generally, whatever the yarn price is there is going to be passed on to the customers.
Right. So sir, that is what I'm asking. Currently -- last year, our average realization is INR 154 per piece. So currently, if we are taking order at this current INR 300 yarn and fabric prices, what ...
Yes, yes. We are seeing the asset price only. The realization is a little less. You would have seen a number of pieces produced during the quarter is higher. That means the garment are all -- plain and regular garment because of the number of pieces is down substantially, so the realizations are less. But if you look at the value of garment exported, is higher. If you look at it, it is about INR 593 crores during this quarter.
That is true, sir. What I'm asking -- trying to understand is per piece of our realization for the whole year is, say, roughly INR 154. So what is the current realization average?
What is the average? INR 154 per piece is the average realization then. There, it is included but the cotton -- whatever, yarn price increase also has been recorded from that.
I'll take offline this clarification. And one more thing I would like to understand is what type of garment production targets we are keeping for current year? Last year, we produced 124 million. So what type of targets we have for current year?
So the new plant, we are trying to ramp up within 6 months' time. We hope that we will run the factory with the full capacity during the second half of the year, somewhere around 15% to 30% growth from this level would be possible.
Next question is from the line of Naushad Chaudhary from Aditya Birla Capital.
A few clarification. And firstly, 1 question on this garment side, sir. As you indicated, your new capacity, you are planning to ramp it up in the next 6 months. So for the future growth, do we have anything in mind in terms of expansion of garment capacity, if you want to talk about it?
Yes, sir. See, presently, our attention is only to ramp up the new factory because the capacity is a little large, and we have to recruit the employees, train them and all these things. So our full attention is on this as well as the new plant of sugar.
Okay. So in terms of employee availability, are we comfortable in terms of the target which we had to have 5,000 people, I think, if I'm right to be needed for the new capacity -- new garment capacity? So are we comfortable in terms of getting those number of people to the factory?
Sir, can you hear us?
[Technical Difficulty]
Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. We'll move to the next question. The next question is from the line of Manish Ostwal from Nirmal Bang.
My question is on the demand scenario, given the geopolitical issues and the rising input price and the end product price inflation environment in the global economy. Recently, we saw The Gap announce their results and they cut their guidance. So can you comment about the demand scenario whether that has deteriorated significantly compared to the quarter gone by? And what is your outlook for the FY '23 in terms of growth?
[indiscernible] If you look at the demand for textile products, it is continually expected to be good only because the international players like Pakistan, Sri Lanka and the other small players are all facing problems who are manufacturing garments and yarn. These people are facing problems. Because of that, the Indian position has improved substantially. So the demand is expected to be good in the coming year also. And the order portion is good. We are in the middle of the next season. We have an order book of about INR 900 crores. We are confident that it will continue. And the yarn, even though the yarn price is at a higher level, the consumption is good, and there is no [ start of a start ] -- and we continue to sell the goods however we can.
And we'll be able to protect our margin in this environment, sir?
Yes, normal margins are protected. We used to have a margin of about 18% to 19% in [ this ] -- on the fabric segment, we are maintaining it. And the garment, this is about 23% [indiscernible].
And lastly, 1 small data point. CapEx guidance for FY 2023?
For this, we have dedicated only the maintenance CapEx of about INR 150 crores. We are not seeing any -- we have not decided any further capital expenditure for the year. Once we decide, we will inform to [ agent ].
INR 130 crores, right?
Sorry to interrupt you. There's a lot of disturbance coming from your line. May I request move to the handset?
Is this better?
No. There's still a bit of disturbance coming from the line.
Okay. I'll come back again.
The next question is from the line of Bharat Chhoda from ICICI Securities.
Could you just provide the value breakup for this yarn and fabric in the current quarter?
Yes, you want the value?
Yes.
Yarn is INR 489 crores. Fabric is INR 86 crores.
INR 86 crores. Okay. And sir, the volumes that have been like -- if you look at the yarn volumes, they appear to be lower. So is it because of the demand coming down? Or have you been using more of captive for our garmenting capacity? What has been the reason for the yarn volumes sales to be lower?
Sir, yarn and fabric together only -- it is -- actually, sir, our captive consumption also has gone up substantially because of the -- our own consumption. And if you look at it together, it is more or less same with the last year.
Okay. And sir, this yarn and fabric that you gave, that was for the quarter, right? INR 489 crores and INR 86 crores?
Yes, for the quarter. Yes, yes.
And for the full year, what would be that number?
Full year yarn and fabric, yarn is INR 2,033 crores.
INR 2,033 crores, yes.
Fabric is INR 722 crores.
7?
INR 722 crores.
INR 722 crores.
The next question is from the line of Gowthamprabhu from Blue Lotus Capital.
Hello? Can you hear me, sir? Thank you for taking my questions. [Indiscernible]
Can I request you to be louder, please?
Yes. Congratulations for [ jubilous ] performance for this year, financial year...
Sorry to interrupt you once again but your audio is not clear. Can I request you to speak through the handset?
Yes. Right now, I'm speaking through the handset only, is it clear now?
Yes.
Sir, may I know what percentage of the revenue comes from manmade fibers or synthetic fibers? And what is your next financial year's revenue breakup from manmade fibers? And do you see any excellent opportunity for [ mmf ] for the next financial year?
Yes, we are [indiscernible] some small portion of manmade fiber. That will be somewhere around 5% to 10% in the yarn and fabric segment. We are not totally into manmade fiber-based garments, we are not making. Yarn and fabric, we are doing about 10%.
Okay. And what is the many opportunities that we're seeing for next financial year -- new opportunities?
Next year also, it is going to be the same manufacturing facility. So we expect it to be in the same level.
The next question is from the line of Kapil Jagasia from Edelweiss Financial Service.
Sir, there was a news article regarding this FDA signing up with [ Australia. ] I suppose we have a good 14%, 15% from this region. Like would we be setting up more base over there? How beneficial that could be? Can you just put some color on this?
Sir, the FDA has been signed with Australia [indiscernible]. We hope that it will help us because our share to Australia is about 50%. So this will enable us to increase the trade with Australia.
Okay. And in terms of realization, how -- like if we compare that with Europe and U.S., the realization or the order shipment that would be higher, how it would be comparable to those regions?
Realization is more or less [ they are ] into this basic and regular garment segment. The realization of it more or less equal in all the zones, like Europe, U.S., Australia and Asia.
Okay. Okay. And sir, regarding this Dubai [ FDA, ] are we looking to set up any base there? Any increase...
We will be exporting to Dubai. We are not planning to set up a base there.
Okay. Okay. Okay. And sir, could you just help me with your segmental margins for the quarter? Yarn, garment, sugar and ethanol.
Yarn and fabric is 18%; garment, 23%; sugar, 28%.
The next question is from the line of Alpesh Thacker from Antique Stock Broking Limited.
Congratulations for a good set of numbers, sir. Sir, my question is more from the industry perspective. For the last couple of months, cotton prices have increased significantly, but the yarn spreads have come down, indicating that the yarn prices are not moving in sync with the cotton price. So what are your take? So is it industry is not able to pass on the yarn pricing -- cotton price increase to the end consumer? And the second is, how is the situation for us? Are we able to pass on the full increase in cotton to our consumer -- to our clients? So that is my first question.
So as you can see, last 1 year, when the cotton prices increases, yarn price also moved even a little higher than the cotton prices. Suppose 6 months before if you see that, cotton price has gone up, say, 30%, the yarn price increase to 40% so like that. So after a certain period, you see this cotton price has continued to move up, whereas [ certain ] say the yarn price was it was increasing. Till date, yarn price was increasing, but compared to cotton, it has slowed down.
So almost, as on today, as we see, we have come into the old -- that is 2 years back, what was the parity. That we can say in the last 1.5 years, the 1.5 years to 2 years, the margin we haven't been able to get a better margin than the regular in the last 1.5 years. So the present situation is almost it becomes a normal business cycle because of the cotton price increase is a little higher than the yarn price in the last 3, 4 months.
So -- but when you say -- when you take only the last 3 months, if you see that the cotton price has gone up [ beyond ] the yarn price. But before this, if you see that the yarn price was much higher than the cotton price. So on an average, we are in the back to the square, same level now. So this time, the next 6 months is crucial because the season starts -- cotton season starts by October. So next 6 months, you know how -- where the cotton price will stand. So that is only then everyone is eagerly looking after. So this is the current question.
Got it. Thanks for the clarification.
The next question is from the line of Sakshi Goenka from Alchemy Capital.
Congratulations on a good set of numbers. Sorry, I missed your segmenting margins, if you could repeat it again.
Yarn and fabric 18%, garment 23%, sugar 28%.
So 23%?
28%.
28%. Okay, good, sir.
Next question is from the line of Akshay Chheda from Canara Robeco Mutual Fund.
My first question is on this order book.
Sorry, you're not audible. Can I request you to speak louder?
Hello? Am I audible now?
[ I can hear you there ].
Just on this order book, so now currently ...
It's about INR 900 crores as of now.
So how do you see the demand? Because at least it has softened a little because in the previous quarter, we were at INR 1,000 crores and now we are at INR 900 crores. So how do you see the overall demand? I mean how should we look at it? Because especially when we are in the process to ramp up the capacity. So shouldn't our order book expand quarter-on-quarter? So that was my first question.
Sir, actually, order book is a 2-cycle process. Generally, June, July, August we'll get the first set of orders. And the second set of orders we used to get it in some time January, February, March. So during this time, order book would be higher. Now we are in the next year, we are approaching the next cycle. So during this cycle, the order book is a little lower only. Actually, if you look at it, historically it is the highest order book in March.
Okay. And sir, what was the garment margin? Is it 25%?
Correct.
So any reason here why the garment margins have come softer, because in the last quarter, we were guiding for a 29%, and that's what we have delivered. But now we are at 25%. So how should we see the stable margins in this business going forward?
Stable margins will be somewhere around 23% to 25% kind of a margin is sustainable in this garment business.
Okay. Okay. Okay. And sir, any reason for the softness from 29% to 25%?
It is because of the higher prices, the yarn prices in the last quarter yielded more profit. This quarter, more or less, the yarn prices also stabilized so demand is also in the normal levels.
Next question is from the line of Kashyap Javeri from Emkay Investment Managers.
Am I audible ?
Yes, sir, you are audible.
Sir, my question is, can you help me with the capacities across businesses that would be available for FY '23, let's say in terms of yarn, fabric, garment, sugar and ethanol.
Yarn is 1 lakh tonne, fabric 40,000 tonnes, garment 157 million?
Including the new expansion?
Yes including the new expansion. Sugar 20,000 TCD.
And ethanol?
Ethanol 3,50,000 liters.
3 lakh?
50,000 liters per day.
Okay. Out of 100,000 tonnes of yarn and 4000 tonnes of fabric, how much would be internal use?
Yarn will be 40% goes to fabric. Out of the fabric, we will consume about 50 percentage to our own consumption.
Okay. And whatever we use in garment, more or less, we are in-sourcing only, right?
What?
In terms of our [ in ] manufacturing, how much do we buy from outside in terms of fabric?
Mostly our fabric only. There is no outside buying.
Okay. Okay. And I understand that today, the yarn to cotton -- sorry, cotton to yarn, can you help me in terms of, let's say, margins per kg cotton to yarn, what are the margins per kg?
Per kg margins is difficult because various [ cones ] we are manufacturing for each [ cone ] each will have a different margin.
The next question is from the line of [indiscernible] Share and Stock Broking.
Congratulations for the great set of number. I just wanted to know about the cotton scenario of India, like how the arrivals looks like? And is there any holding of the inventory by the stockist or some big guys or how the basically cotton arrival will look like for the month of May and June, actually.
Sir, now you see the cotton season almost over. So it starts by October and end by March. And whatever the stocks available only coming into the market and because of the high price, there will be some holding back of the stocks from all the community from, say, like from farmers, ginners, as well as traders and something with the mills also. So we hope that there is some stock, but the data is not clear whether the stock is available of enough quantity to meet the demand for the rest of the period, so until October. So that is only the big question, even the official numbers also are not able to get it clearly. And say, everyone, every segment or even the various associations also collecting datas, but various associations' data are also not equal. So we are only getting different numbers. The reason is that in India, we don't have the correct information or the correct data. So that is a big issue.
In fact, this is also one -- this is a very negative feedback to fuel the price hike. So this generally happens in India. And because of this year, only the thing never has happened in the last 10, 15 years are the imposing the import duty for cotton. Only last year, the cotton duty was 10% plus 1% surcharge, total 11% duty imposed on cotton. So otherwise, every year, whenever the cotton shortage or during off-season, mills normally go for imports. And this year, mills are not able to import because of the duty, which is 11% if we add with the cost, it will be very high.
So that's why everyone has to buy only the domestic market. So this added the fuel to the cotton price. So as of today, some people say that cotton is available. Some people they say that cotton may not be available during -- I mean at the end of the season, maybe last 1 month or 1.5 months or like that. So this is only a market information or rumor or something like, and it's difficult to predict. And however, now the government has removed the duty, though the price is high, the other door is open. So even at a higher price, mills can import. So this is a very big advantage. So at the end of the season, if cotton is not available, then we can go for import. So this is a question.
The next question is from the line of Biplab Debbarma from Antique Stock Broking.
Sir, my question is on the margin. So can we say that the margins that we see -- that we saw, the heightened margins in the last 2, 3 quarters. Now the margins going forward would be back to normal, like the yarn would be 17%, 18%, garment would be around 25% and sugar is around 25%. Can you say that?
Yes, you are right.
Okay, so we are back to normal? Okay, fine. That is. Second question is on the -- just clarification. Did you say that the CapEx that we INR 750 crores CapEx, there is some cost escalation and total cost in fact is INR 900 crores?
Not because of that, [ just that ] we have done some modernization in the plant, like -- but we have done originally planned mission was a little modernized and some modification has been done in the plant that is why INR 100 crore increase in the project cost.
[ Okay. And of that price increase ]...
Sir, sorry, your voice is breaking.
In FY '23, since things are back to normal in terms of margin, and we have also capacity fully operational, what would be the revenue guidance for -- and PAT guidance for FY '23, sir, just ballpark number?
Yes, we are looking at a growth of about 15% to 20%.
In revenue?
Yes, revenue.
And PAT?
PAT, we have to wait because the cotton prices are volatile, we have to wait for some time to ascertain. We hope that the things will be good, but we could not be able to give the ...
So the margins could go down or up depending on the cotton prices?
Go down. Up also it's possible, both the sides is possible, but to say for certain, we will wait for it.
Next question is from the line of [ Apurva from PGIM ] India Mutual Fund.
Sorry, there was some disturbance on my side on my line. Just wanted to -- I don't know whether you've answered this, how much stock of cotton are we holding in terms of, say, a number of months going ahead? And what would be the ...
About 3 months' stock we are holding.
And average pricing, are you disclosing that amount?
Somewhere around INR 80,000 to INR 85,000.
Okay, INR 80,000 to INR 85,000, okay. And so in terms of -- I think yarn prices you mentioned they have come back, right? So are we seeing a spread of around INR 120 to INR 130 as of now, at least, for the cotton spread?
Yes. The EBITDA margin is about 17%, the gross margin would be a little higher, INR 120 would be there.
Okay. Okay. You highlighted. In terms of -- again, coming back to CapEx, already you said now it will be more or less and you will be deciding in the coming year, but any initial thoughts on where would this be, because you would have that kind of free cash flow. So any [ look ] around that?
CapEx that we are planning, we continue to expand in garments only. That is our plan. So that's why we told that already we have 2 projects, the almost the project is completed, but ramping up as well as in the sugar also like some other work is also being the first season, we have to set right everything in a proper way so that our teams are fully engaged in this all the technical team. So that's why I call that maybe after 6 months, we will think of for the next project. So here, next project will be, expansion will be in the garments.
Garments only, fine. And now just to -- again, just to summarize because I couldn't get it properly, just the demand side is not -- there is not a problem on that since you are expecting a 15% to 20%. [It is whether ] Am I audible?
Sir, we would not be able to hear you.
Am I audible now?
Better than before.
So just I couldn't hear it properly. Just summarizing in terms of demand side, you don't see challenge? It is more on the raw material in the cotton pricing side, right? But just what you have mentioned.
Yes.
The next question is from the line of Abhishek Nigam from B&K Securities.
Sir, just 2 questions from me. One, when should we expect full ramp up of new [ garment ] capacity? Should we expect around December or so?
Yes, somewhere in third quarter of this year.
Okay. Okay. And have there been any negotiations or attempts to just speak to the clients to go in for, say, a 3-month price hike instead of, I think, a 6-month [ there have been ] now.
Sir, in this ongoing process, generally, we've been discussed with the client regularly. And some of the new orders, whatever they place, repeat order and all, they will give the increase in the prices. Generally, we will not negotiate for the price increase during the order period. They give order for 6 months, we will not negotiate to take it. Because since ours is a fully integrated unit, we allocate the cotton for the purpose at that price.
The next question is from the line of Akshay Kothari from Envision Capital.
Am I audible?
Yes, sir.
So can you just brief about the FDA opportunities regarding what -- because I can see it in your investor presentation as well. So how are we capitalizing on these opportunities?
[ so ] right now the government has done for -- with UAE and Australia and some discussions going on with U.K. And see, once these things have happened, and definitely, there's a good opportunity especially for the garment industry. So we have to wait and see that when are these -- all these things are [ happening ] even Australia, already signed, and UAE has also signed and still we have to wait until the -- both the Parliament have to approve this FDA. And definitely, and particularly K.P.R., we are also in the considerable export is happening to Australian market. And definitely, it will be a very, a boost for the K.P.R. in the apparel division. So we are very eagerly waiting for this to happen.
Okay. Okay. And 1 more. So your inventory has gone up. So is it like the nature of industry or what is it?
Inventory basically gone up because of price increase, the cotton price increase.
Next question is from the line of [ Deben Sed ] from [ Bolen ] Capital.
So I'm trying to reconcile 2 numbers in your PL for the full year, sir, with the business developments and metrics that have played out. So one is, of course, that I've been tracking your HR policies and capabilities for close to a decade and actually more now. And they rank right up there at the top in the textile industry, and we've heard plenty about them and have had the opportunity to check them out as well. Now this particular year, total employee expenses have risen by a mere some 12.5%, 13%, whereas the -- I think the most labor-intensive part of your business, which is garments, has seen 130%, 35% increase in volumes. So how do I reconcile this hardly 12%, 13% kind of change with a huge jump in garments? Is it that there is more machinery/automation/whatever? Is that the way to see it? Or is there a point that I'm missing here?
Sir, I mean, the revenue has jumped because of the raw material price increase. So the percentage of the expenses is showing a little bit late. If you look at the actual salary expenditure, it is higher.
So actually, I'm looking at the actual numbers, sir, not the percentage to revenues, it's INR 393.68 crores last full year, and it is just INR 445.45 crores this year. Now that's about a 12%, 13% absolute increase. And I'm comparing that with the garment sales in terms of number of garments, not even value, which I suppose has got escalated because of the underlying garment price increase, which has gone from 928 -- 93 million garments to about 120-odd million garments, right?
The garment production, sir, it is not a standard garment. Garment is different from one period to another period. If it is the plain garment, number of garments would go up. If it is a printed garment or embroidery garment, the number of pieces will go down. That will not be -- you cannot use it as a yardstick for this purpose. Basically, there is no much effort employee increase during the year. We have entered the new countries starting devoting people on a very small number of people for the new project.
Okay. So is it fair to assume or interpret this as the fact that your garment mix this year was perhaps less labor-intensive than last year?
Not like that. Labor intensive only, but in the garment -- if you look at style of the garment is different this year.
Yes, so maybe it consumed lesser labor, okay. And the second number, which I was trying to reconcile in the PL was the actually -- again, in absolute numbers, your depreciation provision for the year has fallen in a year where you have aggressively invested in capacity. So is there a change in policy or something here?
Both the projects were completed during the month of March only. So the depreciation provided [ proportionately ]. And also some of the machineries have completed their useful life, 10 years has grown because of that. Next year, the depreciation will go up because the full year utilization will come.
Next question is from the line of Naushad Chaudhary from Aditya Birla Capital.
Just a clarification on the order book side, sir, as sequentially, it has slightly gone down from INR 1,000 crores run rate to INR 900 crores. So is this something which is a peak run rate given the existing capacity we have? Or is there any scope for an order book to increase on the existing capacity?
The order cycle is, in a year is 2x. So once in 6 months, we will get the order. So order period is somewhere in June, we will get -- the June, July will get the first order. And again, we will get the second order sometime in January, February. It is the middle of the season now. So the order book would be a little lesser only. If you look at it, it is a historically higher order book during March. So the order book will be -- so order book cycle and the financial year is a little different.
Okay. Understood. Secondly, on the balance sheet side, sir, as one of the participants has asked in terms of inventory days, which have gone up. If I look at the history also in last 2, 3 years, it has gone up meaningfully. And the reason you shared, the raw material prices. Is there any other piece of it apart from the raw material prices?
There will be some increase in stocks in this subdivision also because we have commissioned for production during the year in the new plant. So that also resulted in a little higher inventory.
Historically, it used to be between 75 to 85 days. Do you think we can -- once things get normalized, we can go back to those run rate? And as the duty also has been -- the import duty on the cotton has been removed, that way we can have a lesser inventory and if required, we can have import of that. Will these points help us to reduce our inventory days?
Yes, definitely it will help us because when there is no import duty, we [ push ] to buy more cotton and store it. Even though we are having premiums [ sharpen ] the prices are very high because of -- if you compare to the last year, it is more or less double the price. So the inventory costs have gone up substantially. That's 1 thing. Second is in the consolidated level, the inventory is fair because the sugar also. Sugar also contributed to a certain extent. Because sugar, you cannot sell it. It is a regulatory product. We can sell based on the government release order only. So whatever we produce, it will be laying in the stock only.
Okay. And lastly, I'm sorry if I missed this point, the recent greenfield expansion of sugar and ethanol, by when we see the full capacity utilization?
Sir, for first quarter, we will start the plan maybe by end of this quarter, we can see the full production.
Okay. FY '23, we'll see the full benefit of this?
Yes, yes, more or less, about 90 percentage we can see.
With a 25% plus kind of EBITDA margin?
We are looking at 25% plus kind of EBITDA margin for the sugar business for the year 2022, '23. We hope that we can achieve it.
I now hand the conference over to Abhishek Nigam for closing comments.
On behalf of B&K Securities, that concludes this conference, and thank you so much for joining us, and you may now disconnect your lines.
Thank you very much. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us.
Excuse me?
Yes, sir.
There will be management ...
Sure, sir. Please go ahead.
So the improved market dynamics [ participant ] expectation from the concluded FDAs with the UAE and Australia is a good news for the Indian apparel industry. We would like to thank all the stakeholders for their continued support, and we expect the support from all stakeholders for the coming years also. And once again, I thank you all for attending this conference call. Thank you.
Thank you very much.