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KPR Mill Ltd
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Yes. Thanks, Jacob. Hi, everyone. Thank you for joining us today afternoon. We are joined today by management from K.P.R. Mills Limited. We have with us Mr. Nataraj, the Managing Director; Mr. Murugappan, who is the CFO; and Mr. Kandaswamy, the Company Secretary. And now without any further delay, I will hand over to Mr. Nataraj for opening comments. Over to you, sir.
Thank you, Mr. Abhishek and very good evening to everyone here, and I welcome you all for the K.P.R. Mills, Q4 earnings call for the financial year 2023. With the opening of economies around the world, after the COVID crisis, consumers had the opportunity to spend the money that they could not during the COVID period. Consequently, demand sold and brands and retailers increased orders to meet this pent-up demand.
However, with inflation rising, especially after the Russian invasion of Ukraine. The demand of consumer goods lower, while inventories remain very high. K.P.R. commenced FY 2023 with a positive note of growth and profitability. But the steep increase in cotton prices, we all know well, coupled with the resultant lower and realization impacted the margin. However, the unstinted support from the garment segment and our inherent strengths enable the K.P.R. to repeat its performance level despite the challenges.
Now the cotton prices started stabilizing, the textile industry is optimistic with the government policies and FTS. As reported earlier, to improve our performance further, we implemented certain modernization and expansion plan at a total outlay of about INR 500 crores. So that is setting above exclusive [ Votek ] spending mill at an outlay of INR 100 crores will be completed during the current financial year.
The rooftop solar power plant at INR 50 crores is completed and commissioned. Processing and printing expansion at a cost of INR 50 crores will be completed in first half of this financial year. Ethanol capacity expansion at INR 150 crores will be commenced before the coming sugar season 2023, '24, that is by October this year. Then finally, we spent around INR 100 crores for modernization to improve the quality of the product so as to meet the customer's requirement. With this, we have spent around INR 500 crores in the last 1 year, which is -- will be -- the project -- will be completed at the end of this year, around INR 500 crores investment.
The geopolitical tensions, high inflation, rising commodity prices and interest rates are impacting many economies. The textile business is also facing challenges. So we are watching the market continuously and will consider any further expansion plans accordingly. With this opening remarks, the floor is now open for questions-and-answers session. Thank you.
[Operator Instructions] The first question is from the line of Kapil Jagasia from Nuvama Wealth Research.
Sir, firstly, I wanted to know reasons for this sharp contraction in gross margins for this quarter?
So this is mainly due to the margin relation in spinning business, that is yarn and fabric. Cotton prices are highly volatile and the demand is a little subdued because of that the margins -- realization of yarn and fabric is lower than the normal level, the profitability are also low during this quarter.
Okay. So what was the margins in yarn and fabric segment this quarter?
This quarter, it's about 10%.
Okay. And the government segment margins would be?
The 25% then, sugar is about 20%. .
Okay. And sir, how are you seeing this coming quarter? Any unutilized high-cost cotton inventory still in the like still in our books or how is it?
No, sir. All the inventories of the previous season was fully consumed. We have only the current inventories.
Okay. Sure. Sir, my next question is your sales contribution from European this year has increased to 60%, 61%. So can you elaborate on any client additions done in that region over the last 1 year?
It is mainly because of the existing customers. And like Primark and some of the European customers increased the order since we have commissioned a new plant for the requirement the demand has increased from Europe. And whatever was balance available capacity will be utilized for the other region customers in the coming year.
Okay. And sir, how is the demand environment in Europe region for garments? Is it improving from last year? How is the outlook over there?
Yes, it's -- and compared to last year, because of the -- we all know well about the Ukraine war. A little bit of the processing trend changed in the Europe. So as like what we are also waiting for similarly, the general image in Europe is also like that they are a little bit slow down. And in the last 3, 4 months, we are able to see -- so -- but we hope that this trend will change. And we are able to see a change in the order flow most probably the orders are moving towards the large players. So this is what we are able to see now.
Okay. And sir, my final question would be, what would be our order book position for garments as of today?
As of today, it's about INR 1,000 crores.
[Operator Instructions] The next question is from the line of Biplab Debbarma from Antique Stockbroking.
Sir, my first question is on your -- on the capacity expansion. So you have multiple capacity expansions. One in ethanol, 1 in Voltex, then you have modernization debottleneck. So I was just trying to understand all this capacity expansion, like what would be the -- how much turnover -- increase in turnover would just capacity expansion would lead to.
Sir, Voltex winning expected to be somewhere around INR 100 crores of turnover on completion of the project. And the solar power plant is expected to generate a revenue of close to about INR 10 crores per annum, so it's a lot of profit. And the processing and the printing expansions expected to increase its capacity by about 4,000 tons. And the ethanol expansion will increase the revenue by about INR 150 crores.
So around more than INR 250-odd crores from all this capacity expansion per year?
Other than that, in the modernization, whatever we have done, it will improve our competitiveness in the market. And we will become a preferred to customers and continue to be the preferred to customers in the market.
So what is all this would lead to also -- I mean, ballpark around INR 250-odd crores of increase in our turnover. Yes?
Yes, yes. It's more of value added product on per year.
Okay. And sir, recently, Warman has announced Mega textile parks. Two of the parks has been launched, 1 in Karnataka and 1 in Tamilnadu. So any plan of investment in this mega textile park? And as far your -- by when do you think this park would be operational and your -- if you intend to invest in when do you foresee that you would investing in this park?
Development actually is not a commencing -- we expect that it will be done in the coming period. And the final notifications and the other benefits will be announced in the coming year. Based on that, we will take a call on that.
Okay. Okay. Okay. And my final question is on the -- your debt, the interest the cost -- I mean, total interest cost has gone up significantly. And I believe that, that level has also gone up. So since we are doing a significant INR 500 crores of CapEx. And in the future also, we are all anticipating your environment. So at what level of debt would you be comfortable? And how would you on this CapEx mix of debt equity? Or what is the thought behind this? What is your thought behind this CapEx expansion? How do you...
After the gas project is we have announced and implementing is from the internal sources only access to the ethanol project where the interest subsidy is available. Apart from the ethanol project to the other loan, other projects are on from internal accruals. The current data is even term loan of about INR 590 crores and the term loan are looking at layout INR 133 crores and the overall debt-to-EBITDA ratio of about 0.37%. So we feel it's at 5-person would be comfortable. But we are not intending to borrow much because cash generations are good. Some of the term loans, whatever we care is mostly in the subsidy loans, other loans, we are slowly closing down.
So what would be the blended cost of debt in this 5 [indiscernible] ?
It will be somewhere around 6%. The [indiscernible] loan is higher because the season ending, we are holding stock for around next 4 to 5 months. That's why the booking availment is a little higher. It will be remunerated in the coming periods.
The next question is from the line of Prerna Jhunjhunwala. As there is no response, we move to the next question. The next question is from the line of [indiscernible] an Individual Investor.
I had a couple of questions. Firstly, as far in the past year, if you look at the total revenue growth in garments, we had probably a 5% to 7% volume growth and a large part of the revenues came from increased realizations, which has reached almost INR 200.
So if you could just give us some idea about what's the kind of value addition which came in and how much was because of the price increase because of cotton?
Some 10% would be because of the cotton price increase that is expected to continue in the coming [ 3-year period ]also because currently, the cotton price is around [ INR 53,000 ] The [indiscernible] audits in the 3 years period also the same. It's expected to continue. On the value additions, we have reduced some of the printing technologies in the garment divisions and the embroidery and other whole-body printing kind of thing. The value relation is slowly going up, and that would be somewhere around 10%.
Okay. So I think the average realizations could sustain at the current level because most of these are kind of longer term in nature.
Yes, they are longer term in nature.
Okay. Sir, as far as the current year is concerned, we had just a volume growth of 5% to 7% last year. Any indication whether growth would be better in the current year based on whatever you are seeing in the market? And slide...
Currently, we have about 147 million garment government capacity, we hope that we will increase close to that.
Okay. Okay. Fair enough. And sir, in terms of slide to some more color on how the macro is looking. You said there is some improvement in demand, which could come through, but maybe something specific to Europe and U.S., what trends are you seeing?
Sir, generally, if you see that the China plus 1, everybody we are talking since launch, and overall, the sentiment is that the customers are looking for large customers, mainly one of the very important business, the inventory is a big issue now. So those who are having the working capital capacity, those are able to keep the inventory level at the customers 1 second, they place the order, they are just keeping warehouse as they are want to hear.
And whenever they need the shipment based on that only we have the ship it. So we have to keep after the production of the garments. So here, the working capital facility is very key is a percent situation. So only like having capacity and inventory storage facility and the working capital facility, this kind of the facilities are key at the present level. So this plays a major role. So large players can get more orders. So there is a position. So K.P.R. is well placed in this area. So we feel that the future will be good for the garments.
The next question is from the line of Naushad Chaudhary from Aditya Birla & Life AMC.
Some clarifications, sir. Firstly, on the cotton side, how much cotton inventory we must be having at this -- on the balance sheet as of now? And what would be the average price?
The balance sheet date, we have about 4 months of inventory. Now we have a little more, but the average cost be somewhere around INR 53,000, INR 54,000.
Okay. And secondly, I understand, sir, you have mentioned on your opening remarks that you would wait and watch for the right time for the announcement on the garment capacity expansion. But if at all, if you have to do it, how much time will it take you to get your capacity ready to fill the demand should it be ready within 6 to 8 months, given you have do you have any scope within your existing facility to expand? Or will it take 1.5- to 2-year like previous greenfield expansion?
So we have a certain space also in the existing facilities also. There is a small like 5 million to 10 million capacity, we can go with our own field. But further, if you want to go for the large expansion, we have to plan for the greenfield. And so we held the past experience in the last 10 years, like creating the facility so we can make it in like 6 to 8 months whatever the size, like a 30 million, 40 million garment capacity, we can be able to set up. But the main thing is here, we have to see how the trend are they rolled over all of the world, or various uncertainties are there, people say some recon maybe there in the future are so like that. And so with various uncertainties, I think we also find it closely watching the market. And again, not in our decision. So we have to wait and see how the trend goes maybe say, next 3 months, 6 months. So based on that, we have to take a decision.
Okay. And if at all, if you announce it, will it be a similar size of the previous capacity 35 million, 40 million plus or would it be...
Yes, yes. Yes.
And in the same region?
Yes, yes, in the same region.
Okay. And lastly, on the yarn business, do you think given the demand and spread pressure, do you think -- this is a vast now and from here on, they should see improvement? Or do you think it is very difficult as of now to comment on the demand and spread growth?
Generally, almost, you see the yarn price, again, the [indiscernible] on the final product, as I told just now, the most of our export of the textile product for Europe and the U.S. So then garment product improve automatically just a raw material yarn. So this also will improve so that we have to wait and see but I can say that what is over because cotton price went up to more than 1 lakh per candy. And it has come down. If you see the last couple of months, it's stabilized somewhere around INR 60,000 to INR 62,000.
So we can say that the worst is over, and we hope these will maybe next quarters are quarter 2, definitely, the situation will improve.
Any comment you would like to make on your retail brand faster? How is it doing? You had some ambitious target for FY '24? Are we on track to achieve that?
Yes, we have the target. And almost we are moving toward except during the COVID time where we started at the time, and it was a little tough time. And in the last 6 months, we are pushing it to cover even the earlier time what we lost and we hope that we can achieve as our plan, but we are liking a little behind because of this the COVID and the other issues. And we are confident that we can push it to the track.
The next question is from the line of Prerna Jhunjhunwala from Elara Capital.
So I just wanted to understand, sir, the opportunity in the government segment, as this China plus 1 opportunity is still there, and very active and various other countries are still facing issues on maybe some of the other factors. I'm -- we're just trying to understand a large player like you, how are we waiting for demand improvement to happen and stuff because otherwise, we can do capacity expansion and player capacities much better than a smaller company. So just wanted to understand the thought process on what is leading to a doubt where the demand would come in the next 6 months?
No, no. You see that 1 year back, the China plus 1 was very interesting, and it was -- there are a lot of orders are going in. But after that, a lot of uncertainties are happening around the world, like in some region, the war is going on. And the governments from industries and help and even K.P.R. the major export is through Europe. And Europe, as I know you know very well that Europe is the most affected because of this war. And the -- even the people's purchasing pattern has changed. So they have attention to basic needs, they have moved.
So like that because of the gas problem, power shortage the power cost has gone up manyfold in Europe. So they are also -- it's every human being like when the basic needs, they struggle the full attention will be on basis. So they will think the fancy or patients will be the next that kind of situation is there. So we are very cautious. We don't want to just investing hundreds of crores and anything happened. So they don't want to like put the investment and keep it ideal or struggling for getting orders and all these things. So then the situation becomes the bus or something like necessarily investing on this, and we should not get into trouble. So we want to -- we can say that we are a little more extra cautious. So that is only the reason we are waiting for.
So that is very interesting because it makes sense. But generally, as per your experience of so many years in the industry, how much time does an improvement in consumption will generally take in such kind of scenario, we have been through many recessionary cycles?
Reception, we can say, but the war scenario on all are all the first time facing this kind of situation. So it is very difficult. So we can assume, but we should not go wrong. So that is the reason we actually -- we are waiting for that. That's why it all we can predict, but that it cannot go right -- so it's better to wait and see for some more time.
Yes. Makes sense, sir. Sir, second question is on FASO. What is our thought process there? And how are we moving ahead on that business?
So we're slowly we started in the state and we moved into southern state. Now we are actually moving to pan India. So this is what -- we bought we planned at the beginning. So we are moving as per our plan. But only the thing were due to COVID other ratios, it was a little bit the time lag, almost 1 to 2 years is lost in that. we are aggressively pushing it and hope that maybe like we are running behind that. And as our team and marketing team and technical team and we are pushing it faster to catch up this time, maybe in a couple of years to what we lost to sell like them. So we hope that we can reach as per our plan.
Sir, do we -- can we assume that you would be -- the brand could be a INR 100 crore brand in the next 2 years?
We also hope to do that.
Okay. Okay. And sir, last question on your spending business. Just what explaining that you have announced? Is it a better profitability business than your current spending? Or is it the same margin business?
Almost margin will be the same. But one thing we can say that this kind of what the cotton has a high fluctuation in the price ups and down is there. And this is -- mainly we use the risk core fiber. So the fluctuation will not be there is, we can say, the stable margin without high risk like that.
Okay. And the demand is also improving in the viscose segment, right?
Yes, yes. Yes.
The next question is from the line of Monish Gorki from HDFC Mutual Fund.
Sir, our sales to Europe is around 60%. So what would be the split between Mainland Europe and U.K.?
U.K. would be somewhere around 15%. Balance will be other European countries.
So 15% of the 60%?
Yes. Okay. Sir, Europe and North America are almost equally large garment markets, what is the reason that we are so strong in Europe, but not as strong as North America. Like if I compare even Australia, which is a very small market, our share is 14%, whereas North America, which is a larger market, we are just at 20%
We started the American business, some 3, 4 years where when we expanded the business. Otherwise, we are in Europe -- not only we are expanding our businesses to other regions like U.S., Australia and all. We hope that the coming periods, the share will increase.
Okay. And sir, yarn and fabric business, what would be the split between domestic and export?
So almost domestic only.
Almost domestic. Sir, what would be our typical yarn realization?
So current quarter is about. INR 260 per kg. Fabric is about INR 310.
Per meter?
Per kilo.
Per kilo, okay. And sir, this cotton prices, if I'm looking at trends of past few months, it's around INR 60,000 a candy. So you said our procurement cost is 53, 54. So why is it lower? Are we like buying some different quality cotton?
No, no, it's 63 -- 62,000 63,000 not 52,000.
Okay. Okay, 62,000.
Okay. And sir, last question, also Asia, generally, the textile garmenting industry say that we don't have FDA with EU. That's why we are not benefiting we have FDA with Japan and Korea. So why our share like as an industry, our share is not that strong in those countries?
See, since beginning, the product, what we are making is to the Europe and the U.S., so like that. And Japanese market is a nice market, not volume-based. So it depends on how you make the product.
So I suppose 1 fact even company or 1 reason makes volume base, and few players make only niche garments. And in this region, if you see that mainly the region where most of the exporters were carputer making more than INR 30,000 crores of export are mostly on volume based. So that is the main reason.
We are towards Europe and U.S., and there is no much -- still we also do a small volume. But the quantity will be very less. It is for the players who are the small players, having like 100, 200 machines like those people can go about niche markets. Large volume we want. We have to get a larger size of factory, we have to go to this kind of markets.
The next question is from the line of Gnanasundaram S. from Spark Institutional Equities.
Sir, to be harping on this again. But just in terms of the garment capacity, we've done about 133 million pieces this year. And our capacity is about 150, 170 in a minimal run for about 18% is the kind of growth that is left out in terms of capacity. And typically, the last facility that we visit took us about 14 months in terms of situation.
So when could we really expect this in terms of you getting confidence because you real estate to a lot of positive facts coming out as expansion into North America or in terms of larger players gaining share. So why is this really not invite confidence in us to go for a capacity expansion right now. Is it labor-related issues?
No, this is not already as for the Singapore unit or a larger size of unit is ramping up a factory of this size it takes time where we have to meet both order booking as well as the training of the labs.
So we have to go in a phase manner only. We cannot go as all of a sudden. It is a small fact like under 200 missions. So we can make it in a couple of months or like that. As the larger capacity size, we have to train the people. At the same time, we have to meet the customers' delivery schedule. So that's why ramping up happens so like take, as you said, like 12 to 14 months. So once this ramping up is forward, then we can think of the further expansion. And they have already told the uncertainty in the market. We have to think that also into taking a decision for the expansion plan. So that is the same situation.
So it's got nothing to do with labor availability in terms of labor attrition?
No, no. That [indiscernible]
All right, sir. Sir, just about the bookkeeping question. Can you just give us a split between the numbers or the yarn and the fabric business as in the sugar business?
The production .or sales?
Sales, sir. .
Yarn sales is about 19,000 tonnes. Average sales is about 2,000 tonnes. .
And the sugar business, sir?
Sugar business the sale is about on like terms about 2 crores [indiscernible]
Just a number -- just for the bookkeeping question. This year, we produced about 133 million, but eventual sales was 120 million. So is this a timing issue? Or has there been any order cancellations, sir?
I did not hear you. Please come again?
No, this year, our garment production is about 133 million pieces. When the sale was about 128 million piece, is it purely a timing issue term of order pickup or has there been cancellations?
As I have explained to you now the shipments are happening on the -- on the basis of the capacity, like they wanted us to produce and keep the stock ready for shipment. Once the shipping in [indiscernible] of septae, they are keeping the arose in our it on record is getting exported. So we are keeping about 2 [indiscernible] production as a tag.
Right. And just one follow-up as this change that earlier, they used to give us a 6-month order book. Now that has come down for 3 months. Is there a change in terms of order book [indiscernible]?
No, no, order book is more or less the same. Only shipping [indiscernible]
The next question is from the line of Akshay from Canara Robeco Mutual Fund. .
Two questions. First is just on the realization for piece. So if you see this quarter also, it is around INR 211. And you did allude to that it's partly a function of, say, 10% because of cotton price and 10% is because of the printing technology, et cetera. Sir, but the cotton prices have corrected. So wouldn't the prices in the realization come down? How should we look at the realization? Can it go back to 140 or 160 or this 200 would continue?
So cotton prices are used to be about INR 33,000 to INR 40,000. Now it's about INR 63,000 INR 64,000, around INR 65,000. The realization rates, we are not excluding any downturn because almost to the cotton prices higher than the normal level. So it is expected to be the same and the beat cotton prices but there in the last year are about 2, 3 months only, not the full year. That has not have an impact on this.
So sir, all of this should continue going forward also?
We are -- we are expecting that it will be more at the same level.
Okay. And sir, second question is, sir, around the sugar business. So I mean, at least there are that the yield and recoveries on the lower side in Maharashtra and Karnataka. So how do you see the FY '24 numbers? Like can we expect a similar number or there will be some on the top line and even on the margin. So what is -- if you can guide for FY '24?
It's too early to predict because it's more of a margin business things will be good because the range last year is good sowing also good. We expect that the teams will be normal this year in Karnataka not [indiscernible]
But sir, any sense from the crushing matters being closed recently? I mean...
Yes? What do you want?
Any color you would like to -- from the crushing season that has just ended or sir, from there, if you can give some inference, if you can give some inference? Sir, if you can give some inference?
Sir, currently addressing information you want?
Yes, sir, if you can help with that.
Yes, we have a rush there. Okay. Okay.
The next question is from the line of Shradha from Amsec.
[indiscernible] revenue number for subject for this quarter on the breakup of sugar economic sugar business?
Can you -- it's not clear. Can you come again? Your line is not very clear. Can you come again?
Can you give me the -- you gave me the volume numbers for yarn and fabric. Can you give the revenue numbers in rupees for yarn and fabric and the state of sugar ethanol in sugar?
Yes, can do. Then yarn quantity is about 19,000 tonnes. And the Fabric is 2,000 tonnes. Yarn revenue is about INR 500 crores and INR 70 crores in fabric. And sugar is about 1 lakh [indiscernible], INR 327 crores is our revenue. The ethanol is INR 2 crores again [indiscernible] like liters and INR 155 crores is the revenue.
How much, hundred and?
INR 55 crores.
INR 155 crores. And so what are the sugar inventory we are sitting at as of this quarter?
Close to 1 lakh tonnes.
Okay. And so this new sugar ethanol capacity that is expected to be commissioned, that is operational in the next cycle of October to January?
Is not a new sugar capacity. [indiscernible] to come to operations from next season that is from October.
The next question is from the line of Pratik Kothari from Unique Portfolio Managers.
Sir, my first question is on the -- we were expecting some large orders to come in after the FDA, which we signed with Australia. Any comments, any color that you can throw on those lines?
Already, we are doing with 1 customer. After the FDA now order flow is increased. And on FDA, we import [indiscernible] also from Australia where generally for import duties there from Australia, the import duties removed because of -- so just we have import also started, we will see the improvement in the future, both the raw material import as well as other booking also.
Okay. Fair enough. And sir, my second question is on the production numbers, which we expect to do this year from 133 million to about 145 million, 150 million. Given the near-term pressures that we are seeing in the consumer market of U.S., Europe, so where is this confidence or optimism coming from? I mean what are we seeing or how are we getting this orders?
Sir, we have an order book that go to 6 months from now. So the next order table will start from sometime in June, July. The inquiries and the discussions are going on as per the inspected even we hope that the business will do well.
So the current order book that we have booked for the next 6 months gives you confidence that we'll do this 150-odd million production.
Yes, yes. We also expect that the Western Europe is more or less now they are coming back to normal, we know that things will improve.
The next question is from the line of Biplab Debbarma from Antique Stockbroking.
Sir, so you mentioned that cotton is -- yarn realization is around 256 per kg. And then the current cotton rate, the cotton yarn's spread down comes is around -- coming around INR 80 -- INR 80 per kg. So sir, is this the normal well, I sort normal level will be something around 110, 120 per kg cotton yarn spread. What would be the ideal cotton yarn spread, sir, for you?
Sir, whatever you said is right. We hope that it will improve from the coming quarters.
And what is the ideal cotton yarn spread for the
I said it's about INR 110 crores to INR 120 per kilo.
Okay. Okay. Sir, second question is that the new capacity dormant capacity of 42 million pieces. What will be the capacity utilization? I'm just trying to understand that if you incrementally get orders, do you have enough capacity to fulfill those orders? What will be the capacity...
More or less the capacity is running full, we hope that the production out production will be achieved in 2, 3 months' time.
So if incremental, do you have the order book in this July -- June-July cycle, you see increasing significant increase 10%, 15% increase in order -- so would you be able to fulfill because if your capacity is running almost full capacity then how would you SP-12 Yes, we can
What capacity is full means we pull back is running now. Literally after to be running capacity outline increase after the take because since it's a new capacity slowly it will improve the production. So a new -- the capacity of the people will increase slowly over a period of time, maybe 3 months to 4 months' time, we will reach their optimum capacity.
So you have 147 million [indiscernible] capacity. So can you tell us more than that in terms of government can you go beyond 147 million cases.
We have some space are grown in the expansion. That can be done whenever it is required, we can do some INR 33 million additional but the small addition of issuing in and some balancing a few months.
So 10 million, 20 million in brownfield that is what you were mentioning, 10 million to 15 million different.
Yes.
Okay. And then final question is on risk cost. So you said it is better that it is less volatile and all. In terms of realization and margin, how much better it been? Are you saying that realization would also be better than the normal yarn and margin would be better than the normal yarn. Can you give us some color on that?
Better, it is not better than the normal yarn like that. It is lighter steady margin because the value addition is steady and the margins also steady
It will be -- we expect that we don't be somewhere around the 18%, 20% margin kind of a business. We are testing the outcome of this expansion. If everything works then we can expand this business also, but we have to see how it comes.
And what would be the capacity that we will be putting on for this cost? I know the amount, but in terms of metric tons, how much capacity you're putting?
The production capacity is like a production of 25 tonnes per day. .
No, for viscose, the new capacity expansion, how much you are doing?
Yes, that's why it says 25 tonnes per day is yarn production capacity.
Expected around the new capacity new facility, it's about 9,000 tonnes per annum.
9,000 tonnes per annum.
The next question is from the line of Mr. Ahmed Madha Unifi Capital.
Sir, first question I had on the yarn volumes. So if I look at the last 3 quarters, we are doing less than 15,000 volumes or thereabouts. This quarter, the number was higher. So can you explain what is the reason for the jump in Q4 yarn volumes? And with that, for the next year, FY '24, with the further ramp-up in the garment production, do we expect that yarn volumes will fall further?
Yes, yes, some small content go to capital consumption. The balance will be sold outside. We are carrying a little more stock during third quarter -- second quarter and third quarter that was litigated during the fourth quarter.
Okay. Got it. Got it. And sir, on the high inventory on your balance sheet, is it just because of the high cotton inventories and the 2-month inventory we are keeping for the garment? These are the reasons or there is anything else?
Yes. That is the reason. I sent some sugar also gains will start on to deliver close to about 1 lakh tonnes of sugar and molasses for the off season. So that is also there. It's mainly because of the high cotton inventory with a higher price.
Got it. And sir, in the sugar segment margins for Q3 and Q4, can you explain what is the key accounting reason or any specific reason why Q3 margins were so high and Q4 margins are low? And also with that, how is -- how much sugar we exported this year?
We have exported somewhere around 37,000 tonnes. On the margin during quarter 3, it's higher because most of the sales is the export sales as well as the ethanol.
Sugar sales are very small. This quarter, sugar sales is very high. Sugar sales, generally, the margins are a little lower. When the turnover is lesser and the power and the era mentioned the margin will be higher been margin, we are looking at somewhere around 22, 23 [indiscernible]
The next question is from the line of Vikas Jain from Equirus.
Sir, firstly, I list your number with respect to what was the yarn margins that you say you did in 4Q?
Fourth quarter is about 10%.
About 10%. Okay. And sir, one clarification. While we are not currently committing to expanding the garment capacity. But as the need arises, can we like, is there a possibility that we can like possibly operate on a double shift in some of the facilities to meet the higher order inflow at all it happens?
We feel that indicate capacity operation is going well. So we would like to keep it like this.
Got it. Got it. And sir, one last thing, you did mention in 1 of the participants of the -- our current garment capacity at 147 million pieces. Is at 147 or 157?
Million capacity sitting in here, we want to move it. They are just making them to move the missions from utility to year -- it is in progress in India now, we have only 141 million capacity.
Correct. So can we expect -- when can we expect that $10 million dose capacity come here? -- just we are also hoping that it will come quickly. We will see.
The next question is from the line of Raj Mantra, and initial Investor.
I have 2 questions. One, why is other expenses and depreciation higher on a quarter-on-quarter basis?
Depreciation is there because we have increased the capital expenditure during the last year and this year. [indiscernible] depreciation, quarter 3 some of the machineries completed its useful life. So it is a little less and some of the important for some of the missionaries came into its enigmental operation, so the depreciation increased. .
Okay. And sir, other expenses?
Other expenses more of our power cars. And because during this quarter, we do not have any yield available from our revenue resources and all so the power cars is increased substantially either higher other expenses.
Okay. Understood. And sir, the second question was, is it fair to assume that the next garmenting capacity expansion announcement is at least 6 months away?
MD explained, we are waiting for the situation to come to normal, then we will decide because we have not finalized anything. It will be taken at our [indiscernible]
The next question is from the line of [ Yash Sana ] from [ ITP ].
I think most of my questions are answered. One question on the U.K. FDA. So like once we sign on in the FDA, what sort of financial impact do we expect for K.P.R. I mean something in terms of numbers, I think we are 60%, we are penetrated into the region. So how does this help in terms of immediate financial impact?
So U.K., we have a few large customers and considerable size of orders from U.K. So once the agreement FDA signed, so we can get more orders whereas like the duty is remote, then definitely, we get more benefit towards the better pricing and the higher orders. So exactly, we can't financially quantify it now. But definitely, there will be a very good positivity for the KPI business, particularly if our garment business.
Right, right. And one question, sir, on the labor front, you mentioned that there's no trouble. How do we see scale up so if we commission another large plant. So how do we see ourselves managing maybe twice the employee base that we have currently. Are we comfortable doing that? And how confident are we for that? And similarly, do we also -- like will we be open to scale up in other geographies where we were availability is maybe higher and it's more accessible than some of our peers are also looking at that. So do we have that on plus or [indiscernible] to our home run?>
Sir, see, because we have one of the best practices for the -- for our employees. And we have bought the one I know the state local employees as well as migrant labors more than 10 states like Varian UP, Bihar. So like various states, people are here. And we are providing an excellent facilities. And in fact, the K.P.R. is the -- we can say the just labor practices, particularly in textiles. So we have all kind of facilities, even higher education food facilities, free accommodations. So all these things we are providing for our employees. So they're very quite uncomfortable. And we continue to even now tallies you know very well even during COVID time also, like the migrant labor was a big issue around the country and all of our employees were in our campus even during the lockdown. So we provided for them salary and free food all the same. So the fully satisfied employees makes better performance. So this quarter, K.P.R.'s policy. So with this strength, we are confident that we can mobilize the people what we repair.
Right, right. Got Yes. So we are well aware of K.P.R.'s policies and congratulations for you for that. And just one last question on realization.
So you mentioned that the realizations maintain the realization going forward. But with the value addition that we are planning to do -- what is the scope and given the raw material situation is actually pulling out a little bit, and we have to be competitive to get the market share, what sort of a realization improvement do we see over the next 3 to 5 years you can comment something on that?
Yes, it's more based on the raw material card more or less value addition side, we have done whatever possible. And any new technology comes and the new change comes, we will be doing it. We hope that making the margins whatever we are getting in the garment business, that will continue. But our opportunity comes will be utilize it.
Right. So maybe a 10% value addition is like a good number to directionally look at?
Yes, yes, 10% definitely possible. But we are looking at more of a margin what we are getting.
The next question is from the line of Manoj Bahet from Camelian Capital. .
Most of them were answered, but I just wanted to start further on with the CapEx part of capacity expansion part. So unless I think we are having some negative view for 3 to 4 years because the way I'm hearing you that in Europe, things are getting normal and you are also pretty confident on your capacity utilization. So just wondering, are we running a risk of not having capacity when opportunity because the way China plus 1 happening the way things are coming to India and the way K.P.R. is positioned. Even, sir, if we put the capacity right now and even if we might have to rate for scaling up for 6 months, 8 months, the cost of having the capacity vis-a-vis not having a capacity and missing the opportunity, not sure that's how you are evaluating it. So just wanted to understand the thought process of not going ahead when like end of the year, we are expecting full capacity utilization and the risk of not having capacity is clearly visible.
Yes. We will take a view, sir. We are having some internal discussions in the coming periods, we will discuss and then explaining what you say to so some concerns among the team.
All right. And second is, sir, if -- like the way we are expanding at a single location, and I fully agree with you, the kind of labor practices, HR practices, which K.P.R. has one of the best class in the textile sector, I would say, maybe in the world. But there will be a point of time when there will be a constant like of scaling up and getting the labor at a single location. So is there any discussion of having one more location where you can again create such a big scale. So just wanted to understand, is there any thought process or you will stick to the single location only?
So you see what we have -- see, the workers are not coming from locally. They're all from various states. So they're all staying in the campus. So wherever the location, the people coming from outstations, it doesn't make a big issue. But the same time, so we have a government, it makes personal attention. So if it is in and around, it's a factory, so that a lot of other advantages like operational convenience because we have our netting facilities, processing. Processing government is alloys only in a particular area like Shipco. And the transport is on convenience. So all these things are better advantage, having in and around the facilities or near to the like processing, printing, embroidery, all these things are reachable around 50-kilometer radius, what we have the facilities. So this makes a lot of cost savings. So based on that only, as you said, at this point, we are also thinking seriously because this much employees we have. So every time we are discussing all these subject. So finally, we are taking appropriate decision.
Right. And sir, one last question I have. I'm sure putting capacity is an easy thing. But scaling up may require hiring, labor and all those things. So do you think that once you go for a brownfield right from getting the land, putting all infrastructure and labor hiring and everything -- are you sure you will be able to do this entire thing in 12 to 14 months or it may take a bit longer because already we are having 30,000 employees.
Yes, because of experience, we can do it. We have -- we are confident.
The next question is from the line of Pratik Tholiya from Systematix.
Just working on clarification. You said 1 lakh ton of sugar that you sold in the quarter, you then to also include the export of 37,000 tonnes, right?
Yes. Yes, includes.
Okay. So domestic is 63,000 and export is 37,000.
Yes, yes.
And for this 26 lakh ton of cane that you cash, that is for the current season or that is the financial year ending March? Currently. For the season. Okay. And sir, can you just help with the realization in the sugar? How much was your average utilization in the domestic and export market during the quarter? .
Combined realization only is about INR 22 per [indiscernible]
Sorry, the INR 22.
Per KG. Okay.
And in ethanol, what was the average realization?
INR 55 per [indiscernible]
Sorry. 65 per liter. So sir, in ethanol during the quarter is INR 200 or INR 2.38 crore liters that you've done that is entirely through juice? .
Yes, it is during the season now I say till be tugs.
And sir for, say, FY '24, what percentage of your production would be via juice and what would be your molasses? How much would you be planning to do through more assets?
Sir, it is utilize. And we are planning for about INR 10 crores ethanol for the year. The INR 5 crores would be from produce and the price will be from a .
Okay. So the 2. Yes. And then lastly, we are also talking about -- we are hearing about this and lower monsoon. And think Karnataka largely would be the interest. So how are you seeing the ground level picture in terms of how much gain you expect to crush in the next season? And what could be the recovery rates for the next season.
For the next season? .
We are expecting a normal monsoon, normal retiming, will let us see because generally, this only a before situation only prevailed in the next season, the last year monsoon is good, so sowing is very good. So we hope that [indiscernible] year.
Okay. Understood. And sir, for this current sugar season, what was the recovery rate for you?
Since as it's a composite unit, you cannot exactly matches recurring foramen This is after diversion at a gross level? 11%. .
And just lastly, 1 request. This now your Sugar business is also expanding and becoming big and the overall profitability also. But I don't see any mention of a sugar at least the volume numbers and all you can share on the PPT, so that we can save time on the call discussing the numbers, and we can have more strategic level discussion. Just a request, maybe you can have a few slides on the PPT with all the volume numbers.
The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.
Most of my questions have been answered. Just on the margin front. So this year, overall margins, we have seen at around 31.4%. And in the past, you have guided that if your garment business margins are around 35% and sugar business margins are close to 25%. Your margin trajectory will be somewhere about 23% to 24%. So just on where do you see your margins going ahead over the next 2 to 3 years?
So amantadine expected in the same line only. And the only the spinning margin was little fluctuating. We hope that it will settle during this year.
Okay. So this year, overall speeding margins for how much? .
17%
Full year, 17%. And what is the comfortable level of margins historically, you have chip .
The new business? Yes, it will be somewhere around 19% to 30%. .
Okay.
And can we expect that to happen this year, considering the label Okay. Okay. So this year, we should expect margins to recover a bit on a year-on-year basis?
Yes. Okay, okay.
And in terms of revenue growth, you have always guided double-digit kind of revenue growth, but considering the situation now and what 6 months of whatever the scenario what you are looking at. Do you expect the overall revenue growth would be in low double digit? Or we should expect it to improve?
Hopefully in double digits.
[Operator Instructions] The next question is from the line of Aman Madrecha from Augmenta Research Private Limited.
Sir, could you throw some light on the arrivals of cotton the season because the news we are reading is that the farmers are holding the cotton.
So how has it been the arrival seen? And could you please highlight on the -- how we are being affected because the Indian cotton is trading at a premium with international cotton. Could you on most of these things?
Yes. Sir, the cotton arrival now up to April, we can say that approximately 200 lakh bales has come compared to last year. Last year by system was around 250 lakh bales. So 50 lakh bales is behind this year. And people believe that the production will be almost same like last year. So maybe the farmers are holding back additionally some 50 lakh bales. So this is what the general market view. And we hope there's a reason like the price is a little higher level, a little above 60 -- 64,000 level.
So whenever cotton price breaches 60, that goes down below 60 Immediately, farmers are slowing down there bringing into the market. So almost like the farmers are now controlling the prices. So that's what the proton situation. And the world market -- they're both prevailing at the same level almost. There's maybe INR 1,000 plus or minus. -- domestic cotton and international carton. Only the thing differences in India, there's 11% import duty is there. So that's why it's not viable now to go for the import carton. So that is a percent situation.
So can we say that there will be no cost order in the country, right?
Yes. The record source even the various associations and the CIB, the government like almost recently announced around 330 lakh bales so it's the production expected production. The consumption was a little lower compared to the previous year. So the cotton is available, there is what the government report as well as the various associations also says.
And sir, could you highlight on like how the pending industry is operating in the country, like are they piping at almost optimal capacity utilization of the still operating below optimal capital play?
Sir, even until now, we're operating at below the standard level because in the last 6 months, the carton price, of course, it touched INR 1 lakh. And surely, it was falling down, whereas cotton yarn price also falling down, but the yarn demand was a little slow in the past 4, 5 months. Because of that, mills also slow down the production. I hope this is still maybe like around, say, 10% to 15% lower than the normal level.
That was the last question. I now hand the conference over to the management for closing comments.
Thank you, sir. K.P.R. well equipped with the high-tech integrated facilities, enthused workforce, progressive business model and empowered by strong performance track record, loyal customer base and drive for enhancing value for all stakeholders will keep its growth in line with the expected level.
So with this, I thank you all once again. Thank you.
Thank you. On behalf of Bativala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.