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Vardhman Textiles Ltd
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Ladies and gentlemen, good day, and welcome to the Vardhman Textile Limited Q1 FY '23 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.
Hi, everyone. Good afternoon. Welcome to the Vardhman Textiles Q1 FY '23 Earnings Conference Call. And from the management team, we are joined today by Mr. Neeraj Jain who is the Joint Managing Director, Mr. Sushil Jhamb, Director of Raw Materials; Mr. Rajeev Thapar, CFO; Mr. Mukesh Bansal, Senior Vice President of Fabric Marketing; and Mr. Varun Malhotra, Head of Finance. And without any further delay, I'll hand it over to management for opening remarks.
Good afternoon, everyone. Thank you for joining the call. We have already declared the results, which I'm sure all of you would have seen [ come to ] by this time. So First quarter has still been reasonably okay because of couple of reasons. One, I think every [indiscernible] year some cotton available to them, which was segue that the prices have not gone to the peak. Also, there were pending contracts, I think with everyone, which were getting executed in this period. So as a result of that, and they were generally on a higher prices basis. As a result of that, I think the margins are also better. Three, the situation kept on becoming challenging. And I think May, June, July, things are becoming more difficult or more challenging as the time passed. So the first quarter number still looks reasonably okay. And the situation after that is that the prices internationally, cotton prices started coming down. And we saw an inverse of almost 25, 30 change between July and December near future.
By the time July was over, December, we started looking at: one, the inverse also the prices are coming down, not only in cotton, but I think lots of other commodities because overall inflation issue is concerned and the rate of interest, we started engaging practically every year. We saw a peak of [indiscernible] in the month of June and July [indiscernible] in near future. Of course, the physical cotton is still relatively expensive compared to this because the basis have increased in this period. So that was one where the extensive product prices started coming down. Everyone started looking at all brands. All customers started looking at deep price of cotton, cotton yarn, and all the products to go down. And then they came to the wait-and-watch policy rather than placing the order because the concern was by the time the product reaches then, there would be a huge loss in the overall inventory in the system.
So that's how we basically look at this time. If we see specifically to the Indian situation, the prices came down in India also. We saw a high of almost INR 105,000 and INR 106,000 a candy. And from there, we came down to as on today, almost [indiscernible] a candy. So it's a drop of almost 25%, 30%, whereas the drop internationally is higher. So over there, we saw from [indiscernible] going down to about 19%. The Indian cotton with INR 283,000 today is one of the costs in the entire world. And in terms of U.S. sales coming close to about [ INR 137, INR 138 ] , whereas the international cotton available today because cotton available internationally will be the end of maybe about, maximum will be needing about [ $1.20 ] or so.
So practically, we are [ USD 0.18 to USD 0.20 ] higher than the international prices. There are 4 countries which cover almost 70%, 80% of the spinning capacity of the world, India, Pakistan, China and Vietnam. Compared to prices in all these 4 countries, the pricing of raw cotton in China will be close to about -- is less than [ $1.92 ] as of now. The Pakistan rupee is devalued and the prices are also reasonable. And if you look at the U.S. and prices in the range of about $0.90, $0.92 as of now. The Vietnam is the third biggest and the Australian cotton available to them today with the [ $0.90 ] New York Future will bring the range about maybe USD 1.18 USD 1.20, whereas India because of the shortage and import we couldn't do in this period. We're still at about [ $1.38 ] and these 4 countries cover effectively 75%, 80% the spinning for the entire world.
So as a result, India has a huge disadvantage, which continues [indiscernible]. So our -- we are not in a position to comparative on the export market. The Indian spinner also started looking at the other -- whosoever has the cotton or whatever cotton is available, they were leaving that and since our prices are probably much higher, it means to the strategy where they started looking at stopping these vendors rather than buying the cotton at these prices and then taking a hit -- but as the international prices of cotton came down the yarn price got readjusted very fast based upon that, whereas the Indian cost was higher. So it was making more sense for the Indian spinners to stop these vendors to use the capacity rather than buying cotton at these prices.
As a result of that, though, the critical prices are almost INR 80,000, INR 82,000 as of now for candy in India, but there's hardly any deal happening with neither a buyer nor a seller at these prices and it's more of a theoretical price because of the shortage, it's not coming down. But I think eventually, there not seem to be any major interest from these spinners to buy at these prices. The second impact of this was also based upon the future prices of cotton in India. The October -- not October, the November, December deliveries are available in India at a price of almost INR 64,000, INR 65,000 a candy, which is INR 17,000, INR 18,000 lower than today's price, which is one clear signal that the prices of cotton are likely to come down sharply in India.
As a result of that the spinners interest was not to buy and also the end customer also started to exchange the price coming down. So why should I take any position today. So everyone was just postponing the purchase. The third factor was the inflation outside India, which was a big concern, post the price of food grains as well as gas, they increased in a big way. As a result of that, I think everyone was concerned about, especially the middle segment or the lower middle segment got concerned and they were trying to have their budget more for the food grains as well as gas rather than looking at the textile. So the overall demand of textile also came down in a big way.
In this period, it is estimated that the Indian spinner almost 30%, 35% spending capacity stopped. And in spite of that, there is hardly any demand for the yarn or other products also. Home textile continues to operate at about 50% capacity. Denim continues to operate at about 50% capacity. The only better segment as of now is evolving fabric compared to all these products. Of course, there is [indiscernible] is still better because as the people are coming out of their homes after the COVID and the travel started and things are becoming normal. But from COVID perspective there still seems to be some demand better than Denim or better than Home textiles as of now. So this is the overall situation as far as India is concerned. And as I mentioned, there are lots of capacity, which has already been stopped as of now.
For Vardhman, I think we have also stopped maybe about 7%, 8%, 10% of our spending capacity for the last couple of weeks because we also thought it's prudent to not to buy the cotton at these prices as start taking a big hit, and it was making more sense to stop some capacity wherever we can, especially about the 100% cotton yarns as needed. There was demand or the demand was there, but at a prices which is making more draws compared to stopping the spenders. So more of a commercial call which has been taken by most of this [indiscernible] in India. And I think this situation may continue for another 1 or 2 months depending upon how fast the prices of cotton concern India and how fast we realign to the international prices.
If you look at the November prices of INR 64,000, which is close to about [ $1.03 ] [ $1.04 ] which as on today may still be acceptable if you look at [ $0.92 ] of near future, that means it's a positive, about $0.10 to $0.12. It's over $0.10 to $0.12 over the near future. So historically, gap is about [ 5%-6% ], but I think even [ 10% ] should be or could be acceptable as of now. The overall export of yarn has come down in a big way. All products, I think there is a drop. Just to give a perspective, normally, India used to export close to about 110 million kg per month of yarn export, which in the last 4 months have been coming down. So from 110, we came down to 80, 70, 60, 50 and so on and so on. And the last month reported figures are in the range of about 25 million kg to 30 million kg only, which means we have dropped that exports from country almost to the extent of 80% or so.
So which is a clear signal that because of our in competitiveness, we are not in a position to export the yarn, whereas the -- for many reason our cost factors and also the demand was less. But I think -- but at the same time, these are some of the challenges which we are finding or facing today. The next season crop seems to be good till now. We [indiscernible] all the cotton areas, and there's likely to be about 5% -- 5% to 6% area growth this year for the same in the -- since the rains are [indiscernible] in most parts of the country in the -- especially in the cotton growing areas. There would be a yield improvement also. And it may be expected that the crop can be the range about 360 lakhs or so. These are currently estimated by the industry. Of course, we have to wait and watch for the exact figure to come from various agencies.
Last year, it looks like we are going to close down somewhere about 295 lakhs base against our original estimate of 340. And later on, because of the crop shortage or the crop disturbant I think the overall both the quantity and the quality was very bad last year, which is because of the quality or because of the higher distribute one has to take, the spinner was taking more loss compared to the other parts of the world. So on a silver lining: one, the next year crop seems to be good. Two, our prices are aligning to the international prices. Third, I think the another thing is that overall pipeline in the system is absolute empty. And whenever or wherever the customer starts understanding, that the [ bad starts ] looking at probably these are the worst prices or these are the stable prices, the demand would start -- start coming up also soon.
The -- another factor, the positive net for India, which started with the China plus one factor, both on account of the [ brand ]. [ Brand ] also as a second source of supply. I think that factor continues to be good, and there doesn't seem to be any major division of brands from that. And I think once our costs are normal, I'm sure there could be a possibility for India to regain their market share once again because it's not that India lost that share. I think the overall demand in the work has been much lower in this period. So that's on the industry side. And specifically on Vardhman side, over and above the results and the situation, which I mentioned, I think this is a period where the industry is passing through a very difficult time. So whatever expansion we announced which are yet to be started. As of now, we have put it on hold both on account of the situation of the industry. And also, the overall cost of machineries are very high still because of the supply chain issues and the machineries are not available for the next 2, 2.5 years. So we want to wait for maybe a couple of months once the situation becomes normal, both in terms of the business and also in terms of the availability of machinery and the cost of machinery because once the prices of all commodities have started coming down, we are sure the prices of machinery and the availability will also start improving. So temporarily, we have put it on hold as of now. And I think we'll take that view soon once the normalization happens. So this is on the yarn side, Mukesh, can you share some of the thoughts on the woven fabric, and then we can take the Q&A.
Yes. Thank you, Neeraj ji. Good evening, everyone. On the fabric side, if you look at the Q1 was sequentially a little slower as compared to Q4 last year. Primarily, the reason being there was inventory correction happening in the western world, primarily the U.S., wherein we saw a lot of pent-up demand after the lockdown opened during the Q3 and Q4 last year. There was a total factors to it. One was that the offices started opening for people who are working from home, they had to go to the offices. -- for the need newer cloning for the office year, whereas in the previous quarter, the demand was more for the clothing that was suitable for work from home. So the brands had higher inventory of casual wear and possibly the lower inventory for the [ dress more with woven ] fabric. So that was one reason wherein there was a demand and supply is back, the right kind was not available in the stores.
Second is that the logistics tightening that was there before, that started easing out for the goods, which were stuck in the -- at the port, they started reaching the brands faster than they would have expected before. So all of a sudden, they had a lot of inventory. So that demand correction happened during the Q1 year. Second, of course, as Neeraj ji mentioned, the commodity prices for few customers not to buy as much as they were calling. So which we expect now the pipeline -- the pipeline is relatively lesser, for maybe the demand will pick up as soon as the some correction in the demand and some correction in the prices happen. That's it from my side, sir.
We can start with the Q&A now. I think the remaining queries could be -- we can clarify as question comes.
Thank you very much. We will now begin with the question-and-answer session. [Operator Instructions] We take the first question from the line of Mr. Sahil Kumar Sharma.
Anil Kumar Sharma. My question is on forward contract booking, we have booked in U.S. and last quarter, we had provided for INR 61 crores. This quarter also, we have provided for INR 41 crores, I think. And whether we will require to provide for this quarter also or that can be the worst also?
No. So we have already want -- we have cleared all the contracts. So the next quarters is not likely to be any negative loss to that extent? Or maybe we have still some puts available to us. So, I'm not very sure whether they'll become the positive or the negative. But the -- as far as the negativity is concerned, as of now, I don't think there's any likely to be any negative in the next quarter. But if the cotton goes down or those ports become in money that could be a positive.
But it can be positive I think. The prices are going down?
Yeah, somewhat cheap prices.
All right. And my second question is at what capacity we are running presently sir, in the yarn as well as...
So on the spinning side, as I mentioned, we have talked about 8%, 9% of our capacity, whereas in the fabric side, we are running more than about 80% of our capacity as of now. So 80%, 85% capacity is still under existing. So overall capacity utilization is not that bad for us.
The next question is from the line of [indiscernible] from Kotak Life.
I have 2 questions [indiscernible] cotton and the...
Sorry, we can't hear you...
Hello? Can you hear me now?
Yes sir, your voice is audible. Please go ahead with your question.
Yes. So I have 2 questions. One, from an industry perspective, post the ban of [indiscernible] and cotton, I think that has also become an act from this month itself. From last 1.5 years since the ban is effective, are we seeing some sort of more demand from countries like Bangladesh who are earlier procuring yarn from China?
So definitely, the demand from China -- from Bangladesh has been good in previous quarters. But yes, as of today, I think all parts of the world, everyone is in a wait and watch situation and using their own inventories. So the overall demand is less even from Bangladesh also for the last almost 1.5, 2 months from core markets.
Sure. So from a structural perspective, do you think this [ ZTN band ] could actually shift the Bangladesh garment manufacturer to start procuring yarn from India also. I know -- I understand Bangladesh is one of the major export partners for Indian yarn manufacturing companies, but that can accelerate from here on?
If you look at last 2 years, the demand from Bangladesh has been quite good. They are expanding in a big way on the governmenting side. At the same time, we are not expanding that big on the spinning side. So if they continue to do well by taking a share from China and should the overall demand for yarn from Bangladesh or Indian yarn will also be good.
Right. Understood. And sir, one follow-up question on this. Is there a possibility that rather than these garment manufacturer players starting -- started to buying yarn from, there could be a possibility that Indian cotton players can start exporting raw cotton to China and then Chinese player can start converting cotton to yarn and then supplying it to Bangladesh. Does that commercially makes viable?
Not really because of 2 factors. One, the China has the import policy where it could be imported only through the quota available to them. And they -- normally government allows the quota from time to time, and that's the maximum bottom taken by and which has been their policy for last almost 10, 15 years. Two, the overall cost of manufacturing is increasing in China also. So they are trying to look at more concentrating on the value addition side, which is the governmenting or made-in fabric. So on the spinning side, they are losing the interest for the last 10 years. Just to give you a perspective, the China's peak capacity, about 10 years back was 112 million spenders, which as of now has come down to 94 million spenders. So I think the overall cost structure also is not allowing them. They are not interested to look at the low-margin industry. So that's why the -- it was like they may not be really very, very interested for these spendings.
Sure, sir, that's helpful. Second question was more of a follow-up from the previous questioner. Can you explain the division of the hedging losses that we are reporting, what is the exact nature of this transaction?
When we were buying cotton Indian cotton, there was no way we could held it because our thought process was the cotton is at a very high price. So of course, the price kept on increasing, which was not an [ asset ] at that stage. So when the season started or the prices are going up, we had no choice than to buy Indian cotton because of power consumption, but the [ MCH ] or there is no mechanism by which you can hold the Indian cotton in India. The only possibility is that you can exit or renew your future. So what we were doing, we were buying physical cotton. And we started selling on the New York Future to head it so that if the prices goes down, at least to that extent, we'll have a loss on the physical cotton and we'll have a gain on the New York Future.
At the same time, if the prices goes up, then we will have a loss on the New York Future, but at the same time, we'll have a gain on the physical partner we had. And the same thing has happened -- so on one hand, we had a loss of New York Future hedges. But at the same time, to that extent, we have gained on the physical side also. The digital side will come under the operation or the raw material cost only. So that's was the hedging loss we have seen separately.
Sir, how much of our inventory in general be hedged on a percentage basis?
Sorry?
So how much of inventory would be hedged as of now?
No. As of now, we have not hedged anything.
So all the hedge contracts are closed now.
Yes. Because as we consume the cotton, we were continuing the forward contracts also. So we have some small ports here and there, which is there which could be only positive now. There cannot be any loss. So if the cotton goes down, there could be some advantage, which could come to us. Otherwise, on the [indiscernible] not there as of now because we don't have any forward contract.
Thank you, Mr. Jain. We'll take the next question from the line of [ Rhea ] from Equitas Investments.
Hello?
Yes. Ma'am please go ahead with your question.
Actually, I'd like to start with the fact that the entire investment there is some headwinds right now. I would want to know what is the CapEx plan for last year? And how has this entire industry phenomenon affected it?
The previous CapEx this year at the projects had already started with continuing, but the new project as of now for the next couple of months, we have put on hold. And once our cotton prices in India comes down as for the Internet, which then only...
Actually, I can't hear you. Hello?
Am I audible now?
Yes, yes. Yes, yes, yes. Sorry.
Our expansion plans, which were going on that's getting completed on time and whatever we -- the plans we were to start, we are putting on hold for a couple of months. Once our raw material prices is in line with international prices, then only will take up this expansion.
Okay. Okay. And going forward currently in the month of July you think? Or with the prices coming down to INR 80,000 to INR 83,000, any further increment demand from the export side or it's not much like.
No. Not much because INR 80,000 to INR 83,000 is almost [indiscernible], so at this year not competitive. So the overall demand, we are not in a position to take those contracts because our cotton is on higher prices. So I think it's only -- it looks like maybe only October or November onwards, once the new arrival comes in and the physical cotton is available, then only the prices will be aligning more to the overall markets.
Okay. And also the export market, how volatile or like because of the exchange distance we had because of dollar terms invoicing. Like would we be getting any incremental sum of money because of that?
No, but of course, I mean, whenever there is a devaluation happens, that's to the extent of export realization, there will be some advantage. But I think, again, the prices will keep on getting readjusted because if you look at the Chinese currency that de-evaluating in this period. If Pakistanis can do a PKR 100 to a U.S. dollar. They have gone to PKR 225 or so. So I think all currencies are devaluing as of now. So wherever you find the competition later on and everyone is the devaluing probably that will get readjusted somewhere of the prices.
Okay. So are you saying do we have any long-term agreement for exports or piece by piece?
No. it's all pieced up by some -- so the maximum contract any customer does it today for is only for a month or 2. So there is no long-term contracts on the spend side as of now.
Thank you. [Operator Instructions]. We have the next question from the line of Apoorva Sharma from [ PGIN India ].
Sir, just wanted to understand correctly what inventory of cotton are we carrying and what pricing would might be...
Sorry, that information, we don't share with the investors.
Okay. Any -- is it -- if you can divide you know the exact pricing or a range, but is it lower than the current quarter price or higher so that we get a almost...
It's almost compatible.
Sorry, prices are almost compatible at the current price. Okay. And sir, can you expect also, as you mentioned and explained earlier in the opening remarks, we have referred the CapEx and we'll take a call in around 2 months. Sir, I mean, what is the level of -- I mean what is the benchmark that you are looking at in terms of, say, cost per spender or anything else in terms of demand or supply scenario I mean what would help us to -- I mean what would...
It's nothing to do with that, the CapEx prices will come down. Only 2, 3 months, I'm looking at if our raw material prices are aligned to the international prices, which means India will also be compared once again. So that's where we want to look at it. It's not that the prices of machine will come down. That's why we are delaying it. No, it's not like that. It's the basic profitability should be restored or the margin should be normalized, then only will take up these projects.
Okay. Why, I was asking is since once you order the machinery, it takes -- there is a lot of lead time, right? So I'm assuming, obviously, things will normalize in the next quarter or 2. So what stops us from at least maybe ordering or obviously, the current prices, you said are high. So that was my -- how I was looking at it. So...
That's true. So maybe your point is valid that once the projects are going to be commissioned only 2 years down the line, but still going in the situation, we thought it could be prudent because in any case, 100,000 spenders will be implemented in the next 2 to 3 months, which should be sufficient for us to take care of additional demand for the next couple of months. So it's only 2, 3 months once the overall mood of the industry becomes better, they start looking at it. So it's not really any permanent changes there in our thought process. I think we still going on the overall expansion plans we have. So it's a matter of once the normalization happens, it's a very challenging time, and we are also looking at how to pass through this time by making all the alternate product changes. So is it more of a sentimental as of now rather than any major issue as concern.
Sure. And one last question. So one, as we said, right, we have also set out some spending capacity because there is no right now in terms of demand, everyone is in wait and watch mode. So once sort of new cotton comes in and things align with international prices and can it be a scenario in Q3 where in you know everyone just starts, the other thing starts and there can be a crush on order in terms of backlog because a lot of the capacity is down already as you mentioned, around 30%, 35%...
Yes, there is all likelihood of the scenario which we are mentioning that since the overall capacity is down, the pipelines are empty, suddenly once the demand comes in, there could be a possibility because of pipeline, the sudden demand can again give a big push to the overall system. But I think we have to wait and watch because the overall capacity is down India, 30%, 35% is the overall spinning down. And maybe another 8%, 10% people would have converted on the alternate products like 100% polyester and 100% [indiscernible], so both of them you are mentioning, I will not be saying that it is impossible. There could be a possibility once the customer with brands start coming in, the prices are normal or they are more comfortable on the raw material prices for a medium term, there could be the possibility that suddenly we might find a huge demand coming in.
Sir, sorry, can I ask, just one related to this. As you said, 35% production is down and out, feeling that the case for, say, a quarter 3, 4 months, we are not able to supply to our key customers that demand goes away and shifts to at least some of it shifts to some other sources or...
No, no...
You could help me explain the dynamic, yes, please.
Yes. So it's not that it has gone to some other countries. Other countries are still not losing or making some money, but the overall demand still is low as the brands are all looking at the prices to be dropped. So it's not that they are buying more from XYZ company. They've been buying less only. And in any case, India controls almost 25%, 30% of the world's exports market of yarn. It's not possible in any other countries to immediately capture that demand.
Okay. So this is -- basically, if I understand it is because the commodity now is all minimum, so everyone is in a wait and watch mode. That's why we are seeing what we are seeing.
Yes, -- that's one. India, specifically, the cotton, specifically, the Indian market is more bad because our prices are much higher than the international prices.
Right, right. Yes. So yes, indirectly, commodity -- so our customers are right now secured because if you have to shut down some capacity, that should not be a problem at least the customers per se. So if the demand is okay, that can come back, but customers are intact right now, right?
Yes, just to give you one another point, though I have mentioned that I stopped 8%, 10% capacity. But just to look at that financial loss should not be there because we buy cotton at a price that we sell at a current national prices of cotton. But at the same time, whoever is my regular customer or is depending upon me, we are ready to take that hit. And to that extent, we are ready to buy cotton also at these prices, so that the customer should not get suffered because that's the long-term price we have taken. So it's only if you don't have customers or you don't have regular customers or you don't have. There are some holding customers which are not coming to you. So to that extent, I'm willing to stop the production. But when it comes to my regular customers, I don't think there is even a [ doubt ] of issue or thoughts that we don't want to supply to them. Then...
That was my point. Maybe my point was the customers demanding is still a supply line that can -- as you mentioned, that is not take away right?
Sir, we are very clear for the customer. There's no second thought even. I mean there's not -- we are very clear that customers want something in respect to the cost of price. We will not leave them.
Thank you, Mr. Sharma. We take the next question from the line of Prerna Jhunjhunwala from Elara Capital.
Just wanted to understand what is the current yarn price in the international market?
In the range of about $4.10 to $4.30, and one there.
And the spread would be around, any guesses?
Spread for EBITDA will be negative. -- for Pakistan, Vietnam, China has been in the range of about [ $0.90 ] or so.
Okay. Though China plus one you're passing opportunity for India. When you think that...
Sorry, then I said the negative news. The margin would be negative not the spread would be negative.
Okay. Understood, sir. I got that sir. Sir, I just wanted to understand that because of Xinjiang cotton ban, the demand for that cotton has reduced considerably. Do you think that China will become a cheaper source of cotton for a longer period of time going forward? Any thoughts on that?
Let's look at the total Chinese balance sheet of cotton, we consume close to about 8 million tonnes. And out of that, they import almost 1.5 million, 2 million tonnes, 6 million tonnes a year or 5.5 million tonnes is their domestic production. Out of that, 80% comes from Xinjiang. So I think the likely scenario going forward would be that whosoever or wherever they are exporting the products, they'll have to import cotton or [ Bojan ] or use the non-Xinjiang cotton, which is available within China. The Xinjiang cotton will be available or will be used either for the Chinese local demand or for the other countries like Asia, Middle East, where they don't have these kind of restrictions, so they'll have to readdress. But in any case, they will be net-net short on the cotton or cotton yarn, if they take aside this Indian cotton for their exports only.
Okay. Okay. Because global consumption pattern, 35% is U.S., maybe 30%, 35% will be Europe, half of which may comply with Indian, half of which may not. So practically 50% plus consumption area for China is available for Xinjiang cotton which -- where we will be competing with them. So was the whole thought that apart from U.S., could there be a situation where China becomes cheaper than Indian spinners.
Not really, if are cotton because today also, I mean, their quarter is at about 95%, 96%, 97%. If our cotton comes down [ 200, 300, 400 ] I don't think really there's a big issue for that.
Okay. That is quite comforting, sir. Yes. So, next question is on the CapEx side. You have put aside the CapEx of yarn for some time. Can there be a possibility of fabric CapEx announcement? Or is it under consideration going forward largely because we are nearing full capacity utilization, when you have full capacity utilization in fourth quarter and eventually, this improved demand that you are expecting from Q3 or Q4 due to supply chain being emptied with the demand for fabric will also be higher. So in such scenarios, do you think that fabric capacity expansion, which takes approximately more than a year to setup could be announced in your term...
Yes, yes. So what our thought process on that is we already have a surplus fabric capacity as far as the fabric is concerned. So it create more of a balancing equipment where this 140 meters per month can go to about 160 or so -- so I think more of work will happen on the balancing or on the -- or wherever the bottlenecking could be done rather than adding any new lines as of now. There are lots of ideas which are already under consideration. And I'm sure one by one, that can be implemented a little bit faster.
Okay. Okay. So sir, how should we look at growth on volume terms over the next 2, 3 years?
So our -- we are simply talking to all the investors that please don't look at the peak utilization, our average utilization has been in the range of about 100 lakh meter, 105 lakh meter, last couple of quarters. So once we are consistently using at about 140 lakh meters. I think only we are reaching to that level for a couple of months, then only we intend to look at the further expansions.
Valid it will take 1 year, but I think that's what we feel that there should be a positive pressure on the team to utilize it fully and then only to take up the next project.
Understood, sir. So that means you would be almost no less than 5% volume growth CAGR for the next 1, 2 years because major capacity coming up?
5% yes, that's true. But at the same time, since our average capacity utilization has been much lesser. So to that extent that 20% will be available on a year-on-year basis on a full year, as we are in a position to utilize it fully.
Okay. Understood. Understood, sir. I will come back to the question queue for more questions.
We'll take the next question from the line of Mr. Sandeep Baid.
Sir, my first question is what is our inventory as of June 30, how many months inventory of cotton are we holding for June 30?
I've already requested we don't share that information. So my request -- I'm not in a position to share that.
Sir, maybe the -- I'm not asking for the price, only the amount of quantity.
Price idea indication have already given that we are almost aligned to the market prices as of now.
Okay. And have you imported cotton from overseas? And are we looking at importing more going forward?
No, import will always have a 11% duty. So it will never make sense unless earlier we were importing only for a specific use where the customer wants the product from those cottons. But in between since the Indian cotton was not available, we have imported some cotton from U.S. or other countries as a replacement in the Indian cotton. But that seems to be a one kind of phenomena as of now. And we'll keep importing specific cotton where the customer wants to source those products.
Okay. But we have not -- so you're not importing any significant quantity in the last few months?
[indiscernible] around the Indian cotton unavailability, against replacement we have imported that.
Will be importing only a specific need of yarn where the customer wanted from a specific cotton.
Understood, sir. Sir, secondly, on the hedging loss, what I'm not able to understand is that as the New York prices as of June 30 were lower than what they were on [ March 31 ]. So why would we -- so and you remarked your hedging [ bets ] as of March 31 crisis when you declared the March 31 results. So why do you have a loss in the June quarter as well when the New York prices were lower?
New York Future prices are lower than...
June 30 prices was lower than the March 31 price.
No, it's not that. Yes, in March that we had taken it, we rolled over those contracts to June.
So is there a significant premium.
The 30th June contracts will get over almost near to 22nd, 23rd of May. -- those are the past days where you have to come out of the option. So if you want to compare these prices, you'll have to look at the prices, which were prevailing practically up to about 22nd, 23rd of May.
Okay. Understood. And lastly, how are the fabric prices -- have you seen significant reduction in subject prices also post the reduction in yarn prices or fabric...
Not really. So it is always a lag, whenever the yarn prices are increasing, this uptake will take time to increase the prices and a vice-versa. So as of now, as far as fabric is concerned, there is some drop. But it's not as -- it's not as sharp as the yarn drops has happened. So generally, the yarn prices will fall in line very closely to the cotton prices where the traffic there will always be some time back.
So sir, just looking at this FY '23, I guess, the quarter 1 was reasonably good, quite good, I would say, if we exclude the hedging losses. Q2 seems to be a bit uncertain. And then, I guess, that Q3 and Q4 will be a function of how the crop is and how the demand comes back. Is my reading correct?
Q2, I will agree with you. Q3, also there's one issue which is likely to happen for every spinning wheel. Whatever inventories we have, finished goods, WIP, they'll get revalued based upon the new cotton prices.
So whenever new cotton prices comes in, so there are 2 kind of dilution which can be a concern. One is I'm already holding to cotton if that's expensive and the new cotton comes at a cheaper price. So that's one loss which is likely to happen.
Two, whatever finished goods are there because the inventory is valued at current cost of cotton, the conversion cost. So today, theoretically for any -- the cotton prices at INR 82,000, which is the current price and tomorrow, whenever, September, October depending when we start buying the new cotton at a lower prices.
So whatever inventories you have, normal inventories in the system, finished goods, I'm talking, they'll also get readjusted based upon the new cotton prices as well as the conversion cost. So there's some mark-to-market, some dilution made which has to happen by the time we're going to be in the often lower cotton prices.
So whether that happens in September or October, I'm not sure. That's also likely to happen across chain for everyone. But yes, quarter 4 onwards, so quarter 3 onwards, on the margin side, we may be normalized. But depending upon when do we start buying any textile, there would be some evaluation, quarter 4 should be absolute normal going back to the situation.
Right.
I hope I could explain the issue.
No, in the last call, you had mentioned that this year, you are holding less cotton as usual. And I think the stress is that even though the cotton may not be there, but on the finished goods you may have did the inventory if the prices are lower.
Correct.
Sir, lastly, from a longer-term perspective, India has already signed the agreement with Australia and UAE. And now you're looking at signing with U.K., hopefully, by Diwali, and then the one with EU is also underway. So from a 2-, 3-year perspective, what kind of growth are you looking at both on the yarn and the fabric side?
There are 3 factors here, which are -- 4 factors which are quite positive for the industry. One is, we have already mentioned the China plus factor, which includes both the customers concerned about this Xinjiang as well as their concerns about having a second source of supply. That's, for sure, is on track and looks good.
The second factor, all these FTAs which are being signed, the country will -- India will get some advantage compared to the others by their GDP exports accessible to us for those countries, which will also increase our share. And to that extent, it will be positive for the industry.
Third, the government has gotten a big way on the integrated textile part for the garment team. If we can make this as a success of the country because it's not only the spinning, which can be -- or the yarn which can be exported. But these countries, especially the Australia, UAE, they not look at the yarn imports. They look at the final product, final consumer product imports.
So if we can create those capacities successfully, and to that extent, I think the advantage will be much bigger because then to that extent the demand will be higher in India, and we will be in a position to take market share. These are all very high-cost countries, and they'll not be importing yarn for sure.
So they'll be importing the final products, and we have to have those capacities available to us. So the government is working on that idea of creating all these mega path, where we are in a position to make it a success. I'm sure it's a quite big positive.
Fourth is, as you know, all of us are aware that our fiber composition is just the reverse of what the world markets are. So the entire world market is 70% synthetic, 30% cotton. And we are 30% synthetic, 70% cotton.
So the PLI team, it looks like there's lots of interest shown by the various companies. And if we are in a position to make it successful and our consumption in terms of the -- in terms of synthetic fiber, keeps improving, I'm sure we will become slowly more competitive on the synthetic exports also whether it's yarn or it's [ deep ] for the products.
And that's another positive where the government has given a big push. Now to the companies wherever or whosoever wants to take advantage of that. And these are a couple of good factors also where the opportunity seems to be quite good for Indian textile industry.
We take the next question from the line of Mr. Abhineet Anand from Emkay Global.
Hello. Can you hear me?
Yes, you're audible.
Yes. From exports perspective, can you detail region-wise where do we export in terms of the importance?
We export to practically entire world. So the Bangladesh, China, Vietnam. Practically these are the countries where lots of export of yarn happen from India. But I think wherever there is a governmenting happening, the India is exporting practically to every country. Of course, Bangladesh has become the biggest.
Okay. So fair to assume that from our Vardhman perspective Bangladesh could be a double-digit number?
Yes, yes, for sure.
Okay. And followed by, as you said, Vietnam and China, right?
Correct.
So in terms of the spindle capacity you highlighted in terms of China from around 110 million in the last 10 years, they have come to around 90, 95. So now India probably is at a pole position in that term, right?
Yes. So Indian spinning -- spindle capacity today will be in the range of about 50 million. And if you look at the new supply in India, I think overall, we will be adding close to about 2.5 million to 3 million spindles, 3 million spindles per year. Out of that, 0.5 million spindles could be for modernization, and another about 2.5 million spindles for the expansion. So next 3 years, we could add close to about 6 million, 7 million capacity, which would be new and another about 1 million, 1.5 million modernization if things goes well.
Okay. Now I know presently we're in more challenging times, and this question might be -- but if I have to look from our demand perspective, your capacity in terms of spindle if you say 3, 4 -- 3 to 5 years' perspective and everything normalizes by 4Q of this year, where do you see that? I'm assuming that demand is back and cotton is back to normalized numbers.
Yes. So our announced numbers are already about 2.5 lakh spindles we have announced over and above this 100,000 spindles which are under implementation. So that's a part of our announced policy, which is declared. And I think to that extent, we'll be reaching close to about 1.5 million spindles in the next 3 years', 4 years' time.
Okay. And if I have to just add on this, what could be for a spinner like us, along with some fabric that we may, what could be a long-term margin assuming a normalized scenario?
So we have always taken this view that the margins for the company would be in the range of about 18% to 22%. A good year could be 22%, around that what we have been. [indiscernible], and the bad year could be [indiscernible]. Of course, last year was an exception towards the positiveness. This year could be an exception towards the negative side.
Okay. And lastly from me, sir, you said that on 3Q, there was a revaluation, right, because of whatever -- whether you have cotton or the finished goods margin.
So I don't know quarter 2 or quarter 3, depending upon when we start buying the new order.
Yes. So that -- where does it -- in terms of accounting that comes under our [ RN ] right? If there is a -- devaluation hit or you say it's directly come...
There is no devaluation hit on current item. It's only whatever the -- whatever is the dilution of closing stock of the finished goods, that's what's reduced.
So does it -- does that flow through the -- through our that current quarter's numbers in terms of P&L?
No, it go through the P&L only, but it will be indirect into the cost of raw materials.
We take the next question from the line of [ Monish Ghodke ] from HDFC Mutual Funds.
Sir, you said that at current specs, the margins will be negative, right?
Correct.
And you also said that current average inventory procurement price is closer to the current market price. So can I say at current levels, our margins would be negative then?
Yes.
Okay.
Negative or miniscule and almost negative or miniscule.
So what would be the Q2 margin? Would it be like in the lower single digit or how much it would be?
I can't really give you any indication on that line. We started the quarter, the things are changing very fast. And it will not be prudent for me to give you any idea on what's going to happen because I'm still not sure, today, the volume is at 80,000. One month back, it was 100,000. I don't know what will it be next 20 days.
But it will be considerably lower than quarter 1, right?
It could be, yes.
Okay. And sir, one more thing is you said that there would be a revaluation in Q3, but your inventory turnover ratio, which is disclosed in the financial year is -- financial statement is 84 days. So that like -- if I assume broadly, it's a 3 months inventory like raw materials as [indiscernible]. So it should finish by October, right?
No, no. The finished goods will never be finished, and we'll keep on supplying. So there will be a minimum inventory. Normally, our inventory of finished goods is about 20, 25 days at any stage. There'll always be a part of system.
Okay. Okay. And sir, on top line, does it include duty drawback benefits, this INR 2,800 crores?
Yes.
What would be the quantum of that?
The duty drawback is about 1.9% on the sale price. And in addition to that, there's a [ RADT ], which is close to about 3.4%, but there's a cap off of about INR 10, INR 10.5 a kg on the 100% cotton yarns. But that's only for the exports, and the domestic you don't get that.
Okay. And sir, in terms of like for yarn and fabric, what would be the share of our top 5 customers?
So we are pretty well organized to that extent. So I think the top 5 won't be more than -- as far as spinning is concerned, that won't be more than 18% to 20% of our overall volume, maybe less than that. Mukesh, what will the top 5 customers in terms of the fabric constituency?
Yes, top 5 preferred in terms of end brands, our customers are [indiscernible].
No, no. What will be your percentage of the total fabric capacity?
Of local customer, sir?
Yes.
I think maybe 10%, 15% only.
Okay. And sir, like maybe at a broader level, like when I'm selling a yarn, let's say at 100 bucks, and if I'm converting that into grey fabric and processed fabric, how much additional realization am I getting? Like to the index of 100.
Mukesh?
I think for the grey fabric is we are not that big into the market. So on finished fabric, index of 100 it is closely a little more than 2x.
More than 2x. So like it will be 100% more you are saying.
So if yarn is sold INR 100, the grey fabric, there will be a further value-addition of, let's say, about INR 50, which becomes 150. For the processed, it will be another 50, which becomes a INR 200 of the total value-addition will be almost double.
Okay. And sir, one last question. For 1 meter fabric, how much yarn will be used in kg terms?
3 meter fabric for 1 kg of yarn.
3 meter fabric for 1 kg yarn. Okay. Okay.
We take the next question from the line of Aman Shah from ICICI Prudential Asset Management.
This cotton situation, this is maybe the first time that the Indian cotton is more expensive than the international cotton. Just wanted to get some sense of what was so exceptional in this year, and whether this can repeat?
So there are 2 exceptions happened in this year. One, our crop was -- the crop got damaged. So the overall crop was [ flat ] in India. It happened earlier also as the natural product sometime [ biddings ] are not there or some kind of disease, it comes to the crop. I think those things have happened earlier also, except that there was import duty which was put in by the government in the budget of 2021.
So industry came to know in between that the crop is short, but at the same time, because of import duty, it couldn't import it. The international prices are also increasing in the same way. So there was a concern that you buy cotton today, by the time gets imported into India because the shipment was taking lots of time, so 4 months down the line, it should get in India. And by the time the prices comes down, where are you going to make use of this.
So these are the 3 factors. One, the crop got damaged; two, import duty restrictions; three, the long period per shipment from outside and very high sales, which was not allowing the normal transits to happen in this period. All 3 factors came together. So this is a big change because of that.
So are you saying that last time around such crop damage would have happened, we would have imported cotton and cotton is generally available.
Correct. Correct. Because by the time the government would be duty-free import in India, it was in the month of April and May. But that time the crop was finished out because the U.S. crop cycle is the same what we have in India.
So it starts somewhere in October, finishes in March. The government allowed the duty-free import in 30th September in the month of May. At that time, there was no crop available outside. So we couldn't import anything.
Then they extended to October. Till October also, there is no crop other than the Australian available. And the Australian, the shipping was not available because of the COVID restrictions. So the cotton could not be imported. One was the cost factor, the custom duty; two, there was no shipment available in this period outside India.
My last question was, there was always the inventory in the play, right? I mean, last time also, we would have inventory with CCI and all that. Was that also a factor which was not present this time around?
There is no inventory available because in the initial period, we exported lots of cotton, then our Indian cotton prices at less. And there is hardly any quantum available with the [indiscernible], or even with the CCI.
So as I mentioned, since the overall drop is only about 295 lakh bales or so in India. There's a huge shortage, which is -- which got created in this period.
Okay. My last question is there an expectation in terms of what is the expiration [indiscernible] do we have some data of what sort of crop can we see this time?
Earlier. So there's a 6% increase in the area, which is already reported as of now. The overall gains are very good in all the cotton areas. And it looks like the early estimate of industry is it could go to about 36 million bales or so in this year.
We take the next question from the line of Mr. Aman from Augmenta Research Private Limited.
Actually, I just wanted to assess a situation as in, like, for example, within the same time last period, how would we [indiscernible] sense of the order book? Like how much the order book revenues or how have been the inquiries Y-o-Y? Because as you have stated that currently the Indian prices are high because -- because of that, the Indian spinners are at disadvantage in the [indiscernible]. So some sense on this -- on a Y-o-Y comparison.
No, no, no. I think please try to understand. I think this what we are taking in the prices of cotton were coming down or prices for commodities were coming down, everyone stopped buying. All brands stopped buying. So it's not only the cost factor, it is the second factor. So one is the overall brand consumption or the brand [indiscernible].
Two, overall demand was also less because of the fact outside were living [indiscernible]. So the overall demand outside because people were getting concerned on the inflation and on the cash side.
India is a third factor, where we were losing because our cotton [indiscernible] for that we don't have the order. Nobody in the system has got any order [indiscernible] or China. The only thing is whatever they are [indiscernible] not putting a loss. Anything they are selling, they are taking a loss. Otherwise, [indiscernible] demand [indiscernible].
I'm sorry to interrupt sir. This is the moderator. I'm sorry to interrupt. Sir, your voice is breaking up. [Operator Instructions]
Yes. So another factor was last year, there was a big supply chain issue for all the products. Brands were ordering much higher than what they needed because the demand overall was good, and they were looking at the shipping not reaching on time.
So they were extra booking the -- all the products, including the textile. As the situation of shipping supply chain started improving, whatever excess inventory brands that bought, they wanted to readjust also in this period.
So let's say someone bought 1 month extra inventory in 2021, which has to be readjusted in this year. So as the supply chain was improving, prices were coming down. So the brands started readjusting to their automization also, which is also one of the reasons why the overall demand is subdued or less in this period.
Okay, sir. And sir, just -- can you just, again, like sorry for the -- can you just again highlight the difference between, let's say, U.S. cotton price and the Indian price? What was this -- what is this currently? And what is the general average? What is the general difference?
So normally, the Indian prices will be about $0.05 to $0.07 higher than the New York Future prices. So if, let's say, the New York Future prices at $0.80, premium cotton should be in the about $0.85, maximum $0.90.
In this period, as on today, the New York Future is at $0.90, and our quarterly at USD 1.37, USD 1.38. So instead of a $0.08 to $0.10 markup, we are higher by about $0.45 as of now.
We take the next question from the line of Pulkit Singhal from Dalmus Capital Management.
Sir, the first question is on the steering your commentary, what it was in the fourth quarter call, would you say you're now more optimistic on the prospects versus what it was 2, 3 months earlier and see it more like a very short-term recovery happening sooner?
I was never very pessimistic on the long term, neither onto my fourth call or fourth quarter call or even before or even today also. My concern was only that the cotton is short in the country, and we will have to pay that cost till the time the new crop comes in.
Same is the situation. So I don't think any fundamental changes happened in these 3 months. Yes, of course, the demand is less, but that's true for everyone. It's not only for India spinners. So I think as our raw material price will get readjusted to the world markets, after that, I'm quite optimistic on the overall industry scenario.
So the biggest change is when that cotton prices started coming down. I mean, there has been a major inflationary trend when we spoke last time. So I would have thought that now with the prices coming down, which was the entire sense of the commentary earlier, this thing should change more from the positive is my expectation.
Yes. So the 2 factors in between on this. One, as the prices started coming down, so everyone is looking at what should be the lowest prices where the normal plan should start happening. Since it's been coming down very fast, everyone is going to wait-and-watch situation. That's one.
Number two, unfortunately, the Indian prices have not come down to the extent that the international prices have come down. So in the month of May or June, when we were doing the fourth quarter call, the prices are almost USD 1.45, USD 1.50, which has now come down to USD 0.90, whereas the Indian cotton from INR 105,000 is still INR 80,000, INR 82,000.
So the prices, of course, have come down. But in India, the drop has not come in line with the international growth. So that's where my concern for the Indian spinner as of now. The overall ones, our cotton is also comparable to the international markets. I don't think there's really any big challenges.
Understood. Last time, we also talked about those spreads doing at $0.90 at that point. How is that even now the spreads are the same? I mean, there's no improvement at all from the $0.90?
So the spread as of now is for the Indian spinner is surely much less than $0.90 in -- so we are talking the spread is the clean cost of cotton versus the yarn prices won't be more than $0.50, $0.55 as of now. And whereas when it comes to the all 3 other countries, which are the biggest winners, it will be the range about $0.90 or so.
Yes. And also, if I ask from a slightly longer-term purposes, I mean, obviously, the Indian government is taking a lot of initiatives whether it be through PLI schemes or integrated textile parts. We're trying to make some real efforts on creating this as a major [indiscernible] manufacturing.
And we are also on [ depositor ] of network with almost 0 bank debt. So any -- we think or thought process on trying to go for any of these schemes or the integrated textiles parts on our balance sheet, which allows us to do INR 3,000 crores to INR 4,000 crores of CapEx. Any thoughts?
So I mean, we have yet to take a final view whether we really want to grow big on the garmenting side or not. But yes, once the new schemes come in, they'll definitely evaluate that.
The earlier PLI scheme was not making sense to us because one, we are not -- that's not our product line as of now. Two, this scheme also indicate that it has to be a separate company for a turnover of INR 300 crores. And we -- I mean, our feeling is for INR 300 crores or some investment, creating both kind of infrastructure and then separating a company, it's a much bigger issue for us.
Anyone who is a smaller or who intends to put in new capacity, it's a beautiful scheme. But any large player, which is already in the company is almost INR 9,000 crores. For a INR 300 crore, INR 100 crore company to create a separate company and then all the utilities and those kind of things, so for Vardhman, it was not making sense at all to us, both in terms of this legal requirement and also that was not our product range at that state.
So we have not shown any interest on the PLI scheme. But once the Mitra comes in or those kind of things come in, we'll evaluate it for sure.
In the integrated textile pass, you will give a lot more [indiscernible] thought process for the application.
Yes. Hopefully, yes. And -- but the challenge is now we understand the government also wants to put into the areas where the more unemployment is there. So we'll have to understand and look at in terms of the overall ecosystem in those states or the setup.
And when could you, sir, get some clarity on your thought process here? Like how far away is that, 6 months, a year, how much time?
Once they announce finally all their schemes and all the infrastructure. But as of now, for the next 6 months, 9 months, I don't think there's going to be any major decision from our side in terms of investing into those schemes.
We take the last question from the line of Mr. Nikhil Agarwal from [indiscernible] Capital.
So like could you give some any revenue guidance for FY '23, FY '24?
Revenue guidance.
Yes, sir.
I've already -- that our capacity utilization is 8%, 10% lower in spinning and maybe about 10%, 15% in CapEx. So to that extent, I think it's easy for you to calculate that.
Okay, sir. Yes. Sir, just a clarification. Like on those spindles, you got -- you had a capacity expansion of about 1 lakh spindles coming up in August. So is that also on hold or has...
Not on hold, but unfortunately, because of the nonavailability of chips and all those spindles, there's lot of machinery system that is still not available. So one plant we have already started partially. And I hope that will get completed by 30th September rather than August. The other plants also we are trying to look at maybe September or October, they will also get installed.
Okay. So the plant which will be starting, what is the capacity on that plant?
I hope by October, November the entire 100,000 spindles will be implemented.
Okay. Okay. Great, sir. And sir, any -- sir, this captive -- what is the capital consumption of the base fabric? Is it like completely you use it for manufacturing the [ percent ]? Or do you sell -- are there any external sales as well?
The grey fabric we sell, so normally, there is always the -- you're required to have some extra capacity in grey to give a proper service to the customer. And we have about 20%, 25% extra grey capacity to get the right subject on for the processed fabric.
So -- but wherever -- I mean, at the same time, that capacity, we normally sell in the markets. So whatever is the surplus capacity available. So our average grey sales in the market will be in the range of about 25, 30 lakh meters a month.
Okay, sir. And sir, what was your -- like for FY '22, what was your realizations on the yarn and fabric side?
Realization?
Like the total volume sold by the -- the total sales from a segment divided by the total volumes sold.
That data, I think you can refer is already a part of our disclosure to the stock exchange. And for gross margin, not handily available this data with me. You could look at or you could speak to our team separately. They can provide you whatever it is.
Okay. Okay, sir. And sir, just one last question. So at what spread -- you said that currently, the spreads in India are about 50% to 55% -- 50% to 55%. So at what spread are you positive, margin-positive?
Close to about $0.80, I think we start becoming positive.
Okay. Okay. Great.
[indiscernible] we start becoming positive.
That was the last question for today. I now hand the conference over to the management for closing remarks. Thank you, and over to you, sir.
Hello?
Yes, sir.
So our final comments?
Yes, sir.
All right. Thank you. So I think I've been explaining to all the investors and to quite an extent, we are still consistent on the thought process. The medium term still looks very, very good. And we were cautious.
We were looking at the Indian prices of around this much higher than international prices, which were giving us a concern when we did the fourth quarter call. And I think slowly that's becoming too. And this period, we have seen it. And another 3 to 4 months is going to be a more painful area in my view.
At the same time, we are looking at or we have stopped 8% or 10% spindles in the last 1 month or so. But we have also looked at wherever possible, how to shift capacity on the alternate products, which might not be giving us the margins, but at the same time, at least we should be in a position to cover our fixed costs.
So we're -- proactively, we're working on those ideas. And I'm sure as internally, we are very much concerned about the situation. And we're looking at whatever best possible in this period to pass through this spend so that we can retain the customers, we can sustain them.
We keep on working on the efficiencies, both on the yarn side as well as fabric side. Our teams are working day in, day out. And I'm sure once the raw materials and normality is there -- is over, the margin of the overall scenario is better.
And also some [indiscernible] capacity stopped as of now. There's already a vacuum which is getting generated into the system. Hopefully, if things go well, there could be some possibilities that the good demand would come in. But we have to wait and watch. I can't really predict in a precise way as of now.
So I'm sure we'll pass through this difficult time also successfully the next couple of months. And once we -- once our prices, raw material prices are internationally competitive, I think we get a much better future. We're still very, very positive on the overall industry scenario. So thank you very much for attending this call.
And any questions or concern [indiscernible] on the side, I can assure you whatever is best possible through. We are all day in, day out working on the same. Thank you very much once again.
Thank you. On behalf of Batlivala & Karani Securities, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.