Trident Q2FY18 Concall Summary

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Financial Highlights

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  • Total Sales at Rs. 952 crores in Q2FY18 compared to Rs.942 crores in Q2FY17.
  • EBIT declined by 65% to Rs. 36 crores in Q2FY18 compared to Rs. 102 crores in Q2FY17.
  • EBIT Margin stood at 3.7% in Q2FY18 vis-à-vis 10.9% in Q2FY17.
  • Cash generated from Operations reached to Rs. 623 Crore in H1FY18 and PAT toRs. 198.8 crores.

Debt and Repayment

  • Debt declined by around Rs. 380 crores in H1FY18.
  • Targeted decline for FY18 is Rs. 450 crores, which is expected to be met easily.
  • Long Term Debt came down by Rs. 359 Crore in H1FY18, including High Cost Debt of INR 163 Cr.
  • Interest Cost came down by 17% Y-o-Y in H1FY18.
  • The Interest Coverage ratio stands at 7.2x in H1FY18.
  • The Credit ratings for the Long-Term Bank Facilities have moved higher to AA- from A+ and the Short-Term Bank Facilities to A1+ from A1.
  • Dun and Bradstreet upgraded business rating of Trident Ltd from 5A2 to 5A1, which is the highest achievable level and indicates minimal risk and high degree of credit worthiness.

Segment-wise Performance 

Textile Segment:

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  • Widened spreads between spot and forward prices of cotton and yarn prices impacted profitability adversely, but have now been stabilized.
  • Volume Sales in BathLinendipped by 11% Q-o-Q due to uneven vendor procurement cycle and change in product mix.
  • US market share for BathLinen is about 12%-13%.
  • Volume growth in BedLinenwas healthy at 23% with sales growth of 30% Q-o-Q, while volume growth in Bed Sheetswas about 35%
  • Bed Sheet is not yet at break-even point; expected to reach it in H2FY18.
  • For Bed Linen, the realizations have improved by 6% Q-o-Q.
  • Volume de-growth in Towel is about 12%.
  • For Towel, half-year to half-year realizations improvement is around 2%-3%.
  • Overall, the result is 9%-10% decline in Towel segment.
  • Proportion of captive yarn consumed is 40% in Q2FY18.
  • Captive Consumption of Yarn volume increased by 24.6% in H1FY18 compared to H1FY17, bringing down product price risks.
  • In domestic business, revenues grew at a healthy rate of 24% Y-o-Y to Rs. 157 crores in H1FY18 due to presence in around 450 Multi-Brand Outlets and e-commerce platforms.

 Paper Segment:

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  • Adverse impact of GSTwas witnessed in Q1 and Q2, leading to decline in Sales by 7% on Y-o-Y to Rs. 204 crores in Q2FY18 compared to Rs. 218 crores in Q2FY17.
  • However, Utilization has improved to 87% in Q2FY18 from 83% in Q1FY18.
  • Q-o-Q price decline in Paper segment is around 4%-5%.
  • EBIT has increased by 76% to Rs. 76 crores Q-o-Q while EBITDA Margin stood at a healthy rate of 48%.
  • The reasons are higher efficiencies and locational advantage (within 40-50 km radius) for Wheat Straw (main component of raw material) in Punjab.
  • However, sustainable margins are 36% to 40%.

 ROSL and Duty Drawback

  • ROSL has been reduced from 3.9% to about 1.9%.
  • Duty drawback is now kept at 2% along with the input credit.
  • Another Bed and Bath business incentive is MEIS which is around 2%.
  • On an overall basis, its impact to is 2% on the Bed & BathLinen margin.
  • Going forward, this 2% impact will be only 1% on EBITDA on the company has a whole.
  • An increase in efficiency and volumes is expected to offset this impact and ensure that margins to continue to grow.

 Utilization Capacity Guidance for FY2019

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  • 60% for Towel.
  • 50%-60% for Bed Linen.
  • 90% for Paper.

 Hedging Position

  • Current hedging position is about 30% to 40% of theestimated export revenue.
  • There was a hedging gain in this quarter.

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Trident Q1FY18 Concall Summary

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Financial Highlights

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  • Total Revenues stood at Rs. 1210.4 crores, up by 3.3% fromRs. 1171.7 crores in Q1FY17.
  • EBITDA up by 4.5% to Rs. 259.4 crores translating to EBITDA margin of 21.4%.
  • PAT grew by 13.2% to Rs. 88.9 crores against Rs. 78.5crores in Q1FY17.

 Segment-wise Performance

 Contribution to Revenue

  •  Home textile (bed and bath put together) - 49% of the revenues.
  • Yarn - 33% of revenue.
  • Paper - 18% of revenue.
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Textiles Segment

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  • Revenuesup by 3% at Rs. 996 croresfrom Rs. 964crores in Q1FY17.
  • EBITDA was down by7% to Rs. 164 crores; EBITDA margins stood at 16%.
  •  Yarn captive consumption increased to 40% from 35% in previous quarter.
  • Yarn business contributed 33% of the total revenues.
  • Bed Linen sales volume growth was 32% Y-o-Y.
  • Towel sales volume growth was down by about 7%-8% Y-o-Y.
  • Bed & Bath Linen contributed 49% of the total revenues
  • Lower EBITDA margin due to
    • Increase in the cotton prices by almost 20% on Y-o-Ybasis.
    • continuous rupee appreciation affecting realizations in towel and bed linen.
  • Breakeven expected for Bed Linen by the month of Sept-Oct.
  • In FY19, about 15% to 20% EBITDA margin in Bed Linen is expected.
  • For Home Textiles, 85%-90% of revenue is from exports and 10%-15% is domestic.

Paper Segment

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  • Revenues up by 3% to Rs. 214 croresfrom to Rs. 207crores in Q1FY17.
  • EBITDA sharply up by 33% to Rs. 95 crores;EBITDA margins of 44%.

 Debt and Repayment

  • Net debt stood at Rs. 2669 crores as on June 30, 2017, down from Rs. 2714 crores as on March 31, 2017
  • Net debt down by Rs. 752 crores since the last 5 quarters.
  • Long-term debt as on June 30, 2017 stood at Rs. 1821 crores, out of which more than 75% is covered under the TUF scheme.
  • Repayment of high-cost term debt ahead of repayment schedule will be continued to strengthen the balance sheet and help reduce the overall interest costs.
  • This led to decline in the Net Debt to Equity Ratio at 0.9 against 1 as on March 31, 2017.
  • In Q1FY18, term loans of Rs. 227 crores including high cost debt of Rs. 187 crores were repaid.

 GST Impact

  •  For the Textile business – 5% GST.
  • For the Paper business – 12% GST.
  • Not much impact on the exports side of the business.
  • Beneficial domestically since much of the competitors are in the unorganized sector; GST will help to get an edge over them.
  • The company expects higher expected sales figures and margins across the product portfolio of the company.

 Utilization Capacity

  •  For Q1, Yarn operated at 95% utilization; Bath Linen at 51% utilization; Bed Linen at36% utilization; and Paper at 88% utilization.
  • In FY 2018,expected Bath Linen utilization is 55%+; Bed Linen utilization 40%-50%; and Paper utilization 90%+.

     Hedging

    •  Done due to fluctuations in exchange rates.
    • For yarn and paper, hedging is done on a back-to-back orders basis.
    • For home textiles, hedging is done on a program basis.
    • The company is hedged for around 5-6 months with a rolling policy in place till now.

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    Trident Q4FY17 Concall Summary

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    Financial Highlights

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    For Q4FY17

    • Net revenues stood at Rs. 1330.1 crores, up by 36% compared to Rs.978.2 crores in Q4FY16.
    • EBITDA improved by 27.3% to Rs. 262.1 crores translating to EBITDA margin of 19.7%.
    • PAT grew by 63.6% to Rs. 99.7 crores against Rs. 60.9crores in Q4FY16.
    • PAT, including comprehensive income, up by 50.8% to Rs. 91.7 crores.
    • Outstanding loans of Rs. 132 crores repaid including high cost debt of Rs.68 crores.
    • Segment-wise Performance
    • Textiles Segment
    • Revenues up by 40.1% at Rs. 1055.8 from Rs. 753.5crores in Q4FY16, YoY.
    • EBITDA was up by26.9% to Rs. 180.1 crores; EBITDA margins stood at 17.1%.
    • Paper Segment
    • Revenues up by 3.5% to Rs. 225.4 croresfrom to Rs. 217.8 crores in Q4FY16.
    • EBITDA sharply up by 28.1% to Rs. 82 crores;EBITDA margins of 36.4%, up by 699 basis points YoY.
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    For FY17

    • Net revenues increased by 29.3% to Rs. 4839.3 crores.
    • EBITDA Improved by 29.9% to Rs. 991.9 crores translating to EBITDA margin of 20.5%
    • PAT stood at Rs. 337 crores, up by 39.1% compared to Rs. 242.3 crores in FY16
    • PAT stood at Rs. 337 crores, up by 39.1% compared to Rs. 242.3 crores in FY16.
    • PAT including comprehensive income, improved by 33.6% to Rs. 331.7 crore.
    • Net Debt stood at Rs. 2714.5 crores as on 31st March 2017, down from Rs. 3420.8 crores as on March 31, 2016.
    • Net Debt to Equity Ratio stood at 1.0 against 1.4 as on 31st March 2016.
    • Free Cash Flow stood at Rs. 749.4 crores for FY17.
    • Repaid a total of Rs. 576 crores in FY17 including Rs. 227crores of high-cost debt.
    • Long-term debt as on 31st March 2017 stood at Rs. 2048 crores, of which 75% (Rs. 1552 crores) is covered under the TUF scheme.
    • Segment-wise Performance
    • Textile Segment
      • Revenues stood at Rs. 3864.1 crores, up by 34.2% YoY.
      • EBITDA increased by 31.9% to Rs. 690 crore s; EBITDA margins stood at 17.9%.
    • Paper Segment
      • Revenues up by 5 % to Rs. 872.4 crores.
      • EBITDA u p by 25.7% to Rs. 301.9 crores; EBITDA margins at 34.6%, up by 569 basis points YoY.

      Capacity Utilization

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    • For Q4, Yarn operated at 96% utilization; Bath Linen at 54% utilization; Bed Linen at29% utilization; and Paper at 88% utilization.
    • Full-year rates are 93% for Yarn; 50% for Bath Linen; 29%for Bed Linen; 89% for Paper.
    • In FY 2018,expected Bath Linen utilization is 55%-60%; Bed Linen utilization is40%-50%.

     FOREX

    • FOREX realization was Rs 40 crores for Q4, highest ever in any quarter.
    • Hedging is done with 4-5 months of hedge position;30%-40%, and open at 50%-60%.
    • India's export share to U.S. is right now around 40% in Towel and 50% in Bed Sheet.
    • Company market share of towel in U.S. for the calendar year 2016 is around 13%.

     Income Distribution

    • Other income of Rs. 49 crores in Q4.
    • FOREX gain is Rs. 40 crores.
    • Interest income is about Rs. 5 crores from the customers and vendors
    • Other small amounts are insurance claims and others.
    • EBITDA Margin guidance for FY18 is 18%-22%.

     Borrowings

    • Total gross borrowings are Rs. 2,852 crores; net borrowings are at Rs. 2,714 crores
    • Out of the total borrowings, TUF based loan is Rs. 1,552 crores and short-term borrowing is Rs.804 crores.
    • Scheduled repayment for FY18 is about Rs. 300 crores.However, expected repayment is about Rs. 400-450 crores.
    • Average cost of debt is around 4%, but Rs. about 500 crores still cost 10%-10.5%.

     Home Textile Segment

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    • Cotton inventory dipped by Rs. 100 crores as compared to last year.
    • Internal consumption for Yarn is 35% for FY17, and 37% for Q4, expected to be 40%-45% in FY18 due to utilization improvement.
    • Breakeven at EBITDA level for Bed Linen expected in Q2FY18 when capacity utilization is 40%.
    • For Bed and Bath Linen, CAGRwas 3% to 4% in the Europe.
    • CAGR in US for last 4-5 years was 4% to 5%.
    • In FY 2018 expected CAGR is 3% to 4% in U.S. market.

     Paper Segment

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    • Paper price increase in Q4FY17 is 4%.
    • Upgradation of Paper machines can be expected in the coming quarters with CAPEX of about Rs. 100-200 crores spread over 2-3 years.
    • Effective tax will be around 27% - 28% in FY 2018 also.
    • Ratio of branded vs Copier segment in Paper business is around 50%-55%.

     CAPEX

    • No expansion is expected for any of the businesses
    • The focus would be on debottlenecking of Bath and Bed Linen, costing about Rs. 50-100 crores for FY18.

     Realizations

    • From FY16 and FY17, the Yarn realizations has improved by double-digit.
    • Bath Linen is more or less flat in FY 2016 and FY 2017.
    • For Bed Linen, this is the first year of operations, with an improving quarter-on-quarter.
    • In a 5-years period, the Towel realization has been improved significantly, currently at 70% - 80%.
    • 2 years back market share in U.S. Towel exports was around10% - 11%, now up to 13% for the calendar year 2016.
    • For India, market share in U.S. market is around 40% to 42% in Bath Linen and 50% to 52%in Bed Linen

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    Fiberweb Q1FY18 Concall Summary

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    Company Background & Business Overview

    • Fiberweb is a pioneer and amongst the leading players in manufacturing of Spun bond woven fabric in India.
    • It was established as a plastic moulding company in 1986 and it forayed into manufacturing Spun bond non-woven products in 1995.
    • The company exports products to USA, UK, Europe, New Zealand, Australia, UAE & South Africa
    • The company crossed the INR 100 cr. topline for the first time in 2017 and has become an approved supplier to Lowe leading to being approved supplier to Walmart in USA.
    • Johnson & Johnson, P&G, Unichem are some of the well renowned customers of Fiberweb along with many others as well.

     Business Segments

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    • The company manufactures diverse products across 3 main categories.
    • Among 3 segments that company serves, the products for Personal hygiene segment form 30% of total production and are supplied locally to customers like J&J, Unichem and many others. These products are not exported
    • Rest 70 % are exported, with 40% in agricultural market and 30% goes in general textile market
    • This segment wise break up of production had been the same for years and would be the same even after the capacity expansion that company is undergoing as discussed ahead.  
    • Fiberweb  has 100% Export oriented units and 70% of revenues come from exports out of which 80% came from USA, 10% from UK and 8% from in 2016.
    • Reason behind the large exports to USA is that first of all, large number of orders comes from USA and the order size from USA is of 50-100 containers as compared to 1-2 containers from Europe and other markets. The large order size results in continuous production for weeks, 24*7 and in continuous process industry, less the change, better is the profitability. Thus, USA is a preferred customer due to bulk orders.

    Financial Highlights

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    • The Q1 is generally the worst quarter among all other quarters.
    • It is because the order pattern in USA (the biggest customer contributing 80% of exports revenue) is such that orders for an entire year till next June are placed in July-August. As the prime season is April-May, products are to be delivered latest by April and so units run at full capacity for 3 quarters and at less capacity in Q1 due to the seasonality.
    • The Q1, FY 2018 has posted phenomenal results on account of better product mix and continuous inflow of orders from new and existing clients across globe
    • Revenue grew by 313% YoY, from INR 13 cr. in Q1, FY 2017 to INR 53 cr. in Q1, FY 2018
    • EBITDA registered a strong growth of 181% YoY, from INR 3 cr. in Q1, FY 2017 to INR 8.4 cr. in Q1, FY 2018
    • Profit after Tax (PAT) increased by an exceptional 231% YoY, from INR 2.3 cr. in Q1, FY 2017 to INR 7.7 cr. in Q1, FY 2018
    • EPS in Q1 FY 2018 grew by 211% at INR 5.7 as compared to just INR 1.8 in Q1 FY 2017
    • The company has become a zero debt company and net worth turned positive in Q1, FY 2017
    • The companyhedges its sales proceeds to protect it from exchange rate fluctuations and any potential loss. This quarter company had a profit of INR 32,000 in the foreign exchange. It was shown in the other income section of P&L statement
    • The company has decided for NSE listing and has assigned the task to concerned people for the same and is expecting to get listed by Q3, FY 2018.
    • The company's cost of raw materials has increased from INR 5.5 cr. in Q1, FY 2017 to INR 41.6 cr. in Q1, FY 2018. It has happened as the company had engaged in trading activity at UAE in this quarter. So, consolidated results include this trading activity
    • Under trading activity, company procures finished products from other manufacturers from China, East Asia and sells them at UAE. Because of this activity along with the rise in prices of raw materials, the cost of raw material has increased.
    • Also, In order to maximize profit, the company has adopted the strategy of higher production by only taking the orders for higher grammage. And even though the costs have increased, but there has been corresponding increase in the Bottom line as well
    • ExxonMobil has remained the supplier of the raw materials since past 20 years.

    Expansion Plans & CAPEX

    • The company has a total installed capacity of 7500 MT at present. 
    • They have two units, one with 5000 MT capacity and other with 2500 MT capacity, located at Daman (U.T.). The Unit-I use unique double beam technology with diverse applications, supplied from renowned manufacturer, Reifenhauser Gmbh, Germany.
    • Unit- I produce high quality products accepted by large companies as end-users across developed countries. The Unit -2 is a leased out facility with made by same German manufacturer
    • In order to meet the rising demand across markets (domestic & International), Company has planned a capacity expansion of 13000 MT out of which 12000 MT is to be installed and made operational in FY 17-18
    • The company has raised INR 32.58 cr. through preferential allotment to meet the capital expenditure of buying two machines- one with 10000 MT spun bound and another 3000 MT melt blown technology based machine)
    • With the expansion exercise, the company's total installed capacity would become 20500 MT
    • Capex on melt blown machine is about INR 20 cr. and for 10000 MT machine, it is about INR 80 CR.
    • Out of 3000 MT melt blown non-woven technology based products, 2000 MT will become operational by September 2017. And 10000 MT will get operational by end of FY 2018
    • The melt based technology is a very specialized one and the product manufactured by this machine is in short supply (25% difference between demand and supply) in the international markets, and the product offers great margins
    • Against about U.S.$ 2.1 for 1 kilo in Non-Woven market, this product price about $3.5 per kilo and the corresponding increase in the production cost is about 3% to 4%
    • It is estimated that melt blown products' profitability would be approximately 70% more than the normal non-woven products.
    • This product is mainly used in Filtration industry and is also used in agriculture segment. In fact, Existing customer of the company has requested for the installation of this machine and it is expected that post-installation, machine would run at full capacity with influx of orders.
    • Also, Company would be increasing the capacity of Unit-2 by 50% or 1250 MT in FY 17-18, thus increasing production without any Capital expenditure thereby attaining better RoI.

    Growth Prospects

    • The company is expecting a minimum of 20-25% revenue growth and about 25% -30% increase in bottom line in FY 2018 as compared to previous yeAr
    • On consolidated basis, with trading activity at UAE, the estimated figure may change slightly upwards as the trading business is expected to grow.
    • The company has an order book of INR 147 cr. 
    • In USA, about 7-8 new clients have been added in Q1, FY 2018
    • The company has taken Trading in Q4, FY 2017 quarter on an experimental basis as there were number of customers wanting to purchase products but at lesser price and they were fine with small compromise in quality. The company started procuring the material from the Chinese manufacturers and selling them to customers in USA with a trading margin of 12-15%. But as the quality is not of the same standard, therefore, in order to prevent the brand equity dilution, the company is planning to set up a 100% subsidiary at UAE fully dedicated for trading activit
    • Economic growth, Government Initiatives to promote technical textiles sector, increased investment in industry, higher consumption and growing exports are going to fuel the growth in the medium to long term.

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    Trident Q3FY17 Concall Summary

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    Financial  Highlights

    Trident Q3FY17 Financial Performance
    • The net revenue  was Rs. 1139 Cr in  Q3FY17 increasing by 26% compared  to   Rs. 905 Cr in Q3FY16
    • EBITDA improved by 30% to  Rs . 233 Cr translating EBITDA margin of 20.5%
    • PAT grew by 26% to  Rs . 79 Cr against Rs. 62 Cr over corresponding Quarter last year
    • PAT including comprehensive  income improved by 18% to  Rs. 71 Cr
    • Revenue increased by 26% to Rs. 3487 Cr in  9MFY17 while EBITDA increased by 30%  to  Rs. 725 Cr translating into EBITDA margin of  20.8%
    • PAT was Rs. 237 Cr higher by 36% 9 MFY17 compared to Rs. 175 Cr in 9MFY16. PAT including comprehensive income was Rs 240 Cr, an increase  of  35% corresponding period  last year
    • 65-75% of exports are to US and about 15-20% are to Europe

    Segment wise performance

    • The percentages of Bath and Bed together as well as Yarn of total revenue for nine months: 48% is with Bed and Bath both and around 19% is Paper and 34% is Yarn
    Trident Q3FY17 Segmental Revenue
    • Textile Segment

      • Revenue from textile segment  was Rs . 916 Cr in  n Q3FY17 against Rs.  704 Cr in the Q3 of  FY 16 giving a YoY growth of 30%.
      • EBT was higher by 11% at Rs. 83 Cr and EBT margin was at 9.1%.
      • EBT margin has been declined as of  150 basis point due to  increase in the
      • price of cotton in Q3 FY 16
      • 9 Month Revenue of  textile segment stood at Rs. 2838 Cr higher  by 32%   YoY
      • EBT of textile increased by 26% to Rs. 291 Cr while the EBITDA margin was 10.2%.
    • Paper Segment
      • The revenue  were  higher  by 11% at Rs .  223  Cr compared  to Rs. 201 Cr in Q3 of FY 1 6. In paper size the  increase in realisation on YoY is  4%. QoQ will  be around 1.5-2%.
      • Overall EBT increased sharply by 62% at Rs. 63 Cr translating the EBT margin at  28.4% which is higher by  890 basis point YoY. This was due to better realisation of paper products and higher valuation of paper products.
      • In the paper segment the revenues were up by 5% to Rs. 650 Cr .
      • EBT of paper segment increased to 49% to Rs. 178 Cr translating the  EBT margin of  27.5% higher  by 810 basis point YoY
    Trident Geographic Revenue Q3FY17

    Awards & Recognition

    • Trident was conferred with runner-up award  of  prestigious  PMI India  award  2016, for  its integrated textile project at  MP.
    • Several awards for energy conservation such as award of National Energy Conservation award 2016 by ministry of power, Govt of  India.
    • EPMA energy conservation award 2016 by Indian paper mill association


    Revenue  Analysis

    • Out of total revenue 49% of revenue is from bath & bed both, and  around  19% is from paper and 34% is from yarn .
    • The team appointed in US and UK both is doing well. And in last 9 months the team has as shown a good growth in terms of order book and pipeline and visibility, towel volume has been increased by 20%.
    • Spill over in towels in Q3 and company is confident that Q4 will be better than Q3
    • About 65-70 % export is in US and 15%-20% is in Europe.

     Debt

    • The net debt of Rs. 2608 Cr as on 31 Dec 2016 which is down from Rs. 3273 Cr as of 31 March 2016
    • Debt equity ratio was 1.4x over 1.9x over last year
    • Repaid outstanding term loan of Rs. 78.5 Cr including high rate debt of Rs. 8 er, with this the company has paid Rs. 445 Cr of debt including Rs . 159 Cr of high rate debt
    • Long term  debt as on 31st  Dec 2016 is Rs. 2072 Cr out of which more than 75% is covered under TUF scheme
    • Average cost of the TUF loan is less than 3%.
    • The net debt had gone up about Rs . 100 Cr because of procurement of cotton and inventory
    • In bed linen, the utilization has gone down and is about 27% in this Quarter against 32% in previous Quarter.
    • The company is moving towards right direction with right approach in utilization
    • In FY 18 company is planning to repay Rs. 400 Cr of debts.The payments will be done by free cash flows.
    • Overall debt in Towel segment in FY18 will be Rs. 400-500 Cr less
    • SBI has reduced the MCLR by 150 basis points and he company has already got the benefit of approximately 50 basis points

     EBITDA margins

    • In Textile, EBITDA margins will 18-22%
    • In last 2 years the margin in yarn was between 12% -20% and now, the range is between 15% -22%.
    • In towels the margin is 20-24% due to marketing and US clients.
    • In bed linen they have not even reached breakeven yet. Breakeven is expected in Q4.
    • Decline in EBITDA margin was due to two reasons firstly, the increase in the raw material cost which is cotton, cost of cotton in Q2 was less than the cost of cotton in Q3. Secondly, in this Quarter. the company had a MTM forex of about Rs. 8 Cr like contracts of exports.
    • In towels there is decline in the utilization and was at 46% in the quarter . and in Q2 was 58%.
    • In yarn 45 days is the lead time and cotton prices are increasing so, proportionately the price will increase .
    • In FY 18 the utilization will be around 65% for towels and 50% for bed linen


    Impact of high cotton prices

    • Company procures cotton between month of October to March and in yarn there is 45 days lead time and in towel there is 3 months lead time .
    • The utilization of bed linen is 27% in Q3FY17 vs 32% in Q2Fy17. The overall utilization has been declined however, the proportion of processing has been increased significantly. Capacity utilization for paper business stood at 90%
    • In  Q3FY17, the ratio of processed and unprocessed cotton is 90:10.

    Capex

    • Capex maintenance will be around Rs. 50-55 Cr in a year.
    • Expansion in Europe and US, penetration in these market and offices are open in Europe to take care of the market.
    • Capex in paper segment
      • No  such  capex  done,  just  evaluation  of  the  existing  operations  to  meet  the margins. Debottenecking can improve production by 15-20%

    Update on Clients

    •  Increase in clientele base and major growth is from visiting clients, no exact data of clients as of now
    • Many clients had been added mostly in US in last Quarter and this Quarter
    • Penetration in new market also will be  done
    • No of customers for bed linen was 5 in Q3FY17, out of which 2 are big customers.

    Regulatory Updates

    • Import duty in US
      • India has an inherent advantage in cotton and that will be kept in consideration while preparing import regulations by  US.
      • Import duty is 9% in bed and home textile in US
    • Demonetization impact on paper  segment
      • Paper segment is having good demand and demonetization has no impact in India
    • New notification of rebate of Ministry of textile on exports.
      • Rates are still not decided but 3-4% on output cost, 2% for  procurement and 5% of VAT
    • Effects of 3.5% of duty from the govt notification.
      • That is generic for bed & bath and the rate has not been decided yet and duty drawback committee will sit and decide the same and can be done anytime in future

    Price expectation

    • Possibility of decrease of price in FY 18  in  Paper industry
    • It completely depends on price & demand.
    • FY18 will be good for the paper (writing, printing & copier ).Import from Indonesia is in writing and printing.
    • Cotton production is expected to be increased and cotton prices also hiked and reached to 42000 per candy, in December the rates was 40000 per candy.

     
    Realisation in yarn

    • Only bed linen has been increased to 15% and other as similar to last quarter.
    • YoY the  towel realisation was less around 6% whereas yarn was 13 % higher

    Capacity Utilisations

    • Capacity Utilization of Bed Linen facility was 29% in 9M FY17, while the utilization in Bath Linen stood at 49% based on tonnage capacity. Yarn business also reported improved utilization level of 92%.
    • in Bed Linen, the utilizations are lower. It is at 27% in this quarter as against 32% in the previous quarter which is Q2. However,  60% was processed and 40% was non quarter. The proportion is 90-10 in Q3FY17, and so realizations are going to improve.
    • Towel segment capacity is 90000 ton details.The segment is given as of maximum rated limit and at normal capacity it will be around 75-80% can be achieved.India is more competitive than china in towel and cotton.
    • The capacity in paper is around 1 lakh 75 thousand ton per annum and utilization is 90%.

    Cotton procurement prices/ hand textile fair response.

    •  Average  cotton prices are around  42000  per candy.
    • The yield in cotton per hectare has been increased.
    • For every 20% increase in cotton prices the impact at  Yarn level is around 8% to 10% whereas in Towel and Bed Linen, it is around 5%
      to 6% only.
    • Very good response for hand textile for bed sheets, towels, and other products

    Patents benefits

    • Patents always showcase the customers as a USP and they look as a different Product and it keep the company ahead from the other compet it ors.
    • Paper demand is increasing day by day

    Guidance for FY 18

    • FY 18 seems very promising, as all the initiative taken by the Company in past, have started delivering results and momentum will be good in upcoming  quarter
    • Top management of company is ready to focus on global scale capacity in shortest possible time, the company is confident of generation robust cash flow  and  will create tremendous value for the stakeholders
    • Demand of writing, copier, and printing is good and 50% of production is from printing & writing which is B2B and 50% is copier right now
    • Company will increase the copier paper segment.
    • The company topline will grow by 20% in FY 18.
    • Rs. 400 Cr debts wil be repaid per year and the flow of cash will be there and the cash generation will be more than the  payment
    • Demand in US and globally will be flat only in towel segment
    • The proportion of Indian products is increasing at 10% CAGR YoY.

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    SVP Global Ventures Q3FY17 Concall Summary

    SVP Global Logo

    Brief Intro of Company

    •  SVP is diversified Yarn manufacturing company
    • Primarily incorporated in 1982, has units in Tamilnadu with capacity of 98000 spindles
    • Central benefits like TUF & other interest subsidies & also the state of Rajasthan announced some additional subsidy benefits in its Resurgent Rajasthan scheme for companies to create jobs & set up greenfield capacities in the state. Therefore the company has set up high end value added compact cotton yarn manufacturing facilities in Rajasthan

    Financial highlights

    SVP Global Q3FY17 Financial Performance
    • Total income for the Q3FY17 grew by 71.9% Quarter on quarter to Rs 6197 million
    • EBITDA was Rs 493 million which is 152% higher quarter on quarter. EBITDA margins stood at 7.96%
    • Net profit grew by 203% to Rs 94 million. This is mainly due to new capacity expansion which are state of the art and also a clear reflection of a well executed business strategy. The focus is on high margin & profitability
    • The volumes this Q3 FY17 is 5000 tonnes from new capacity & from rest of tamil nadu it is 15000 tonnes.
    • Total Gross Debt is about 952 crores
    • Normal receivable cycle is about 60 – 90 days
    • Gross Interest rate is anywhere between 11 to 12%
    • There is operating income of 7.56 crores which is income from subsidy
    • Consolidated EBITDA was about 8-
    • The company has 100 crores of Mortgage loan paying interest of 13%.
    • The company has 390 crores of working capital limits

    Realisation from Rajasthan

    • The realization from Rajasthan is higher because the selling price of compact cotton yarn is selling at premium 
    • Average selling price for Rajasthan is Rs 245
    • Average cotton cost was about 100 -110 per kg
    • EBITDA from Rajasthan it is around 22% 

    Expansion Plans

    • Setting up 3 units in Rajasthan.
      • In the first phase the company has commissioned 1 lakh spindles of compact yarn, it is currently operating at 90% capacity utilization
      • Phase II of expansion is setting up of 2400 rotors which is expected to commence full production by the end of the current quarter. For phase II the 2400 rotors is expected to generate around 120 crores of revenue
      • Phase III of the expansion plan is adding another 50000 spindles which expect to commission in the next quarter
    • ROE roughly about 20% for these projects
    • Equity invested in the spinning project is about 450 crores, this is including the existing plants
    • In the new plants the company has 170 crores for 1 lakh spindle project & if you include the Phase II & Phase III this figure goes to 270 crores

    Exports

    • Exports from new unit are generally in the ratio of 50:50. Last quarter there was increase in exports due to demonetization
    • Exports are mainly to china, Bangladesh, Vietnam, Pakistan etc

    Other Operational Updates

    •   The company has power tariff concession wherein Electricity duty gets waved or reduced by 40-50 paisa per unit reduction. This may come around 1% 
    •    CST is charged on sales @ 2% & no benefit of that is claimed
    •    Revenues from Trading is about 100 crores & rest 510 from manufacturing, 90 crores from phase I, 420 crores from Tamilnadu unit
    •    Manufacturing revenue from new plant is about 90 crores
    •    For FY 18,  the company has 50000 spindles & rotors which will be in operation & expected to get 75 to 80% utilization for the entire year
    •    Trading revenue is generally less around 2%
    •    VAT exemption is 60% & no plans for dilution of equity
    •    The company has overall 490 crores of long term debt which includes the debt taken on for phase II & phase III
    •    Generally the machines have very long life span of 20-25 years & depreciation is calculated before that

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