Himatsingka Seide Ltd

Ladies and gentlemen, good day, and welcome to Himatsingka Seide Limited Q3 FY '26 Earnings Call hosted by Elara Securities. As a reminder, all participant lines will be in the listen- only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.

I now hand the conference over to Ms. Prerna Jhunjhunwala -- from Elara Securities. Thank you, and over to you, Ms. Prerna.

Thank you, Nitya. Good afternoon, everyone. On behalf of Elara Securities India Private Limited, I would like to welcome you all for Q3 FY '26 Post Results Conference Call of Himatsingka Seide Limited. Today, we have with us the senior management of the company, including Mr. Shrikant Himatsingka, who is Executive Vice President and Managing Director - - sorry, Executive Vice Chairman and Managing Director; Mr. Sankaranarayanan M, President, Finance and Group CFO; Mr. Bankesh Dhingra, Vice President and CFO, Operations; Mr. Bimal Agarwal, Vice President, Corporate Finance; Mr. Harikrishnan Balasubramanian, Associate Vice President, Finance, Banking and Compliance.

I would now like to hand over the call to Mr. Shrikant Himatsingka for opening remarks, post which we can take the Q&A session. Thank you, over to you, sir.

Thank you very much, Prerna, and I'd like to welcome everybody to the earnings call. Thank you for taking the time. As always, I'll just start with a business update, and then I'll be happy to take any questions that you might have.

So on the business front, the consolidated total revenue stood at about INR637.26 crores down from INR722 crores during the same period last year, but range-bound vis-a-vis Q2 operating revenues. The decline was primarily on account of the overhang of tariffs that, as we all know, prevailed during the quarter and therefore, affected our revenue streams during this period.

The Q3 '26 other income of approximately INR25 crores was primarily on account of foreign exchange movements in the ordinary course of business, given the depreciation of the rupee vis- a-vis the USD during the quarter. Capacity utilizations had a small correction, while our spinning plant was at 99%. Our Sheeting and Terry Towel divisions saw approximately 100 to 200 basis point correction during the quarter. Again, mirroring some of the impact that we had on the revenue front.

Despite the reduction of U.S. tariffs now that have been announced recently from 50% to 18%, but we strategically continue to want to focus on driving revenue streams from non-U.S. jurisdictions. That remains a strategic priority for us. That we will do despite potential growth in the U.S., but we'll still continue to target enhancing revenue streams from non-U.S. jurisdictions.

The Indian market continues to be a high priority for us, as we have been saying, and we currently serve the market with 3 brands. The brands are positioned to serve consumers across price points and channels. And our India business continues to demonstrate consistent growth

Y-o-Y reinforcing our domestic presence as we see it. We are present across all channels, and we think India is going to be an important market for us in the years to come. It's relatively small at this point, but it's showing the right signs in terms of growth prospects.

Needless to say, it's very positive for us to see the EU FTA go through, and the recent U.S. tariff revisions along with the announcement of the EU FTA has undoubtedly paved the way for several new opportunities for us to expand and to tap into a new potential opportunities across major markets.

I would also like to add that in addition to our focus in enhancing our utilization levels from our existing product lines, Himatsingka will be introducing new product verticals by leveraging our existing infrastructure and capabilities in order to accelerate our utilization levels in order to diversify our revenue streams and tap new opportunities that will arise in the wake of the new regulatory frameworks that one sees globally. So this is from us on the business update front. I'll be happy to take any questions that you might have.

Thank you very much. The first question is from the line of Yash Naik from KamayaKya Wealth Management Private Limited. Please go ahead.

And so since there is a tariff reduction from U.S. so sir, can we expect from the next financial year, we can expect the margin to be around our previous margin like around 20% or we need to wait for some time?

No. I think progressively going into the next year, margin should normalize. What I think will happen is as we have shared with you all earlier during the period of tariffs or at least a 50% regime. Obviously, we had to share in the pain, and we had given support to clients. We will have to conclude our negotiations with clients in order to get most of it back. And we feel that margin should normalize going into as we progress in FY '27.

And sir, since now there is 1.5 months so there, we might experience some pain in Q4, right? Sorry, we might experience -- sorry?

Some pain in Q4 as we have already now 1.5 months in the Q4.

Yes. I mean I don't think Q4 will see any immediate release because the tariffs have just been announced. And after they were announced by the time the executive orders were signed, it took another few days. And so by -- there won't be any major positive impact as far as Q4 is concerned.

Okay. Okay. And sir, last question is regarding, sir, if you could any -- provide any guidance on the revenue front in FY '27?

We don't unfortunately give guidances, but I will reiterate the fact that we are actively looking and seeing new product lines to accelerate our growth rates, and we will be doing so by leveraging our existing infrastructure that we possess. Our capex will not be altered any capexes on account of new product verticals will be within our annual maintenance capex buckets.

But we feel that our inherent infrastructure capabilities are diverse, and we believe that the FTAs the reduction in reciprocal tariffs and where India stands after having signed also the U.K. FTAs will unleash potential not just in the home textile space, but other areas as well. And we feel that our infrastructure geared to cater to these opportunities, and we don't want to miss out on it.

Himatsingka is not solely a home textile player, although it's been our focus all these years. We have a very strong know-how and infrastructure capability in the cellulosic value chain, and we want to leverage that for other product categories. The categories could include apparel solutions, could include fabric solutions and also yarn solutions.

So we would like to strengthen our product portfolio, this will help us diversify our revenue mix, our geography mix. It would help us mitigate any concentration risk and will open up a whole new world of opportunities for us to tap into. So we are very excited about that. We certainly don't want to depend only on 2 product categories to drive growth.

We see more buoyancy in our bath business, going forward. Our bedding business, while it will see growth, but the growth would be a little more muted, and we want to utilize some of our expertise and infrastructure, as I said, to tap into new growth verticals and much larger market pools where global market -- where global trade is substantially larger than that of home textiles.

It will also land up enhancing our domestic revenue stream substantially other than what we will do in home textiles.

Currently, if you could provide the domestic revenue, like I feel our revenue from U.S. is around 60%. And in the last call you mentioned. So is it in the same range? And what would be the share of India in Q3 and going ahead as well?

We haven't disclosed India-specific numbers. But we feel U.S. will substantially -- will come down substantially below the 50% mark over the next 18 to 24 months is what we believe, if not earlier. And we will continue to see India grow for us. I think India should become approximately INR400 crores to INR500 crores market in the next, I would say, 2 years.

The next question is from the line of Aditya Singh from Multi-Bagger Stocks.

Okay. I had a question regarding the raw materials. Like how do we diversify compared to -- we source our raw material from? Is it majorly U.S.? Or are we thinking of shifting to some other countries?

Could you repeat your question? Your voice is very muffled?

Yes. I was just wondering that if we are changing our sourcing from U.S. of raw materials?

No. So we don't source only from the U.S. There are some varietals of raw materials we source from the U.S. But we largely -- a lot of the cotton we use emanates from India. And going forward, we are not changing anything as such, we are adding to the existing portfolio of products we do. So our Home Textile Solutions product portfolio will remain strong and an integral part of our offering.

We'll continue to focus on the growth that comes from there. But we will also look at accelerating growth rates, tapping into new verticals, which offer a whole new world of opportunity for us.

And in doing so, our raw material mix will shift more -- more and more in favor of Indian raw material content. But again, that could vary depending on client requirements.

Okay. And next question was regarding the EU FTA. So how can we capitalize on this opportunity? Like are we moving towards European suppliers or European retailers more than the U.S. ones? Because you told us that you were thinking of diversifying your portfolio more.

Yes. So I think by the time the EU FTA comes into force, which will take, I guess, a few months.

I'm certainly not aware of the exact time frame from -- in terms of when it comes into force. And I guess the U.K. FTA is also work in progress and will come into force in a few months. So this will open up all the countries that fall in these jurisdictions, where India have an equal footing vis-a-vis some of the other suppliers that currently have duty-free access.

And so we will most definitely see interest from these jurisdictions vis-a-vis home textile products, but also vis-a-vis products that we will add to our portfolio. So yes, non-U.S. jurisdictions should continue to rise in terms of revenue contribution and market access.

Okay. And when you say revenue contribution, like can you put a number on that, this is the number that we are targeting from the EU market in a specific time period or whatever it be, in the next FY or in the next from next FY?

As I said, over the next 2 fiscals, we would like to substantially correct our U.S. exposure, and diversify our exposure. And a lot of that will be taken up by India and the EMEA region, which is Europe, Middle East and Africa. I think these 2 jurisdictions will be, let's just say, the most benefited from our change in revenue mix. But that doesn't mean our absolute numbers in the U.S. will decline. It's just that the rate of growth in some of the other jurisdictions we see could potentially outpace the growth that we will see in the U.S. over the next period of time.

Yes. I understood. But I was just asking if you could quantify the number. Like if you would have said INR400 crores to INR500 crores market to be in India. I just want to a number for the EU market like that.

Unfortunately, the market numbers for India is in context to a number that I put out there where I said that we'll be looking at approximately INR800 crores to INR1,000 crores from India over the next 4, 5 years, which I had said a year back. And I think that in the next 18 to 24 months, we should be in the INR400 crores to INR500 crores mark, vis-a-vis you -- I won't be able to put a number on it, but I do think it will be very substantial in terms of -- I mean not EU -- other jurisdictions non-U.S. will be very substantial over the next 18 to 24 months vis-a-vis our revenue mix.

The next question is from the line of Bhavin Chheda from Enam Holdings.

Yes, sir, can you share your net debt numbers as on December 31? INR2,480 crores.

INR2,480 crores. The capacity utilization for the quarter you have given in the press release, can you give for 9 months also?

I'll have to get back to you on 9 months, but it should be pretty range bound plus/minus 100 -- it will be around 100 basis points higher probably.

And sir, additionally, this 25% duty has been immediately taken off. So has that got implemented on your shipments, which are landing in U.S. right now?

Just hold on. One sec. So yes, 25% is applicable and the move to 18%, I'll have to just check and get back.

So 25% is not payable right now by the U.S. importers, right? That's right, yes.

And majority of that incremental 25%, I believe, was absorbed by Indian company. So the straight retention or margin benefit starts coming to us on all the shipment landing in U.S. or it would be on new orders, which may start from March or April?

Yes, it would most definitely be a function of bilateral discussions with a concerned client. It is not auto as at least as far as Himatsingka is concerned, I can't speak for the rest of the industry.

But the dialogue needs to take place. And it certainly will not be effective vis-a-vis shipments that land today. It will be effective for them, but our price revision will need to be discussed and will be for orders that are over and above what's currently in the system, most probably, but this has to be negotiated.

Sure. And sir, my last question, as you said, you have been using Indian cotton, but obviously, currently, the U.S. cotton landed price is more or less similar or marginally lower than Indian cotton and there has been duty benefit on importing U.S. cotton. So while we have not explored on that part, any specific reason for that?

No. Bhavin, the U.S. cotton to the best of my knowledge is definitely not cheaper than Indian cotton for the varietals that we use in our industry or at least as far as Himatsingka is concerned.

So there is no cost advantage vis-a-vis U.S. cotton, that's not accurate. So I would request you to just have a look at those things again.

Almost was 50% now, and 25% even -- taking out 25% now because on that import part, duty becomes exempt. So I was comparing on a parity on a duty payable basis.

Yes. But the decision on whether U.S. cotton is going to be used or another cotton is going to be used is more linked to product positioning and consumer preferences, it's less to do with any of this. So from the supply side, we don't have any cost advantage if we were to use U.S. cotton because the price differential is substantial. The impact of tariffs on U.S. denominated -- U.S. cotton denominated product was lower. That is true. But vis-a-vis absolute cost of product using U.S. cotton will always be more expensive.

The next question is from the line of Shashikant from Brighter Mind Equity Advisors.

So congrats on the set of numbers. My question is about cotton -- on Bangladesh exemption that U.S. has given them if they use U.S. cotton. So how much -- and obviously, there was some news bites that if Indian companies use U.S. produced cotton, then duty will also be 0 for those companies. So how much cotton are we using currently from the U.S.?

It varies every quarter. It could be 10%, it would be 30%, it could be 40%, it would be 20%, depends on the order book and client preferences. So it keeps going. It ranges every quarter. It's difficult to put a number on it.

Okay. If you analyze in FY '25, how much percentage of U.S. cotton was part of our cotton procurement?

Approximately 30 -- between 30% and 40% of imported cotton. I have to check out how much was U.S.

Okay. And as we -- there was the process going on for the completion of and drafting of EU FTA currently. So as we expect that it will be done in 12 to 18 months. So what is our strategy to get into into these markets? And what is the current market share in European Union?

Our current market share in those jurisdictions, including the U.K. is probably in the region of, I guess, 20-odd percent and growing. And we, as a strategy, will obviously do the following. A lot of clients are interested as well to enhance their sourcing from India. And we are seeing that that interest come through. So it might take a few quarters to fructify because they would like to see the FTA in effect. But we are certainly seeing some interest from these jurisdictions vis-a- vis sourcing from India and balancing their sourcing basket which currently also sources a lot from jurisdictions like Pakistan because of duty-free access.

So we are seeing those dialogues start. And so that's going to be obviously something that should translate to some business vis-a-vis their inbound interest. And the second piece, of course, we will be aggressively pitching given now -- given the fact that we now have a level playing field even if we haven't necessarily seen inbound interest, the teams are out there pitching aggressively in terms of what's possible from our portfolio and the fact that we now have a level playing field. So I think that also will throw up new opportunities and revenue streams.

So all in all, I think there's a lot to tap into in the U.K. and EU. But having said that, I would also like to add that other jurisdictions like the Middle East, like India, like APAC and so on other non-U.S. jurisdictions as well are seeing some traction. And as I was saying earlier, we will be adding new product verticals to accelerate our growth in the quarters to come. We are not going to be reliant solely on home textile products.

This strategy will give us a richer portfolio of products to go to market with, especially in the backdrop of the new regulatory framework that will be enforced shortly. So I think all in all, keeping these initiatives in mind, we should see more accelerated rates of growth going forward in the quarters to come.

Understood, sir. About the India market, we had 3 brands, Himeya, Liv, Atmosphere. So how much number of stores we are looking to expand this year? And what is the current...

Sorry to interrupt you, sir. Sir, your voice is breaking. Can you please repeat?

Okay. So it was about the Indian market presence. So currently, how much stores are there and how much is COCO and how much is the MBO?

We largely have an MBO presence. We're not adopting a COCO strategy because of underlying challenges in the home textile category. We are not a fashion play. And if we do have stores, there will be a more asset-light model such as a franchise model and things like that and more experience centers.

So our strategy vis-a-vis India is to be present across channels. We are present in the MBO space, which is pan-India. We are present in the large format stores, which are all your department stores in the country. We are present in the hospitality space, we are present in servicing the B2B requirements of large retailers across India, all the major names. We are present on e-commerce platforms. We are present on quick commerce platforms and so on. So we are present across.

We do not have any franchise stores at this point. But I think our focus will be on other channels in the near term.

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

Congratulations on the numbers in a difficult time. Sir, just wanted to understand on the cellulosic capabilities that you highlighted at the beginning of the call, could you just highlight your interest currently over there? And how are you looking forward to leverage it?

Yes. Cellulosic nearly means not manmade -- the non-mandate fibers, although we use some of it in certain products. But our focus is largely cotton and other cellulosic fibers. It could be viscose, it could be linen and so on. But what I was trying to essentially say, Prerna is, Himatsingka currently operates in the space of home textile solutions largely. And we have products which are bath product portfolio, our bedding products portfolio and our drapery and upholstery products portfolio. So these constitute our home textile solutions offerings.

And going forward, our growth rates need to be recalibrated -- and we need -- as we think we need to align to the emerging realities, given the FDAs with major jurisdictions and given what transpired with the U.S. and the learnings from that, we think that we should be actually going to market with a broader range of products than just home textiles.

Our infrastructure is obviously a global scale and capabilities. And we have created extremely flexible shop floors over time. And this will enable us to tap new product verticals, which could be from -- ranging from fabric solutions to technical textile solutions in the fabric space to apparel solutions to yarn solutions and all of that from our existing infrastructure. So we are going to be doing that progressively. We are already actively engaged, and we are trying to tweak our model to now embrace this new reality. We are very excited about the opportunities that could potentially present themselves going forward.

We have had a tough few years. We have spoken about the reasons why we have had a tough few years, but we feel it's time to shift gears. Home textiles will continue to be a major portfolio for us but we think that our dependence on just this would be limiting ourselves. And therefore,

we are looking at new frontiers and new opportunities to really transform ourselves going forward. We have to play in larger market pools.

Home Textile is pretty restrictive. And as I see it, whatever one says, growth rates can't continuously be buoyant in the home textile space. We see bath as a stronger play, and we will hopefully see stronger growth rates in that. In sheeting, I think the growth rates will be a little more muted. And I feel that the global supply on that product, the math on that will make the growth rates a little muted. And therefore, we think that it's time for us to look at new frontiers to leverage our current position.

Understood, sir. Sir, in this context, if I just want to understand that U.K. and Europe FTA getting signed in the next 6 to 12 months and getting ratified maybe. So the opportunity with home textile is also humongous. So will you be exploring those areas as well in home textiles or it will be a combination of both? Because we have very low market share in both bed sheet and towels in Europe and U.K.?

Yes. So we will be exploring that Home Textiles will not take a back seat, Prerna. But we just feel that we would like multiple engines to drive growth because just being driven by home textile solutions is probably not adequate for us, looking at the global opportunities that are presenting themselves, we can't be limited to a product portfolio of home textiles. It's limiting.

And sometimes the gestation periods of enhancing market share could be different from what one believes it will be.

So I'm not trying to say that we will not see growth in home textiles. I'm just trying to say that if we were to look at ourselves, we feel that our growth rate needs to substantially be enhanced.

And in order to do that, we need to work on -- with multiple engines. That's really what we are getting at. And so we have identified a few verticals that I've outlined to you, and we are working on those fronts to drive growth.

And that's fantastic, sir. Maybe we'll have more clarity on the plan in coming quarters and?

Yes. We will be sharing more with stakeholders. I just thought that I put this out there as something that we are working on and as an update, and it's also linked to the opportunities that will seemingly come through because of the changes in regulatory frameworks, i.e., the FTAs and the reversal of tariffs and so on. So us looking at fabric solutions or apparel solutions or yarn solutions, along with home textile Solutions will pave the way for Himatsingka 2.0 and we'll keep stakeholders obviously updated as we go along.

Thank you so much, sir, and all the best.

Thank you all for taking the time this evening. Do get in touch with us should you have any further questions, and we'll be happy to answer them to the best of our ability. Thank you.

On behalf of Elara Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.