GOKEX - Gokaldas Exports Ltd Share Price

Question and Answers from the Q&A Section of Gokaldas Exports Q1 FY'26 Earnings Call:

1. Rehan Saiyyed: "What is the current utilization level across facilities, and are we planning any fresh capacity additions in FY'26?"

Siva Ganapathi: We are operating at utilization levels in the 90s for India and about 80% for Africa. We plan to add capacities by bringing up three factories in India, set to come online in Q3: one in Bhopal, another in Kolar Goldfield, and a small knit factory in Ranchi. In Africa, we are adding 500 machines at an existing facility, which we expect will begin to show results starting Q3.

2. Rehan Saiyyed: "The employee cost has increased substantially this quarter. Is it due to wage inflation or ramp-up in new facilities?"

Siva Ganapathi: Yes, the employee cost increased due to a minimum wage hike of 5% and an increase in headcount by over 1,200 people in anticipation of volume growth. I expect this level of wage expense to continue for the rest of the financial year, without further significant increases.

3. Rehan Saiyyed: "What is the outlook for Q2 regarding seasonality, execution timelines for current orders, and tariff implications?"

Siva Ganapathi: Q2 typically is a lean season for the Indian apparel industry. However, order bookings are solid. We anticipate some margin challenges similar to Q1 due to agreed customer discounts to absorb tariff increases. Overall, volumes should remain in line with current levels, not a source of worry.

4. Jignesh Kamani: "How is BTPL performing, any issues with ramping up?"

Siva Ganapathi: BTPL's performance post-acquisition has steadily improved, with quality and profitability showing substantial gains. We are considering moving forward with an amalgamation. The plan is to acquire the remaining stake, with total cash outflow not to exceed INR70 crores and the rest via equity.

5. A Sathyamurthy: "About the recent INR9 crore export capital incentive, is it sustainable?"

Siva Ganapathi: The INR9 crore incentive was accrued over the last 1.5 to 2 years. We anticipate securing similar incentives averaging INR4 crores annually over the next four to five years.

6. Monish Ghodke: "What are the return ratios concerning BTPL?"

Siva Ganapathi: Owning BTPL allows improved turnaround and access to better margins, with expectations of exceeding a 12% EBITDA margin. Given our acquisition cost, we see strategic benefits supporting strong return metrics going forward.

7. Raman: "What is the current utilization of BTPL and the expected EBITDA impact post-acquisition?"

Siva Ganapathi: BTPL currently operates at 40%-50% capacity. Upon reaching full capacity, we anticipate revenues of INR1,800 crores and EBITDA exceeding INR200 crores when we hit 90% utilization, expected by early FY'27.

8. Vishal Mehta: "What are the EBITDA and volumes including acquisitions?"

Siva Ganapathi: Revenue from acquired entities is INR282 crores with a 11% EBITDA margin. The decline compared to the previous year is due to previous operational setbacks that have since stabilized.

9. V.P. Rajesh: "With current tariff levels, do you foresee a more favorable long-term environment for production?"

Siva Ganapathi: The ongoing tariff situation has created short-term challenges. However, long-term prospects for India remain strong due to our labor supply, capacity, and ongoing diversification of output geographies. The expectation is for improved operational efficiency and margins moving forward.

10. Sundar: "What will be the new levels of margins post-tariff adjustments?"

Siva Ganapathi: While margins may see temporary dips due to tariffs, I don't see this as a permanent impact. If tariffs stabilize at around 20%-25%, we should be able to manage our cost structures effectively and regain margins by next financial year.

This summary encapsulates the primary inquiries and responses from the earnings call, providing insights into operational strategies, financial outlook, and potential impacts of tariff adjustments.