VTL - Vardhman Textiles Limted Share Price

Management provided a cautious outlook for Vardhman Textiles Limited, acknowledging ongoing challenges in both domestic and global textile markets. They highlighted issues such as high cotton prices in India, ranging between $0.81 and $0.83 per pound, significantly above international levels of around $0.66 to $0.67. This renders Indian cotton less competitive compared to cotton from countries like Vietnam and Indonesia. Furthermore, they noted an 18% to 20% price premium for raw materials like polyester and viscose due to stringent import regulations.

Key forward-looking points included:

1. Capacity Expansion: By the end of Calendar Year 2025, the company plans to increase its production capacity by 38%, which will transition towards synthetic products, thereby diversifying their product line and enhancing margin profiles.

2. Market Adaptability: Management is actively engaging with customers to adapt to evolving needs, positioning itself as a reliable partner, and focusing on high-quality fabric production amid fluctuating demand.

3. Revenue Projections: For FY26, they forecast a 10% revenue increase in the fabric segment, potentially reaching around Rs.4,500 crores, and a further 30% increase in FY27. This translates to an expected revenue growth of Rs.1,500 crores over two years.

4. Operational Agility: Management emphasized the company's commitment to modernization and cost control to navigate near-term uncertainties while enhancing long-term sustainability.

5. Potential Export Advantages: India's relatively lower tariffs may provide opportunities to increase exports to the USA, especially in light of competitive pressures from other countries facing higher tariffs.

Overall, while the immediate environment remains uncertain, Vardhman is focused on leveraging its capabilities and customer relationships to drive resilience and growth.

1. Rajesh Jain: "Can you tell me why is there a sharp jump in other income and other expenses in this quarter?"

   Neeraj Jain: "The other income increase is due to land purchase for one of our plants, around Rs.25-26 crores, along with mark-to-market losses on dollar-rupee conversions captured in other income. The rise in other expenses relates to significant modernization efforts across factories, involving repair and maintenance costs."

2. Rajesh Jain: "Can you provide any update on your foray into technical fibers, how is the capacity expansion going on that front?"

   Sagrika Jain: "The progress is as anticipated, and we should be operational by Quarter 3."

3. Avinash Chandra: "Could you describe the huge unallocated costs reflected in the numbers?"

   Neeraj Jain: "All our business is textiles only, and the minor discrepancies are due to our acrylic fiber business, which contributes a small amount to the consolidated numbers."

4. Avinash Chandra: "Is it accurate that lower international cotton prices have started impacting EBITDA margins?"

   Neeraj Jain: "Yes, higher raw material costs are influencing our EBITDA margins, which have historically been around 17-19%. Indian cotton prices have risen significantly, leading to a negative trend in margins."

5. Anil Kumar Sharma: "Can you explain the decline in grey fabric sales volume despite running at full capacity?"

   Sagrika Jain: "There may be factors like a change in product mix influencing sales figures. While running at full capacity, specific volume reductions can occur due to different pricing and customer demand."

6. Prerna Jhunjhunwala: "How do you foresee the cotton, yarn spread position today for coming periods?"

   Neeraj Jain: "The current spread for Indian mills is around $0.68 to $0.70, which remains challenging, though we've seen some improvement."

7. Falguni Dutta: "Are spreads directionally improving, and are we seeing profitability at the PAT level for yarn?"

   Neeraj Jain: "The basic products are not yielding any profit at the PAT level due to ongoing high cotton prices impacting margins."

8. Rajesh Jain: "On the fabric side, can you share the expected revenue increase in FY26?"

   Neeraj Jain: "We project a 10% increase in fabric revenue in FY26, totaling around Rs.4,000 crores, with clarity on margins depending on the outcomes of the current tariff situation."