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Sangam (India) Limited Q4 FY24 Earnings Conference Call Summary
Key Executives Present • Managing Director: Anurag Soni • Vice Chairman: S.N. Modani
Financial Performance Highlights • Revenue Increase: 13% quarter-on-quarter to ₹701 crores • EBITDA Growth: 38% rise to ₹67 crores • EBITDA Margin: Expanded to 10% • Future Targets: Aim for ₹4,000 crores revenue and 12.5% EBITDA margin by FY26
Strategic Initiatives • CAPEX Completion: Successful projects in denim and synthetic fabric • Product Mix: 53% of products are value-added • Export Markets: Presence in over 60 countries; one-third of business from exports
Guidance and Projections • Margin Goals: Targeting 12.5% margin in two years • Product Contribution: Fabric and garment segments to rise to 60%, yarn to 40% • Revenue Growth: Projected 15% growth for FY25
Debt and Financial Management • Debt-to-Equity Ratio: Remains comfortable despite margin pressures • Long-term Debt: Stands at ₹690 crores • Interest Costs: Expected to peak this year
Product and Market Insights • Gross Profit Margins: Decline attributed to falling cotton and polyester prices • Competitive Advantage: Diversified product portfolio across textile segments • Branded Products: Garments currently account for 3% of total business
Capital Expenditures and Future Plans • Capex Allocation: Focused on garment segment for growth • Renewable Energy: Plans to increase usage from 10% to a higher percentage
Dividend Policy and Taxation • Dividend Payout Ratio: Maintained at 20% to ensure continuity • Tax Regime: Operating under a 25% tax rate, leading to lower cash outflows
Closing Remarks • Future Communications: More clarity on interest rebates and dividend policies promised • Invitation for Inquiries: Soni encouraged further questions from participants.
Company Overview • Date of Call: March 20, 2024 • Key Executives: Anurag Soni (Managing Director), S.N. Modani (Vice Chairman) • Industry Position: Leader in PV dyed yarn and denim with 40 years of growth.
Financial Performance • Revenue: Increased by 3% year-on-year to ₹621 crores. • EBITDA: Declined by 18% to ₹48 crores. • Capital Expenditure: Planned at ₹792 crores to enhance production and expand into high-value segments.
Strategic Goals • Revenue Target: ₹4,000 crores with stable EBITDA margins of 12.5%. • Capex Focus: 60-65% directed towards sales growth; remainder for cost-cutting. • Export Growth: Anticipated increase from 30-40% to 38-40%.
Market Outlook • Pricing Pressures: Industry has faced challenges, but prices are expected to stabilize. • Utilization Rates: High at 90% for denim and PV fabric, 80-85% for yarn. • Margin Improvement: Yarn margins projected to reach 12-12.5%.
Financing and Debt • Funding Structure: 75% of capex funded through debt, benefiting from Rajasthan government interest rate scheme. • Current Debt: Long-term borrowing at ₹560 crores; working capital between ₹450-500 crores.
Operational Insights • Inventory Levels: Higher-than-normal inventory in anticipation of price stabilization. • Cost Management: Other expenses reduced by ₹10 crores year-on-year due to lower freight costs.
Future Projections • Revenue Growth: Projected growth of 18-20% for the upcoming financial year. • Debt-to-Equity Ratio: Expected to rise to 1.3 due to capex plans. • Market Share: Estimated 20-25% in the PV yarn segment.
Additional Insights • Promoter Structure: 70% equity held by promoters, with familial ties among key executives. • Production-Linked Incentive (PLI): Expected benefits of ₹45 crores over five years starting FY 2025-26.
Conclusion • Optimism for Growth: Management expresses confidence in future growth and margin improvements, driven by strategic investments and a recovering market.