Sumeet Industries (NSE:SUMEETINDS) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Sumeet Industries Limited Q1 FY 'twenty seven Results Conference Call. 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 0 on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to mister Pat Asadia from Caring Advisers Private Limited. Thank you, and over to you, sir. Thank you. Good afternoon, everyone. On behalf of Kirin Advisors, I welcome you all to the conference call of Sumeet Industries Limited. From the management team, we have mister, managing director, Mr. Executive director.

0:50 With that, now hand out the call to Mr. For the opening remarks. Over to you, sir. Thank you. Good afternoon, everyone, and a very warm welcome to all our investors, analysts and stakeholders joining us today for the quarter one FY twenty seven earnings conference call of Sumeet Industries Limited. It is a pleasure to have you with us today and I sincerely thank all of you for your continued trust and support. For the benefit of those joining for for the first time, let me briefly introduce Sumeet Industries. Established in 1988, Sumeet Industries has built a strong presence and integrated manufacturing unit with a diversified product portfolio concern... Comprising of purchase, partially oriented yarn, and full texturized yarn.

1:35 Our products feature a wide range of end user industry including apparel, home textile, and industry applications. Operating from SUREC, one of India's largest synthetic textile manufacturing hubs, we provide... We... It it provides us with a strategic advantage in sourcing, manufacturing, logistics, and customer servicing. Now a new phase of the company's journey began in 2024 under the leadership of Eagle Group, a textile focused industrial group with over four decades of experience across the future value chain. Since then, our focus has always been on strengthening of operation excellence, improving manufacturing efficiencies, and building a scalable platform that can support sustained long term growth. Coming to our financial performance, we delivered a resilient quarter despite an exceptionally challenging operating environment for the producer industry.

2:24 During our quarter one FY twenty seven, our income in... Income increased by over 9% year on year to $2.72.24 crores. Our EBITDA stood at 8.85 crores with an EBITDA margin of 3.24%. This for the quarter was 1.14 CR. Although revenue growth remained pretty, profitability during the quarter was impacted. Now this impact was due to temporary industry wide headwinds. Due to the... A lot of geopolitical tension in The Middle East and US, there was a sharp increase in the crude oil prices, which resulted in significant volatility in our raw material, such as PPA and energy, along with elevated freight and logistic cost. These factors created margin pressure across the policy revenue and affected manufacturing across the industry.

3:16 Importantly, the underlying demand environment has remained encouraging. Demand across federal home sector industry application continue to be healthy, and the challenges witnessed during the quarter were largely driven by input cost inflation. There has been any weakness in end market demand. Encouragingly, the operating environment has all... Already started improving. The crude oil prices have largely stabilized, the raw material availability has improved, and the supply chain has normalized, and the price volatility has moderated. We believe this for temporary disruption and with industry conditions steadily returning to norm... Alongside navigating this near term challenges, we also achieved one of most important milestones to complete recent history to the success... To completion of our right issue.

4:05 I would like to sincerely thank all of our shareholders for the confidence they have shown in the company and for for the strong participation in the capital raise. The board has approved the the allotment of 16.84 crore equity shares at an issue price of 11.86 per share, raising $1.99.75 crore with net proceeds of approximately $1.94.90 crore available for deployment towards our strategic growth initiatives. This might proceed from the issue as a clear mark for clearly defined priorities. Approximately 100 crores will be utilized towards handling working capital to support higher production levels and efficiency procurement of efficient procurement of raw materials. Around 15 crores will be invested towards the optimization and integration of the new acquired cities. Approximately 23 crores will paid for the repayment of borrowings, Among these strategic initiatives, the operationalization of the one of the most significant growth drivers of other company.

5:22 Earlier in March, Sumeet received a declared successful bidder for the acquisition of Makoda Limited duty plant under the c... CLRP for a consideration of 23.47 crores. This plant has an internal manufacturing capacity of one lakh 40,000 tons per annum of p two six, a key raw material for our downstream POM audio operation. Once we commissioned, it is expected to approximately double our existing product capacity by significantly assembling backward integration, improving operating efficiencies, and enhancing our overall cost competitiveness. We believe this product will serve as a key growth engine for the company over the coming years. Looking ahead, we are optimistic about the opportunity before us with industry conditions stabilizing a significant stronger balance sheet, lower expected finance cost, and the execution of our strategic growth.

6:13 We believe Sumeet Industries is well positioned to enter its next phase of customer growth. Based on the current demand environment and our execution road map, we remain confident of delivering more than 50% revenue in the current financial year '27, along with the EBITDA margin of around 6% and a profit after tax in the range of 3.5 to 4%. Our focus remains on discipline execution, operational efficiencies, and creating sustainable long term value for our stakeholders. Before concluding, I would like to thank our shareholders, customers, lenders, business partners, and every member of the Sumeet Industries family for their continued trust and support. With that, I thank you all once again for joining us today, and I I now open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on the touch tone telephone.

7:06 If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sumeetupar from Styles Holdings. Please go ahead. Yeah. Hi, Prateek. First of on the successful I thank you. You. Hello, Arjun? Yes. Please go ahead, sir. Yeah. Please. Okay. Thank you. So I wanted a few questions I have. Number one is on the volume that you've delivered for Q1, if you could share, you know, what was the volume that we did between POI or an FDI?

7:53 Okay. I would like to inform you that the production was affected due to the highly volatile and Mhmm. And plus, we also took a maintenance shutdown for fifteen days. And that is why our volume... Production volume reduced by 17% during this quarter, than the last quarter. Still, we were able to manage the sales because we had stopped if we were able to liquidate. Got it. So... Understood. The other question I have is I I saw the exchange filing about the conversion of debt as well. The option is convertible debentures. So net net as of like, currently, what is the gross debt? This is good share number. Gross?

8:39 Gross debt that we have in the balance sheet right now. Oh, okay. After the repayment from the right issue proceeds, and we have the long term date is reduced to... Right now, we have long term date of 86 crores and short term borrowing of 74 crores. Yes. Okay.

9:36 So that was part of equity? Yeah. Yeah. That is completely different. That is. We have paid 23 to our bank. So our debt is reduced. And even the short term mortgage, like, capital, all has been serviced. So the financial cost will reduced in the current financial. Okay. So we also had some CapEx that was getting commissioned. Right? There was some 20,033 that was supposed to happen by '21.

10:23 Commission that is... Yes. That is already commissioned. Part of it was commissioned in July, and the other part is commissioned right now in August. Okay. So now our capacity is... What is our... The the polyester capacity? What's the... What is the capacity? Our CP capacity is 300 tons, and our LAN drone capacity is around now now has become two forty tons per day. Oh, it's three forty, two forty? Two forty. Three forty. Okay. Yes. The plant capacity is we have returned, and we are going now to 50 turn into one. Okay. Understood. Alright. So after this, coming back to the debt, I've got to think of the conversion, etcetera, this right issue that we have done and we are repaying. Roughly, what is the finance cost you're expecting, say, from next quarter?

11:20 We expect a significant reduction in the financial cost, but as we have said, the date... The overall date, '23 CR is reduced. The rest of the date, the next cost will be there. And in short term, the future interest, the capital... Because of the working capital, we have received the working capital. The future cost will be also making negligible. So all that will reduce our commission cost. Okay. Thank you so much. I'll join the queue. Thank you. Thank you. The next question is from the line of from Orient Capital. Please go ahead. Hello? Audible? Hello? Yes, ma'am.

12:06 Hi. I have few questions. So what annual power cost savings are expected when renewable energy reaches around 60% of total consumption? We expect an overall reduction of the the power cost. We would it's... We expect a benefit of around 25 per annum after all of our renewable power is commissioned. Okay. And q one EBITDA margin stood at 3.24% against the FY twenty seven guidance of around 6%. What are the key drivers required to bridge this gap Or As...

12:56 Ma'am, as we... As I informed you, I informed everyone in my speech that the first quarter, the demand, the supply, and everything was very volatile due to the constant change in the raw material prices. The raw material prices were highly volatile weekly. So the demand was also stringent, and the margin were also stringent. Now things have come back to normal. We are running as a plant at full capacity, and we are expecting a good demand ahead. Apart from this, the new 30,000 tons per annum capacity is already commissioned in the in the second quarter, so that will add up to our margin. Further, the naval power will also be added up in the second half of the year. That... The margin will be added, and we expect a good demand now. Good demand and good...

13:45 And as as the raw material will come down, we expect the margin to improve further. Okay. And what percentage of the current product mix comes from value added? Currently, we are at 30%. 30 to 25%. Sorry? I I think I lost you. Thirty thirty to 35%. Okay. Yes. 30 to 35% of our land production is where we are now. And what utilization level is targeted for the facility in the first full year of operations, and how long is expected to reach optimum utilization? Yeah. This branch, when they start, they will be optimum capacity within one to two months.

14:31 So once it starts within fifty days, we expect it to reach to the optimum capacity. Okay. Fine. That's all. Thank you. Okay. Thank you. Thank you. The next question is from the line of from. Please go ahead. Hi, and congratulations on a great quarter. I have a question. You talked about the decrease in 13% decrease in volume, but increase in sales from existing stock. So what is the revenue growth expectations that we have in the next couple of quarters? Do we expect the same growth quarter on quarter? We we expected growth quarter on quarter because in the first quarter, the production was less.

15:22 But due to the highly volatile pricing, we were able to maintain our top line. Now in this quarter, our production is also increased, and the prices are also... We are also trying to sustain the prices. So... Oh, yes. Overall, in the financial year '27, we expect revenue growth of approximately 3030% than the last financial year. Okay. Fantastic. And from an EBITDA perspective, what is the guidance or or perspective that we expect for the next three quarters? I don't know if I missed this in the initial part of the conversation. But... Yes. We are really pretty confident that by the end of twenty twenty seventh, we will be able to achieve our EBITDA level of 6%, which we are targeted.

16:17 Okay. Okay. And for the Nakoda facility, is it on schedule? Yes. It is on schedule. Okay. And when do we expect it to be adding to our top line and bottom line? When do we start and what is the increase that we expect in our revenue? Next financial Okay. So so to your answer to the previous question, when it gets commissioned in next financial year within fifty days, it'll be 100%. Yes. Yes. Yes. Okay. Thank you so much. Alright. Thank you. Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the touch tone telephone.

17:07 The next question is from the line of from Gala Ventures. Please go ahead. Hello, cable. Please go ahead. Hello, cable. Please go ahead. If there's no reply from the line of Cable, I will promote the next. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on the touch tone telephone. We will wait for a moment while the question queue is envelopes. The next question is from the line of from Phoenix Capital. Please go ahead.

18:08 Hello. Hello. Hi, sir. Actually, could you please, could you share an update on Nakura City plant? And what what what is your payment to make it operational? And when you expect commercial production to begin? On the Nakura City plant, the work of the new machines, all that have been given. The work of installation is already going north, and we expect that in the next financial year, it will commission. And once it commissions, as I already informed you, we can distribute it to get optimum capacity. Okay. And around 100 crores from the right issue is being good for working capital. So how much additional revenue do you expect this to support?

19:05 I've I've told you that about 30 percent additional capacity is already sufficient. And we are moving into the yearly plans as well. So to support all this, the working capital is being used as well as when the when the product starts, that the working capital requirement will also be fulfilled with this working capital requirement. And the the current working capital, what we are you are using our bank limit, we have already filled up, so our financial cost will be reduced. Okay. And sir, I mean, how much of your overall power requirement is currently made through renewable energy sources?

19:55 Currently, only 20% is is being serviced. 20 or 30% will be serviced to renewable power. And further, 25 to 30% will be done once our service commission. And what is expected timeline for commissioning the new 6.5 megawatt captive solar power plant? And also, from which quarter do you expect this cost saving to start reflecting in the business? The remaining power... We are expecting the remaining power plan to be commissioned in the last quarter. Okay. Okay, sir. Okay, sir. Yeah. Yeah. Thank you. Thank you. Ladies and gentlemen, anyone who wishes to ask question, may press star and one on the touch tone telephone.

20:45 The next question is from the line of from SK Capital. Please go ahead. Hello, sir. Have one question regarding the current market conditions like the stock is facing. The stock has been in a lower circumstance the last twelve to fourteen days. So what are your actual views on it? Because retail investors are not getting the exit that they require after the right issue. Sir, I can't comment on the share price going down and all, but it was expected as our share prices were at $34.35 level, and the right issue was at $12.11.86. Okay. So Everybody wants to tell now. Yes.

21:32 So, like, the share price was also taken in the last one month from 22 to 35 rupees also, sir. That's all. Yeah. That's all the touch of... I mean, this is on a currency also. We we we we we we we Okay, sir. I wish you the very best. Thank you. Thank you. Thank you. The next question is from the line of Himanshu Dhubesh from Stylus Holding. Please go ahead. Yeah. Hi. Thanks for the... All the opportunity.

22:19 So first question was, you know, in terms of our margin, when you say 6% guidance as you invest, EBITDA margin, Where can we see the gross margin doing that? Sorry? We we recorded it, like, I think 15% gross margin, right, for FY... For the first quarter. So can we see, like, 30% kind of gross margin would be used to do prior to the entire bank request that happened. I can't hear you properly. Once if you can Right. The the answer. Should I repeat? Yes. Yes. Yes. Yes. Yes. Yeah. Sorry. Sorry. So my question was to... Prior to, you know, as the the bank of, the company used to update around 20 to 25% gross margin.

23:14 I think last three, four quarters, we have been oscillating. We reached 20% plus. But again, in this quarter, we are adding 15% gross margin. So I just wanted to understand, say, the full year, when you are guiding for 6% operating margin, what is the gross margin that you're expecting? Hello? Am I audible? Yes. Yes. So we are expecting our margin to increase. In this first quarter, as I told you, was very volatile, and that is one of the... That we were not able to achieve the gross margins. But we are very confident that So, usually, the business model is, you know, like, when it's because of crude price going up, your raw material prices are going up, like, how soon are you able to pass on the price to the customer?

24:19 Hello? No. As I told you, if the prices go up, we are able to pass it on immediately, but the prices are very volatile. They are going up after three days of coming down. So that is why the difference to parity was too much in the demand and supply. And that is the that is the reason that we were not able to pass on completely to our customer. Okay. Understood. Next question I have is on order. Yes. Sorry? For the attendee. Sir, you are saying something working correctly. Sorry to interrupt you. Yes. Our our order cycle around fifteen days.

25:08 So... Fifteen days. Okay. Yes. If the if the rate is sustained for fifteen days, then we are able to pass it on. But it is in the fifteen days if the price goes up and comes down. We have to take raw materials constantly. So that's why that is where the gap came. Understood. Okay. So this actually was around the tax losses. So because the price of the acquisition, the company had, you know, huge amount of lot of. So are we having unabsorbed depreciation and losses, you know, that we can now utilize because of which our tax also may also be the radius? Hello?

25:58 Yeah. I'm... Should I repeat the question?... Kind of for a tax benefit because we already used it in past quarter. I think, basically, they are asking that we have any tax credit or something like that, because we want this... Because the Industries before until they have a huge office. So he is asking whether we have any tax credit or not. No. No. Because everything was used first, and we have to clear the balance sheet. Then the... It is the return off in that. Okay. Got it. Also, we have some, you know, investments and loans and advances in the balance sheet. Think $14.15 crores is as of March. So so to just...

26:44 Like, what are the utilization of that? Yes, sir? Some investments, it's shown in the balance sheet. Right? 14 crore. Out of the 15 CR, the 9 CR is in the Hyurja that we have the stake in the Hyurja. That is basically the power plant. This is a power plant. We have given... Yeah. So we have given 9 crores for it. Okay. Got it. And what about the capital working progress? So we are around 32 crores, and you mentioned some of it has now become operational. So entire capital working progress has now been operational from this month, like you mentioned, all the focus on capacity is coming online.

27:38 So is this only operational now, the entire CapEx that we have done? Yes. The the 30 times for the plan is operational now, and it's operational in second quarter. Okay. And this will also be utilized, like, immediately can... This optimal utilization will take time. No. No. It will be operational. And and this would be... And this is in our cycle. Once it is commissioned, actually, within a month, it comes to its optimum capacity. Okay. In a month, it will come to operation.

28:24 Understood. Just one last question from my side, which is on trade receivables. I think that is also... I mean, I can see that both payables and receivables are that way slightly higher. But are there any receivables which are, like, more than six months older? No. We don't have any. Okay. So everything is recent only back then. Yes. Understood. Got it. Thank you so much for the opportunity. Alright. Thank you. The next question is from the line of Nikita, NHMI. Please go ahead. Hello. Am I audible? Yes. Sir, so my first question is, do we currently have any export revenue and are we planning to export value added YARN?

29:15 Or do we need any additional certifications for export? Okay. First of all, evidently, didn't have any export, but now, yes, we are planning for export. We are already doing green export, and we don't need any special certificate in green export. Okay. So has the rupees 23 crore Nakoda acquisition amount already been paid, and is it included in the rupees 90 crore CapEx or separate from this? No no no. It is INR 90 crores CapEx. Okay. Thank you, sir. Thank you for answering my question. Thank you. Thank you. Thank you. The next question is from the line of from.

30:06 Please go ahead. Yeah. Good afternoon, sir. Sir, there any further scheduled maintenance shutdown plan for the remaining part of FY twenty seven? And if so, what would be the expected impact on production volumes? There is no schedule maintenance on for the next... Remaining of the year. We have to take one. We schedule maintenance in a year. We did that during this time, then we thought it was right to do it due to the highly volatile market applications. And which end user segment currently has the strongest demand among apparel, like apparel, low home textiles and industrial applications?

31:04 We have demand from industrial applications in the category. Sorry. We have good demand from apparel sectors, like garments and the heating sectors. And there is always a good demand for Diwali. So we expect the market to go better only from here till Diwali. Okay. And also, can you give us a limelight on what proportion of revenue comes from the top 10 customers and has the con... Customer concentration has also been reduced? See, the... Our business model is a little different in this side, in this industry. The business model is we tell much you guys to other agents who sell it to the the final users.

31:51 Now there are thousand of final users. So they are they are not like any top end customers. Our our customers are our agents. But the final customers are many more than thousands. And with the new diversity diversity of our product range, we have introduced new products. And due to that, more and more customer in we are ending up. So we are making our product portfolio dynamic that we are able to cater to many new customers and many new segments all over India. Now we are not only focusing with regards to Europe. We are focused all over India. Okay.

32:36 So you meant to say the customers are in mask and there are few agents. Right? Correct? Yes. Yes. Yes. Okay. So can you can you give us a timeline, like, what are the proportions of of 10 agents from that revenue are coming from? Approximately 50%. Okay. It's 40. Okay. And also, what is the current demand and why is it FDUI? It's the right. Hello? Sorry, mister Cable. Your voice is not audible. Hello?

33:22 I'm audible. Yeah. So what is the current demand and price environment for POY, f price, and extra SD WAN? The current demand for POY, extra SD all are pretty good, and we expect it to rise day on day. Okay. And... So we don't see any issue. We don't see any issue right now in demand. If if the war is settled, then the things become stable. Okay. And following the 23 crore debt repayment, what will be the expected gross debt and net debt position by the end of FY '27?

34:16 And it's 23 CR. Yeah. We did this. So we I was... Then our debt... Then we are approximately from from a... Our machine from them, the debt will remain only around 33 r. Sorry. What is the number you said? Approximately, 30 CR will remain. 30 CR. Okay. Okay. And what are the normal inventory receivable and payables... Payable days for the business? Okay.

35:09 Got it. Sir, what are the normal inventory receivables and the reward days for the business? Inventory... Normally, what you need is... You're you're asking about the convert... Later in case of conversion issue? Yes. We expect our payments approximately in thirty to forty five days, we receive our payment. And the payment is also as for the credit, we we get credit of around thirty days from our customer... From our enrollment to the client. Okay. Okay. Got it. Got it, sir. Yes.

35:56 So that's all from my side, sir. Thank you so much for giving us the insights about the business. Yeah. Thank you. Okay. Thank you. Thank you. The next follow-up question is from the line of Kurin from Canada Realty. Please go ahead. Yeah. Hi. One question. Given that you've finished the rights issue and and acquisition on the phone and all the RPS conversion. From our shareholder perspective, what are the important milestones that we should be tracking over the next twelve months to see or access how the transformation is progressing? For your voice like... My phone, can you just repeat the question, please?

36:44 So is it clear now? Yes. Yeah. So given that we kind of come out of the restructuring phase Yes. From a shareholder perspective, what are the most important milestones that we should be tracking to see or assess whether transformation is progressing as planned? Sir, we have come out in successfully searching phase, and the major milestone we have done is upgradation of machinery and expansion plans. The major milestone we are expecting is the fully commissioning of our renewable solar power plant so that our power cost is produced. Due to the right issue proceeds, our financial cost will go down drastically. The major... Most major milestone is the Nagoda City plant. Once it's commissioned, there will be a straightaway effect on our top line as well as the bottom line. We expect our top line to double after this. So that is our reason why should we are targeting right now.

37:46 Got it. Trying to deploy product diversity. We are also looking for diversity and adding of the related to our portfolio. We are expecting it... Our market to go further better. About the 6%? Yes. Fantastic. And you you did say that the Nakora plan commission is is expected in FY twenty seven. Do you know which quarter... Do you... Can you comment on which quarter? Another... The next financial year, not this average. Correct. Correct. But which quarter and the next financial year? We are targeting the second quarter of the next financial year.

38:33 Got it. Got it. And one last question, you you did say the margins in q one were impacted because of crude price fluctuation and volatility. In case we see that going forward, how are we protecting the EBITDA? Or or will we still see the fluctuation if the volatility continues? If the if the volatility continues, we are... We have a plan to procure more raw material at the right time because we are not expecting this more to fuel for for too long. And that is why we never got the chance to procure a long term with the price. So if it goes further and if we think it is escalating, then we'll protect our margins by not reducing our finished prices and procuring the raw material at the right time.

39:31 Got it. And at this point, have we got raw material, or are we getting raw material at the rates prior to the volatility we saw? The pricing of the raw material has come down, but they have not come up... Come to the level. That will take time. As you know, that the crude just got down last week. So the effect doesn't come out so easily when it comes down. Mhmm. Mhmm. So, yes, we are looking at good times. The operating prices have started coming down. We are looking at a good sign of that, and we expect it to get normalized in the the... This month, in the... By the end of this month. Got it. Thank you so much, and wish you the best.

40:16 Alright. Thank you. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to mister for closing comments. Yes. Thank you everyone for joining the conference call of Sumeet Industries Limited. If you have any further queries, you can write us at [email protected]. Once again, thank you everyone for joining the conference. On behalf of... Thank you. On behalf of Kirin Advisors Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.