RSWM Ltd Q4 FY2025 Concall Summary

Key Takeaways

• PAT turned positive at ₹1.6 crore in Q4 FY25, recovering from a ₹8 crore loss in Q3, helped by a one-time synthetic yarn inventory liquidation and internal efficiency gains.
• EBITDA margin improved to 6.2% from 4.6% QoQ, but the synthetic yarn sell-down depressed the gross margin percentage even as other segments improved.
• The India-UK FTA is a strategic unlock: management expects it to help grow India's share of UK apparel imports from 6% to 15-20%, adding nearly \$1 billion in exports.
• Ginni Filaments acquisition remains a split story: the knitting division has stabilized, but the spinning division is still loss-making with no major modernization planned for FY26.
• What to watch next quarter: whether the Q1 FY26 performance holds at Q4 levels or slightly better as management expects, and any clarity on US tariff outcomes for Indian textiles.

Quarterly Performance & Profitability Drivers

• PAT turnaround: The ₹1.6 crore profit was driven by a mix of consistent improvements and a one-time reduction of finished goods inventory, especially in the synthetic yarn business.
• EBITDA margin walk: Q4 margin rose to 6.2% from 4.6% in Q3 and 4.7% in Q4 last year, attributed to recent operational developments.
• Gross margin distortion: The synthetic yarn liquidation, which carries comparatively lower EBITDA among the five product segments, depressed the gross margin percentage; other businesses showed reasonably good improvement.
• Finance costs rose during FY25 on higher working capital requirements and term loans for the Ginni Filaments unit at Chhata.
• Depreciation increased mainly due to commissioning of the new Kapaas unit at Banswara, Lodha.
• Inventory normalization: The finished goods inventory build-up noted in H1 FY25 was subsequently liquidated during the year, decreasing inventory on the balance sheet.

Rajeev Gupta: "If you look at the performance in 4th Quarter, there is a mix of things which are consistent and few things which are one time. As Nitin also shared, we had the reduction of stock in various businesses, especially our recent Synthetic yarn business. So that is a one-time thing which has happened during this quarter."

Demand Environment & Market Positioning

• Cotton yarn spread remained under pressure and is more or less unchanged; markets were good, especially Bangladesh, with healthy demand.
• Denim segment still faces low industry-wide utilization, but RSWM captured good orders and improved its own utilization by working closely with brands.
• Exports performance: Significant revenue increase from Middle East, Africa, Southeast Asia and other markets in FY25; India's favorable tariff positioning versus Vietnam and China is a strategic strength.
• US import tariffs remain unclear for India; management is closely monitoring and preparing partners for potential changes.
• India-UK Free Trade Agreement has been signed and is described as a major strategic development that could be transformative for Indian exporters.
• Utilization headroom: Still a little possibility of improvement in utilizations, but broadly slightly better than the industry average.

Rajeev Gupta: "Apparel industry currently is exporting to UK, yet the share of Indian export is only 6% in the overall \$24 billion apparel industry of UK. We are expecting with these changes in the policy, FTA, we have an opportunity to unlock almost \$1 billion additional exports from India to UK and taking our share from 6% to maybe 15% - 20% driven by favorable sourcing and supportive policies."

Ginni Filaments Acquisition: Progress & Challenges

• Acquisition cost was ₹160 crore; the two divisions are performing very differently.
• Knitting division has performed well, with teething troubles from the management changeover now resolved; expects better performance in coming quarters.
• Spinning division remains challenged due to old machinery age and inefficiency; no major modernization has been undertaken.
• FY26 plan for spinning: No major restoration or modernization package proposed for the next year; management will try to minimize losses through right product mix and utilization.
• Revenue contribution from the Ginni acquisition was requested by an analyst but not provided as a percentage of total revenue.

Rajeev Gupta: "Even next year also, we are not proposing any major restoration package for Chhata. We will try to minimize loss in terms of efficiency and try to strike a balance in terms of the right product mix and right utilization."

RSWM 2.0 Transformation & Strategic Initiatives

• RSWM 2.0 is described as a cultural shift across the organization rooted in agility, cost effectiveness, smart manufacturing, product development, sharper execution, and on-time delivery; early effects are visible in productivity, client satisfaction, and cross-functional alignment.
• Panchtatva initiative: Based on five elements (fire, earth, water, air, space), combining Indian tradition with textile innovation; attracted strong interest at Bharat Tex 2025.
• Graphene-based textiles: Signed a development agreement with Birla Cellulose and TACC Limited to produce Graphene-based textiles, enabling entry into technical fabrics and smart clothing segments; still in very early stages with a master batch under development.
• Product innovation: Investing in product centers and co-creating with customers on design, trends, collections, and innovation focused on blends and functional properties (antibacterial, moisture wicking, UV protection); no new investment proposed for new product development at this point.
• Sustainability: RSWM is a liquid zero discharge company; all manufacturing facilities recycle water and do not discharge to the environment. Currently consuming 60 lakh PET bottles per day for conversion into polyester staple fiber.

Rajeev Gupta: "RSWM 2.0 is not just a transformation plan, it represents the cultural shift across the organization. We have adopted the new mindset which is rooted in agility, cost effectiveness, smart manufacturing or product development, sharper execution, and to be on time to our customers' needs."

Cost Structure & Capital Allocation

• Power cost initiatives: Two-pronged approach of increasing green power usage to reduce per-unit cost, and investing in energy-efficient machines to reduce consumption; normal CAPEX is largely directed at power efficiency.
• Finance cost reduction was requested by an analyst in absolute terms or as a percentage of sales, but management did not provide a quantified target, describing only the approaches without a specific reduction figure.
• Debt reduction target: Targeting to lower the debt-to-equity ratio and improve interest coverage through improved capacity utilization, better product mix, refinancing high-cost borrowings, prepaying selected loans, and working capital optimization.
• CAPEX for current year: Limited to normal maintenance CAPEX and some balancing equipment for enhancing utilization; no major CAPEX commitment for this year.
• Bhilwara Energy Limited investment: Singularity Fund made an investment of ₹250 crore; RSWM did not liquidate its share; management referred to stock exchange filings when asked whether the investment was primary or secondary.

Guidance & Commitments

Key Metrics