Swaraj Suiting LtdQ1 FY24Textiles & Apparels

Swaraj Suiting Ltd

Q1 FY24 Earnings Call Analysis

Management growth scorecard

Revenue

Category 1

Margin

Category 2

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Revenue guidance

Category 1

→Swaraj Suiting Limited aims to double its revenue with the ongoing capacity expansion, targeting ₹650 to ₹700 crores in FY25.
→Current existing capacity operates at 100%, generating ₹350 to ₹380 crores; additional capacity is expected to generate ₹250 to ₹300 crores.
→Orders have doubled compared to last year, with a 2-month order book of approximately 35 lakh meters, indicating strong demand.
→The company is focusing on growing branded and export segments, targeting 30% to 35% revenue from brands in 3 years while reducing reliance on traders.
→Backward integration into spinning and weaving is expected to reduce outsourcing costs and improve gross margins.
→Conservatively, revenue growth is underpinned by a stable government environment and raw material price fluctuation mitigation through subsidies and incentives.
→Production capacity for denim and non-denim to achieve 60%-70% utilization in the current year post-expansion.

Category 2

→Swaraj Suiting Limited aims to double its revenue in the near future driven by capacity expansions in both denim and non-denim divisions, targeting ₹650-700 crores revenue for FY25.
→PAT margins are conservatively guided to increase from around 5.7% to about 6%, excluding subsidies, reflecting cautious optimism amid raw material price volatility.
→EBITDA margins in H2 FY24 were around 13.5% and considered sustainable due to cost-saving initiatives and subsidies like power and capital subsidies not yet accounted for in margins.
→The company expects to receive substantial subsidies totaling ₹130-150 crores across seven years, contributing to margin stability.
→Backward integration into spinning and weaving is expected to improve gross margins and reduce job work costs.
→Peak depreciation post-expansion is estimated at ₹23-24 crores.
→Overall, earnings growth is expected to be steady but conservatively guided to mitigate risks from raw material price fluctuations and macroeconomic factors.

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Yes

→Swaraj Suiting Limited is planning a CapEx investment around ₹300 crores, which includes working capital.
→They are targeting about ₹250 crores of this CapEx funding through bank debt.
→The company has a working capital limit sanctioned by the bank of ₹80 crores, with 25% margin from their side (~₹110-120 crores total).
→No explicit mention of any upcoming equity fundraising was made during the call.
→The company plans to utilize subsidies (₹130-150 crores estimated) which will help in future CapEx and reduce financial costs.
→They appear comfortable managing working capital with existing credit facilities and subsidies.
→Current indications point mainly towards debt funding for expansion with available bank credit and subsidy inflows supporting this.

Yes

→Current order book is about 35 lakh metres, which has approximately doubled compared to last year when it was around 17-20 lakh metres.
→The company already has a good order book for the near term, supporting their revenue growth targets.
→Orders are confirmed through strong supply chains in India and Bangladesh, including tie-ups with major brands like Reliance Trends.
→The confident order book enables investment in expansion with an expected doubling of revenue.
→The company shows optimism about achieving conservative revenue and PAT targets despite fluctuating raw material prices and macro risks.

Yes

→FY'24 CapEx: Commencement of all planned CapEx with total investment aimed to be completed this year.
→Total CapEx investment is around ₹300 crores, inclusive of working capital; bank debt planned around ₹250 crores.
→Capacity expansion for spinning, weaving (denim and non-denim) to be completed by June/October 2024.
→Future CapEx supported by expected subsidy inflows (capital subsidy, power subsidy, interest subsidy) estimated around ₹130-150 crores distributed over seven years.
→No new expansion plans disclosed beyond current phase; management will update investors if plans arise.
→Strategic investments include backward integration into spinning and weaving to reduce outsourcing and improve gross margins.
→Adoption of advanced machinery and technologies reduces wastage and utility costs.
→Implementation of SAP S/4 HANA cloud ERP for operational efficiency and cyber security.
→Focus on sustainability, certifications (ISO 9000, 45000, 14000, SA8000) and improving export brands portfolio as strategic initiatives.

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