Indo Count Industries Limited, a global leader in home textiles, held its Q4 & FY25 Earnings Conference Call on June 2, 2025, addressing analysts and investors. Management highlighted record revenues of Rs 4,200 crores, a 16% year-on-year surge, and a robust 106 million meters in sales. Despite a challenging Q4 marked by down trading and tariff uncertainties, the company remains committed to doubling revenues by 2028 through strategic acquisitions and brand launches, notably Wamsutta in the US. The call focused on margin pressures, interest costs, free trade agreements, and the company’s diversified growth strategy, with management projecting gradual improvement and long-term optimism despite short-term volatility.

Earnings Conference Call with Investors and Analysts: Overview

Indo Count Industries Limited’s Q4 & FY25 Earnings Conference Call was moderated by company executives, including Executive Vice Chairman Mohit Jain and Group CFO K. Muralidharan. The session provided a comprehensive review of the company’s performance, addressed investor concerns, and outlined future growth strategies.

Key Highlights:

Record Revenue: The company achieved its highest-ever revenue of Rs 4,200 crores, a 16% increase year-on-year.

Volume Growth: Sales volume surpassed 106 million meters, up 10% from the previous year.

ESG Recognition: Improved DJSI score and multiple sustainability awards.

EBITDA and Margins: EBITDA stood at Rs 574 crores with a margin of 13.7%, slightly impacted by strategic investments and market volatility.

Dividend: The board recommended a dividend of Rs 2 per equity share.

Navigating Market Volatility and Tariff Uncertainty

Management acknowledged that Q4 was particularly challenging due to reduced consumer confidence and uncertainty over potential tariffs. This led to a shift in product mix towards lower-priced offerings, impacting both volume and value.

Key Management Insights:

Down Trading: Customers opted for lower to mid-priced products, reducing the average selling price by about 6%.

Impact on Margins: The change in product mix affected Q4 revenue and profitability, with fixed cost absorption declining, especially in the US business, which is in an investment phase.

Forward Outlook: Management expects similar trends in Q1 FY26 but anticipates gradual improvement in subsequent quarters. They refrained from providing specific guidance due to the fluid tariff situation, emphasizing operational flexibility and market share retention.

Strategic Acquisitions and Brand Expansion in the US

Indo Count has aggressively expanded its presence in the US market through acquisitions and brand launches.

Strategic Moves:

Wamsutta Acquisition: The company acquired the legendary Wamsutta brand, planning a direct-to-consumer launch soon.

Licensed Brands: Added Fieldcrest and Waverly to the portfolio, both showing strong consumer traction.

Utility Bedding Segment: Expanded manufacturing capabilities for pillows and quilts through acquisitions of Fluvitex and Modern Home Textiles, targeting a $4 billion market opportunity.

Greenfield Project: A new facility in North Carolina is expected to be completed by September 2025, with a peak revenue potential of $85–90 million.

Investment Rationale:

Total Investment: Over the past 12–15 months, the company invested approximately Rs 460 crores in brand acquisitions, capacity expansion, and talent acquisition.

Revenue Goal: Management aims to double revenue by 2028, driven by the ramp-up of branded and licensed offerings and optimal utilization of US manufacturing.

Free Trade Agreements and Global Market Dynamics

Management discussed the impact of recent free trade agreements and ongoing negotiations, which are expected to bolster the company’s global competitiveness.

Key Developments:

India-UK FTA: Eliminates duties of 10–12% on Indian textile exports, leveling the playing field with Bangladesh and Pakistan.

EU Negotiations: Ongoing discussions for a similar agreement, which could unlock significant opportunities for Indian home textile exports.

US Tariffs: A 10% baseline tariff is in effect for most countries, with additional tariffs on China. The company expects a bilateral trade deal between India and the US before July 2025, which could provide preferential treatment for textiles.

Market Exposure:

US: 70% of revenue.

UK: 10% of revenue.

Other Markets: 20% (Europe, Australia, Japan, Middle East).

Financial Performance and Investor Queries

Management provided a detailed breakdown of financial results and addressed specific investor concerns.

Key Financial Metrics:

Q4 Sales Volume: 25.6 million meters, down 10.8% year-on-year.

Full-Year Sales Volume: 106.4 million meters, up 9.8% year-on-year.

Q4 Income: Rs 1,029 crores, down 5.9% year-on-year.

Full-Year Income: Rs 4,191 crores, up 16.4% year-on-year.

EBITDA: Rs 88 crores in Q4 (down 47% year-on-year), Rs 573 crores for the year (down 5% year-on-year).

PAT: Rs 11 crores in Q4 (down from Rs 92 crores), Rs 246 crores for the year (down from Rs 338 crores).

EPS: Rs 0.56 for Q4, Rs 12.42 for the year.

Net Debt to Equity: 0.42 as of March 31, 2025.

Investor Concerns Addressed:

Interest Costs: Management expects interest costs to stabilize around Rs 120–130 crores annually, with some inventory buildup in US operations.

Working Capital: The cash cycle is at approximately 130 days, with ongoing evaluation to optimize without compromising margins.

Margin Pressures and Product Mix Dynamics

Investors expressed concern over the sharp deterioration in gross margins, particularly in Q4.

Management Response:

Product Mix Impact: The shift to lower-priced products in Q4 led to under-absorption of fixed costs and lower selling prices, impacting margins.

Utility Bedding and Brand Business: These segments are currently operating at a loss due to high investment in talent and infrastructure, but are expected to stabilize as utilization increases.

Geographic Diversification: The company is focused on growing other markets (EU, UK, Japan, Australia, Middle East) to reduce reliance on the US.

Operational Challenges and Manufacturing Footprint

Management addressed questions about operational challenges, particularly in the US, and the rationale behind their manufacturing strategy.

Operational Insights:

US Manufacturing: The company has invested in three strategic locations (two acquisitions, one greenfield), with strong customer traction and a focus on building a robust team.

Manufacturing Economics: Both Vapi and Kolhapur sites have similar margin profiles, with no differentiation in cost patterns.

Capacity Utilization: Current utilization is at 50%, with expectations of gradual improvement as new facilities come online.

Consumer Sentiment and Brand Strategy

Management discussed the impact of weak consumer sentiment in the US and the company’s brand strategy.

Key Points:

Consumer Behavior: Down trading is observed across the board, not limited to specific retailers or customer segments.

Brand Launch: Wamsutta will be launched as a direct-to-consumer brand within 30–60 days, positioned as an affordable luxury offering.

Long-Term Vision: The company is committed to making Wamsutta a global home textile brand, with a focus on direct-to-consumer and retail partnerships.

Investor FAQs: Tariffs, Margins, and Growth Outlook

Management fielded a range of questions from analysts, providing clarity on several critical issues.

Summary of Key Investor Queries and Responses:

Topic	Investor Concern	Management Response
Tariffs	Impact of recent tariff changes and uncertainty	Down trading observed across the US landscape; no knee-jerk reaction from retailers; company remains flexible
Margins	Sharp deterioration in gross margins	Attributed to product mix shift and under-absorption of fixed costs; expect stabilization as utilization improves
Growth Outlook	Guidance for FY26 and beyond	No specific guidance due to volatility; focus on market share retention and long-term growth
Brand Strategy	Launch and success of Wamsutta	Direct-to-consumer launch within 30–60 days; positioned as affordable luxury; long-term commitment to brand building
Free Trade Agreements	Impact of India-UK and potential India-EU FTAs	Significant boost to competitiveness; UK FTA already leveling the field; EU negotiations ongoing

Key Investor Queries and Responses

1. Expansion in North Carolina: Capex, Timeline, and Revenue Potential

Investor Query:

What is the total capex for the North Carolina greenfield project (Phase 1), and what are the expected completion timeline and revenue potential?

Management Response:

Total investment for Phase 1 is Rs 130 crores, with Rs 31 crores already spent and Rs 99 crores to be invested between April and September 2025.

The project is expected to be completed by September 2025, adding 18 million pillows capacity.

Combined with existing facilities, total pillow capacity will reach 31 million pillows.

Revenue potential for the North Carolina facility is projected at US$85–90 million, with total utility bedding business (all US facilities) expected to reach US$175 million.

2. Free Trade Agreements: UK, EU, and Competitive Positioning

Investor Query:

How will the India-UK FTA impact the company’s UK market share? What are the benefits if an India-EU FTA is signed?

Management Response:

The India-UK FTA eliminates 10–12% import duties on Indian textiles, leveling the playing field with Bangladesh and Pakistan.

UK currently represents 10% of revenue; the company is actively engaging with customers to expand presence.

If an India-EU FTA is signed, it could unlock significant export opportunities by providing duty-free access to a large market, further boosting competitiveness.

3. Interest Costs: Trends and Future Outlook

Investor Query:

Why are interest costs elevated, and what is the plan to reduce them?

Management Response:

Higher interest costs are due to inventory buildup for increased production and ongoing investments in US operations.

Inventory levels have now stabilized, but US operations are still ramping up, so some inventory buildup is expected.

Annual interest costs are projected to stabilize around Rs 120–130 crores.

4. Revenue and Margin Guidance: Near-Term Volatility and Long-Term Goals

Investor Query:

What is the revenue and margin guidance for FY26, given the current market volatility?

Management Response:

No specific guidance for FY26 due to ongoing market volatility and uncertainty around tariffs.

The company’s objective is to maintain and grow market share, with a long-term goal to double revenue by 2028.

5. Gross Margin Pressure: Causes and Peer Comparison

Investor Query:

Why did gross margins decline sharply in Q4, especially compared to peers?

Management Response:

The decline was driven by a shift in product mix towards lower-priced offerings (down trading), impacting both raw material and fixed cost absorption.

The split is roughly 30% raw material, 70% fixed costs (including employee and other expenses).

This trend was observed across the US landscape, not specific to any single retailer or customer.

6. US Investments: Rationale and Confidence Amidst Challenges

Investor Query:

Why is the company investing heavily in the US, given the history of challenges for Indian firms in US manufacturing?

Management Response:

Investments are focused on strategic locations, strong customer traction, and a robust team.

The company has acquired two facilities and is building a greenfield project, all with active customer engagement and feedback.

Management is confident in the long-term potential, despite short-term challenges.

7. Brand and Utility Bedding Contribution: Revenue and Margin Impact

Investor Query:

What is the current and future contribution of brands and utility bedding to revenue and margins?

Management Response:

In Q4, new segments (utility bedding and brands) contributed Rs 125 crores out of total revenue of Rs 1,029 crores (about 12%).

These segments are currently operating at a loss due to high investment in talent and infrastructure, but are expected to stabilize as utilization increases.

The company expects branded business margins to be 15–20% higher than core business margins once stabilized.

8. Working Capital and Cash Cycle

Investor Query:

Is there room to improve the cash cycle without compromising margins?

Management Response:

The cash cycle is currently at about 130 days.

The company is evaluating opportunities to optimize, but will not compromise supply chain security or customer service.

Some increase in working capital was seen in Q1 and Q2, but has since stabilized.

9. Consumer Sentiment and Retailer Behavior

Investor Query:

How is weak consumer sentiment in the US affecting retailer behavior and procurement?

Management Response:

Down trading is observed across all retailers, not specific to any segment.

Retailers are not making knee-jerk inventory decisions; they are managing cautiously as the situation evolves.

There is no significant shift in procurement volumes due to tariff uncertainty.

10. Wamsutta Brand Launch and Strategy

Investor Query:

How is the launch of Wamsutta being managed in the current down trading environment?

Management Response:

Wamsutta will be launched as a direct-to-consumer brand within 30–60 days, positioned as affordable luxury.

The company is prepared for a learning curve in the D2C space and remains committed to long-term brand building, despite short-term market challenges

Conclusion: Resilience and Strategic Vision

Despite macroeconomic headwinds and short-term margin pressures, Indo Count Industries Limited remains steadfast in its commitment to growth and diversification. The company’s strategic investments in brands, manufacturing, and global market expansion position it well for long-term success. Management’s transparent communication and focus on operational flexibility underscore their confidence in navigating current challenges and capitalizing on emerging opportunities in the home textile industry.