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Mint
2 days ago
- Business
- Mint
This textile star's rally masks a margin meltdown. Should investors be worried?
Shares of Gokaldas Exports Ltd have surged 13% over the past month, buoyed by a trio of tailwinds energizing India's textile sector. The rally follows a 90-day pause on reciprocal tariffs by the US and the conclusion of the India-UK Free Trade Agreement, both of which are expected to boost export competitiveness for the textile manufacturer. The Indian government's recent decision to restrict the entry of ready-made garments from Bangladesh to just two ports—Kolkata and Nhava Sheva—is also likely to bode well for the company as this could improve its pricing power. For Gokaldas Exports, which derives over 75% of its revenue from the US, these developments come at a crucial time. The easing of trade barriers and favourable policy signals could help the company deepen its global presence and attract more Western buyers seeking alternatives to China. Yet, underneath the optimism lie financial cracks. Despite robust revenue growth, Gokaldas Exports has been grappling with sliding margins and a rising debt burden. Moreover, its promoters hold just 9.38% of the company and nearly all of it is pledged. Profit Pulse takes a look into what's driving Gokaldas Exports's recent rally, the risks lurking beneath the surface, and whether the current momentum is sustainable. India-UK FTA opens new doors While the 90-day pause on the US's reciprocal tariffs and import restrictions on Bangladeshi garments offer near-term relief and protection, Gokaldas Exports stands to gain the most from the India-UK free trade agreement. The two countries finalised their FTA on 6 May, bringing to an end nearly three years of negotiations. According to the agreement, the 8-12% UK import duty on textiles and garments will be eliminated, making Indian exports more competitive as compared with those from countries such as Bangladesh and Vietnam. This development is expected to double the UK's contribution to Gokaldas Exports's revenue. Currently, the company earns about ₹250 crore annually from the UK—accounting for about 5% of its total revenue. Additionally, Gokaldas Exports is eyeing a $1 billion incremental export opportunity in the UK market, driven by a 12% cost advantage over Chinese suppliers. Bangladesh previously enjoyed a competitive edge through duty-free access. However, with India now securing similar benefits under the India-UK FTA, a shift in sourcing towards Indian exporters is likely. Gokaldas Exports expects the real impact of the trade agreement to be felt from the second half of 2025-26 (October 2025-March 2026), once ratification and customs implementation are complete. Also read | Trent's 1,000% rally takes a breather. Can a Sensex rejig revive its fortunes? The $1 billion revenue target Credit rating agency Icra expects India's textile export volumes to the UK to double in 5-6 years following the implementation of the revised tariffs. It also expects the India-UK FTA to drive the addition of incremental capacities across the industry. For Gokaldas Exports, Icra's outlook reinforces the case for scaling up operations to meet future demand. The company is targeting $1 billion ( ₹8,500 crore) in revenue over the next few years, up 120% from its FY25 revenue of ₹3,864 crore. To enhance its competitiveness, the company is positioning itself through new factory builds and recent acquisitions to ride the expected export surge. Gokaldas Exports has already commissioned phase I of a new sewing factory in Bhopal, Madhya Pradesh, where it plans to add 1,100 machines. The first phase of this facility is already operating at near full capacity. Phase II is expected to be completed by the end of June. In Karnataka, Gokaldas Exports is constructing another facility where it will add about 750 machines. Additionally, a new leased unit in Ranchi is expected to house 200 machines operating in two shifts, effectively functioning as a 400-machine unit dedicated to knits. With these expansions alone, Gokaldas Exports is expected to generate ₹355-365 crore in incremental income annually. The company is also expanding capacity at Atraco, one of its acquired entities, where 500 machines are being added. This expansion could contribute an additional ₹125-130 crore in revenue. All these new units are scheduled to commence operations at various points through FY26. These initiatives are part of a broader growth strategy. Gokaldas Exports's management has made it clear that capacity addition will remain a focus over the next two years and beyond. Also read | Can this under-the-radar company cash in on the $150 bn weight-loss drug boom? On the mergers and acquisitions front, Gokaldas Exports recently acquired UAE-based Atraco and Indian knitwear manufacturer Matrix Clothing Pvt. Ltd for a combined ₹930 crore to expand its product offerings. These acquisitions provide access to high-value knitwear, new customer bases, and low-cost production locations. The integration of these entities is progressing. The management has indicated that bringing both these entities up to the company's standards will be a priority. Gokaldas is also evaluating a strategic merger of BRFL Textiles Pvt. Ltd (BTPL), its recently acquired fabric unit. The company has so far invested ₹175 crore in the company via optionally convertible debentures to support BTPL's capital expenditure, performance upgrades, and working capital needs. Capacity utilization at BTPL has improved meaningfully, from near-zero orders to 40-45%, accompanied by better production quality and reduced reprocess rates. Margins under pressure Gokaldas Exports has delivered strong topline growth over the past three years, with sales nearly doubling from ₹1,790 crore in FY22 to ₹3,864 crore in FY25. However, the company has struggled with slipping operating margins and rising leverage, raising questions about the sustainability of its expansion strategy. Gokaldas Exports's operating margins have barely improved, rising from 8.4% in FY21 to 9.6% in FY25, due to cost pressures, additional costs for starting new units, and one-off expenses related to the two acquisitions. Net profit margins have fluctuated between 2% and 7%, not offering any stability. Meanwhile, peers like Page Industries Ltd and KPR Mill Ltd have consistently reported operating margins in the 18-21% range, reflecting stronger pricing power, integrated operations, and better cost controls. Gokaldas Exports's return ratios also reflect the pressure on profitability. The company's return on equity (ROE) stands at just 9.4%, significantly below its peers. Page Industries's RoE stands at 48.5% and Vedant Fashions Ltd's at 23%. Gokaldas Exports's return on capital employed (RoCE) is similarly modest, at 11.8%, lower than Page Industries's RoCE of 59.4% and Vedant Fashions's 26.6%. Adding to the concern is Gokaldas Exports's rising debt burden. The company's borrowings increased to ₹845 crore in FY25 from ₹154 crore in FY23, pushing its debt-equity ratio to 0.41x. While this is still comfortable, interest costs have tripled over the last two years, putting pressure on the company's bottom line. While Gokaldas Exports aims to improve its margins in the long term, over the next few quarters it expects its margins to decline by 200 basis points, with a recovery likely from the third quarter of FY26 (October-December 2025), depending on clarity around tariff-related policies. Also read | This luggage leader is staging a turnaround. But can it overcome its baggage? Despite current uncertainties, Gokaldas Exports expects to clock 10-15% revenue growth over the next 2-3 years. For FY26, it is targeting consolidated revenue growth of 15%, supported by a healthy order book. Volumes for the ongoing first quarter (April-June) are fully secured, although Q2 visibility is lower due to ongoing tariff uncertainties. Gokaldas Exports has also earmarked ₹150 crore in capital expenditure for FY26, with ₹166 crore in cash and cash equivalents to support this. Sharekhan has a 'buy' rating on Gokaldas Exports citing strong medium- to long-term prospects. While the brokerage acknowledges near-term headwinds, particularly from US tariff uncertainties that may dent demand and compress margins, Sharekhan remains optimistic about the company's ability to navigate these challenges. Promoter pledging clouds rally Over the last couple of quarters, Gokaldas Exports has witnessed rising institutional interest on account of its growth prospects. Domestic institutional investors (DIIs) have gradually increased their stake in Gokaldas Exports from 25.46% in June 2022 to 36.82% in March 2025, making them the largest shareholder group. Foreign institutional investors also have ramped up their stake in Gokaldas Exports aggressively, from 10.97% to 25.79% during the same period. However, a key concern is that promoter ownership in Gokaldas Exports stands at just 9.38%, with 96.3% of promoter shares pledged as collateral, an unusually high level even in capital-intensive industries. While pledging is not inherently negative, a level this high can expose shareholders to significant downside risk. If the company underperforms or the share price drops, lenders may invoke the pledge, triggering forced selling and sharp stock corrections. A bumpy road Gokaldas Exports is clearly benefiting from multiple macro trends that have bolstered investor sentiment. However, the road ahead is not without bumps. Margin pressure, rising debt, and an unusually high level of promoter pledging cast a shadow over the company's growth narrative. For investors, the stock offers high growth potential but also high risk. Keeping an eye on margin recovery, execution of new capacities, and promoter-level developments will be critical in assessing whether this momentum can turn into durable long-term performance. Ayesha Shetty is a research analyst registered with the Securities and Exchange Board of India and a certified Financial Risk Manager. Disclosure:The author does not hold shares in any of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers should conduct their own research and consult a financial professional before making investment decisions.
Time of India
2 days ago
- Automotive
- Time of India
India is a reliable partner for us amid global challenges, says Schaeffler CEO
The German global automotive and industrial supplier has committed to investing €100 million annually in India over the next five years, while also exploring the prospect of establishing a GCC in the country. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads PUNE: As the geopolitical landscape evolves, marked by tariff tantrums, economic uncertainty, and supply chain disruptions, Germany-based global automotive and industrial supplier, Schaeffler AG , sees India as a reliable partner with significant growth potential worthy of investment. The company has earmarked €100 million (₹900 crore approx, assuming €1 = ₹90) annually for investment in India over the next five years.'In this geopolitical environment with all the tensions and stress in supply chains, with questions of who you are, and who you are going to be friends with, you need to be careful. I think our relationship with India has proven to be strong. We have always seen reliable partners here,' Klaus Rosenfeld , Global CEO of Schaeffler AG, said at a media roundtable held during his week-long visit to Wednesday, the company inaugurated a new manufacturing plant in Shoolagiri, Tamil Nadu, focused on powertrain, chassis components, and advanced technologies. It also operates plants in Pune, Vadodara, and Hosur, along with three R&D centres. Over the last three years, ₹1,700 crore has been invested to enhance local capabilities. Currently, Schaeffler's business in India generates more than €1 billion in further noted that the growth observed in India, along with government initiatives in infrastructure development, digitalisation, and investment in AI, all point in the right direction. Compared to other global markets, India offers a particularly conducive environment for growth. 'This is a friendly environment for us, where we feel that we can do much more,' he Schaeffler operates across four main regions: the Americas, Europe, Greater China, and Asia Pacific--a region which is managed from Singapore, chosen for its connectivity and ability to effectively link this diverse and heterogeneous market. However, he emphasised that 'the real place to be' in the region is the India-UK Free Trade Agreement as an example, he suggested it could serve as a model for the European Union (EU), adding that he hopes that the EU will 'get its act together' to establish a similarly cooperative relationship. While acknowledging the challenges involved, he emphasised the importance of fostering a friendly and reliable partnership based on win-win the slower pace of EV adoption does not appear to be a major concern for Rosenfeld. He believes whether electrification happens faster or slower, customers will continue to purchase vehicles– whether they are electrified or internal combustion engine (ICE) cars. This diversity in demand serves as a hedge for consistent also identified electric two-wheelers as key to India's mobility future. Less common in Germany but essential in India, this segment will see focused investment from the is projecting a global automotive landscape in 2030 where ICE vehicles will account for approximately 30 per cent of the market, with hybrid vehicles and battery electric vehicles (BEVs) each making up around 35 per cent. Regional variations will apply as China, for instance, is already ahead of this curve, with BEV adoption significantly higher than the global hedge against bad times is vehicle lifetime solutions-- services such as repair and maintenance--as they generate consistent revenue, providing stability during economic downturns. 'In bad times, people don't buy cars. They repair cars," he strategy is reinforced by its 2023 acquisition of KRSV Innovative Auto (Koovers), a Bengaluru-based B2B e-commerce platform providing spare parts solutions to India's aftermarket the CEO envisions Schaeffler being recognised as a Motion Technology company and moving beyond the traditional label of an automotive supplier, which he sees as only half the story. "When you consider our core technologies and the breadth of our product portfolio, it's all about motion," he global trade tariffs, Rosenfeld noted that we are moving into a multipolar world with the old idea of free trade being clearly challenged. 'For Europe, this is something of a wake-up call. It is ultimately about competitiveness,' he on the shifting dynamics with China, he added, 'For a long time, Europe and particularly German manufacturers viewed China as a workbench. That perspective has completely changed and the landscape is shifting for global companies like ours.'He believes companies can navigate these changes if they remain open-minded and embrace localisation, which involves real investment in capacity, financial capital, and human AI, which is fast redefining every domain, he believes, the technology holds significant potential in areas involving transactional tasks, however, large-scale and complex manufacturing processes are unlikely to be fully replaced by AI. In these domains, AI can drive substantial improvements in efficiency and cost-effectiveness, making it a valuable tool for operational Schaeffler is also 'carefully looking' at establishing a global capability centre (GCC) in India, further reinforcing the company's long-term commitment to the country.
Time of India
3 days ago
- Automotive
- Time of India
India is a reliable partner for us amid global challenges, says Schaeffler CEO
Pune: As the geopolitical landscape evolves, marked by tariff tantrums, economic uncertainty, and supply chain disruptions , Germany-based global automotive and industrial supplier, Schaeffler AG , sees India as a reliable partner with significant growth potential worthy of investment. The company has earmarked €100 million (₹900 crore approx, assuming €1 = ₹90) annually for investment in India over the next five years. 'In this geopolitical environment with all the tensions and stress in supply chains, with questions of who you are, and who you are going to be friends with, you need to be careful. I think our relationship with India has proven to be strong. We have always seen reliable partners here,' Klaus Rosenfeld , Global CEO of Schaeffler AG, said at a media roundtable held during his week-long visit to India. On Wednesday, the company inaugurated a new manufacturing plant in Shoolagiri, Tamil Nadu, focused on powertrain, chassis components, and advanced technologies. It also operates plants in Pune, Vadodara, and Hosur, along with three R&D centres. Over the last three years, ₹1,700 crore has been invested to enhance local capabilities. Currently, Schaeffler's business in India generates more than €1 billion in revenue. Rosenfeld further noted that the growth observed in India, along with government initiatives in infrastructure development, digitalisation, and investment in AI, all point in the right direction. Compared to other global markets, India offers a particularly conducive environment for growth. 'This is a friendly environment for us, where we feel that we can do much more,' he said. Globally, Schaefler operates across four main regions: the Americas, Europe, Greater China, and Asia Pacific--a region which is managed from Singapore, chosen for its connectivity and ability to effectively link this diverse and heterogeneous market. However, he emphasised that 'the real place to be' in the region is India. Citing the India-UK Free Trade Agreement as an example, he suggested it could serve as a model for the European Union (EU), adding that he hopes that the EU will 'get its act together' to establish a similarly cooperative relationship. While acknowledging the challenges involved, he emphasised the importance of fostering a friendly and reliable partnership based on win-win outcomes. ICE vs EVs Interestingly, the slower pace of EV adoption does not appear to be a major concern for Rosenfeld. He believes whether electrification happens faster or slower, customers will continue to purchase vehicles– whether they are electrified or internal combustion engine (ICE) cars. This diversity in demand serves as a hedge for consistent growth. He also identified electric two-wheelers as key to India's mobility future. Less common in Germany but essential in India, this segment will see focused investment from the company. Schaeffler is projecting a global automotive landscape in 2030 where ICE vehicles will account for approximately 30 per cent of the market, with hybrid vehicles and battery electric vehicles (BEVs) each making up around 35 per cent. Regional variations will apply as China, for instance, is already ahead of this curve, with BEV adoption significantly higher than the global average. Another hedge against bad times is vehicle lifetime solutions-- services such as repair and maintenance--as they generate consistent revenue, providing stability during economic downturns. 'In bad times, people don't buy cars. They repair cars," he noted. This strategy is reinforced by its 2023 acquisition of KRSV Innovative Auto (Koovers), a Bengaluru-based B2B e-commerce platform providing spare parts solutions to India's aftermarket workshops. Meanwhile, the CEO envisions Schaeffler being recognised as a Motion Technology company and moving beyond the traditional label of an automotive supplier , which he sees as only half the story. "When you consider our core technologies and the breadth of our product portfolio, it's all about motion," he explained. Global markets On global trade tariffs, Rosenfeld noted that we are moving into a multipolar world with the old idea of free trade being clearly challenged. 'For Europe, this is something of a wake-up call. It is ultimately about competitiveness,' he said. Reflecting on the shifting dynamics with China, he added, 'For a long time, Europe and particularly German manufacturers viewed China as a workbench. That perspective has completely changed and the landscape is shifting for global companies like ours.' He believes companies can navigate these changes if they remain open-minded and embrace localisation, which involves real investment in capacity, financial capital, and human capital. On AI, which is fast redefining every domain, he believes, the technology holds significant potential in areas involving transactional tasks, however, large-scale and complex manufacturing processes are unlikely to be fully replaced by AI. In these domains, AI can drive substantial improvements in efficiency and cost-effectiveness, making it a valuable tool for operational optimisation. Meanwhile, Schaefler is also 'carefully looking' at establishing a global capability centre (GCC) in India, further reinforcing the company's long-term commitment to the country.
India Today
23-05-2025
- Business
- India Today
India plans to let US, other foreign firms bid for government contracts: Report
India is preparing to open a significant portion of its government procurement market to foreign companies, including US firms, in what officials describe as a strategic policy shift tied to ongoing trade senior government officials told news agency Reuters that contracts worth over $50 billion, primarily issued by federal agencies, could soon be accessible to US companies as part of a broader effort to strike a limited trade agreement with Washington by early move follows a similar concession made to the United Kingdom earlier this month under the India-UK Free Trade Agreement. British firms were granted access to select central government tenders on a reciprocal basis, signaling a shift in India's traditionally protectionist stance on public procurement. 'In a policy shift, India has agreed to open its public procurement contracts gradually to trading partners including the U.S. in a phased manner and reciprocal manner,' said one official familiar with the the total value of India's public procurement market is estimated at $700–750 billion annually, including spending by central, state and local governments, only federal-level contracts are expected to be opened up initially. State and municipal tenders will remain off limits for now, sources told the news development comes as trade minister Piyush Goyal concluded a visit to Washington aimed at accelerating bilateral talks. Both sides are hoping to finalise an interim deal before the 90-day tariff pause announced by President Donald Trump expires in US had threatened a 26% tariff on certain Indian imports if a deal isn't reached in has long resisted joining the WTO's Government Procurement Agreement, citing the need to shield domestic small businesses. However, officials stress that the new approach won't compromise that principle.A quarter of government contracts will remain reserved for Indian small businesses, said Anil Bhardwaj, secretary general of FISME, an industry group representing micro and small enterprises, told commerce ministry has maintained that any foreign access to procurement markets will be tightly controlled, limited to non-sensitive sectors, and matched with reciprocal access for Indian firms Indian exporters, this could open up new global tendering opportunities while giving New Delhi a bargaining chip in trade talks. 'Opening procurement to foreign firms on a reciprocal basis offers an opportunity for Indian businesses in overseas markets as well,' added Bhardwaj.
India Gazette
22-05-2025
- Business
- India Gazette
Engineering goods kick start FY26 with double-digit growth: EEPC India
New Delhi [India], May 22 (ANI): Indian engineering goods exports on Thursday recorded an 11.28% year-on-year growth in April, reaching USD 9.51 billion, attributed to a lower base effect and increased shipments of electric machinery, ships, motor vehicles, and copper products. According to the release, the positive iron and steel exports growth after several months was also of the factors for double-digit growth in engineering goods exports in April. It highlights that engineering goods exports to the US grew 17% on a year-on-year basis to USD 1.66 billion in April this year compared to USD 1.42 billion in the corresponding month last year. This came along with the rise of 37.3% in shipments to the UAE, 37.3% to USD 538.8 million (from US$392.5 million). Other markets like the UK, Singapore, Brazil, and Australia also saw high double-digit growth. 'That our exporters have achieved growth despite multiple global challenges is indeed laudable. The support of the Government of India remains critical during such difficult times. The recently concluded India-UK Free Trade Agreement is an important step towards strengthening our position in the UK market. We sincerely hope that in the coming days, we will continue on this growth path,' said Pankaj Chadha, Chairman of EEPC India. Regionally, North America remains the top export destination (21.1% share), followed by European Union (17.4%) and West Asia and North Africa (14.1%) follow. While, significant growth was noted in Oceania (36.4%), Sub-Saharan Africa (31.6%), and Latin America (27.2%) regions as well. 'According to the Quick Estimates of the Department of Commerce, Government of India, the share of engineering goods in India's total merchandise exports was recorded at 24.71% in April 2025 as against 24.21% in April 2024,' the release said. (ANI)
