Nandan Denim’s topline, gross profit, and ebitda rose significantly during the quarter ended June 2017. However, an uptick in average realisation per meter was offset by higher cotton procurement costs and a rise in operating expenses, thereby impacting the company’s margins. Conclusion of the capex resulted in higher depreciation and finance costs, too, eventually taking a toll on the final profit margin.

The company is likely to reduce its debt by Rs 60 crores every year from its regular cash flows. The capacity utilisation rate at the company’s denim manufacturing facility is expected to scale up from 85 per cent in the recently-concluded quarter to 90 per cent by fiscal ’18-end, thus supporting higher volume-driven sales growth in the long run.

Headwinds such as the Gujarat floods and the pink bollworm attack on cotton fields in the state may lead to higher raw material prices. But the company has 47 to 60 days of cotton inventory and is reasonably confident of adequate supplies as the pan-India cotton acreage improves substantially. In the near future, raw material cost fluctuations are unlikely to affect the company’s operating margins considerably.

From a year-on-year perspective, Nandan has completed capacity expansions at the denim fabric, shirting fabric, and yarn manufacturing units.