Gokaldas Exports , a leading Indian apparel manufacturer and exporter, has reported a strong financial performance for the first quarter, despite facing challenges from recent tariff changes in the United States market.

Financial Highlights

• Profit After Tax (PAT) grew by 53% year-on-year to INR 41.00 crores
• EBITDA margin improved to 12.1% from 8.8% in the same quarter last year
• Total income grew by 4% overall, with a 20% growth excluding acquired entities
• The company faced margin pressure from customer discounts of INR 15.00 crores related to U.S. tariff absorption

Tariff Impact and Strategic Response

Siva Ganapathi, Chairman and Managing Director of Gokaldas Exports, addressed the impact of revised U.S. tariffs on India, which are expected to reach 25%. The company anticipates continued tariff burden sharing of 2-2.5% of revenue through the financial year. To mitigate these challenges, Gokaldas is focusing on:

1. Cost optimization and productivity gains across the group
2. Expanding capacity with three new factories in India and 500 additional machines in Africa
3. Increasing European business contribution, which rose to 13.4% from 9% average

Capacity Expansion and Diversification

The company is actively expanding its production capabilities:

• New factories coming online in Q3 in Bhopal, Kolar Goldfield, and Ranchi
• Brownfield expansion in Africa with 500 additional machines
• Potential advantage in Africa operations due to lower 10% U.S. tariff compared to 20-25% for other countries

BTPL Acquisition Progress

Gokaldas Exports provided an update on the acquisition of Bombay Rayon Textiles Limited (BTPL):

• Total acquisition cost revised to INR 552.00 crores from earlier INR 588.00 crores estimate
• BTPL's fabric processing unit is expected to strengthen vertical integration and potentially improve margins

Outlook and Challenges

While Q2 is expected to face similar margin challenges as Q1 due to pre-committed orders with tariff burden sharing arrangements, the company remains optimistic about long-term prospects:

• Anticipating clarity on U.S.-India trade deal, which could provide a positive impact
• Focusing on European markets, especially with potential FTA benefits in the UK and EU
• Continuing to monitor global trade dynamics and adjust strategies accordingly

Siva Ganapathi commented, "We are combating these issues by focusing on cost optimization and better productivity gains across the group. Further, we are in dialogue with all customers to explore ways to manage the cost of goods for them."

As Gokaldas Exports navigates through these challenging times, the company's strategic investments and geographical diversification efforts are expected to play a crucial role in maintaining its growth trajectory and market position in the global apparel manufacturing industry.

Gokaldas Exports Limited, a leading garment manufacturer, has announced a strategic merger with BRFL Textiles Private Limited, a move set to reshape the Indian textile landscape. The Board of Directors of Gokaldas Exports approved a draft scheme to amalgamate with BRFL Textiles, aiming to create a vertically integrated business model that promises improved operational efficiency and market competitiveness.

Merger Details

The merger combines Gokaldas Exports' robust garment manufacturing business, which reported a turnover of INR 2,476.70 crore and a net worth of INR 2,144.92 crore, with BRFL Textiles' fabric manufacturing operations, which posted a turnover of INR 371.42 crore and a net worth of INR 147.57 crore.

Share Exchange Ratio

BRFL Textiles shareholders have been offered two consideration options:

1. 40 Gokaldas shares for every 3,581 BRFL shares, or
2. 30 Gokaldas shares plus INR 8,952.50 cash for every 3,581 BRFL shares

This flexible approach allows BRFL shareholders to choose between full equity participation or a combination of equity and cash.

Strategic Rationale

The merger is designed to achieve several strategic objectives:

• Create a vertically integrated business model
• Improve operating margins
• Achieve economies of scale
• Optimize resource allocation
• Secure consistent and quality fabric supply for garment manufacturing
• Enable cross-selling through respective distribution channels
• Streamline legal and regulatory compliances

Impact on Shareholding

Post-merger, the promoter shareholding in Gokaldas Exports is expected to decrease from the current 9.16% to between 8.53% and 8.68%, depending on the choices made by BRFL shareholders.

Regulatory Approvals

The scheme is subject to several regulatory approvals, including:

• Clearance from stock exchanges (BSE and NSE)
• Approval from the National Company Law Tribunal
• Consent from shareholders and creditors of both companies

Financial Snapshot

Industry Implications

This merger represents a significant development in the Indian textile and garment industry. By integrating BRFL Textiles' fabric manufacturing capabilities with Gokaldas Exports' garment production expertise, the combined entity is poised to enhance its competitive edge in the global market.

The amalgamation is expected to result in improved operational and financial efficiencies, potentially leading to better margins and increased shareholder value. It also positions the merged company to better serve international fashion brands and retailers with a more comprehensive and vertically integrated offering.

As the textile industry continues to evolve, this merger could set a precedent for further consolidation in the sector, as companies seek to strengthen their position in the global supply chain.

The market will be watching closely as this deal progresses through the regulatory approval process and begins to demonstrate the anticipated synergies in the coming months.