Gokaldas Exports Limited Q3 FY26 Earnings Call Summary

Summary

Gokaldas Exports Limited - Q3 FY26 Earnings Call Summary Monday, February 02, 2026, 11:00 AM IST

Event Participants

Executives 2 S. Ganapathi (Vice Chairman and MD), Sathyamurthy (CFO)

Analysts 12 Ankit (Anand Rathi), Ashutosh Nemani (JM Financial), Bhavin Chheda (Enam Holdings), Bijal Shah (RTL Investments), Gunjan Kabra (Niveshaay), Harsh Mittal (Emkay Global), Hitaindra Pradhan (Maximal Capital), Jayesh Shah (Ohm Portfolio), Kaustubh Pawaskar (ICICI Securities), Rehan Saiyyed (Trinetra Asset Managers), Riddhesh Gandhi (Discover Capital), Rohit Maheshwari (Tata AIG), Sahil Sharma (Dalmus Capital), Samay Sabnis (Helios Capital), Shradha Agrawal (Asian Market Securities), Vishal Mehta (IIFL Capital)

Financials & KPIs

Geographic & Segment Commentary

• India Operations: Revenue grew 8% YoY on an underlying basis despite a 50% reciprocal tariff to the U.S. The segment maintained ~10% EBITDA margins through rigorous cost management and a shift toward European customers (now 17-18% of India revenue). Management expects India margins to remain at current levels until the penal tariff is resolved.
• Africa (ATRCO): Revenue and margins (1.5% EBITDA) bottomed out in Q3 due to the temporary expiry of AGOA and port congestion. Order books for Q4 FY26 are robust as Africa maintains a 10% tariff advantage over other Asian peers (20%) even without AGOA. Management targets 10% EBITDA margins for this segment by H2 FY27.
• Europe & UK: Strategic focus area with revenue share increasing to ~16%. European orders currently yield higher margins (11-12.5%) compared to U.S. orders (low single digits) due to the absence of penal tariffs. Onboarding of new EU customers is underway to de-risk the U.S.-heavy portfolio.

Company-Specific & Strategic Commentary

• Tariff Mitigation: The company absorbed a ₹40.2 crore net impact (₹60 crore gross penal tariff minus ₹20 crore recovery from supply chain/efficiency). Strategies include using U.S. cotton (20-25% of FOB) to gain 50% tariff offsets and negotiating discounts with fabric vendors.
• Vertical Integration (BTPL): The acquisition of Bombay Rayon Fashions Limited (BRFL) fabric processing unit is expected to conclude in Q2 FY27. This integration is projected to add 2-3 percentage points to EBITDA margins by internalizing fabric sourcing.
• Capacity Expansion: New units in Bhopal, Karnataka, and Jharkhand provide an incremental revenue potential of ₹500 crores annually. However, staffing and ramp-up are being calibrated based on the timing of FTA implementations (UK/EU) and U.S. tariff resolutions.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Tariff Burden & Pricing

• Question: Is the current gross margin a new base or is there operating leverage left? (Rehan Saiyyed)
• Answer: Gross margins improved due to productivity gains and vendor negotiations. While ₹3.5 crore was a one-off for the New Labor Code, the ₹40 crore tariff hit is a recurring headwind until the regime changes. (S. Ganapathi)

Africa Turnaround

• Question: Why are Africa margins so low at 1.5%? (Prerna Jhunjhunwala)
• Answer: Due to deliberate volume reduction to avoid giving discounts during the AGOA expiry period. As volumes return to $25M/quarter in Q4, fixed cost amortization will drive margins back toward 10%. (S. Ganapathi)

European Opportunity

• Question: How significant is the EU FTA for India? (Varun Gajaria)
• Answer: It is a “massive” opportunity to compete with Bangladesh (duty-free). The implementation is likely 1.5 years away (2027), but onboarding is happening now to seed the market. (S. Ganapathi)

U.S. Sourcing Shifts

• Question: Are brands diversifying away from India due to the 50% tariff? (Gunjan Kabra)
• Answer: Early days; brands are struggling to find capable alternative suppliers. Gokaldas is protecting business by sharing the tariff burden to maintain long-term relationships. (S. Ganapathi)

Key Takeaway

Gokaldas Exports delivered a resilient Q3 FY26, managing a flat top line of ₹998 crores despite a significant ₹40.2 crore net hit from U.S. penal tariffs. While consolidated EBITDA fell 18% YoY to ₹96 crores, India operations remained robust with ~10% margins, supported by aggressive cost-saving and a strategic shift toward the European market (16% share). The Africa segment bottomed out this quarter due to AGOA uncertainty and port issues but is positioned for a sharp recovery in Q4 FY26 with a $125M annual revenue target for FY27. Strategic focus remains on vertical integration via the BRFL acquisition and leveraging upcoming UK/EU FTAs to rebalance the portfolio. Management expects the current quarter to represent the performance floor, with substantial margin expansion to 12-13% possible once U.S. trade tensions ease and localized fabric processing commences.