Apparel manufacturer Gokaldas Exports looks to complete the integration of its newly acquired Atraco and Matrix units by the end of FY25. The company experienced a dip in profit by 16.5 per cent owing to high freight costs and a loss of productivity due to the transition during the recently concluded financial quarter.

In August 2023, Gokaldas Exports entered into an agreement to acquire Atraco, an apparel manufacturer with a strong market presence in the US and Europe, for $55 million. Subsequently, in April 2024, Gokaldas announced the acquisition of Matrix Design & Industries Private Limited for an enterprise value of ₹489 crore.

Sivaramakrishnan Ganapathi, Executive Vice-Chairman, and Managing Director, Gokaldas Exports, explained to businessline, “The revenue increased due to the organic growth of Gokaldas Exports’ units and the addition of new facilities.” The company achieved a 79.9 per cent rise in consolidated revenue, reaching ₹939.7 crore compared to ₹522.2 crore in the same April to June quarter last year. However, profitability was impacted primarily by one-time challenges and additional expenses.” The profits fell to ₹27.2 crore in Q1 FY25, compared to ₹32.6 crore.

In the initial phase, Gokaldas expects to incur some expenses without generating corresponding revenue. Despite these challenges, Ganapathi expects expenses to diminish when operations stabilise and the new facilities start contributing effectively.

The transition challenges from Atraco in the fourth quarter had a cascading effect on the first quarter’s profitability, resulting in a non-recurring airfreight cost of ₹8.6 crore. The company is seeing strong traction for business volume in the upcoming quarters and anticipates that capacity across all acquired and expanded apparel units will be fully utilised.

Additionally, the new manufacturing unit in Madhya Pradesh is ramping up to full capacity and is expected to reach optimal levels by Q3FY25. The fabric processing unit in Tamil Nadu is expected to start commercial production later this quarter in Q2FY25.

₹280 crore investment

Gokaldas Exports had committed to investing ₹280 crore over two years to build three new manufacturing facilities in Madhya Pradesh, Tamil Nadu and Bangladesh.

In a post-results conference call, Ganapathi addressed the situation and updated on the manufacturing unit in Bangladesh, saying, “The problems in Bangladesh have been escalating and reached a critical point a week ago. We have been anticipating this and have been also shying away from creating capacities in Bangladesh due to concerns about safety, security, and overall business viability.”

Further, the company is actively exploring opportunities to increase its capacity in low-cost regions. “We already have a factory in Madhya Pradesh and, through our Matrix acquisition, another in Ranchi, Jharkhand. These locations are cost-effective and could potentially compete well with Bangladesh in the market”, he added.

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