Gokaldas Exports says tariff hit to Q4 margins was temporary, order pipeline remains strong

Apparel manufacturer Gokaldas Exports said the pressure on its fourth-quarter margins due to US penal tariffs was temporary and that its order pipeline for FY27 remains healthy despite global uncertainties.

Speaking to CNBC-TV18, Sivaramakrishnan Ganapathi, Vice Chairman and Managing Director of Gokaldas Exports, said the company had to absorb part of the tariff burden during the March quarter by offering price discounts to customers.

He said the 50% penal tariff applicable on Indian exports remained in place until mid-February, affecting profitability during a large part of the quarter. However, pricing normalised after the tariff was removed.

“A significant part of our fourth-quarter revenue reflects that additional burden, which is why fourth-quarter margins took a bit of a hit, which is no longer valid post the middle of the fourth quarter,” he said.

Despite the tariff pressure, Ganapathi said the company managed to grow revenue and retain customers. Around 70% of Gokaldas Exports’ shipments go to the US market.

“We managed that, grew our revenue despite it, and held our margins,” he said, adding that adjusted margins would have remained largely intact without the tariff-related discounts.

The company also sounded optimistic on future demand and order visibility. Ganapathi said Gokaldas Exports is fully booked till the second quarter of FY27 and has already started discussions for third-quarter orders.

“As far as FY27 orders are concerned, we have fully booked until the second quarter, and we are working on third-quarter bookings, which are also going well,” he said. “So, the prognosis for orders seems to be good.”

The company said it continues to gain market share despite a broader slowdown in US apparel imports. According to Ganapathi, supplier consolidation among global retailers is benefiting larger and more reliable exporters such as Gokaldas Exports.

“While retail demand is up, US imports have been showing a downward trend, and our order book has been growing regardless of that downward trend in US imports,” he said.

“This means that even though retailers are buying less, we have been growing more, primarily because of supplier consolidation.”

Ganapathi also said the company expects a recovery in its Africa operations during FY27 after a strong fourth quarter.

“In FY27, we'll see Africa operations and profitability bounce back pretty strongly in the year ahead,” he said.

On currency movements, Ganapathi said the company follows a conservative hedging policy and does not speculate on forex movements. Gokaldas Exports hedges nearly 80% of its forward two-quarter revenue.

While the weak rupee could benefit exporters, he said the company may not immediately gain from it because a large part of its receivables has already been hedged at lower exchange rates.

Also Read | How Blissclub is betting on engineered fabrics to disrupt India’s apparel marketThis is an edited transcript of the interview.Q: Typically, the fourth quarter is the stronger quarter, but you've reported profits that are down almost 32%, despite full-year revenue growth as well. What's hurting profitability most right now? And, on the whole, with what's happening in the US and the geopolitical tensions there, to what extent has the situation stabilised? Also, to what extent is the Africa book and your diversification strategy working against what you have in the US and the slowdown that you're seeing there?

Sivaramakrishnan Ganapathi: If you look at the fourth quarter numbers, we had US tariffs impacting us for a significant part of the fourth quarter. So, we were managing customers by giving them discounts to share the tariff burden. If you recall, the 50% penal tariff was prevalent well into mid-February. Until that period, for exports, we were managing by giving some price discounts to our customers. Post that, we normalised our pricing. So, a significant part of our fourth-quarter revenue reflects that additional burden, which is why fourth-quarter margins took a bit of a hit, which is no longer valid post the middle of the fourth quarter.

If you look at the revenue for the fourth quarter, it is as high as or a notch higher than the previous fourth quarter, and the reason for that is we have managed to keep the business and grow the business regardless of the high penal tariffs that were prevalent in the fourth quarter. So, the company, on the contrary, in my opinion, has managed to address some of these significant concerns that were impacting India.

As far as the Africa business is concerned, the fourth quarter was a strong performance in Africa. That performance momentum is going to be maintained, and we will develop further on it. In fact, the performance is going to improve quarter on quarter, linearly, in the quarters ahead. So, in FY27, we'll see Africa operations and profitability bounce back pretty strongly in the year ahead.

Overall, I would say we did manage well. Even for the whole year, we faced a humongous amount of headwinds in terms of penal tariffs. As you recall, 70% of our exports go to the US, and that was impacted by a 50% tariff, which was applicable only to India and not to any of our competing countries. We managed that, grew our revenue despite it, and held our margins. In fact, if we adjust our margins for the kind of tariff burden share or tariff discounts that we offered, our margins are more or less intact. That's how we managed the business. And now that the tariff is off and there's a level playing field across the world, we have started performing strongly again.

Q: I just had a two-part question. One is, what proportion of FY27 orders has been locked in? How many of them are FOB, because transport costs, etc., have increased a fair amount? And secondly, while you've got some reprieve when it comes to tariffs, the other kicker is currency as well. So, what's your hedging policy here, and how much benefit accrues to you because of the weaker rupee?

Sivaramakrishnan Ganapathi: Almost all of my revenue is FOB, so the entire transport burden is on the customers. However, inbound transport, if we have imported raw materials like imported fabric, imported trims, etc., those costs are borne by us. So, of course, there is some degree of cost pressure thanks to petroleum price increases, etc., but we are managing it well.

As far as FY27 orders are concerned, we have fully booked until the second quarter, and we are working on third-quarter bookings, which are also going well. So, the prognosis for orders seems to be good.

As far as the exchange-rate situation is concerned, while the rupee depreciated sharply, we have a policy of hedging almost 80% of forward two-quarter revenue. So, we do book forward covers, and for the subsequent two quarters — the third and fourth quarters — at any point in time, we hedge almost to the extent of 50% to 60%.

Given that our hedge rates are of the order of ₹88–89 or ₹90, whereas the prevailing currency is of the order of ₹95–96, it's a lost opportunity. But we don't speculate on currency. We have hedged our receivables, which means that if the currency stays weak going forward, we should be able to take the benefit of it. However, in the forthcoming two quarters, we may not get that benefit as we have already hedged.

Q: To what extent would you say apparel demand globally has been impacted by what's happening in West Asia? Because of inflation going up and transport costs rising, to what extent has demand been impacted? And are you seeing any early signs of revival in your conversations with clients in the US and Europe, especially in the US, after this tariff situation seems to have eased a little compared to what you saw in FY26?

Sivaramakrishnan Ganapathi: If you look at US retail demand through calendar 2025 and the early part of 2026, retail demand has been fairly robust. US retail demand has generally been on an increasing trend. Partly, it could be because of the "Big Beautiful Bill", which put some extra money in terms of tax savings into the hands of middle-class Americans. So, that has also helped keep retail sales fairly strong.

The inflationary pressures due to oil prices may hit American consumers going forward. We have to see where oil prices stabilise and how much they impact US consumption. Consumers have a way of confounding economists, so we've got to see how consumption plays out in the second half of calendar 2026.

In fact, we have already sold out up to Q2, and in Q2 we produce for the holiday season — from Thanksgiving to Christmas. So, we have bookings all the way up to that period, and at the moment we are looking at Spring-Summer 2027. Those are the bookings we are discussing with our customers.

So far, we have not seen any major headwinds from a booking standpoint. Again, time will tell how US consumers react and how that translates into bookings. But keep one thing in mind — from the middle of calendar 2025, US retailers had already started tapering down their purchases. So, while retail demand is up, US imports have been showing a downward trend, and our order book has been growing regardless of that downward trend in US imports.

This means that even though retailers are buying less, we have been growing more, primarily because of supplier consolidation. So, we have been able to hold up revenues, consolidate the market, and take market share.

I think this also means that US retail inventory must be coming down sharply, as retail sales are doing well while imports are declining. That provides an added cushion for us when retail sales do trend down, if inflationary pressures remain high.