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Vardhman Textiles Ltd : W e l l p o i s e d t o c a p t ur e d e m a n d g r o w t h…
We met the management of Vardhman Textiles (Vardhman) to
comprehend the company’s business and get a fair idea about its future
plans. Vardhman, part of the Vardhman Group, is a large textile
conglomerate with a presence across the textile value chain. The
Vardhman Group has a turnover of over $800 million and a workforce of
25,000 employees. The group has one of the largest spinning capacities
in India (8,70,000 spindles) and is among the largest domestic yarn
producers with a market share of 3.5%.
Global demand and increasing spreads
The demand for Indian yarn has been increasing due to the adverse
climate in Pakistan and appreciating yuan, which makes Chinese yarn
expensive. The spread between cotton and cotton yarn prices has been
increasing from | 59/kg in cotton season 08-09 (CS) (October-September)
to | 72/kg in December 2010. Owing to this, the operating margins of the
spinning segment recorded a marked improvement from 14.4% in FY09
to 24.8% in Q3FY11. Since ~50% of the company’s revenues come from
the spinning segment, this scenario will be beneficial for Vardhman.
Well poised to cater to increasing demand
While the textile industry is recovering, domestic cotton spinners are
reaping the benefits of the capex incurred during FY06-FY10 and are
enjoying record high profitability. All textile players including Vardhman
have incurred heavy capital expenditure during FY06-10 to expand
capacities in anticipation of strong global demand. We believe Vardhman
with a spinning capacity of 8,75,000 spindles, the highest in India, is well
poised to further tap the opportunities that lie ahead.
Comfortably leveraged
Among its peers, Vardhman has the lowest debt to EBITDA levels of 3.7x
(FY10). This gives it comfort to further raise debts to fund its expansion.
Also, in a rising interest rate scenario Vardhman will be in a very
comfortable position to service its debt.
V i e w
Bearing in mind the favourable scenario for domestic players and the fact
that it has the largest domestic spinning capacity, Vardhman is likely to be
one of the key beneficiaries of the revival in the Indian textile industry.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Vardhman Textiles Ltd : W e l l p o i s e d t o c a p t ur e d e m a n d g r o w t h…
We met the management of Vardhman Textiles (Vardhman) to
comprehend the company’s business and get a fair idea about its future
plans. Vardhman, part of the Vardhman Group, is a large textile
conglomerate with a presence across the textile value chain. The
Vardhman Group has a turnover of over $800 million and a workforce of
25,000 employees. The group has one of the largest spinning capacities
in India (8,70,000 spindles) and is among the largest domestic yarn
producers with a market share of 3.5%.
Global demand and increasing spreads
The demand for Indian yarn has been increasing due to the adverse
climate in Pakistan and appreciating yuan, which makes Chinese yarn
expensive. The spread between cotton and cotton yarn prices has been
increasing from | 59/kg in cotton season 08-09 (CS) (October-September)
to | 72/kg in December 2010. Owing to this, the operating margins of the
spinning segment recorded a marked improvement from 14.4% in FY09
to 24.8% in Q3FY11. Since ~50% of the company’s revenues come from
the spinning segment, this scenario will be beneficial for Vardhman.
Well poised to cater to increasing demand
While the textile industry is recovering, domestic cotton spinners are
reaping the benefits of the capex incurred during FY06-FY10 and are
enjoying record high profitability. All textile players including Vardhman
have incurred heavy capital expenditure during FY06-10 to expand
capacities in anticipation of strong global demand. We believe Vardhman
with a spinning capacity of 8,75,000 spindles, the highest in India, is well
poised to further tap the opportunities that lie ahead.
Comfortably leveraged
Among its peers, Vardhman has the lowest debt to EBITDA levels of 3.7x
(FY10). This gives it comfort to further raise debts to fund its expansion.
Also, in a rising interest rate scenario Vardhman will be in a very
comfortable position to service its debt.
V i e w
Bearing in mind the favourable scenario for domestic players and the fact
that it has the largest domestic spinning capacity, Vardhman is likely to be
one of the key beneficiaries of the revival in the Indian textile industry.
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