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Gangotri Textiles (GTL) is one of the leading players in open-ended (OE) spinning in the organised segment. Its 5,904 rotors produce yarn with a count ranging from 2s and 20s for consumption in the home textiles segment. The 17,376 spindles produce fine count yarn, ranging from 14s to 40s, for hosiery manufacturers. The 1,000 pieces of men’s trousers per day that are manufactured are sold under the brand name, Tibre. It has installed 2 X 1.65-MW wind mills.
The Rs 351-crore project of GTL covers expansion-cum-integration of facilities in spinning, weaving, processing, garmenting and installation of windmills. The company plans to add 19,200 spindles to produce 2/30’s polyester-cotton yarn (to be commissioned by January 2007) and 31,200 spindles to produce 2/40’s cotton yarn (to be commissioned by October 2007) at a cost of Rs 73.76 and Rs 77.46 crore, respectively. The company proposes to set up a weaving and processing capacity of 51,000 meters per day at a cost of Rs 128.83 crore (to be commissioned by October 2006). Its modern facility to produce 3,000 pieces of men and women garments will cost Rs 7.83 crore (to be commissioned by October 2006). The installation of 6 X 1.65MW wind mills will requires Rs 59.12 crore.
GTL recently announced a strategic alliance with Switzerland-based Trailer for joint marketing and branding for its brand Tibre, both in Europe and Asia
Of the Rs 351-crore expansion, Rs 273 crore will be financed through debt, Rs 55 crore through public issue, and the balance through internal accruals, promoter’s contribution and subsidies.
Strengths
- With the current expansion, GTL will be able to extend its presence in weaving, which was the missing link between spinning and garmenting.
- In FY 2005, yarn contributed nearly 92% to the overall sales. However, going forward, this share will reduce to around 40% and the balance will be come from fabrics (around 30-35%) and garments (around 20-25%) enjoying much better margin.
Weaknesses
- GTL aims to sell 30% of its fabric capacity in the export market, which is a new segment for the company and may take time to establish.
- The present debt-equity ratio is around 3.4, which is considered to be relatively high. Similarly, the debt-equity ratio for the expansion project is also around 3.5.
- The past performance is not consistent. For example, the net profit declined 95% from Rs 5.32 crore in FY 2001 to Rs 0.26 crore in FY 2002. Though it increased for two consecutive years, the net profit halved to Rs 3.25 crore in FY 2005. The profit has bounced back in the first nine months ended December 2005 to Rs 6.28 crore, but sales were 21% lower.
Valuation
The market price crossed the upper band in April 2006 and is currently traded around Rs 60. At the offer price band of Rs 41-Rs 46, the post-issue equity works out to be between Rs 16.37 crore and 17.10 crore. EPS for TTM ending December 2005 is around Rs 2.4. PE is between 18 to 19 times at the lower and the upper price band. The Textiles-Cotton/Blended industry average is around 14 times.
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