PBM Polytex Limited. Stock Performance Details Shareholding Details September 2015

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1 PBM Polytex Limited Date: 2 th January, 216 Stock Performance Details Shareholding Details September 215 Current Price : ` 94.2^ Face Value : ` 1 per share 52 wk High / Low : ` / 58. Total Traded Volume : 2,539 shares^ Market Cap : ` 76.6 crore^ Sector : Textiles EPS (H1 FY16) : ` 5.27 per share Equity Share Capital : ` 8.1 crore P/E (TTM) : 7.68 (x)^ P/BV (TTM) :.8 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : PBMPOLY BSE Scrip Code : ^ As on 19 th January, 216 Particulars Shareholding Nos. (%) Promoter & Promoter Group Holding 6,31, Total Institutional Holdings (FIIs & DIIs) 1,35.2 Public Holdings 2,97, Total 81,3, 1. Background PBM Polytex Limited was incorporated on 24 th November, 1919 in the name of The Petlad Bulakhidas Mills Co. Ltd. The management of the company was taken over by The House of Patodias in 1978 and the name of the company was changed to PBM Polytex Ltd. It is engaged in the business of manufacturing and processing of yarn. The company s yarns are used for Knitting, Weaving, Gassing and Mercerizing applications and are tailor-made to suit customer s specifications. PBM manufactures a wide range of products which includes Ne 24 s to Ne 8 s, both single and TFO doubled yarns from 25 raw material mixes. It also offers indigenous raw cotton like Dharwad Cotton Hybrid (DCH) 32, MCU 5, Shankar 6. The selected imported varieties include Egyptian Giza, USA Pima, USA SJV, Israel Pima, Peruvian PIMA, Sudan VS, California Acala SJV, Colombia Acala, Australian, Central American SJV, West African and Turkish. The Company's manufacturing units are located in Petlad, Gujarat and Borgaon, Madhya Pradesh. The Company has three windmills in Jamnagar, Gujarat and one windmill in Kutch, Gujarat. PMB exports its yarns to an enviable client list which includes over 56 destinations around the globe. An Initiative of the BSE Investors Protection Fund1

2 Financial Snapshot Particulars Standalone (` Million) Income Statement H1 FY16 H1 FY15 Income from Operations ,19.2 Y-o-Y Growth (%) (11.8) (5.8) EBITDA Y-o-Y Growth (%) (28.6) (41.2) EBITDA Margin (%) Net Profit Y-o-Y Growth (%) (12.6) (51.8) NPM (%) Balance Sheet Fixed Assets Cash and Bank Balances Inventories Net Working Capital Net Worth 1, Balance Sheet Ratios ROCE (%) RONW (%) Source:Capitaline From the Research Desk of LKW s Gurukshetra On a Standalone basis, Net Sales stood at Rs million in H1 FY16 as compared to Rs. 1,19.2 million in H1 FY15, this marking a decline of 11.8% y-o-y. The increase in the raw material price (cotton) impacted the profitability of the Company. However, on the other hand, the prices of cotton yarn came down on account of a fall in exports which put pressure on domestic prices also. Since, the Rupee continued to get stronger in terms of the US Dollar; it resulted in lower realisation of export yarn as PBM exports 4% of its products across the globe. Material Cost declined to Rs million in H1 FY16 from Rs million in H1 FY15. Employee Cost increased by 9.9% on a y-o-y basis to Rs million in H1 FY16 from Rs million in H1 FY15. Power and Fuel Expenses increased mainly because of denial of permission by the Gujarat State Electricity Board for buying power from the open market. It stood at Rs million in H1 FY16 as compared to Rs million in H1 FY15. Other Expenses stood at Rs million in H1 FY16 as compared to Rs million in H1 FY15. In line with the lower Topline, EBIDTA dropped by 28.6% y-o-y to Rs. 8.3 million in H1 FY16 as compared to Rs million in H1 FY15. EBIDTA Margin declined to 8.2% in H1 FY16 from 1.1% in H1 FY15. Depreciation Cost and Interest Cost stood at Rs. 2 million and Rs million respectively in H1 FY16. In line with the decline in the profits at the Operating level, PAT for H1 FY6 stood lower at Rs million as compared to Rs million in H1 FY15. PAT Margin stood at 4.4% for H1 FY16 and H1 FY15. An Initiative of the BSE Investors Protection Fund2

3 Total Debt comprising Short Term Borrowings and Long Term Borrowing s stood at Rs million in H1 FY16 as compared to Rs million in H1 FY15. This reflected a decline of 48.5% on a y-o-y basis. Inventories of the Company decreased to Rs million in H1 FY16 from Rs million reported in H1 FY15. For H1 FY16, Trade Receivables of the Company stood at Rs million as against Rs million in H1 FY15. The members of the Company passed a Special Resolution and approved the sale of its windmill on a Slump Sale basis. Performance on the Bourses Stock Performance as on 12th January, 216 % 1 5 PBM Polytex BSE Small Cap Peer Comparison The table below gives a snapshot view of the Company s performance vis-à-vis its closest peers for H1 FY16. (` In millions) Particulars PBM Polytex SEL Manufacturing Company Nitin Spinners Income from Operations , ,862.8 EBIDTA 8.3 1, Net Profit 42.9 (831.6) EBIDTA Margins (%) PAT Margins (%) 4.4 (8.1) 5.7 Book Value Per Share P/E (x) 7.39^.^ 5.79^ P/BV (x).77^.1^ 1.56^ RONW (%) 4.3 (7.7) 11.7 Source: Capitaline Financials on Standalone Basis; ^ On a Standalone Basis as on September, 215 (TTM Basis) An Initiative of the BSE Investors Protection Fund3

4 About the Industry The Indian Textile Industry is one of the largest contributors of employment as well as to the overall trade exports of India. The Indian Textile industry is spread across the length and breadth of the country and in terms of employment is labour intensive. The industry is divided between two prominent segments, that is, hand spun and hand woven segment as against a capital intensive sophisticated mills segment. Not just being amongst the largest employers, the Textile industry has also contributed to the trade exports of the country quite significantly over the years. The industry realized export earnings worth US$ 41.4 billion in FY 215, marking a growth of 5.4% as per data from The Cotton Textiles Export Promotion Council (Texprocil). Another important characteristic of this sector is the dominance of unorganized segment which consists of handloom, handicrafts sericulture which operates on a small scale and adopts traditional manufacturing tools. In contrast to this, the organized segment though as a percentage of the overall industry is small, it brings to the table economies of scale and contributes a large part of the total textile export earnings of the country. It is estimated that the Indian Textile industry could reach US$ 223 billion over the next 5-6 years from the current size of US$ 18 billion. This indicates that the industry growth would more than double in the next 5-6 years. As a percentage of the Indian GDP and Index of Industrial Production, this industry constitutes about 5% and 14% respectively. Given the importance of this industry to overall GDP growth, the Government has allowed 1% FDI in this sector under the automatic route; the TUFS Scheme, Textile Parks etc are the other initiatives taken by the Government to promote manufacturing of textiles and thereby increase export revenues for the industry. Besides, the Government has also provided for subsidies on machinery and infrastructure. The Indian Government has signed a MoU with Kyrgystan seeking to strengthen bilateral co-operation in the fields of Textiles, Clothing, Silk and Sericulture and Fashion. Amongst the key factors affecting growth of Indian Textile Industry is its labour intensive nature, high dependence on monsoon and capital intensive nature. Also, its fragmented nature is hurting the quest for consistent growth in the export market. Management Outlook The future for the Indian textile industry looks satisfactory, buoyed by both strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players into the Indian market. The organised apparel segment is expected to grow at a CAGR of more than 13% over a 1-year period. A number of initiatives taken by the Government includes implementation of several export promotion measures such as Focus Market Scheme, Focus Product Scheme and Market Linked Focus Product Scheme for increasing share of India s textile exports, proposal to extend 24/7 customs clearance facility at 13 airports and 14 sea ports resulting in faster clearance of import and export cargo and allowance of 1% FDI in the Indian textiles sector under the automatic route. Further, an improvement in the international markets augurs well for the Company given that it exports its products in USA, Canada, Australia, Europe, Middle East & Far East countries. Currently, Indian yarn is widely accepted in International markets as the exporters regularly meet the needs of importers with sound efficiency and economy in countries like USA, Italy, Spain, Japan, China, South Korea, Taiwan, Bangladesh, Vietnam etc. Despite the efforts being made by the Government to revive the economy, sluggish global demand and declining export competitiveness, the situation at ground level are not showing the improvement that was expected. At the same time, certain risks such as increased intensity of competition from local and global players, exchange rate fluctuation, increase in the power rate, increase in the raw material prices and the overheads which are not fully passed on to the consumers in the depressed market environment may affect the performance of the Company. However, the Company s growth prospect seems to be satisfactory. It is taking measures to hedge currency within the permissible RBI guidelines. The company has shut down its captive power plant and has decided to purchase power from State Electricity Board. Further, it has invested for the modernization and upgradation of its production facilities in order to produce quality goods. An Initiative of the BSE Investors Protection Fund4

5 Financial Graphs 115 Net Income from Operations 11 ` in Million ,19.2 H1 FY H1 FY16 12 EBIDTA & EBIDTA Margins ` in Million % H1 FY15 H1 FY16 EBIDTA EBIDTA Margins PAT & PAT Margins ` in Million % 36 H1 FY15 H1 FY16 PAT PAT Margins An Initiative of the BSE Investors Protection Fund5

6 Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements based on available data, and LKW s Gurukshetra shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW) commenced business in 1991 and is currently engaged in providing CAPITAL MARKET RESEARCH, INVESTMENT ADVISORY and STRATEGY services. GURUKSHETRA is the Research and Training arm of LKW. LKW Investment Advisers is the SEBI registered Investment Advisory arm of LKW. 5 Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd. Office: B Wing, 55-56, Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai enquiry@lotusknowlwealth.com Tel: Website: An Initiative of the BSE Investors Protection Fund6