31 st May, 2016 TABLE 1 MARKET DATA (STANDALONE) (As on 31 st May, 2016) NSE Code SOMATEX NSE Market Price ( ) 5.80 NSE Market Cap. ( Cr.) 17.54 Sector Textiles Face Value ( ) 10.00 Equity ( Cr.) 33.03 52 week High/Low ( ) 9.35/ 2.80 Net worth ( Cr.) 26.65 Business Group Somani H L TTM P/E N.A. Traded Volume (Shares) 5,995 Year of Incorporation 1940 TTM P/BV 0.22 Traded Volume (lacs) 0.35 Source Capitaline Corporate Office: 2, Red Cross Place, Kolkata 700 001, West Bengal Company Website: COMPANY BACKGROUND The Ahmedabad unit of Soma Textiles & Industries was taken over in 1969 and a major modernisation and expansion programme was carried out to revive it. The Company was one of the first units to manufacture indigo denim in 1986. In 1994, the Company commissioned its 100% export oriented spinning unit (cap.: 30,204 spindles) at a capital outlay of `74 crores. The Company's principal products include cotton yarn and cotton fabrics as also blended yarn and man made fabrics. In 1995, the Company replaced 20 narrow width Ruti looms with 12 Sulzer 390 cm wide width looms. To achieve better capacity utilisation, six Sulzer wide width looms along with one Schlafhorst rotor spinning machine and other balancing machines were installed and commissioned in Sep.'95. This will increase the production of denim by 25%. The Company plans to improve the quality of yarn for the export market, using sophisticated control equipment, while also planning to introduce stretch denim fabrics. Due to the recessionary trend experienced by the Textile industry and the depressed export market, the steep competition from the unorganised sector resulted in erosion in the profitability of the Company during the year 1999 2000. To increase the production of Denim Fabrics the Company has installed 20 Second hand Picanol Airjet Looms. TABLE 2 PRICE PERFORMANCE 30 th May, 2016 29 th May, 2015 30 th May, 2014 % Change 2016 vs 2015 2015 vs 2014 CAGR for 2 years Price ( ) 5.70 3.05 4.05 86.89% 24.69% 18.63% Trading Volume (Shares) (yearly avg.) 6,478 2,094 1,886 209.28% 11.04% NSE Market Cap. (in Cr.) 18.83 10.07 13.38 86.99% 24.74% 18.63% Source Money Control 1 P AGE
TABLE 3 FINANCIALS ( Cr.) 2015 2014 2013 % Change CAGR for 2 years 2015 vs 2014 2014 vs 2013 Net Worth 26.65 62.23 65.82 57.17% 5.45% 36.37% Current Assets 66.15 126.37 132.88 47.65% 4.90% 29.44% Non Current Assets 166.24 173.62 193.76 4.25% 10.39% 7.37% Total Assets 232.39 299.99 326.64 22.53% 8.16% 15.65% Investments 101.89 97.38 88.93 4.63% 9.50% 7.04% Finance Cost 22.52 23.62 24.26 4.66% 2.64% 3.65% Long Term Liabilities 31.59 82.75 87.63 61.82% 5.57% 39.96% Current Liabilities 174.15 155.01 163.44 12.35% 5.16% 3.22% Turnover 225.54 272.93 322.71 17.36% 15.43% 16.40% Profit After Tax (PAT, Cr.) 33.58 13.34 1.66 N.A. N.A. N.A. EPS ( ) 10.00 4.00 1.00 N.A. N.A. N.A. Source Money Control/Annual Report Discussion as per Company: There was no improvement in the business scenario of the Textile Industry and is continued to remain challenging. The revenue from operations for the year 2014 15 was 225.54 crores as compared to 272.92 crores in the previous year. The same is not strictly comparable due to the sale of Baramati Unit during the previous year. The Financial position of the Company severely affected due to non availability of adequate working capital from the Banks as loans were classified by Banks as non performing assets as Company failed to pay interest and installments consecutively for more than 90 days. This also affected the top line growth of Company. The loss before Prior period, Exceptional item and tax was 47.64 crores against the previous year s loss of 29.45 crores. The net loss for the year was 33.58 crores against the net loss of 13.34 crores. 2 P AGE
AUDIT QUALIFICATIONS Audit Qualifications in last 3 years: The Auditors have not made any qualification in last three years. However, the Auditors have emphasised on the following matter in FY 2014 15. Emphasis of Matter (FY2014 15): (a) Auditors have drawn attention to Note 12.2 to the Financial Statement, relating to Account Receivables of Soma Textiles FZC, an associate enterprise of the company, whereby the debtors have requested the company for 2 years cooling period i.e. till March 2016. The amount of such debtors is AED 6,26,31,823. Auditors are unable to comment on said receivables of Soma Textiles FZC, which are deemed to be good by Independent Auditor of Soma Textiles FZC Business Management World Auditors & Business Consultants. The Company has shown a loan amount of 98.52 crores (Previous year 94.44 crores) given to Soma Textile FZC (UAE) out of GDR proceeds, classifies as long term loan. This loan had been advanced by the Company as a Quasi Equity (Note 12) in addition to the capital of Soma Textile FZC when the said loan was given, the said Company was a wholly owned subsidiary, however, with effect from 31 st March, 2010, the Company s holding in this company has diluted from 100% to 40%. In the financial statements of Soma Textile FZC ended as at 31.03.2015 the accumulated loss reflects at AED 5,64,690 as against Total Capital of AED 9,00,000 (including Statutory Reserves). (b) Attention to the following is invited: As per the provisions of Section 23 of SICA Act, 1985 the Accumulated Losses of the company as at 31 st March, 2015 have resulted in erosion of more than 50% of its peak net worth during the four financial years immediately preceding the financial year ended on 31 st March, 2015. Consequent upon, the Company has become a Potentially Sick Company under the said provision. Response Comment Frequency of Qualifications Not Applicable as the Auditors have not raised qualifications. Have the Auditors made any adverse remark in last 3 years? No TABLE 4: BOARD PROFILE (As on 31 st March, 2015) Regulatory Norms Company % of Independent Directors on the Board 50% 50% % of Promoter Directors on the Board 33% Number of Women Directors on the Board Atleast 1 1 Classification of Chairman of the Board Non Executive Promoter Director Is the post of Chairman and MD/CEO held by the same person? No Average attendance of Directors in the Board meetings (%) 100% Source Money Control/Annual Report Composition of Board: As per Regulation 17(i)(b) of the Listing Regulations, 2015, the Company should have at least 50% Independent Directors as the Chairman of the Board is a Promoter Director. The Company as on 31 st march, 2015 has 50% of Independent Directors and hence, it meets the regulatory requirements. Board Diversity: The Company has 6 directors out of which 5 are male and 1 is female. The Company is compliant as per Clause 17 of the Listing Regulations, 2015 regarding the requirement of at least one woman director. 3 P AGE
TABLE 5 FINANCIAL RATIOS Ratios 2015 2014 2013 Turnover Ratios Return Ratios Liquidity Ratios % Change 2015 vs 2014 2014 vs 2013 Inventory Turnover 6.84 3.97 4.57 72.50% 13.08% Debtors Turnover 11.66 6.34 6.71 84.03% 5.53% Fixed asset Turnover 1.36 1.57 1.67 13.69% 5.61% Current Asset Turnover 3.41 2.16 2.43 57.87% 11.07% Operating Profit Margin 21.12% 10.79% 1.30% N.A. N.A. Net Profit Margin 14.89% 4.89% 0.51% N.A. N.A. Return on Assets (ROA) 14.45% 4.45% 0.51% N.A. N.A. Return on Equity (ROE) 126.00% 21.44% 2.52% N.A. N.A. Return on Capital Employed (ROCE) N.A. N.A. 9.32% N.A. N.A. Current Ratio 0.38 0.82 0.81 53.41% 0.27% Quick Ratio 0.19 0.37 0.38 48.69% 2.36% Cash Ratio 0.08 0.09 0.09 15.04% 8.73% Working Capital Turnover ratio N.A. N.A. N.A. N.A. N.A. Solvency Ratios Debt to equity ratio 4.76 2.75 2.77 73.14% 0.56% Interest Coverage Ratio N.A. N.A. 0.83 N.A. N.A. Trading Ratios Source Money Control Market Cap / Sales 0.09 0.07 0.06 21.01% 18.24% Market Cap/ Net Worth 0.74 0.32 0.30 133.51% 5.77% Market Cap/PAT N.A. N.A. N.A. N.A. N.A. Market Cap/EBITDA N.A. 22.40 25.94 N.A. 13.62% Trading Volume (shares) (avg. of 1 year) 6,065 2,059 2,073 194.59% 0.67% Trading Volume (shares) (high in 1 year) 1,61,945 16,055 17,333 908.69% 7.37% Trading Volume (shares) (low in 1 year) 1.00 1.00 1.00 Ratio High/low trading volume 1,61,945 16,055 17,333 908.69% 7.37% Ratio High/average trading volume 26.70 7.80 8.36 242.41% 6.75% 4 P AGE
TABLE 6 (A): OWNERSHIP & MANAGEMENT RISKS Mar' 2016 Mar 2015 Mar' 2014 Comments Shareholding Promoter shareholding 49.28% 49.28% 49.28% Public Institutional shareholding 15.13% 15.13% 15.13% Public Others shareholding 35.59% 35.59% 35.59% Non Promoter Non Public Shareholding TABLE 6 (B): OWNERSHIP & MANAGEMENT RISKS Market Activity of Promoters Preferential issue to promoters Preferential issue to others GDRs issued by the Company Issue of ESOPs/Issue of shares other than Preferential allotment Source Annual Report No new equity shares were issued by the Company during the two year period from Mar 2014 to Mar 2016. The promoter shareholding remains unchanged during the said period. No other major change was observed in the shareholding pattern during the said period. The promoters have pledged 39.93% of their shareholding and 19.68% of total shareholding. The promoters have not sold/bought any shares in last three years. No preferential issue of shares was made to the promoters in last three years. No preferential issue of shares was made to other shareholders in last three years The Company did not issue any GDRs in last three years The Company did not issue any shares to the employees under ESOP Scheme. Further, no new equity shares were issued by the Company in last three years 5 P AGE
Glossary Equity: The equity shares capital of the Company Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders funds of the Company Turnover: The revenue earned from the operations of the Company EPS: Earning Per Share is net profit earned by the Company per share Profit After Tax Number of outstanding shares P/E ratio: It is the ratio of the Company s share price to earnings per share of the Company / Price of each share Earnings per share Current Assets: Cash and other assets that are expected to be converted to cash in one year Fixed Assets: assets which are purchased for long term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment Total Assets: Current Assets + Fixed Assets Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges incurred during the year in relation to borrowed money. Long Term Liabilities: Long term liabilities are liabilities with a maturity period of over one year. Current Liabilities: A company's debts or obligations that are due within one year. Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business can turn its accounts receivable into cash during a period Accounts recievables Fixed Asset Turnover: The fixed asset turnover ratio is a financial ratio of net sales to fixed assets Fixed Assets Current Asset Turnover: The current asset turnover ratio is a financial ratio of net sales to fixed assets Current Assets 6 P AGE
Operating Profit Margin: Operating margin is a measurement of what proportion of a Company s revenue is left over after paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company s operating income (also known as operating profit ) during a given period by its sales during the same period. Operating profit Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales Net profit Return on Assets: ROA tells you what earnings were generated from invested capital (assets) Net profit Total Assets Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Net profit Net worth Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. Net profit Total Debt Equity share capital Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. Current Assets Current Liabilities Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities. Current Assets Inventories Current Liabilities Cash ratio: The ratio of the liquid assets of a Company to its current liabilities. Current Assets Inventories Account Recievables Current Liabilities Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates a Company's effectiveness in using its working capital. Current Assets Current Liabilities Debt to Equity ratio: The debt to equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a Company can pay interest on outstanding debt. 7 P AGE
Market Cap/Sales ratio: Market Cap/sales ratio, Price sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per share stock price by the per share revenue. / Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company s market cap to net worth. / Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company s market cap to net profit. / Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company s market cap to EBITDA. / Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year 8 P AGE
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