Volant Textile Mills Ltd BSE Scrip Code: 531865 Textiles October 09, 2012 Equity Statistics Current Market Price Rs. 3.11 52 Week High/Low Rs. 3.55/1.34 Market Capitalisation Rs. Crores 23.31 Free Float Rs. Crores 7.25 Dividend Yield % 0.00 One Year Regression Beta Times 0.11 BSE Volumes Trend - Average = 81.61 Thousand 150 100 50 Relative Returns Returns 1M 3M 6M 1 Yr Absolute 18% 52% -1% 12% Rel. to Sensex 12% 41% -9% -1% Shareholding Pattern 100% 80% 60% 40% 20% 6000 5000 4000 3000 2000 1000 0 0% Volant Textile Mills Ltd Sensex Sep `11 Dec `11 Mar `12 Jun `12 Promoter DII FII Others Business Summary Volant Textile Mills Ltd (Volant), incorporated in 1994, is engaged in the manufacturing of grey fabric and trading of fibers, acrylic waste and fancy shirting. The company is promoted by the Somani family, which has a textile manufacturing background since the year 1932 in Mumbai. Volant has a total installed capacity of 3,890,865 meter per annum of grey fabric at its manufacturing unit located at Solapur, Maharashtra. Geographically, during FY12, 89% of the revenues were contributed from domestic market and 115% from exports. Due to the significant accumulated losses, Volant was declared a sick industrial unit by BIFR in March 2006. The updated scheme of rehabilitation is submitted to the operating agency (OA) by the company and the OA will convene a creditors meeting as per the directive of BIFR, and then submit the revised Draft Rehabilitation Report to the BIFR. The company has proposed its merger with another unit for the manufacturing of technical textile products and the said merger is part of the rehabilitation scheme submitted to the OA. In FY12, Volant reported net sales of Rs.21.8 crore and PAT of Rs.0.4 crore. Volant Textiles has a long-standing presence in the industry and has promoters with extensive experience in the textile industry. The company is exploring opportunities to venture into manufacturing of niche products, strengthen the quality of its products and reduce the conversion cost. These initiatives, if successfully implemented, could have a positive impact on the company s business. Volant has incorporated a 100% subsidiary in the name of Force Protective Solutions Pvt Ltd for developing textile and other products for supply to the armed forces. Also, to diversify its business, Volant has forayed in mattress ticking industry. The company has already started taking orders and building a design data bank for these products. Though the company has turnaround in FY11 and has reported profit in FY12 also, its net worth is still negative due to accumulated losses. Furthermore, it reported net loss during Q1FY13. The company is a small player in the fragmented industry and faces competition from integrated as well as unorganized textile companies. Also, Volant is exposed to the risk of fluctuations in cotton and yarn prices. Volant is currently trading at 51.8 times FY12 EPS. Board of Directors Person Mr. Rajesh Somani Mr. Atul B. Raval Mr. Dhanpal A. Tare Mr. Ravindra J. Lade Mr. S. Ramadoss Mr. Anantvikram Somani Source: AR and CARE Research Role Chairman Managing Director 1 Initiative of the BSE Investors Protection Fund
Background Volant Textile Mills Ltd (Volant), incorporated in 1994, is engaged in the manufacturing of grey fabric and trading of fibers, acrylic waste and fancy shirting. The company is promoted by the Somani family, which has a textile manufacturing background since the year 1932 in Mumbai. Volant has a total installed capacity of 38,90,865 meter per annum of grey fabric at its manufacturing unit located at Solapur, Maharashtra. Geographically, during FY12, 89% of the revenues were contributed from domestic market and 11% from exports. Due to the significant accumulated losses, Volant was declared a sick industrial unit by BIFR in March 2006. Volant has incorporated a 100% subsidiary in the name of Force Protective Solutions Pvt Ltd for developing textile and other products for supply to the armed forces. Business overview Volant is engaged in the manufacturing of grey fabric and trading of fibers, acrylic waste and fancy shirting. The company s net sales during FY12 was Rs.21.76 crore of which Rs.2.19 crore of sales was contributed from direct exports and 0.12 crore through merchant exporters. The company s key inputs are yarn and fabric, which are procured solely from the domestic market. Raw material cost was approximately 76% of the net sales during FY12. Strengths and growth drivers Volant Textiles has a long-standing presence in the industry and has promoters with extensive experience in the textile industry. The company is exploring opportunities to venture into the manufacturing of niche products, strengthen the quality of its products and reduce the conversion cost. These initiatives, if successfully implemented, could have a positive impact on the company s business. Risk and concerns Though the company turnaround in FY11 and has reported profit in FY12 also, its net worth is still negative due to accumulated losses. Furthermore, it reported net loss during Q1FY13. Volant is exposed to the risk of fluctuations in cotton and yarn prices. The company is a small player in the fragmented industry and faces competition from integrated as well as unorganized textile companies. Future strategy and expansion plans To diversify its business, Volant has forayed in mattress ticking industry. The company has already started taking orders and building a design data bank for these products. The company plans to develop this sector within technical textiles, in the near future. The company was declared a sick industrial unit by BIFR in March 2006. The updated scheme of Rehabilitation is submitted to the operating agency (OA), and the OA will convene a creditors meeting as per the directive of BIFR, and then submit the revised Draft Rehabilitation Report to the BIFR. The company has proposed its merger with another unit for manufacturing of technical textile products and the said merger is part of the rehabilitation scheme submitted to the OA. Industry outlook The Indian Cotton Textile sector plays a significant role in the economy of India. The textile industry contributes 4% to the country s Gross Domestic Product (GDP) and 17% to the total exports. India is self sufficient in cotton being the second largest producer in the world. This provides India a competitive edge worldwide in terms of cost of raw material. However, textile industry is dependent on the exports to the other countries especially US and EU. With the slowdown in these western markets, the derived demand is expected to remain subdued. The Indian textile industry has witnessed a challenging time in the last few years. Cotton prices reached an all time high followed by a phase of correction. Textile products from Bangladesh permitted to be imported duty free are cheaper and have impacted the sale of Indian products. The Indian textile industry is thus passing through an adverse phase although the future would be more optimistic if input costs, including the cost of raw material and interest, could remain generally stable and export demand picks up. 2 Initiative of the BSE Investors Protection Fund
Peer comparison Year ended March 31, 2012 Income statement (Rs. crore) VTML MIL KSLIL Total income 21.9 191.9 1,983.0 Net sales 21.8 178.6 1,998.1 EBITDA 1.9 10.3 169.3 Ordinary PAT 0.4 14.8 (119.5) Adjusted PAT 0.4 3.3 (119.5) Per share data (Rs.) Adjusted BVPS - 33.2 44.1 Diluted EPS 0.1 2.3 - Growth (Y-o-Y) (%) Growth in total income 17.0 31.2 10.9 Growth in net sales 16.7 22.8 13.6 Growth in EBITDA (1.2) (9.1) (22.9) Growth in adjusted PAT (36.5) 17.3 NM Growth in EPS* (92.9) (3.4) NM Profitability ratio (%) EBITDA margin 8.7 5.8 8.5 Adjusted PAT margin 1.9 1.7 NM Valuation ratios (Times) Price/EPS (P/E) 51.8 24.3 NM Price/Book value (P/BV) NM 1.7 1.3 Enterprise value (EV)/EBITDA 21.0 10.8 12.2 Note: MIL: Mohit Industries Ltd., KSLIL: KSL and Industries Ltd. VTML, FY12 financials are based on abridged results Quarterly financials Income statement (Rs. crore) Q1FY13 Q4FY12 Q3FY12 Q2FY12 Q1FY12 Total income 7.1 9.1 3.6 5.3 4.0 Net sales 7.0 9.0 3.6 5.2 4.0 EBITDA 0.1 0.4 0.3 0.9 0.2 Ordinary PAT (0.1) - 0.0 0.4 0.1 Adjusted PAT (0.1) - 0.0 0.4 0.1 Growth (Q-o-Q) (%) Growth in net sales (22.9) 154.6 (32.3) 32.7 Profitability ratio (%) EBITDA margin NM 4.1 9.6 16.8 4.3 Adjusted PAT margin NM NM 0.6 8.3 2.8 3 Initiative of the BSE Investors Protection Fund
Financial analysis During FY12, net sales of the company on increased by 16.7% y-o-y to Rs.21.9 crore. Total income witnessed a growth of 21.9% during the same period. Due to an increase in raw material cost as percentage to sales, EBITDA margin contracted from 10.3% in FY11 to 8.7% in FY12. PAT of the company declined by 36.5% y-o-y in FY12 to 0.4 crore. Net worth base remains negative to accumulated losses of past. In view of accumulated losses, no dividend was declared by the company in FY12. Annual financial statistics FY08 FY09 FY10 FY11 FY12 Income statement (Rs. crore) Total income 27.7 9.8 15.7 18.8 21.9 Net sales 2.9 9.2 15.3 18.7 21.8 EBITDA (0.4) (0.1) 1.0 1.9 1.9 Depreciation and amortization 1.0 1.1 1.2 1.2 1.2 EBIT (1.4) (1.2) (0.2) 0.7 0.7 Interest 0.3 0.2 0.1 0.2 0.5 PBT 22.9 (1.0) - 0.6 0.4 Ordinary PAT 22.9 (1.1) - 0.6 0.4 Adjusted PAT (1.5) (1.0) - 0.6 0.4 Balance sheet (Rs. crore) Adjusted networth (4.7) (5.7) (5.9) (5.3) (4.9) Total debt 15.7 20.1 19.9 18.3 16.7 Cash and bank 0.1 0.7 0.4 0.3 0.3 Investments - - - - - Net fixed assets (incl. CWIP) 11.0 13.3 12.0 10.8 9.6 Net current assets (excl. cash, cash equivalents) (0.1) 0.4 1.7 1.9 2.1 Per share data (Rs.) Adjusted BVPS NM NM NM NM NM Diluted EPS 30.6 NM NM 0.9 0.1 DPS - - - - - Growth (Y-o-Y) (%) Growth in total income NM (64.7) 61.2 19.3 17.0 Growth in net sales NM 220.6 67.3 21.6 16.7 Growth in EBITDA NM NM NM 84.6 (1.2) Growth in adjusted PAT NM NM NM NM (36.5) Growth in EPS NM NM NM NM (92.9) Key financial ratio EBITDA margin (%) NM NM 6.8 10.3 8.7 Adjusted PAT margin (%) NM NM - 3.4 1.9 RoCE (%) NM NM NM 5.3 5.7 RoE (%) NM NM NM NM NM Gross debt - equity (times) NM NM NM NM NM Net debt - equity (times) NM NM NM NM NM Interest coverage (times) NM NM NM 4.2 1.5 Current ratio (times) 1.0 1.4 1.5 1.3 1.3 Inventory days 59.0 53.1 44.9 40.4 36.5 Receivable days 26.2 14.9 44.9 94.8 104.9 Financial Year (FY) refers to period from April 1 to March 31 4 Initiative of the BSE Investors Protection Fund
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