Patspin India Ltd 1 st June, 2016 TABLE 1 MARKET DATA (STANDALONE) (As on 31 st May, 2016) NSE Code PATSPINLTD NSE Market Price ( ) 8.60 NSE Market Cap. ( Cr.) 27.18 Sector Textiles Face Value ( ) 10.00 Equity ( Cr.) 30.92 52 week High/Low ( ) 14.00/6.65 Net worth ( Cr.) 4.70 Business Group B K Patodia TTM P/E N.A. Traded Volume (Shares) 1,702 Year of Incorporation 1991 TTM P/BV 1.83 Traded Volume (lacs) 0.15 Corporate Office: 3 rd Floor, Palal Towers, Ravipuram, M. G. Road, Ernakulam, Kochi 682 016, Kerala Company Website: www.patspinindia.com Source Capitaline COMPANY BACKGROUND Patspin India Ltd is an India based company engaged in the business of manufacture and export of cotton, cotton yarn, waste, stores and spares, and other related materials. The company manufactures yarns of various counts ranging from NE 20s to NE 120s. The Company operates in one business segment, textile industry and has its production facilities and all other assets located in India. The company has 2 Plants at Palakkad in Kerala and Ponneri in Tamil Nadu having a capacity of 113,856 spindles, consisting of 79,025 compact spinning and 34,831 Ring Spinning, along with twisting and gassing capacities. The Company also has 4 wind mills with total capacity of 5.80 MW, for captive consumption. The Company s associate companies include GTN Textiles Limited and GTN Enterprises Limited. TABLE 2 PRICE PERFORMANCE 31 st May, 2016 28 th May, 2015 30 th May, 2014 % Change CAGR for 2016 vs 2015 2015 vs 2014 2 years Price ( ) 8.79 7.90 8.55 11.27% 7.60% 1.39% Trading Volume (Shares) (yearly avg.) 9,182 4,671 2,631 96.60% 77.53% NSE Market Cap. (in Cr.) 27.18 24.43 26.44 11.26% 7.60% 1.39% 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 24.70 31.31 24.35 21.11% 28.58% 0.72% Current Assets 126.90 175.15 151.91 27.55% 15.30% 8.60% Non Current Assets 221.07 216.54 234.23 2.09% 7.55% 2.85% Total Assets 347.97 391.70 386.14 11.16% 1.44% 5.07% Investments 36.89 29.74 24.74 24.04% 20.21% 22.11% Finance Cost 30.83 34.64 29.04 11.00% 19.28% 3.04% Long Term Liabilities 169.11 183.64 212.81 7.91% 13.71% 10.86% Current Liabilities 154.15 176.74 147.63 12.78% 19.72% 2.18% Turnover 554.42 609.61 461.97 9.05% 31.96% 9.55% Profit After Tax (PAT, Cr.) 6.48 4.25 15.82 252% N.A. N.A. EPS ( ) 2.00 1.00 5.00 300% N.A. N.A. Source Money Control/Annual Report Discussion as per Company: As per Annual Report for FY 2014 15, management discussion on performance is as follow: As reported in previous year s Directors Report, the company continued to perform reasonably in the two quarters of the year under review, but due to variety of reasons, from the 3 rd quarter of FY 2014 15 the industry went into tailspin and started incurring substantial losses. The major causes were as follows: Raw cotton prices crashed and the benchmark New York Futures plunged from over 90 cents a pound in July 2014 to below 60 cents by Oct / Nov 2014. Similarly, the Indian cotton prices also crashed steeply. For example, Gujarat Shankar 6 prices which was ruling at over 43,000/ per candy in July 2014 came down to 31,000/ per candy in Feb. 2015. Spinning mills, specially export oriented Mills always keep several months of stock of cotton due to quality reasons. Such Mills were left with high priced cotton with resultant value losses. The prime factor in causing the cotton price crash was the change in Chinese Cotton Procurement policies, which in the past had kept the global prices buoyant. Consequently, the yarn prices also plunged significantly, especially in fine and superfine yarns. The cotton yarn exports to China came down by nearly 23% in 2014 15 as compared to 2013 14. Globally India exported nearly 14% lower in 2014 15 compared to 2013 14. These factors had a bearish effect on demand and realization resulting in Mills obliged to carry substantial unsold inventories. Due to excessive production of cotton yarn and lack of demand resulted in the mills obliged to carry unsold inventories of finished goods putting extreme pressure on prices and margins. Due to adverse financial performance of most of the Mills and strain on working capital, they could not procure and stock raw cotton as they used to do in the past. As a result, the Cotton Corporation of India (CCI) was asked by the Government to undertake wide spread Minimum Support Price operations and so far they have procured nearly 9 Million bales of Indian Cotton. As a result, the Indian cotton prices have once again firmed up by nearly 10 12% since beginning of the season in Nov/Dec. 2014 and now. As regards financial performance of the year under review, in spite of several adverse factors as mentioned above, due to company s strong presence in the International market resulted a total revenue of ` 555.60 crores as against ` 610.65 crores in the previous year. The operating profit was lower at ` 35.04 crores as against ` 59.20 crores in the previous year. After meeting finance cost of ` 30.83 crores, the profit before depreciation, amortization and tax expenses was ` 4.21 crores and net loss after provision of depreciation and deferred taxation at ` 6.48 crores. 2 P AGE
Under the circumstances, company has been reviewing various options to tide over the liquidity constraints caused by the extreme market changes, in consultation with Banks and financial institutions who have given financial assistance. It is proposed to approach them with a revitalization proposal which will seek to securitize the long term exports of the company and will result in economizing the cost of borrowing in the current year, the industry is hopeful that cotton yarn export demand will emerge from China and other Asian countries. We also hope that the parity between raw cotton and finished yarn prices may stabilize and normal trading conditions will return soon. AUDIT QUALIFICATIONS Audit Qualifications in last 3 years: The Auditor have not raised any qualification for last three years. Frequency of Qualifications Response Have the auditors made any adverse remark in last 3 years? No TABLE 4: BOARD PROFILE (As on 31st March, 2015) NA Comment Regulatory Norms Company % of Independent Directors on the Board 50% 62.50% % of Promoter Directors on the Board 37.50% Number of Women Directors on the Board At least 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 (%) 77.14% 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 Non Executive Director. The Company as on 31 st March, 2015 has 57.14 % of Independent Directors and hence, it meets the regulatory requirements. Board Diversity: The Company has 8 directors out of which 7 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 Solvency Ratios Trading Ratios % Change 2015 vs 2014 2014 vs 2013 Inventory Turnover 7.04 5.44 5.71 29.36% 4.76% Debtors Turnover 28.33 19.43 9.86 45.83% 97.01% Fixed asset Turnover 2.51 2.82 1.97 10.92% 42.74% Current Asset Turnover 4.37 3.48 3.04 25.53% 14.45% Operating Profit Margin 1.48% 0.91% 5.03% 262.27% N.A. Net Profit Margin 1.17% 0.70% 3.42% 267.65% N.A. Return on Assets (ROA) 1.86% 1.09% 4.10% 271.63% N.A. Return on Equity (ROE) 26.23% 13.57% 64.97% 293.27% N.A. Return on Capital Employed (ROCE) 8.13% 12.41% 1.78% 34.44% 596.70% Current Ratio 0.82 0.99 1.03 16.93% 3.69% Quick Ratio 0.31 0.36 0.48 12.56% 25.82% Cash Ratio 0.19 0.18 0.16 3.22% 9.52% Working Capital Turnover ratio N.A. N.A. 107.94 N.A. N.A. Debt to equity ratio 9.17 8.71 11.37 5.32% 23.44% Interest Coverage Ratio 0.73 1.16 0.20 36.82% 481.20% Market Cap / Sales 0.05 0.04 0.06 9.95% 24.22% Market Cap/ Net Worth 1.07 0.84 1.08 26.76% 22.23% Market Cap/PAT N.A. 6.19 N.A. N.A. N.A. Market Cap/EBITDA 37.08 35.71 20.03 3.83% 78.29% Trading Volume (shares) (avg. of 1 year) 8,362 3,875 1,188 115.81% 226.05% Trading Volume (shares) (high in 1 year) 91,195 56,036 13,500 62.74% 315.08% Trading Volume (shares) (low in 1 year) 8.00 1.00 1.00 700.00% 0.00% Ratio High/low trading volume 11,399.38 56,036.00 13,500.00 79.66% 315.08% Ratio High/average trading volume 10.91 14.46 11.36 24.59% 27.31% Source Money Control 4 P AGE
TABLE 6 (A): OWNERSHIP & MANAGEMENT RISKS March' 2016 March' 2015 March' 2014 Comments Shareholding Promoter shareholding 65.00% 65.00% 65.00% No major change was observed in the shareholding pattern during the period Public Institutional 0.02% 0.03% 0.03% March 2014 To March 2016. The shareholding promoters have pledged 36.26% of their Public Others 34.98% 34.98% 34.98% shareholding. The shareholding pattern shareholding has reclassified as per the SEBI circular Non Promoter Non 0.00% 0.00% 0.00% dated 30 th November, 2015. 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 The promoters have not sold/bought any shares in last three years. No preferential issue of shares was made to Promoters during last three years. No preferential issue of shares was made to other shareholders during last three years. The Company did not issue any GDRs during last three years. The Company did not issue any shares to the employees under its ESOP Scheme in last three years. 5 P AGE
Equity: The equity shares capital of the Company Glossary 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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