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Mandhana Industries Ltd.: Experts' corner
533204 MANDHANA Group (B) BSE data
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Management speaks
Manish Mandhana
Manish Mandhana
Joint Managing Director
Mandhana Industries Ltd.
February 23, 2011, 12:17 pm
Why should an investor buy your company's stock?

The answer to this question has two aspects – one is company performance and the second one is sector performance.

As regards company perf0ormance, we have been growing at a CAGR of almost 38% for the last 5 years both in terms of top line and bottom-line. From a modest turnover of approximately Rs 126 crore and PAT of Rs 6.4 crore in FY05, we have grown strength to strength on the back of huge capacity additions and innovative product offerings. For FY11, we are well on our way to achieve revenues of Rs 800 crore with a PAT of approximately Rs 70 crore. With numerous growth plans under execution, we will maintain the same growth rate both in sales and profitability.

Another important yardstick is stock performance. Our company was listed in May 2010 when we made a public offering of our shares at a price of Rs 130. In a short span of about 9 months, the stock’s price doubled to Rs 260, thus giving our investors a great return on their investments. As a management principle, safety and maximization of shareholders’ wealth is our prime goal. We follow the best of corporate governance practices, thereby ensuring complete transparency in business operations. The company has one of the lowest debt-equity ratios in an industry made of companies with huge debt. Our future growth prospects make us confident about adding further to shareholder wealth. 

Another sign of our good future prospects is the sizable jump in our net profits for the quarter ended December 31st 2010, which touched Rs 19.9 crore, and a solid price-earnings (PE) multiple.

What’s more, the textile and apparel sector itself is going through a very buoyant time and the perception of the sector from the investment point of view has undergone a sea change. This has enabled performing and growing companies in the sector to command a better price multiple now compared to earlier times. The readymade garment industry both domestic and international is expected to grow at a CAGR of 6.4% and is expected to reach Rs 2156 billion by the year 2014, accounting for nearly 40% of the country’s total textile exports, further picking up growth at a CAGR of 4.6%.

What events do you expect in your industry sector over the next few months? Are these hurdles or catalysts?

The industry has great expectations from Union Budget 2011. First and foremost, we expect the immediate lifting of the indefinite abeyance on the fresh sanction of term loans under TUFS by banks along with security and pumping of fresh investments in the sector.

Also, interest subvention granted on packing credit granted earlier should be continued. The RBI is currently thinking of discontinuing it on the grounds that the rupee has depreciated in recent times.

Further, the government should promote exports by re-introducing beneficial schemes like section 80HHC of the IT Act which has been suspended for now.

One hurdle the industry faces is rising yarn prices. Polyester-cotton yarn rose to a high of 30% in a single month! This adversely affects all counts and types including combed and carded and weaving and knits, and any new leap in prices is increasingly being resisted by foreign buyers. 

In addition, restructuring the existing rigid labour laws and costs would be a boon for the industry. Labour currently accounts for the largest cost component for Indian apparel makers.    

What growth initiatives has your company planned?

Our topline estimate for FY 2011 is at Rs 775-800 crore. We have expanded our weaving capacity at Tarapur, Maharashtra, from 18 million metres to 36 million metres, which will be operational from March 2011. We have also set up a new garment unit at Tarapur with a capacity of 4 million pieces, which will be operational from May 2011. Again, we will be setting up a new garment factory at Baramati with a capacity of 3.5 million pieces. Thus our total garment production capacity will go up to approximately 11 million units per annum. We have already acquired 26,000 sq metres of land at Baramati High-Tech Textile Park.

More importantly, we have entered into an exclusive agreement with ‘Being Human’- The Salman Khan Foundation for promoting, designing, marketing and distributing the ‘Being Human’ line of clothing. We have plans to launch stores in the metros, followed by 10-12 more in tier I and tier II cities. We have projected a turnover of Rs 50 crore in FY 2012 for this retail venture project, Rs 100 crore in FY 2013 and Rs 250 crore in FY 2014.

Who is your competition? What differentiates you from them?

We believe that there is a level playing field in the Indian textiles and apparel market where every competent player benefits from available opportunities. Secondly, our business format is such that we do not have any direct competitors in the country -- we are into both textiles and garments, doing business in both domestic and international markets.

If we consider only garment exports, we do face some amount of competition from our Asian counterparts in Bangladesh, Vietnam, Sri Lanka and Pakistan.

How do you see your company performing over the next financial year?

As mentioned earlier, with our CAGR profit of 30-40% with targeted investments in production capacities of both textile and garment output and the retail venture led to a surge in our topline growth to 24-28% and bottomline growth of 56-60%. For the next fiscal year, i.e. FY12, with the revenue addition through our expanded weaving and garmenting capacities and ‘Being Human’ kicking off, we expect to achieve a sales figure of Rs 1,050-1,100 crore, with a PAT of Rs 95-100 crore.