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2 Small Cap Stocks Buzzing in the Textile Sector

HomeCompany2 Small Cap Stocks Buzzing in the Textile Sector

indian textile sectorThe fundamental strength of the textile sector in India lies in its strong production base of wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool to synthetic fibres like polyester, viscose, nylon and acrylic. India accounts 63 % of the market share of textiles and garments, worldwide. The Indian Textile Industry contributes approximately 5 % to India’s gross domestic product (GDP), and 14 % to overall Index of Industrial Production. The sector earns a major portion of its revenue from exports and is the 2nd largest employment provider in the country.

About 27% of the foreign exchange earnings in India are through textiles. The potential size of the Indian textile and apparel industry is expected to reach U.S. $223 billion by 2021 from U.S. $ 108 billion in FY 2015.

Indian textile exports

SYBLY INDUSTRIES

Price – Rs. 7.40

Market Cap – Rs. 30.10 Cr.

Incorporated in 1988, Sybly Industries (“Sybly” or the “Company”) manufactures branded yarn & thread, both in Polyester and cotton. The Company operates in a niche business of converting raw yarn to threads and supplying it for weaving. Sybly got listed on Bombay Stock Exchange on December 1995. The Company operates out of its 25,909 sq. yards factory in Ghaziabad and has recently acquired an additional 13000 sq. yard for future expansion.

Products

  • Polyester yarn ranging from coarse counts to finer counts in both Hank & Cones;
  • Single wrap qualities & varies polyester hosiery yarns;
  • Grey yarns threads which applies to jeans, socks, clothes, sugar bags, jackets.

The Company currently has 10,000 spindles (a thin rod or stick with pointed ends that is used in making yarn) and produces an average of 8 tonnes per day (i.e. 80% capacity) and is planning to increase it to 15,000 spindles in FY 2017.  Further, the Company is planning to add capacity up to 20,000 to 25000 spindles in the next 2-3 years.

The Company has an order book position of Rs. 25 Cr. from its reputed dealers which ensures growth in turnover as well as the profit margins in the coming years.

New initiatives

The Company has recently ventured into using recycled polyester fiber for manufacturing of polyester yarn. The demand for Indian sourced polyester yarn is growing on the back of sporting and apparel companies like Adidas, Nike and Levi’s who have all recently started sourcing  it from India. Polyester yarn is not only cost effective but is also environmentally friendly. As per its recent filing with the Bombay Stock Exchange, this new initiative can potentially increase the Company’s operating margins by 10%.

Demerger of Non-Core Business and Separate listing of New Company

The board of directors of the Company in a meeting held on 26th May 2016, decided to demerge the non-core assets and related liabilities of the Company to a new entity – Space Incubatrix Technologies Limited (under incorporation). In addition the Company plans to amalgamate with itself:

Vartex Fabrics Private Limited (“Vartex”): Net worth = Rs. 2.86 Cr

Dux Textiles Private Limited (“Dux”): Net worth = Rs. 0.96 Cr

Both the above companies are controlled by same promoters and are engaged in trading cotton fabrics. The merger will result in consolidation of similar lines of business and create a larger and clearer business structure for the Company.

sybly industries

sybly industriesPost the demerger, the new company, i.e. Space Incubatrix Technologies will be separately listed on the Bombay Stock Exchange. Shareholders of Sybly Industries will receive 85 equity shares of Space Incubatrix Technologies for every 100 shares they hold of the demerged company, i.e. Sybly Industries.

By virtue of amalgamation of Vartex and Dux, promoter shareholding in the Company will increase to 49.16% post the demerger and amalgamation.

Promoters Hiking Stake

sybly industries promotersAn increase in promoter stake is a strong reaffirmation by the insiders, who are the first recipient of any information and knowledge, that there is greater potential value in the business than what the market is paying for it.  The promoters have increased their stake from 13.88% to 23.78% in 1 year (approx 71% increase). This reinforces the conviction of the promoters that the market has undervalued the business and the price of Company’s equity shares.

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Celebrity Fashions

Price – Rs. 13.20

Market Cap – Rs. 55.10 Cr.

Celebrity Fashions (“Celebrity Fashions” or the “Company”) is an Indian garment exporter, manufacturing the largest number of trousers in the country. The Company operates through 8 manufacturing facilities, 1 warehouse and 2 washing plants.

celebrity fashions plants

Studio Celebrity – The Company operates a design studio which offers a one-stop-shop solution for design and product development. Celebrity Fashions provide its clients with various design support, such as computer aided design and drafting (CADD) for prints, trend analysis and life style presentation.Premium Brands

Strong Clientele

The Company‘s strong clientele includes name like Timberland, Gap, Armani jeans, Dockers, Nautica, and Vans. Celebrity Fashions forayed into the domestic branded ready to wear men’s garment market in the year 2000 under the brand name “Indian Terrain”.

Strong Presence in International Business

Celebrity Fashions

The Company earns a majority of its revenue from export markets, mainly in European and American geographies where the demand is picking up after a prolonged slowdown. 

Government Initiatives

The Government has allowed 100% FDI in the Indian textiles sector under the automatic route. The government has given approval to 40 new textile parks to be set up in next 2-3 years. Development of handlooms, promotion of handicrafts and increasing sericulture are some of the other initiatives that the government has stressed upon which will ensure future potential of the industry, providing employment to over 35 million people. Additionally, in June 2016, the Government of India approved a Rs. 6,000 crore special package for textiles & apparel sector. The measures approved include additional incentives for duty drawback scheme for garments, flexibility in labour laws to increase productivity as well as tax and production incentives for job creation in garment manufacturing.


 

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.

 
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5 Responses to “2 Small Cap Stocks Buzzing in the Textile Sector”

By Parker Valasek - 19 July 2016

It is appropriate time to make some plans for the future and it is time to be happy. Good information. Kudos.

By Zoro - 6 August 2016

“Celebrity Fashions” is neck deep in debt, isn’t that a concern for you ?

By Rajat Sharma - 6 August 2016

Of course it is. When did I say “BUY”. The article discusses 2 stocks that were buzzing on high volumes. That’s all!!

By Radha - 17 January 2017

Sybly secures fiber export order worth Euro 1.02, is it a trigger for this stock…

By Rajat Sharma - 18 January 2017

no

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