Current price 79.50

Sector Textiles - Denim

No of shares 45549056

52 week high 94.15

52 week low 32.55

BSE Sensex 28756.91

Nifty 8733.75

Average Volume 13799

BSE Code 532641

NSE Symbol NDL

Recommendation

– BUY/HOLD

Date – 1g/04/2015

Nandan Denim Ltd.

Company Overview

Nandan Denim Ltd is an India-based company engaged in textile industry. The company is engaged in

manufacturing gray cotton fabrics, khakhis and denims. They also manufacture fabrics of different weaves,

dyes, combination of yarns and weights. The range of fabrics include denim, twills, stretch, bull denim, broken

twills. Their principal products include cotton grey fabric/ blended fabrics, cotton yarn, denim fabrics and ready

made garments. Nandan Denim Ltd was incorporated on August 9, 1994 as a private limited company with the

name Nandan Denim Pvt Ltd. The company was established for manufacturing, trading and export of textile

products and was promoted by Vedprakash D Chiripal and Brijmohan Chiripal. Initially, the company was in

the business of trading of fabrics in domestic and international markets.

It also offers fabrics of various weaves, dyes, combination of yarns, weights, etc. The company’s products

include twills, stretch products, bull denim, and broken twills. It serves garment manufacturers, importers,

distributors, ready made garment exporters, various brands, stockiests, etc. Nandan Denim Limited also

exports its products to West and South East Asia, Europe, and the Americas. In terms of installed capacity,

NDL now ranks as the largest domestic denim fabric manufacturer.

Considering the company’s established position, large capacity and a healthy clientele, NDL has successfully

developed a healthy client base in the domestic market, including established apparel (such as Spyker, Mufti,

Gini & Jony and Color Plus) and textile products manufacturers (such as Tirupati Denim and Vardhaman

Textiles). The top 10 clients account for ~39% of revenues, indicating moderate concentration risk. In the

export market, NDL has developed relationship with some international players, which, we believe, needs to

be further strengthened. According to the management, the company supplies to major global brands such as

Ralph Lauren, Armani Exchange, Talbots, Calvin Klein, Tommy Hilfiger, Target, Anntaylor, Carrefour and Polo.

The current market capitalisation stands at Rs 366.44 crore.

Category No. of Shares Percentage

Promoters 27,758,720 60.94

General Public 10,527,324 23.11

Other Companies 3,366,317 7.39

Foreign - NRI 2,465,880 5.41

Foreign Institutions 1,409,062 3.09

Financial Institutions 16,253 0.04

Central Government 5,500 0.01

Market Cap (Rs Cr) – 366.44

Company P/E (x) – 7.56

Industry P/E (x) – 19.06

Book Value (Rs) – 47.56

Price / BV (x) – 1.69

Dividend (%) – 12 %

EPS (TTM) – 10.64

Dividend Yield (%) – 1.49 %

Face Value (Rs) – 10

Share Holding Pattern Financial Details

Industry Overview

Denim is of the most promising category in India’s apparel market. In 2013, the denim market of India was

worth Rs.13,500 Cr. which accounts for 5 percent of the total apparel market of the country. The market is

projected to grow at a CAGR of 15 percent to become Rs.27,200 Cr. market in 2018.

The denim market in India is skewed towards men’s segments with 85 percent contribution coming from it.

Women’s denim segment contributes 9 percent to the market and the kids segment the rest 6 percent. The

women’s and kid’s denim segments are expected to witness higher growth rates due to their lower base and

increasing focus of brands and retailers on those segments.

In general the western lifestyle and western fashion has accelerated the trend of casualisation across the

globe. This trend has boosted the consumption of casual fashion apparel like denims, dress shirts, tees,

casual shirts among both men and women consumers in all developing countries including India. The average

number of denim items owned by Indian consumer is much lower in comparison to consuming market of the

United States, Europe etc. The number is even lower than countries like Brazil and China. This difference in

the number demonstrates the huge potential that exists for denim in the domestic market.

The value share of denim market is skewed in favour of mega metros and metros which account for almost

half of the total denim market at a share of 49 percent. Though the markets of other urban areas and rural

India contribute high in volume terms, their combined share in market value is only 51 percent. As the

penetration of denim category and the awareness of denim quality increases in those cities and rural India,

their share in market value will start increasing with more number of consumers willing to pay premium for the

quality, design and fit. In India unbranded denim products dominate the market with around 60 percent share

of the market. The share of brands in denim market stands at 40 percent. Most of the unbranded players

operate on the lower price segment of the market where awareness of quality of fabric, finishing and washes,

design and fit are relatively low.

Balance Sheet

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Sources Of Funds

Total Share Capital 45.55 45.55 45.55 45.55 45.55

Equity Share Capital 45.55 45.55 45.55 45.55 45.55

Reserves 170.96 138.04 113.38 99.88 82.54

Networth 216.51 183.59 158.93 145.43 128.09

Secured Loans 379.95 365.48 254.18 255.89 248.30

Unsecured Loans 8.59 0.00 0.00 6.34 19.34

Total Debt 388.54 365.48 254.18 262.23 267.64

Total Liabilities 605.05 549.07 413.11 407.66 395.73

Application Of Funds

Gross Block 668.81 513.80 433.47 366.79 271.79

Less: Accum. Depreciation 216.46 172.60 132.09 100.36 75.03

Net Block 452.35 341.20 301.38 266.43 196.76

Capital Work in Progress 0.00 54.06 4.67 14.55 65.96

Investments 4.16 0.37 0.28 3.41 3.41

Inventories 138.50 119.76 98.42 121.32 68.03

Sundry Debtors 121.42 91.17 69.47 55.01 128.35

Cash and Bank Balance 26.07 19.93 15.50 2.51 1.62

Total Current Assets 285.99 230.86 183.39 178.84 198.00

Loans and Advances 49.20 50.96 36.26 37.11 30.77

Fixed Deposits 0.00 0.00 0.00 5.29 3.22

Total CA, Loans & Advances 335.19 281.82 219.65 221.24 231.99

Current Liabilities 180.11 121.91 106.58 85.77 89.36

Provisions 6.55 6.46 6.28 12.18 13.02

Total CL & Provisions 186.66 128.37 112.86 97.95 102.38

Net Current Assets 148.53 153.45 106.79 123.29 129.61

Total Assets 605.04 549.08 413.12 407.68 395.74

Contingent Liabilities 101.39 107.69 58.07 42.73 5.61

Book Value (Rs) 47.53 40.31 34.89 3.19 2.81

Profit and Loss Account

Mar '14 Mar '13 Mar '12 Mar '11 Mar '10

Income

Sales Turnover 893.75 703.12 573.84 507.40 375.83

Net Sales 893.75 703.12 573.84 507.40 375.83

Other Income 3.99 1.53 4.82 1.03 -1.07

Stock Adjustments 12.17 37.59 -7.06 15.96 -6.82

Total Income 909.91 742.24 571.60 524.39 367.94

Expenditure

Raw Materials 658.31 542.71 408.65 397.77 258.21

Power & Fuel Cost 55.40 44.70 38.32 32.61 28.30

Employee Cost 31.04 25.44 19.23 14.70 13.02

Other Manufacturing Expenses 0.00 0.00 0.00 4.81 2.21

Selling and Admin Expenses 0.00 0.00 0.00 5.65 7.22

Miscellaneous Expenses 28.50 20.94 17.99 0.67 1.14

Total Expenses 773.25 633.79 484.19 456.21 310.10

Operating Profit 132.67 106.92 82.59 67.15 58.91

PBDIT 136.66 108.45 87.41 68.18 57.84

Interest 32.03 31.76 27.84 16.78 16.91

PBDT 104.63 76.69 59.57 51.40 40.93

Depreciation 49.73 40.92 33.26 25.36 22.60

Profit Before Tax 54.90 35.77 26.31 26.04 18.33

Extra-ordinary items 0.00 0.00 0.00 -0.13 -0.04

PBT (Post Extra-ord Items) 54.90 35.77 26.31 25.91 18.29

Tax 15.60 4.71 7.51 8.55 6.70

Reported Net Profit 39.31 31.05 18.79 17.35 11.58

Total Value Addition 114.94 91.08 75.54 58.44 51.89

Equity Dividend 5.47 5.47 4.55 0.00 0.00

Corporate Dividend Tax 0.93 0.93 0.74 0.00 0.00

Per share data (annualised)

Shares in issue (lakhs) 455.49 455.49 455.49 4,554.91 4,554.91

Earning Per Share (Rs) 8.63 6.82 4.13 0.38 0.25

Equity Dividend (%) 12.00 12.00 10.00 0.00 0.00

Dividend and Bonus History

Index and Company Price Movement Comparison

Symbol Value Action

RSI(14) 63.615 Buy

STOCH(9,6) 66.966 Buy

STOCHRSI(14) 78.714 Overbought

MACD(12,26) 4.940 Buy

ADX(14) 24.813 Buy

Williams %R -16.703 Overbought

CCI(14) 97.4447 Buy

ATR(14) 5.2893 High Volatility

Highs/Lows(14) 6.6357 Buy

Ultimate Oscillator 58.764 Buy

ROC 4.981 Buy

Bull/Bear Power(13) 7.0360 Buy

Technical Indicators

PBIT – 9.23 v/s 9.36

RoCE – 14.36 v/s 13.36

RoE – 19.65 v/s 16.25

Net Profit Margin – 4.37 v/s 4.40

Return on net worth – 18.51 v/s 16.91

D/E Ratio – 1.76 v/s 1.99

Interest Cover – 2.71 v/s 2.33

Current Ratio – 0.83 v/s 0.86

Reserves – 170.96 cr v/s 138.04

PAT – 39.31 cr v/s 31.05 cr

Total assets – 605.04 cr v/s 579.08 cr

Net sales – 893.75 cr v/s 703.12 cr

Book Value – 47.53 cr v/s 40.31 cr

Important Ratios(YoY)

Days BSE NSE

30 64.18 64.15

50 65.09 65.06

150 56.31 56.27

200 53.38 53.35

Simple Moving Average

Investment Rationalize

Nandan Denim Ltd. is one of India fastest growing denim manufacturer with a good product portfolio and an impressive

clientele which includes both major domestic and international players such as Spyker, Mufti, Gini & Jony Color Plus and textile

products manufacturers such as Tirupati Denim and Vardhaman Textiles and Ralph Lauren, Armani Exchange, Talbots, Calvin

Klein, Tommy Hilfeger, Target, Anntaylor, Carrefour and Polo and its current market capitalisation stands at Rs.366.44 crore.

NDL’s denim fabric manufacturing capacity has increased to 110 mmpa (mn metres per annum) – the highest in India. The

company plans to cater to the growing local and global demand with the expanded capacity.

Owing to lack of premium products and low export contribution, the company focuses primarily on the low-mid end of denim

fabrics where realisations range from 115- 130/metre (domestic market); premium products fetch realisations ranging from 160-

250/metre which will help to reduce market competition in the particular segment.

Increase in manufacturing cost in major denim manufacturing nations such as China and Pakistan will help the company to

explore more opportunities from around the world. The exports of its products to West and South East Asia, Europe, and the

Americas will add to the revenue and profits of the company.

NDL’s Revenue has grown at a CAGR of 18.9% and PAT has grown at a CAGR of 24.5% in the last five years, where the

industry was struggling a lot.

India is a country were majority of population is in between age group of 18-40 years as well as increase in per capita

expenditure in denims and per person usage of denims in India is far below when compared with other developing and

developed countries which will add to the growth prospects of the company.

Companies backward integration model and reduction in cotton prices and reducing cash conversion cycle and working capital

cycle will guarantee good profit margins and positive cash flow. And NDL’s order book ensures good and healthy sales and

growth of the company.

NDL’s have a healthy ROE of 19.65 % and Price to Sales Ratio stands at 0.41% which ensures the company is available at a

discounted price.