Sangam India Ltd.

Ajcon Global Services Ltd. research reports are also available on Bloomberg [AGSL<Go>]

Email: [email protected] Website: www.ajcononline.com

Akash Jain – MBA (Financial Markets)

-------------------------------

Research Analyst (Mentored by CA Ashok Ajmera, CMD)

=

Standalone - Financial Summary (Rs. crores)

Particulars FY14 FY15 FY16E FY17E FY18E

Revenues 1,433 1,469 1,633 2,069 2,409

Growth (%) - 2.3 11.1 26.6 16.4

EBITDA 202 220 277 360 424

OPM (%) 13.96 14.9 16.7 17.3 17.5

PAT 40.5 51.6 82 140 163

PAT (%) 2.80 3.48 4.94 6.7 6.7

EPS (Rs.) 10.27 13.08 20.84 35.5 41.44

P/E (x) 27 21 13 8 7

Equity cap. (Rs. cr) 39.42 39.42 39.42 39.42 39.42

Networth (Rs. cr) 331.4 371.7 436 567 721

Book Value (Rs.) 84 94 111 144 183

Price/Book (x) 3.29 2.86 2.43 1.87 1.47

Total Debt (Rs. cr) 590 615 726 785 674

D/E (x) 1.78 1.65 1.66 1.38 0.94

ROE (%) 12.22 13.87 18.81 24.67 22.66

Source: Company, Ajcon Research

Strong background Established in 1984, Sangam India Ltd. is the flagship company of Sangam Group a Rs. 4,000 crores + business conglomerate having diverse business interests across textiles, steel, infrastructure, power and energy sectors. Mr. RP Soni, Chairman & First Generation entrepreneur, leads the Group. Sangam ranks among the leading players in Indian textiles sector with presence in PV (polyester viscose), dyed yarn and fabrics. One of market leaders in PV dyed yarn with 25% share.Today, SIL is a leading manufacturer of PV yarn in India. The company is also present in the Indian synthetic blended fabric and denim segments with brands such as Sangam Suitings and Sangam Denim. Sangam also has garnered respectable market – share in denim segment within three years of commencement of production. Sangam was promoted as a fabric manufacturing unit, under the name of Arun Synthetics Pvt. Ltd, by Mr. R.P. Soni and Mr. S.N. Modani. The company took a strategic decision to backward integrate and forayed into spinning in 1995 by installing 17,280 spindles for manufacturing PV dyed yarn. Sangam‟s manufacturing facilities are located in Bhilwara, Rajasthan. As of FY15, the company has a spinning capacity of 211,296 spindles and 3,128 rotors; weaving capacity of 437 looms; and processing capacity of 53 mn meters P.A.

Largest largest producer of PV dyed yarn SIL is the largest producer of PV dyed yarn in Asia at Single location. SIL is a forerunner in manufacturing ready to stitch Fabric with the annual capacity to produce 24 million meters of fabric and 32 million meters of denim.

Marquee clients The company„s client base includes Raymond, RSWM, Banswara Syntex, Donear, Siyaram and Grasim. It has a network of 100 dealers and 1,000 retailers across India.

CMP Rs. 276.60

Target Price Rs. 497

Upside 80%

Time horizon 1 year

Basis of

valuation

FY18 Estimated

Financials

Beta vs Sensex 0.80

BSE Code 514234

Bloomberg Code SNGM.IN

Reuters Code SANG.BO

52 Week

High/low Rs. 290/Rs. 68

Face Value Rs. 10

Share Capital Rs. 39.4 crores (FY15)

Total Debt Rs. 615 cr (FY 15)

Market

Capitalization Rs. 1,089 cr

Book Value Rs. 104.5 per share as

on H1FY15

Shareholding

Pattern (%) As on Sep 2015

Promoters 47.35

FIIs 3.00

DIIs 4.03

Others 45.62

Price Performance (%)

1M: 9.7%, 3M: 38%, 6M: 134%, 12M: 247%

Investor‟s Delight: Sangam India Ltd. (SIL) ”BUY”, 26th November,2015




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Domestic Clientele: Raymonds, Siyaram Silk Mills, Grasim Bhiwani Textile, BSL Ltd., Donear Industries, S. Kumar Nationwide, Shri. Dinesh Mills, RSWM. Overseas Cientele: Bossa Ticaret Ve Sanayi Islatmeleri (Turkey – PV Dyed Yarn), Oguz Textil (Turkey – PV Dyed Yarn), Baekart (USA – PV Dyed Yarn), TBM Textil bezero De Menezes (Brazil – PV Grey Yarn), Vanden Berghe Roger NV (Belgium – Carpet Yarn), EDPA (USA – Cotton Yarn, Knitted fabric), Melmar Knit Wear Company (Egypt – Cotton Yarn)

Foray in Seamless Wear garment segment to improve margins Recently, SIL has forayed into seamless garments for women under Channel Nine brand. For this segment, the Company has latest world class seamless technology imported from Italy. Having established its presence across the value chain, its foray into branded seamless garments not only will enable it to extend its value proposition directly to consumer segments through its own brand; but more importantly pave way for improving margins going forward. Given the explosion of demand in the women-wear segment, Channel Nine would offer diverse range at affordable price across customer segments. Channel Nine range comprises an exquisite range of seamless garments for women including Intimate wear (seamless bra and panties), Active wear (seamless sports bra and leggings), Yoga wear (Yoga T shirt, Yoga Legging, Yoga Track Pant) Shape wear (low compression and high compression),

Casual wear (leggings and tanktop), Outwear, products for fitness, shaping and technical products. Apparels with performance features like odour resistance and moisture management find loyalty with customers. The rising per capita income and change in lifestyle has increased demand for quality products. However, with the increasing exposure to international fashion trends, the Indian consumer today wants more than just need – based clothing. In addition to old parameters like basic functionality, comfort and price, better look, perfect fit and trendiness have also become key purchase parameters. Innovations in casual wear products are primarily related to product design, color selection options and fiber mix. SIL is also leveraging its existing channels of distribution as well as initiating newer channels (online) to capture the market share in Rs.15,000 crore domestic apparel industry. SIL has introduced seamless garment manufacturing facility with 36 seamless knitting machines with current capacity to produce 3.6 mn pieces per annum which will eventually scale up to 10.8mn units by FY18. The steady increase in the operating margin percentage is mainly due to the higher margins in the seamless garments business. Key clients in Seamless Garments include Nike, Urban Yoga, JC Penny and many other reputed players.




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Competition Mapping (Product & Price)

Brand Sports

Wear

Inner

Wear

Casual

Wear

Shape

Wear

Night

Wear

Swim

Wear

Men‟s

range

Seamless

range

Pricing

Channel

Nine

√ √ √ √ - - - √ Rs. 299

onwards

Enamor √ √ - √ √ - - - Rs. 199

onwards

Amante - √ - √ √ - - - Rs. 395

onwards

Zivame √ √ √ √ √ √ - √ Rs. 400

onwards

Adidas √ - - - - - √ √ Rs. 800

onwards

Nike √ - - - - - √ √ Rs. 800

onwards





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Successful backward integration The company has successfully modified their capacities, thereby resulting in better integration and efficiency in the value chain. Today, its denim fabrics and seamless garments rely minimally on the externally sourced raw materials. In the past four years, their in-house consumption of PV yarn has grown from 5% in 2010-11 to 18% in 2014-15. At the same time, they consume about 50% of the cotton yarn captively, despite nearly doubled capacities in the past four years. SIL is initiating further investments in yarn and fabric capacities to ensure complete integration of the textile value chain in the coming years. Investments in capacities lead to scale. However, they have continued to focus on reducing controllable costs to improve their profitability, despite regular expansion.

Impressive financial performance and strong cashflows Sangam has witnessed a topline compounded annual growth rate (CAGR) of 11% in its revenues and 25% in its net profits over the last five years. In the same period, it has invested close to Rs300 crore in capex (forward and backward integration) but reduced its debt/equity ratio to 1.43x in FY2015 from over 3.6x in FY2010 due to focus on cash inflows. The return ratios have also improved consistently with return on equity (RoE) and return on capital employed (RoCE) at over 15% in FY2015 from less than 10% in FY2010. The significant improvement and consistency in its financial performance is driven by its efforts to continuously move in backward-forward integration.

Stock Price Movement

Recommendation & Valuation Sangam being probably the only Company which has all the segments of textiles industry including seamless women which has value addition. With due consideration to factors like a) Company managed by very well qualified, experienced and dedicated professional management, b) a fully corporate governance compliant Company with full transparency, c) diversified product mix with market leadership in most of its products, c) foray into seamless female garments segment with its own brand of “Channel Nine” which will add tremendous value to the Company, d) impressive financial performance with strong cash flows, e) prudent debt management – debt/equity to improve to 0.94x by FY18E from current 1.65x in FY15 inspite of expansions for capacity additions, f) ROE set to improve from 13.87% to 24.67% in FY17E, g) stock attractively trading at cheap valuations of 7x at estimated FY18 EPS, hence we recommend a “BUY”. We value the stock at Rs. 497 (by assigning a multiple of 12x (which is appropriate considering the strengths of the Company and its market leadership) at FY18E EPS of Rs. 41.44.




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360 degree Bird‟s eye view of Sangam

Particulars Yarn Fabric

Revenue share PV Yarn – 45%

Cotton Yarn – 12%

PV Fabric – 18%

Denim – 19%

Geographic presence

(by revenue share)

Domestic – 78%

Exports – 22%

(Asia, Latin America, Europe,

Middle East)

Domestic – 75%

Exports – 25%

(Asia, Latin America, Europe,

Middle East)

Market position ~25% share in the Indian

dyed PV yarn market as

indicated by management

Fast growing branded player

in a highly fragmented

industry with a large number

of unorganized players

Industry growth

expectations

(in volumes) for 2012-13

to 2017-18E

Blended yarn: 5.5-6.6%

Cotton Yarn: 3.5-4.5%

Domestic RMG segment: 5-

6% CAGR

End market Synthetic and cotton fabric

manufacturers

Synthetic garments and

apparel manufacturers

Sales growth

(FY11-15 CAGR)

PV Yarn – 1.7%

Cotton Yarn – 10.7% (due to

higher internal consumption)

Total Yarn: 3.2%

PV Fabric: 9.3%

Denim: 19.1% CAGR

Total Fabric: 13.9%

Margin drivers Demand conditions

Cost of raw material, PSF

and VSF

Cost of substitute, cotton

yarn

Cost of raw material,

Backward integration: Yarn

produced in – house meets

the entire requirement for

denim fabric

Key risks Fashion and behavioural

changes

Volatility in prices of PSF and

VSF

High dependence on key

vendors for PSF and VSF

requirements

Recent entrant in the

branded fabric space. As a

result, it faces stiff

competition from established

brands.





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Investment Rationale

1) Strong Q2FY16 result and FY15 performance

(Rs cr) Q2FY16 Q2FY15 %yoy Q1FY16 %qoq

Total Income from Operations

401.0

370.8

8.2

366.6

9.4

Material costs

(235.8)

(226.4)

4.2

(196.3)

20.2

Changes in inventory

17.2

16.6

4.0

1.8

842.1

Power and Fuel

(44.1)

(42.4)

(40.4)

Empolyee benefit expenses

(35.4)

(30.0)

18.1

(33.1)

7.1

Other expenditure

(41.2)

(34.9)

17.9

(36.8)

11.8

Operating profit

61.7

53.7

15.0

61.9

(0.2)

OPM (%)

15.4

14.5

91.9

16.9

(8.8)

Depreciation

(19.3)

(19.2)

0.6

(20.4)

(5.4)

Interest

(16.3)

(16.3)

0.3

(17.6)

(6.9)

Other income

1.9

0.5

289.8

2.1

(9.5)

PBT

28.0

18.7

49.7

26.1

7.6

Tax

(9.4)

(6.8)

38.6

(8.9)

5.6

Effective tax rate (%)

33.4

36.1

34.0

(1.8)

Other provisions / minority etc

-

-

-

Adjusted PAT

18.7

12.0

56.0

17.2

8.5

Adj. PAT margin (%)

4.7

3.2

142.7

4.7

(0.8)

Equity capital 39.4 39.4

0.1 39.4

0.1

FV 10.0 10.0

- 10.0

-

No. of equity shares (cr) 3.9 3.9

0.1 3.9

0.1

EPS for the quarter

4.74

3.04

55.9

4.37

8.5


Commenting on the results, Mr. R.P. Soni, Chairman, SIL said “I am happy to present yet

another robust quarterly performance for our Company. Commodity prices continue to soften globally

over the last couple of months and yet we have managed to contain its impact on our revenues. “




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According to the management, its strategy to increase focus on exports seems to be yielding better-

than-expected results, with SIL‟s overall exports reporting a sharp jump of 46% YoY and 49% QoQ.

What is even more encouraging is that this growth was witnessed in all three categories; with Yarn

exports registering a growth of 18% YoY (72% QoQ), Denim exports reporting a growth of 1250% YoY

(40% QoQ) & PV Fabric exports reporting a growth of 15% YoY (29% QoQ).

These results are in line with our strategy to increase the export of value added products in lieu of

lower margin yarn export. Going forward our focus will continue on increased integration and higher

export, enabling further margin improvement, said Mr. R.P Soni, Chairman.

The management is delighted to have received an encouraging response to its recent foray into

seamless garmenting (July 2015). What enthuses is that this response is despite the fact that SIL is yet

to fully roll out its brand and marketing campaigns. Till date, it has already appointed 600 MBOs (Multi

Brand Outlets) all over India and intend taking this network to 1,000 by the end of this financial year.

As also, the Company is on track to set up 8-10 EBOs (Exclusive Brand Outlets) by the end of this

financial year. The Company is hopeful of a much higher revenue contribution & better operating

margin from this segment going forward.

The management remains committed to steer the Company towards higher profitability. Its efforts are

to see that the Company steadily migrates to newer, value added, product segments. While the

Company has already started benefitting from the move into specialty denims, SIL intends to make

aggressive inroads into the domestic lingerie retail market through its brand Channel Nine.

As a Company, it has always been our endeavor to grow but without compromising on quality.”

concluded Mr. R.P. Soni, Chairman.

FY15 Performance

2014-15 was also the first full year of operations post SIL‟s exit from the toll collection business. The

decision to exit the unrelated business was painful momentarily – then resulting in the loss of earnings

and subsequently hitting its profitability. But it also enabled it to focus more intensively on its area of

expertise. The Company witnessed a 2.5% increase in net revenues, from Rs. 1432.61 crore in 2013-

14 to Rs. 1468.66 crore in 2014-15. The company reported a net profit of Rs. 51.57 crore, accounting

for an increase of 27.3% against Rs. 40.50 crore in 2013-14. The EBIDTA of the company also

improved by 11.1% to Rs. 217.39 crore in 2014-15 against Rs. 195.74 crore in 2013-14.

The company has managed to reduce the debt burden during the year under review; the impact of

which is going to be visible in the coming year. In addition, the company also forayed into branded

seamless garment segment. This segment offers a huge potential, given the company‟s robust and

integrated business model coupled with high demand in the woman intimate wear as well as active

wear segments

Expansion in FY15

The Company successfully implemented its project of Rs. 76.50 crores for installation of 36 nos.

Machines for manufacturing of seamless garment, 10080 spindles for manufacturing of cotton yarn and

56 weaving machines for denim fabric weaving.




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Planned Capex to drive growth..

The Company is executing an expansion project having outlay of Rs. 198 crores upto June 2016 being

part funded by Term Loans of Rs. 157.50 crores and balance from internal accruals. The project

envisages installation of 26,736 spindles on P/V Dyed Yarns, 74 Imported Airjet Shuttleless Weaving

Machines, One Denim Line and 2 mw Solar Power Plant. The Project activities are in progress as per

schedule.

Break up of Capex:

Location Type of capex Amount (Rs. cr)

Biliya Kalan, Bhilwara One Denim Processing Line 19.12

Biliya Kalan, Bhilwara One Air Texturizing machine

and other balancing machines

6.41

Biliya Kalan, Bhilwara One Denim Processing Line 15.9

Sareri, Bhilwara 4 Knitting Machines and other

balancing machines

6.47

Soniyana, Chittorgarh Installation of 26,736 Spindles

for PV Dyed Yarn

116

Atun, Bhilwara Weaving – 74 machines 46.75


2) Presence across the value chain – from yarn to branded garments

The company has progressively invested in its capacities across product segments and ensured

better integration. Currently, the company produces 32 million meters of its denims mainly through

captive consumption of its cotton and PV yarns.

3) Wide product range

The company offers a wide variety of yarns – from cotton to PV to textured. At the same time, the

company has indigenously developed ability to deliver large quantities with virtually any shade of

colour. It has a colour bank of more than 5,000 shades and produces 6-50 counts of yarns. It offers

single ply, double ply, grindle, roving grindle, core spun, slub and other fancy yarns, making it a one-

stop shop for fabric manufacturers. The company has also partnered various brands to introduce new

varieties of man-made fibres, adding considerable value to its products.

4) Established global footprints

SIL‟s fascination for quality has enabled it to even meet the requirements of most demanding clients

across relevant markets - evident by their continued improvement in export revenues. They have

established footprints across key markets including Turkey, Portugal, Egypt, China, Poland, Brazil,

Germany, Belgium, Chile, Italy, Australia, Japan, UK, USA UAE, South Africa, etc.

These associations have also enabled them to gain traction for newer products and thereby optimise

their distribution costs. At home, they have traditionally enjoyed longstanding relationships with their




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dealers and retailers. The Company has a robust network of 100 dealers and 1,000 retailers – giving

them access to majority of Indian consumers.

This has also become the foundation for their newly launched consumer-facing product brand – Channel

Nine. Most of the credible retailers have posed immense faith in their product quality and enabled them

create initial buzz for the brand at much lesser cost. They, on the other hand, have also played a crucial

role in the pre-development stage for the brand –offering them vital inputs and understanding of the

evolving consumers, which is instrumental in the brand‟s acceptance among the target audiences. In

the coming years, they expect to launch more consumer brands and product lines by marrying their

understanding of product, processes, quality fascination and the intelligence bestowed upon them by

their credible distribution network.

5) Quality Research & Development

Sangam‟s hallmark of offering of quality products is evident in the increased market share, the repeat

clientele and the customer loyalty that its products command. The company has not only invested in

state ofthe art machines offering latest technology; but continued to expand its dedicated and fully

equipped quality control department over the years. In addition, Sangam‟s units are equipped with

world-class and advanced quality testing equipment like Uster tester, evenness tester and hairiness

tester – all of them ensure that the yarn produced is free of neps and other faults like low strength,

colour-fading, low strength, unevenness in colour, etc. Owing to its ability to offer consistent quality,

the company‟s yarns command a premium at key markets. The company employs strict quality checks

across its units including colour fastness test, light fastness test, rubbing fastness test, pilling test,

residual shrinkage test, checking of cloth construction parameters and the comparison of the finished

fabric with the customer‟s specifications. Sangam‟s research teams constantly try to develop new and

value-added products and introduce colour shades to suit the end use of its customers. The units are

equipped with worldclass labs, advanced equipment and qualified professionals to ensure fast

turnaround of new products.

6) Overall good performance of all the segments

Yarn division

Yarn Division: The flagship division, Sangam Spinners is one of the largest manufacturers of polyester

viscose dyed yarn in South Asia. An ISO 9001: 2008 organization is reckoned as market leader in PV

dyed yarn segment. The company today has more than 200,000 spindles and 4,000 rotors to produce

polyester, viscose dyed and its blended yarn and 100% cotton Yarn which gives annual production of




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73,000 M tons. Major part of the total yarn production consists of all varieties of P/V dyed yarns used in

the manufacture of suiting, shirting, knitting and carpet. The division is also known for producing and

exporting high quality cotton from S-6 Quality. Equipped with the latest technology and driven by a

dedicated team of professionals, the Company has been maintaining its leadership position since over a

decade.

Exporting to Major Countries: SIL exports to Argentina, Bangladesh, Belgium, Brazil, Colombia,

Chile, Egypt, Germany, Iran, Italy, Nepal, Poland, Portugal, Romania, South Africa, Spain, Switzerland,

Turkey, Ukraine, USA, Morocco, New York, Peru, Philippines, Syria, Canada, Egypt, Slovenia and Sri

Lanka.

Global Edge:

1) Catering to more than 28 countries

2) 3 star export house status

3) One of the largest PV Dyed yarn manufacturer in Asia.

4) Vertically Integrated Composite Mill leads to complete textile solution

5) Among India's Top 500 Global Organizations

Product Range & Capacity:

Product Range Count Production Capacity

Per Annum

Dyed Yarn Polyester/ Viscose, Polyester 100%, Viscose 100% dyed yarn.

Knitting yarn, Weaving yarn, Slub yarn Elitwist yarn, Sewing thread and Carpet yarn. Jumbo winding Machine to produce package up to 5 kg. yarn with Spandex/ Lycra.

From 10s to

50s in single and double.

42,000 M Ton

Raw White Polyester/ Viscose, Polyester 100%, Viscose 100% raw white yarn. Knitting yarn, Weaving yarn, Elitwist yarn, Sewing thread & Slub yarn in raw white.

From 30s to 40s in single and double.

6,000 M Ton

Cotton Yarn(Ring spg)

100% cotton yarn by using only Shankar-6 cotton. Knitting yarn, Weaving yarn, Elitwist yarn, Compact yarn & Slub yarn.

30s to 40s in combed

7,000 M Ton

Cotton Yarn(Open

End)

100% Cotton OE yarn. Produce on ACO-8 (SE20) machine. From 6s to 20s in carded

18,000 M Ton

Knitted Fabric

Single Jersey, RIB and Interlock with and without Lycra. 18 Machines 3,000 M Ton

PV Yarn segment: The Company‟s yarn production stood at 40,921 MTPA and actual sales stood at

34,161 MTPA. Inter division stood at 16.5% of production up from 5.4% in FY11. FY15 topline from PV

Yarn stood at Rs. 682.08 crores. With increasing applications (earlier used predominantly for

bottomwear) in summer suits, carpets, socks and knitted fabrics would drive demand for this product

The Company targets to increase in-house consumption (up from 15% currently, to 30% in the year).

Forward integration to value added fabric is the way forward for the Company in this segment to

improve realizations and thereby improving margins from PV segment.




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Cotton Yarn segment: The Company‟s yarn production stood at 17,925 MTPA and actual sales stood

at 9,568 MTPA. Inter division stood at 46.6% of production. Buoyancy in domestic demand, increased

usage in readymade garments, increased consumption of denim fabric, growing income level and

urbanization and penetration of organized retail will drive the demand for this segment.

Fabric division

The fabric division of Sangam is equipped with latest technology and state of art computerised

designing looms like high speed Air Jet looms (Models includes Somet Mythos, Toyota Tappet &

Jacquard, Picanol & Tsudakoma), P7100 Sulzer Tappet & jacquard Looms and Dornier Jacquard Looms

to produce one of the finest fabric in Polyester/ Viscose, Polyester/ cotton, Pure Cotton, PV Lycra and

Polyester woollen segment. The division has 251 LOOMS with Annual production of 30 Million meter

fabric. The Product range includes: Polyester/ Viscose

Polyester/ cotton

PV Lycra

Polyester woollen

Processing: Sangam Processors holds significant market share in processing PV, PC and cotton fabric.

The division is equipped with latest machinery like Automatic Jigger, Cold Pad batch machine, Jet

Dyeing & Beam Dyeing machines and Kier decatising and Super Finish machine. The division has annual

production capacity of 54 Million Meter Fabric.

There is virtually no shade, tint or hue that isn't enhanced by Sangam Processors, a vast range from

the softest pastels to the most vibrant hues. Sangam processors has also introduced many specialized

finishing like Teflon Finish, Chiller Finish, Enzyme Finish & Perfume Finish.




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PV Fabric: For FY15, Fabric production stood at 22.747 Million Mtrs. Per annum (MMPA) and actual

sales stood at Rs. 22.153 MMPA. FY 15 revenues from PV Fabric stood at Rs. 216.52 crores. Increasing

use in summer suits, women bottom wear, knitted fabrics would result in increased demand for PV

fabric. The Company‟s strategy going ahead would be to increase exports by introducing value added

exports.

Denim Segment

The modernized plant of denim with the annual production of 40 million meter fabric is equipped with

latest sheet dyeing ranges & finishing ranges. The plant is well equipped to produce fabric like SBIT,

IBST, Indigo of any caste, Pure Indigo shade of 0.5% to 4.5% & sulphur dyeing.

The plant has a facility to produce over-dyed fabric as well as finishes like Flat finish or required hand

feel.

The fabric is available from 5 Ozs to 15 Ozs and contains OE slub, Ring slub, Silkies, Mix count, multi

count, stretch, and poly weft- all in international quality standards with well experienced &

knowledgeable technical team.

Denim Fabric: At present, the Company has a Denim Capacity of 32 mn mtrs p.a as against Arvind

108 mn mtrs p.a, Nandam Denim (110 mn mtrs p.a post expansion) and other global peers like

Vicunha Textiles (230 mn mtrs. P.a.), ISKO (200 mn. Mtrs. P.a) and Tavex (160 mn. Mtrs. P.a.)

Denim plant heads does not see any bottlenecks in Denim plant with regards to production, availability

of raw material, labour unrest etc.

SIL believes Denim to be at the forefront of their growth strategy. The management is firming up their

plans to expand the capacity in the denim segment.

The Management expects growth coming from Denim segment especially interior of India (i.e rural

areas) as its affordable, longer durability and value for money.

In addition, given their demonstrated expertise in product innovation, they are expanding the product

range to include variety of finishes, processes and value-added products. Having received initial success

at the exports arena, they also intend to increase their exposure to exports. In addition, post Channel




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Nine, they are gearing up to introduce denim garments under their in-house brand, which will further

establish their leadership in the attractive segment going forward.

Indian Denim Sector

India is the second-largest producers of denims after China. 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.

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.

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.

The emergence of semi-urban clusters, areas having less number of farming communities, across the

country has opened a plethora of opportunities for regional brands and retailers. A typical denim

consumer of the semi-urban cluster demonstrates a blend of the characteristics of urban and rural

consumers; like an urban consumer he or she shows awareness of brand and product quality and like a

rural consumer pricing and affordability plays a crucial role in his or her purchase decisions.

Denim market - Key demand driving factors

1) An aspiration youth (15-29 year olds) with higher spending power than previous generations,

which make 26 percent of the consuming population.

2) A wide range of consumer segment that consider denim as an apparel of choice owing to its

comfort and style.

3) Favoured preference for denim amongst youth owing to its versatile association.

4) Increasing usage of denim products by women and youth in smaller cities and rural India.




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Key trends

1) In India most of the denim manufacturers focus on the domestic markets as the value

realisation remains higher in domestic market than in export markets.

2) In the recent times the industry has witnessed entrance of new fabric manufacturers which

is expected to make the market for denim fabric more price competitive in the coming

years.

3) Cotton remains the fibre of choice in denim apparel. In blended denim fabrics polyester is

being used as weft threads.

4) The demand for stretch denim is growing at a faster rate in India market due to its comfort

and fit characteristics.

5) The colour of denim jeans is no longer limited to traditional blue colours. Indian youth has

started accepting denim in different colours including green, red, yellow etc.

Seamless Garments Division

a) Seamless Garments capacity – 9,000 pieces capacities per day

b) The Seamless Garment division has 36 machines imported from Italy which requires

minimal man power and is fully computerized. The designs are feeded into the system by

the designer. Workforce is trained to handle the complexity of the equipments.

c) Key raw material – Nylon 6.6 yarn (superior to Nylon 6 and polyester) is imported from

Thylon and Dupont. At present there are no major producers in India for Nylon 6.6.

Recently, Sarla Performance Fibers has set up Nylon 6.6 pilot plant.

d) At present, Seamless garments under the brand “Channel Nine” are available at 650 Multi

– Brand Outlets (MBOs).

e) The Company plans to have 10 stores (Exclusive Brand Outlets) in the state of

Maharashtra, Gujarat Karnataka and Andhra Pradesh to create Brand Awareness as

customers can feel the high quality product.

f) The Company had consulted a PR agency for signing a brand ambassador but the PR

agency suggested the Company to take a year‟s time to smoothen operations. Overall, the

Company expects to develop the brand in next two years. According to the Management,

once the stability is achieved, the Company may sign a brand ambassador.

g) One store would be ideally have an area of 350-800 sq. ft.

h) Capital Expenditure of one store would be around Rs. 50 lakhs

i) The Company plans to produce 3 mn pieces by FY16 and expects a growth rate of 100%

for initial 3 years. Post 3 years, the Company expects to witness a growth rate of 18-20%

in Seamless garments segment.




-------------------------------


Seamless technology benefits Seamless Garment technology is advancement in apparel industry which eliminates the fabric

laying, cutting and sewing process.

By eliminating the cutting and sewing process, complete garment knitting provides a variety of

advantages in knitting production such as saving in cost and time, higher productivity, quick

response production, homogeneity and other advantage.

a) Reduced labour costs

b) Fewer machines

c) Smaller work space

d) Lower energy costs

e) Reduce yarn and fabric inventory

f) Quicker samples

g) Production of complete garment

h) Engineered features like compression, ventilation

i) Just in time production

Benefits

Appearance &

performance

Design, flexibility & styling

Better fit & support

Comfort &

durability




-------------------------------


B2B TO B2C

A new aspirational brand “Channel Nine” launched

1) Foray into the women‟s branded apparel – intimate, active & casual wear category.

2) Innovative first-of-its-kind „seamless technology‟ introduced in the country.

3) Present manufacturing capacity of 3.6 mln units p.a.

4) Latest world class seamless technology imported from Italy.

5) Leveraging „made in India‟ to tap export markets

Brand Story

Channel nine clothing is designed to provide the woman of today, ultimate freedom of movement,

comfort, fit and an enhanced fashion quotient, as she rushes about her daily business.

A) Target group

Channel Nine Woman is independent.

She is always on the move

Fashion and fitness are her way of life

Her clothes are effortless

The Next Big Step…




-------------------------------


B) Consumer Preference

a) Change in the lifestyle

b) Performance features like odour resistance & moisture management

c) Not very price sensitive

d) Better look, perfect fit, trendiness are key purchase parameters

C) Selection Criteria

Fit, Quality, Style, Emotional Connect, Price

Proposed Marketing Activities for Seamless garments

Promotional / mass media ATL

a) Display ads

b) PPC

c) Social media paid ads

d) Contexts

Online, digital & social media

a) Mainline dailies

b) Lifestyle magazines

c) Radio

d) TVC

City specific promotions

a) OOH

b) Ground activations

c) Local FM

d) Messages/ whatsapp

In store branding/ visual merchandising

a) Special offers

b) Promotions

c) Sponsored ads




-------------------------------


4 Pronged Strategy for Seamless Garments Division

1) Exclusive Brand Outlets

a) 10 Exclusive outlets targeted to be launched by March 2016.

b) Asset light, franchisee model to be adopted.

2) Multi Brand Outlets

a) 400 Multi Brand outlets across 24 states

b) 1,000 stores targeted

c) Tie up with Central (Future Retail)

d) In discussions with other large retailers

3) Private Label

a) In discussions with overseas retailers

b) In Licensing opportunities via JVs, being explored from Poland, USA and Australia

4) E – Commerce

a) Company portal

b) Tie ups with E – Commerce majors like Flipkart, Amazon, ebay, Sanpdeal, Paytm,

Fashiontech, Belletouch.

EBO MBO

Private Label

E-Commerce




-------------------------------


7) Prudent Financial Management

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 TOTAL

PAT (RS.

Crs.)

14 25 27 5 -16 17 57 17 51 41 52 290

CFO (Rs.

Crs.)

20 16 -20 59 110 64 75 209 155 163 136 987

CFO/PAT

(X)

1 1 -1 11 -7 4 1 12 3 4 3 3

Prudent cash flow management

Aids in deleveraging…

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Eq

(rs.

Crs.)

78 137 188 193 177 190 240 252 298 331 372

Debt

(rs.

Crs.)

185 312 645 730 693 693 718 652 564 498 535

D/E

Ratio

(X)

2 2 3 4 4 4 3 3 2 2 1

Despite addition in gross block…

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Gross

Block

(Rs.

Crs.)

269 354 528 705 877 891 924 1059 1087 1114 1218




-------------------------------


Industry Overview - Domestic apparel

Domestic Apparel

a) Indian domestic apparel market garners $41 bln

b) 9% CAGR over 2013E – 2023E

c) Highly fragmented with only 19% of sales coming from organized sector

d) Women‟s wear market is largely dominated by unorganized players e) Women‟s tops and shirts market is expected to post a CAGR of 12%

f) While women‟s t-shirt and casual wear is expected to post 15 % CAGR.

Indian inner wear

a) One of the high growth categories in the apparel market

b) Category growth is an impressive 12% CAGR

c) Present size: Rs. 15,870 crore (US$2.9 bn)

d) Expected size: Rs. 27,900 crore (US$5.1 bn)

e) The women‟s innerwear segment contributes 60% to the market approximately

Indian active wear

1) India‟s market for sportswear garners US$7.3 bn

2) It is expected to have grown @33% p.a. between 2010-2014

3) Some of the few trends supporting this growth are :

a) Increased media coverage of sports

b) Success of top Indian athletes

c) Investment into sports infrastructure

d) Participation from women




-------------------------------


Products

Product – wise Revenues (FY15)

PV Blended Dyed/Grey Yarn

Cotton Spun Yarn

Cotton Open End Yarn

Texturised Yarn

Synthetic Blended Fabric

Seamless garments

45%

12%

18%

19%

6%

PV Yarn Cotton Yarn Woven Fabric & Processing Denim Fabric Others




-------------------------------


Locations

Current Capacities

a) Spindles - 211,296/55000 MTPA

b) Open End Rotors - 3,128/14000 MTPA

c) Knitting Machine - 18/3000 MTPA

d) Texturising Machines - 3/7200 MTPA

e) Weaving Machines - 437/50 MMPA

f) Process House - 53 MMPA

g) Seamless Garment Knitting Machines - 36 mn pcs. p.a

h) Coal Based Captive Thermal Power Plants – 31 MW

i) Captive Solar Power Plants – 1 MW

j) Wind Power Plants at Jaisalmer – 5 MW

Sangam (India) Ltd., Bhilwara

Weaving, Processing and Seamless

Garment Plant (Atun)

Denim Plant (Biliya Kalan)

Spinning Plant Unit -I (Biliya Kalan)

Spinning Plant Unit -II (Sareri)




-------------------------------


Plant visit photos




-------------------------------





-------------------------------


Export Markets

Geography wise Revenues

USA UK China Egypt

Poland Brazil Belgium Chile

Italy Spain Australia Japan

South Africa UAE Turkey Portugal

78%

22%

Domestic Export




-------------------------------


Industry Basics Ring Spinning Open Spinning

Bobbin rotates constantly for insertion of

twist

Spool does not need to be rotated to insert

twist

Cannot handle spools of bigger size Much larger spools can be wound

Can spin finer yarns 3-5 times faster than ring spinning

Uniform and strong yarn Uniform but flexible yarn with better dye

ability

Combed yarns (finer) Carded yarns (coarser)

Yarns for varied applications Yarns for heavier fabrics such as denims etc.

Stronger 20% more twisted but 15-20% weaker as

the yarn is coarser

Suitable for all staple fibers Not suitable for man-made staple fibre

spinning except rayon as the fibre finish

clogs the rotor


Difference between Spinning and Weaving

Spinning and weaving are two steps in the production of textiles. The most basic difference

between them is their process and purpose. Spinning is the process of making thread out of raw

fibers. Weaving is the process of taking threads and making them into cloth.

To make threads, a person would need to take the raw materials (wool or cotton, for example)

and spin them. This was done with a spindle or distaff in ancient times and then eventually

through the use of a spinning wheel.

But that only gives you a single thread. In order to make cloth, many threads must be woven

together. This process requires a loom. In weaving, a single thread is interlaced over and over

again with a set of threads that run the other way. When this has been done enough times, the

result is a piece of woven cloth.

So spinning is an earlier step in textile production--the purpose is the making of thread. Weaving

is a later step--the purpose is the making of cloth.




-------------------------------


Difference between Knitting and Weaving

Knitting and weaving are the two different processes to produce knitted and weaved fabric. In

modern times, both types of fabrics have a great demand in the market. The manufacturing

process of this both types is different from one to another

Knitting: The process in which fabrics are produced by set of connected loops from a series of

yarn in weft or warp direction is called knitting. Knitted fabrics are produced by knitting

technology. Different types of knitted fabrics are produced by the knitting machine.

Weaving: The process in which fabrics are produced by interlacing two sets of threads according

to design is called weaving. Weaved fabrics may be in grey, stripped or colored form. Different

types of designed fabrics are produced by the weaving technology.

Knitting Weaving

Knitted fabrics are produced by set of

connected loops from a series of yarns

Woven fabrics are produced by interlacing

two types of threads

One set of yarn is used in this method Two sets of yarn is used for this method

Do not require sizing Sizing is required before weaving

Yarn preparation is not so necessary Yarn preparation is must

Production capacity of knitting is more Production capacity of weaving is less than

knitting

Production cost of knitting is less than

weaving cost

Production cost of weaving is higher than

knitting

About 52% fabrics are produced by knitting

technology in textile section

About 48% fabrics are produced by weaving

techniques in textile section

Knitting is done by loop formation Weaving is done by shade formation

Elastic property of the knit fabrics are higher

than woven fabric

Elastic property of the woven fabrics are less

than knitted fabric

Dimensional stability is lower than woven

fabric

Dimensional stability is higher than knitted

fabric





-------------------------------


Industry Overview

Global Textiles and Apparel Market

The global trade of textile and garments was approximately US$781 billion in 2013. This is almost

4.6 per cent of the trade of all commodities, which is estimated at approximately US$17 trillion.

From 2008 to 2013, the global textile and garment trade has grown at a CAGR of 4 per cent. The

current global garment market is estimated at approximately US$1.15 trillion which form nearly

1.8 per cent of the world GDP. Almost 75% of this market is concentrated in Europe, USA, China

and Japan. An analysis of per capita spends on garment in various countries shows a significant

difference between numbers in developed and developing economies.

Within the major markets, India has the lowest per capita spend on garment ($37) which is only 3

per cent of the highest one viz. Australia ($1,131).

The top five textiles and garment exporting nations are China, India, Italy, Germany and Turkey.

China is the single largest exporter with 39 per cent share while India stood at a distant second

place with 5 per cent share.

The top five textiles and garment importing nations are US, China, Germany, Japan and United

Kingdom. USA is the largest importer with a share of 17 per cent of the total global trade. The

Indian textile and garment industry has an important presence in the country‟s economy through

its contribution to industrial output, employment generation, and the export earnings. It

contributes almost 5% to the $ 1.8 trillion Indian economy whereas its share in Indian exports

stands at a significant 13 per cent. India is the second largest

exporter of textile and garment goods with a global trade share of approximately 5 per cent.

Indian Textile Industry

1) India is the world‟s second largest producer of textiles and garments.

2) Strong presence in entire textile value chain – vertically and horizontally integrated – from

fibres to fashion.

3) Contributes about 11% to industrial production, 14% to the manufacturing sector, 4% to

the GDP and 12% to the country‟s total export earnings.

4) India accounts 63% of the market share of textiles and garments.

5) India is the 2nd biggest producer of silk and cotton Indian textile industry accounts for

about 24% of the world‟s spindle capacity and 8% of global rotor capacity.

6) India has the highest loom capacity (including hand looms) with 63% of the world‟s market

share.




-------------------------------


7) India accounts for about 14% of the world‟s production of textile fibres and yarns (largest

producer of jute, second largest producer of silk and cotton, and third largest in cellulosic

fibre).

Traditionally Indian textile and apparel manufacturing industries have been cotton focused. Even

today, cotton has more than a 60 per cent share compared to 40 per cent share globally. But this

scenario is changing fast. Manufacturers, as well as brands, are increasingly looking towards other

fibre options, mainly polyester. With the increase in the „Value Retailing‟ format in the domestic

market and increased demand for synthetic fibre-based products from global brands and retailers,

demand for polyester is set to grow.

Cotton

1) Production of raw cotton grew to 37.5 mln bales in FY14, up from about 28.0 mln bales in

FY07, a CAGR of 4.3%

Man Made Fibre

1) During the period of FY07-FY14, production increases at a CAGR of 1.7% and stood at

1.28 MT in FY14

Yarn

1) Production of yarn grew to 5.3 MT in FY14 from 3.8 MT in FY07, implying a CAGR of 4.9%

2) Cotton yarn accounts for the largest share in total yarn production; in FY14, the segment‟s

share amounted to 74%

Fabric

1) Fabric production rose to 63,319 MSM (million square metre) in FY14 from 52,665 MSM in

FY07, implying a CAGR of 2.7%

2) The major segment in FY14 is cotton yarn, which accounted for more than 56%

Exports have been a core feature of India‟s textile and trade apparel sector, a fact

corroborated by trade figures Exports grew to ~$32 bln in FY13 from ~$18 bln in FY06,

implying a CAGR of ~9%.




-------------------------------


Strengths

1) Third largest producer of cotton in the world

2) Fifth largest producer of man – made fibre and yarn in the world

3) Vertical and Horizontal integrated textile value chain

4) Strong presence in entire textile value chain from raw material to finished goods

5) Globally competitive spinning industry

6) Average cotton yarn spinning cost at US$2.5 per kg which is lower than all the countries

including China

7) Low wages: rate at 0.75 US$ per operator hour as compared to US$1 of China and US$ 3

of Turkey

8) Unique strength in traditional handlooms and handicrafts

9) Flexible production system

10) Diverse design base

Weaknesses

1) Structural weaknesses in weaving and processing

2) 2 percent of shuttle less looms as a percentage of total looms as against world average of

16 percent and China, Pakistan and Indonesia 15 percent, 9 percent and 10 percent

respectively.

3) Highly fragmented garment industry

4) Except spinning, all other segments are predominantly in decentralized sector

Key schemes

1) Technology Upgradation Fund Scheme has infused investment of more than Rs. 2,500 Bn

in the industry. Support has been provided for modernization and upgradation by providing

credit at reduced rates and capital subsidies.

2) Scheme for Integrated Textile Parks provides world class infrastructure to new textile units.

To date, 57 Textile Parks have been sanctioned with an investment of Rs. 60 Billion. By

2017, 25 more Textile Parks are to be sanctioned.

3) Integrated Processing Development Scheme for sanctioning processing parks has been

initiated. Rs. 5 Bn has been earmarked for this scheme.




-------------------------------


4) Integrated Skill Development Scheme has provided training to 1.5 Million people to cover

all sub-sectors of textiles such as Textile and Apparel, Handicrafts, Handlooms, Jute and

Sericulture.




-------------------------------





-------------------------------


About the Management

We recently visited all the plants of the Company and found that the Company has experienced,

qualified, enthusiastic, dynamic team where in each head of the Department works like an Entrepreneur

and adds value to the Company. We were enthused by the spirit and motivation of the team.




-------------------------------


Past Financial Performance

Profit & loss (Last 5 years)

(rs. Crs) Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 5 yr

CAGR

Sales 852 1,172 1,417 1,479 1,433 1,433 12%

Expenses 722 971 1269 1270 1244 1260

Operating

Profit

131 201 148 208 188 217 11%

Other

income

7 8 13 13 13 3

EBIDT 138 209 160 221 202 220 10%

Depreciation 63 64 68 77 74 80

EBIT 75 145 93 144 127 140

Interest 48 57 67 69 66 67

PBT 27 88 26 75 61 73

Tax 9 27 9 24 21 23

PAT 17 57 17 51 41 52 25%





-------------------------------


Balance Sheet Highlights (last 5 years)

(rs. Crs) Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15

Equity

share

capital

39 39 39 39 39 39

Reserves 150 200 213 258 292 332

Secured

loans

671 673 577 564 498 535

Unsecured

loans

22 45 75 - - -

Total 882 958 904 862 829 906

Debtors 131 159 125 175 201 252

Inventory 177 238 202 214 234 265

Debtor

days

56 50 32 43 51 62

Inventory

turnover

5 5 7 7 6 6

ROE 9% 26% 7% 19% 13% 15%

RoCE 9% 16% 10% 16% 15% 16%





-------------------------------


Financial Highlights


11721417 1479 1433 1469

0

500

1000

1500

2000

2010-11 2011-12 2012-13 2013-14 2014-15

Revenues (Rs. cr)

Revenues (Rs. cr)

194

155

214196

217

0

50

100

150

200

250

2010-11 2011-12 2012-13 2013-14 2014-15

EBITDA (Rs. cr.)

EBITDA (Rs. mn)

57

17

51

41

52

0

10

20

30

40

50

60

2010-11 2011-12 2012-13 2013-14 2014-15

PAT (Rs. cr)

PAT (Rs. cr)

14.40

4.30

13.00

10.30

13.10

0.00

5.00

10.00

15.00

20.00

2011 2012 2013 2014 2015

EPS (Rs.)

EPS (Rs.)




-------------------------------


The big picture Background integration

Increase yarn capacity (PV & cotton)

a) To meet in-house consumption

b) To augment integration capabilities

c) To maintain market leadership status

Forward integration

a) Increase denim (fabric) manufacturing capacity

b) Explore opportunities into denim garmenting, affordable price points, focus on high growth

domestic market

c) Focus on increased exports of fabric

d) Foray into manufacturing of seamless garments

e) Strong focus on the new vertical (channel nine), multi-pronged strategy

f) Asset light retailing venture, tight control over costs

g) Explore in-licensing opportunities with global brands, via JVs

Results

a) Changing business model to insulate company from biz cycles

b) Moving up the value chain

c) Improved revenue growth

d) Much better margins




-------------------------------


Peer Comparison

With regards to peer comparison, there is no single Company which has all the

segments of textile industry. However, we have made an attempt to compare Sangam

India with other companies segment wise.

For Yarn and Fabric division, we felt appropriate to compare it with Sutlej Textiles,

Banswara Syntex and RSWM

Particulars Sangam India Sutlej Textiles

Banswara

Syntex

RSWM

Promoters Shareholding 47.35% 63.83% 59.10%

CMP 276 509.9 97 310

FV (Rs.) 10 10 10 10

EPS (TTM) 16.26 68.55 2.85 44.44

Book Value (Rs.) 105 341 134 187

P/E (x) 17 7.4

34 7

P/BV (x) 2.5 1.50 0.72 1.66

Net Sales (Rs. cr) 1,469 1,878 1,231 3,003

EBITDA (Rs. cr) 220 232 141 346

EBITDA Margin (%) 14.9 12.4 11.5 11.5

PAT (Rs. cr) 52 115 8 85

PAT Margin (%) 3.48 6.15 0.65 2.8

Market Cap (Rs. cr) 1,088 835.36 164.21 718

Equity Capital (Rs. cr) 39.42 16.38 16.43 33.4

Networth (Rs. cr) 372 558 221 442

Total Debt (Rs. Cr) 615 522.64 565.97 1,119

Market Cap/Sales (x) 0.74 0.44 0.13 0.24

D/E (x) 1.65 0.94 2.57 2.53

ROE (%) 13.87 20.68 3.64 19.2

Enterprise Value (Rs. cr) 1597 536 565 1832

EV/EBITDA (x) 7.3 2.3 4 5.3





-------------------------------


Peer comparison

For Denim division, we felt appropriate to compare it Nandan Denim and Arvind

Particulars Sangam India Nandan Denim Arvind

CMP(Rs.) 276 135.6 298.1

Face Value (Rs.) 10 10 10

Book Value (BV) (Rs.) 105 57 100

P/BV (x) 2.5 2.4 2.99

Market Cap (Rs. cr) 1,088 618 7,698

Net Sales (Rs. cr) 1,469 1,097 5,225

Market Cap/Sales (x) 0.74 0.56 1.47

EBITDA (Rs. cr) 220 165 827

EBITDA Margin (%) 14.9 15 15.8

PAT (Rs. cr) 52 51 377

PAT Margin (%) 3.48 4.6 7.2

EPS (TTM) (Rs.) 16.26 12.96 12.62

P/E (x) 17 10 24

Total Debt (Rs. cr) 615 423 2,503

Equity Capital (Rs. cr) 39.42 45.55 258.24

Networth (Rs. cr) 371.7 259 2,577

D/E (x) 1.65 1.63 0.97

Enterprise Value (Rs. cr) 1,597 981 10,117

EV/EBITDA (x) 7.3 5.9 12.2

ROE (%) 13.87 19.7 14.6





-------------------------------


Peer comparison

For Seamless Wear segment especially inner wear segment and host of other garments,

we felt appropriate to compare it Page Industries and Lovable Lingerie

Particulars Sangam India Page Industries Lovable Lingerie

CMP(Rs.) 276 12,803 245.5

Face Value (Rs.) 10 10 10

Book Value (BV) (Rs.) 105 347 110

P/BV (x) 2.5 37 2.23

Market Cap (Rs. cr) 1,088 14,280 412

Net Sales (Rs. cr) 1,469 1,543 172

Market Cap/Sales (x) 0.74 9.25 2.40

EBITDA (Rs. cr) 220 319 24

EBITDA Margin (%) 14.9 20.67 13.95

PAT (Rs. cr) 52 196 19.7

PAT Margin (%) 3.48 12.7 10.6

EPS (TTM) (Rs.) 16.26 193.03 12.95

P/E (x) 17 67 19

Total Debt (Rs. cr) 615 134.4 5.49

Equity Capital (Rs. cr) 39.42 11.15 16.8

Networth (Rs. cr) 371.7 386.76 185.10

D/E (x) 1.65 0.35 0.03

Enterprise Value (Rs. cr) 1,597 14,409 416

EV/EBITDA (x) 7.3 12,923 248

ROE (%) 13.87 50.6 10.65





-------------------------------


Standalone Profit and Loss Account (Rs. crores)

Particulars

2012-13

2013-14

2014-15

2015-16 2016-17

2017-18

Aud. Aud. Aud. Esti. Proj. Proj.

Domestic Revenue 1184 1122 1173 1330 1767 2107

Export Revenue 301 342 330 340 340 340

Gross Revenue from Operation

1485 1465 1504 1670 2107 2447

Less: Excise Duty 6 32 35 37 38 38

Net Revenue from Operation

1479 1433 1469 1633 2069 2409

Other Income 12 13 11 24 15 17

Total Revenue 1491 1445 1480 1657 2084 2426

Growth (%) 2 12 26 16

Raw material 834 827 855 923 1208 1400

(Increase)/ Decrease in Inventories

-17 -11 -7 -21

Store & Spares 45 47 47 53 59 64

Power & Fuel 143 139 156 173 193 207

Salary &Wages 94 105 119 132 148 159

Other manufacturing Exp. 119 83 33 36 52 67

Administrative 13 15 16 17 23 29

Selling Expenses 39 38 42 46 61 77

Total 1270 1244 1260 1380 1724 2002

PBDIT 221 202 220 277 360 424

Interest :Term Loan 38 32 29 30 32 30

:Working Capital 31 34 39 38 39 27

Depreciation 77 74 80 80 101 109

Prov. For Book debts. 0 0 0

Profit before tax (PBT) 75 61 72 129 188 259

Income tax 24 21 21 47 48 95

Net Profit 51 41 52 82 140 163





-------------------------------


Standalone Balance Sheet (Rs. crores)

Particulars

2012-13

2013-14 2014-15

2015-16 2016-17

2017-18

Aud. Aud. Aud. Esti. Proj. Proj.

Liabilities

Share Capital 39 39 39 39 39 39

Reserves & Surplus 258 292 332 397 528 682

Term Loan 343 275 257 332 386 370

Unsecured Loan/FD

Other Long term Liabilities 49 46 42 40 40 40

Bank Borrowing 220 222 277 330 344 238

Term Loan install. In Next Year

99 93 81 64 55 66

Sundry Creditors 64 71 75 75 94 107

Other Current Liabilities 58 59 73 83 87 91

Total 1131 1097 1177 1361 1573 1634

Assets

Gross Fixed Assets 1093 1125 1218 1396 1519 1596

Less:Depreciation 501 574 653 733 833 943

Net Fixed Assets 592 551 566 663 686 653

Non Current Assets 29 37 40 40 40 40

Inventory 214 234 265 265 358 402

Debtors 166 189 232 254 338 377

Other Current Assets 123 83 70 90 102 111

Cash & Bank Balance 8 3 4 48 49 50

Total 1131 1097 1177 1361 1573 1634

TNW 297.85

331.44 371.70

436.71

567.15

721.02

Debt/Equity 2.22 1.78 1.65 1.66 1.38 0.94

Current Ratio 1.16 1.14 1.13 1.19 1.46 1.87

FACR 1.34 1.50 1.67 1.68 1.56 1.50

TOL/TNW 2.80 2.31 2.17 2.12 1.77 1.27

DSCR 1.56 1.07 1.24 1.64 2.74 3.46





-------------------------------


Recommendation parameters for fundamental reports:

Buy – Absolute return of 20% and above Accumulate – Absolute return between 15% and above

Book profits: On achieving the price target given in the research report for a particular Company or on a occurrence of a specific event leading to change in fundamentals of the Company recommended

Disclosure under SEBI Research Analyst Regulations 2014:

a) Analyst holding: No

b) Company holding: No c) Directors holding: No d) Group/Associates Position: No e) Relationship with management: No f) Any Compensation Received by our Company/Associate during the last 12 months: No g) Our Company/Associate have managed the public offering of securities for the subject

Company in the past 12 months: No

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Analyst Certification

I, Akash Jain MBA (Financial Markets), research analyst, author and the names subscribed to this report,

hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. I also certify that no part of compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view (s) in this report.

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