Shivalik Global Ltd - Rs.27.00

Established in 1997, Shivalik Global Ltd. (SGL) a vertically integrated multi-product company covering the entire textile value chain starting from the processing of yarn to the manufacture of readymade garments, has grown at an enviable pace and is today placed in the select club of textile export oriented units in the country. Besides its own manufacturing for direct exports, SGL is also acknowledged as a leading processor. Its apparel & export division exports 100% of its production to USA, EU, Canada, and non-quota countries. PVH, Arrow, Woolrich, Motherhood, BHS, John Forsyth, Basic Red are few of its international customers.

SGL’s manufacturing plant in Faridabad has complete in-house divisions for knitting, dyeing and processing, yarn dyeing, woven process, sewing thread and garments manufacturing and equipped with modern technologies. To increase its production capacity and fund its expansion plan, SGL raised Rs.60 cr. in March’06 through an IPO. But instead of undergoing an expansion, it took over an existing 6-year old integrated textile unit, Shyam Tex International, at book value for a consideration of Rs.25.70 cr. and paid through a mix of cash and stock. With this acquisition, its annual production capacity gets enhanced to 3.9 million pieces of garments, 58 million metres of dyeing, printing and processing of woven fabric, 5400 MT of knitting & 8200 MT of dyeing and processing of knitted fabrics. Moreover, SGL is re-locating its plant for which it is acquiring 15 acres of land from the Government of Haryana and has already made 10% initial payment amounting to Rs.1.51 cr. Thereafter, its Faridabad land of 5 acres, which is situated in a prime location, will be developed for commercial use.

With such large integrated facilities, creative designs, product development, strong marketing network and a large pool of technical and managerial talent, SGL is well poised to capitalise on the unfolding opportunities in textiles and knitted garments both in the domestic and global markets. Incidentally, after hitting a high of around Rs.90, the share price has tumbled down sharply due to the poor market sentiments. However, the company is quite good fundamentally and is estimated to report sales of Rs.300 cr. and profit of Rs.13 cr. for FY07 on consolidated basis. This works out to an EPS of Rs.5 on its expanded equity of Rs.26 cr. Considering SGL’s plan of developing its Faridabad property, which may fetch around Rs.350 cr. in FY08 or FY09, the scrip is grossly undervalued at the current market cap Rs.75 cr. Investors are strongly recommended to buy at current levels because even if we exclude the real estate story, the scrip has the potential to touch Rs.40 (40% appreciation) in a year’s time.