Shri Lakshmi Cotsyn - 110.00 Rs

Incorporated in 1988, Shri Lakshmi Cotsyn Ltd. (SLCL), erstwhile Shrivatsa International Ltd., is engaged in manufacturing blended suitings & shirtings, cotton fusible interlining, quilted/embroidered fabrics and specialized technical fabrics for defence/paramilitary forces. It also has a sophisticated processing & dyeing unit specializing in Vat & Disperse dyes apart from a coating plant to coat polyurethane on fabrics and make them waterproof or water repellant. The company also has in-house rotary printing machines for printing various types of fabrics. SLCL specializes in manufacturing bulletproof jackets with advanced technology using aramid fabric and UHMPE sheets to produce hard armour plate, which meets the requirement of NIJ threat level 3. Recently, the company has undergone a huge expansion of more than Rs.250 cr. to become a major textile player.

SLCL had a facility to manufacture 18 million (mn.) metres of suiting shirting, 10 mn. metres of cotton sheeting processing; 1.2 mn. metres of embroidered and quilted fabrics and 2.5 mn. metres of industrial fabrics for defense and others. Now it has set up a new plant spread over an area of 48 acres in Fatehpur, Uttar Pradesh, which has a capacity to produce 20 mn. metres of denim, 12 mn. metres of wide width sheeting, 6 mn. metres of cotton suiting (heavy weight bottom wear fabric) and 3000 tonnes of terry towels in a year. The commercial production has begun and it is expected to operate at optimum levels in FY08. Besides, it is also putting up a captive power plant and a captive yarn- dyeing unit with a peak capacity of 1500 MTPA. Notably as a step towards forward integration, SLCL is setting up the garment manufacturing unit at Rorkee in Uttaranchal with a capacity of 10,000 trousers, 5,000 shirts and 5,000 ladies wears per day. Lately, it has also decided to establish a nylon project with a capacity of 8.55 mn. metres p.a. at Fatehpur only for manufacturing nylon coated fabrics and furnishing fabric both woven as well as knitted. Few months back, SLCL entered into a joint venture with an UK based company to carry on the business of manufacturing armour plates, panels, helmets, ballistic body amours etc. and similar safety/security related equipments for the domestic as well as global markets. The manufacturing unit of this JV will be established at Fatehpur in U.P. In short, the company is on a strong trajectory of growth with the impact of expansion kicking in every quarter.

To fund its expansion plan, the company made a preferential allotment of 37 lakh shares and 11 lakh warrants at Rs.129 per share apart from debt. Couple of days earlier, it reported stunning numbers for the March 2007 quarter and reported 65% jump in sales of Rs.154 cr. whereas net profit almost tripled to Rs.12 cr. and registered 18% OPM against 8% in the last fiscal. It will be interesting to see if the company can maintain such a high profit margin in future also. On a conservative basis, for the year ending June 2007, it can clock a turnover of Rs.550 cr. and profit of Rs.35 cr. This translates into an EPS of Rs.24 on its diluted equity of Rs.14.80 cr. For FY08, however, inspite of high interest cost and depreciation it may report sales of Rs.725 cr. with net profit of Rs.45 cr. i.e. EPS of Rs.30. Interestingly, Reliance Capital is holds 9% stake through preferential allotment since the last one year. Investors are, therefore, recommended to buy this scrip on sharp declines with a price target of Rs.210 in 12 months.