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In the post-quota regime, textile exports have become a common theme for players to post revenue growth and improve profitability.
Companies in the home textiles segment -- like Welspun and Alok Industries -- have done quite well. Vijayeswari Textiles, another home furnishings company, is now in expansion mode by raising funds through a public issue.
Vijayeswari is a vertically integrated manufacturer of high-end home textile products like bed linen. Its customers include some of the world's leading retailers such as Macy's, Kohl's and Laura Ashley. At Rs 81 crore in FY06, exports accounted for almost 87 per cent of its sales.
On the back of increasing export opportunity in the sector, Vijayeswari has aggressive plans to expand its existing capacities and participate in the growing the US and UK market for high-end home textiles. India's textile exports are expected to grow at 18.67 per cent a year to $50 billion by FY2012 as compared to $17.9 billion in FY06.
For this, Vijayeswari will invest Rs 260 crore, of which Rs 90 crore will come from the issue and the remaining Rs 170 crore from a term loan. It has plans to double its existing capacities across its spinning, weaving, processing and made-up facilities.
With these new capacities coming up by 2009, the company expects its turnover to increase significantly. Between FY02 and FY06, the total revenues of the company have only grown at 12.17 per cent a year, net profit is up 53.46 per cent.
As it has already done a turnover of Rs 71.58 crore in H1 FY07, the full year turnover is expected to be about Rs 140-150 crore with a net profit of Rs 16-18 crore.
The past performance has been a clear indication of better industry prospects and its ability to tap the US and the UK. But as it still generates about 76 per cent of its exports from the US and 16 per cent from the UK, its dependence on these two markets is a worry.
Moreover, a limited product offering and high client concentration also need a mention. It also faces stiff competition from China and Pakistan.
Though Vijayeswari is listed on Madras Stock Exchange, it is not frequently traded. With its fresh issue at a price band of Rs 115-130, the company will have a market cap of Rs 208-220 crore, about 1.5 times its estimated FY07 sales.
The issue price is at about 9 and 10 times estimated FY08 earnings at the lower and upper end of the price band. Compared to its peers like Alok and Welspun, which are trading at P/Es of 9-12 times for the past 12-months, Vijayeswari appears expensive.
