Gokaldas Exports hits 20% upper circuit on Atraco acquisition

Shares of Gokaldas Exports hit a new high of Rs 735, as they surged 20 per cent on the NSE in Tuesday’s intra-day trade after the company through its wholly-owned subsidiaries has entered into an agreement to acquire Atraco Group (Atraco), a leading manufacturer of apparel with a strong market position and customer relationships across the US and Europe.

At 09:55 AM; the stock was quoted 19 per cent higher with trades of around 29.70 lakh shares on the NSE. Meanwhile, the benchmark Nifty 50 was up 0.2 per cent at 19,350. 

Atraco operates with a network of four manufacturing units in Kenya and one in Ethiopia producing about 40 million garments annually. Their product range includes shorts, pants, shirts, t-shirts, blouses and dresses catering across age groups.

Atraco Group’s revenue was approximately $107 million with a profit after tax of $7.2 million for the calendar year 2022.

Gokaldas Exports in an exchange filing said the equity value of the transaction is $55 million (Rs 450 crore) and the same will be funded by a mix of debt and internal accruals. The transaction will comprise of acquisition of shares and assets and will be subject to customary regulatory approvals. The transaction is expected to be closed by Q3FY24 (Oct-Dec 23).

The deal is executed at a reasonable valuation of ~8x P/E. The same will be funded by a mix of debt and internal accruals. With this acquisition company will gain access to low-cost duty-free locations for manufacturing, according to ICICI Securities.

Gokaldas Exports is a leading readymade garment manufacturer and exporter in India, engaged in the business of design, manufacture and sale of a wide range of readymade garments for men, women and kids, for all seasons.

The long-term prospect for the industry remains strong with the continuing shift of global sourcing away from China, supplier consolidation towards efficient and well-capitalized players, and supply side instabilities in several countries, the company’s management said in the Q1-FY24 earnings conference call.

Favourable currency, production-linked incentive (PLI), and free trade agreements (FTAs) with key markets should drive the company to a strong future. The India-UK FTA negotiations have made good progress. India is also negotiating FTA with Canada and EU. All of these moves have the potential to open up large markets for preferential trade, Gokaldas Exports said.