15 One size fits all?
What sets S Kumars apart from other textile companies is the fact that it is the only one present in all textile product lines. Analysts are divided over the extent of benefits that can come from such a policy. According to Sejal Doshi analyst at domestic securities firm, Angel Broking, the foray of S Kumars into home textiles may require new capacities, but their experience in textiles will make the task easier. A Mumbai-based textile analyst points out that venturing into new products will require its own time, going up the learning curve. Garments are a labour-intensive business that requires basic technology. Whereas, home textiles is capital-intensive and requires advance planning; it cannot be set up piecemeal. The disadvantage of getting into many product lines is that it will consume more management time and resources. Moreover, the clients for garments and home textiles are different and so may not bring any synergies. Peers Abhishek Industries and Welspun have already established themselves in home textiles, while Arvind Mills has established itself as a garment player. A positive fallout of more product lines is hedging of risk. Emerging opportunities
While there are lingering doubts about the company's business strategy, analysts believe that the business it is in, offers a huge potential for growth. According to a report by Angel Broking, domestic textile sector is preparing to capitalise on the opportunities opening up in post-quota regime, by banking on its self-sufficiency in cotton and cheaper skilled labour. Analysts note that India is emerging as an alternative to China for buyers from western countries. This is because buyers don't want to keep all their eggs in one basket. Moreover, unlike China, there is no excess capacity in India, which will ensure that whatever is produced will be sold. However, analysts note that the competitiveness of Indian companies will depend on pricing. More importantly, there is a huge opportunity waiting to be tapped in the domestic sector. The per capita cloth consumption in India is just about four metres at present, compared to 40 metres in US. Kasliwal points out that 70 per cent of Indians are below 35 years and considering the fact that they are likely to be the main consumers going forward, the growth potential is enormous. A turnaround story
What is going for the company is that it has been able to engineer a turn around in its financial performance in the recent past. After a tumultuous period when it saw its losses mounting, S Kumars has managed a turnaround in its financial performances. The company posted a net profit of Rs 17.50 crore for the June 2005 quarter compared to a loss of Rs 33.7 crore in the corresponding previous quarter. Net sales also grew 29 per cent to Rs 206 crore, while operating profit showed a 172 per cent growth to about Rs 23 crore.
| FINANCIALS | |||||
| (Rs crore) | JQ05 | JQ04 | % change |
FY05 (6 months)* |
FY 04 (12 months ended Sept) |
| Net sales | 205.90 | 159.30 | 29.25 | 344.53 | 615.00 |
| Other income | 2.10 | 0.94 | 123.40 | 4.30 | 6.90 |
| Operating profit | 22.91 | 8.43 | 171.77 | 27.75 | 32.00 |
| OPM (%) | 11.13 | 5.29 | 8.05 | 5.20 | |
| Net profit | 17.45 | -33.73 | 151.73 | 9.15 | -19.00 |
| NPM (%) | 8.47 | - | - | 2.66 | - |
| EPS (Rs) | 1.08 | - | - | 0.59 | - |
| P/E (12 month) |
11.7x | ||||
