A GROWTH SHARE FOR
INVESTMENT
Yogindera
Worsted
Limited
PUBLIC ISSUE OF 60,00,000 EQUITY SHARES OF
RS.10/- EACH FOR CASH AT A PRICE OF RS.24/-PER EQUITY SHARE (INCLUDING SHARE
PREMIUM OF RS.14/- PER EQUITY SHARE) AGGREGATING TO RS.1440 LACS ("THE
ISSUE") THE FACE VALUE IS RS.10/- PER EQUITY SHARE AND THE ISSUE PRICE OF
RS.24/- PER EQUITY SHARE IS 2.4 TIMES OF THE FACE VALUE.
ISSUE OPENS ON JANUARY 16, 2007
ISSUE CLOSES ON JANUARY 22, 2007
Company is engaged into production of Acrylic and blended yarns, which are used by the manufacturers of Apparels, Hosiery, Woollen Knitted Garments, Furnishing Fabrics, Industrial Fabrics, Carpets, Bedding & Upholstery and Blankets etc. The product range of Company consists of: 1. High Bulk Dyed Acrylic Yarn 2. High Bulk Dyed Acro woollen Blended Yarn 3. Chenille Yarn 4. Fancy Polyester Yarn like Buckley yarn 5. Injected Slub Fancy Yarn and 6. Space Dyed Yarn. Most of the yarn manufactured by our Company is dyed in fiber stage, resulting in good quality, which in turn leads to excellent color fastness. The yarns manufactured by us are knotless. Company has repeated orders from its existing customers
EXCELLENT TRACK RECORD FOR QUALITY & TIMELY
DELIVERY
Company has built a track record
for quality products and timely delivery. Our Company has been able to
retain customers and further strengthen the relationship by providing them
end-to-end solutions for their requirements. Strategic Sourcing being most
important element in the spinning industry, Company has diversified
competencies in this area by maintaining good and cordial relations with the
suppliers. We are equipped with latest machines and equipment to
scientifically monitor labour productivity. Company has always maintained
cordial relationship with its labour and there has been no labour unrest
since inception. Company is diversifying into production of ready to wear
garment with a capacity of 2.52 Lacs pieces per annum. As a matter of
strategy, company has been working to enlarge its client base and product
range, which may reduce dependency on few customers. Company has
successfully implemented expansion plans in the past without time or cost
Overruns / escalations. With the removal of quota restrictions on textile
products, Company is in a better position to expand its base in the existing
foreign markets and penetrate/ search for newer markets due to high standard
quality products manufactured by us.
Company has been keeping pace with the technological advancement taking place in the industry and from time to time had installed machines with latest technology, procured from reputed overseas suppliers. Recently, Company has imported and installed Fancy Twisting Machine from China, wherein various types of Fancy Yarns of high value additions are made.
STRONG FUNDAMENTALS
The net worth Company before the
issue is Rs.1585.21 Lacs as at 31st March, 2006.
The cost per share to the promoters is Rs.10.00 per share and the book value
per share is Rs.17.81 as on 31stMarch, 2006.
EXPANSION IS THE KEY TO SUCCESS
These yarns are utilized in
apparels, undergarments, Terry Towels, Denims, Medical Fabrics, Furnishing
Fabrics and Industrial Fabrics. Company’s unit is the latest Worsted
Spinning unit to produce single and double yarns for hosiery as well as
weaving purposes. Company has installed plant & machineries imported from
renowned Textile Machinery Manufacturers like Rieter (Switzerland), Savio
(Italy), Mayer & Cie (Germany), Schlafhorst AG & Co. (Germany), Truetzschler
(Germany) and Elitex (Czechoslovakia). Company has also installed plant &
machineries purchased from Laxmi Machine Works, Kirloskar Toyota Textile
Machine & Zinser Textile System. In addition to worsted spinning, Company
has a range of fancy yarn machines and are equipped with 100% yarns/ fibers
dyeing facilities for running a textile unit, manufacturing pre-dyed worsted
woollen /acro woollen yarn with 6,475 spindles. The Company has an existing
installed capacity of 2,695 MTS (6475 spindles) per annum. Company is going
in for further capacity expansion of 825 MTS (3200 spindles). Accordingly,
the total capacity post expansion will be 3,520 MTS (inclusive of 435 MTS of
Fancy yarn for which Industrial License in not required) (9675 spindles) per
annum. Company also proposes to set up a unit having capacity of
manufacturing 2.52 Lacs pieces of garment per annum. Company has
continuously expanded and modernized its facilities in line with the
industry trend, which has been supported by term loans from Financial
Institutions and Banks under Technology Up-gradation Funds Scheme (TUFS)
introduced by Government of India.
EXPERIENCED PROMOTERS
The promoters have more than 14
years of experience in the textile industry. The promoters have latest
market information and technology availability in their unit and have been
continuously updating the manufacturing capacities and capabilities of their
unit over the last few years, so as to keep pace with developments and
ground market requirements in the textile industry. Company has recruited
qualified textile engineer with more than 30 years of production experience
in spinning industry. Company has successfully implemented expansion plans
in the past without time or cost Overruns / escalations.
EXPORTING TO APPAREL & GARMENT INDUSTRY
Company exports worsted yarns and
knitted fabrics to countries like Kenya, South Africa, United Kingdom,
Maruitius, Spain and others. Its customers are in apparel and garment
industry, industrial fabrics, furnishing fabrics, towels, Denims etc. At
present, its exports are restricted to around 9 -10 countries only, which
leaves more scope for company to develop new markets and to increase its
presence accordingly. Further, with the phasing out of quota restrictions,
company expects to achieve high growth rate by taping the global markets in
the coming years. Company offers a large variety of synthetic blended yarns
in acrylic, polyester, and chenille for textile end uses and industrial
applications.
OBJECT OF THE ISSUE
The Objects of the issue are to
raise capital aggregating to Rs.1440.00 Lacs for financing the fund
requirement of Rs.1598.70 Lacs for the project. The proposed project of our
Company includes expansion in the production capacity by addition of 825 MTS
(3200 spindles) per annum to its existing capacity of 2695 MTS (6040
spindles) and setting up a unit for manufacture of ready to wear garment
with annual capacity of 2.52 Lacs pieces. The fund requirement includes
Rs.150.00 Lacs for Building, Rs.610.70 lacs for Plant and Machinery,
Rs.174.00 lacs for Misc.fixed assets, Rs.55.00 lacs for Contingencies,
Rs.15.00 lacs for Preliminary & pre-operative expenses, Rs. 144.00 Lacs for
Public issue expenses and Rs.450 00 Lacs as margin money for Working
Capital. The object of the issue also includes creating a public trading
market for the Equity shares of our Company by listing them on the Stock
Exchange. We believe that the listing of our Equity Shares will enhance our
viability and brand name and enable us to avail of future growth
opportunities. The Main Object Clause of the Memorandum of Association of
the Company enables us to undertake the activities for which the funds are
being raised in the present issue. Further, we confirm that the activities
carried out until now is in accordance with the object of Memorandum of
Association of the Company.
Cost of Project and Means on Finance
Cost of Expansion / Diversification
Amount in Rs. Lacs
Sr. Particulars Spinning Garmenting Total cost
No. Section Section
1 Building 131.10 18.90 150.00
2 Plant & Machinery 410.70 200.00 610.70
3 Miscellaneous Fixed Assets 122.00 52.00 174.00
4 Contingencies 40.00 15.00 55.00
5 Preliminary & Pre-Operative Expenses 15.00 0.00 15.00
6 Public issue expenses 144.00 0.00 144.00
7 Margin Money for Working Capital 450.00 0.00 450.00
Total 1312.80 285.90 1598.70
Means of Finance
Amount in Rs. Lacs
Sr. Particulars Amount
No.
1 Share Capital – Public issue 600.00
2 Share Premium 840.00
3 Internal Accruals 158.70
Total 1598.70
BASIS FOR ISSUE PRICE
QUALITATIVE FACTORS
Promoters and top management have
several years of experience and expertise in their domain. The day to day
affairs of Company are looked after by qualified and experienced key
personnel from varied areas, under the supervision of Jt.Managing Director.
Company has been making profits consistently since last 5 years. The Profit
after tax of Company has grown from Rs.71.72 Lacs on March 2003 to Rs.295.28
Lacs in March 2006 at a CAGR of 60.27 %. The Sales of Company has grown from
Rs.2,471.37 Lacs as on March 2003 to Rs.4,072.49 Lacs as on March 2006 at a
CAGR of 18.12 %. Company has, in the past implemented expansion plans as per
the schedule without time or cost overruns. Company will have benefit of
economies of scale with the total installed capacity increasing from 2695
MTS (6475 spindles) to 3520 MTS (9675 Spindles) post expansion.
QUANTITATIVE FACTORS
Information presented in this section is derived from the audited financial
statements,
The adjusted profit for last five years is given hereunder:
Amount in Rs. Lacs
Particulars 30/09/06 31/03/06 31/03/05 31/03/04 31/03/03 31/03/02
Adjusted Profit 171.84 297.14 273.42 88.81 72.19 91.51
Earnings per Share
Year EPS (Rs) Weight
2003-04 1.01 1
2004-05 3.14 2
2005-06 3.32 3
2006-07 (6 months) * 3.86 –
Weighted Average 2.88
* Annualised
31
Price Earning Ratio (P/E) in relation to the issue price of Rs.24/- per
share
Based on 2005-06 EPS of Rs.3.32 7.23
Based on weighted average EPS of Rs.2.88 8.33
Industry P/E
Particulars P/E Ratio
Highest 10.50
Lowest 4.30
Average 9.80
(Source: Capital Market June 5 – June 18, 2006 )
Return on Net Worth
Year Net Worth Net Profit RONW
Weight
Rs. in Lacs Rs. in Lacs Company
(%)
1. 2003-04 1011.50 88.02 8.70 1
2. 2004-05 1298.91 274.61 21.14 2
3. 2005-06 1585.21 295.29 18.63 3
4. 2006-07 1751.73 171.84 19.62 * -
Weighted Average RONW 17.81
-
Annualised
Minimum RONW required for maintaining pre issue EPS
Minimum return on total net-worth needed after issue to maintain, pre-issue
EPS of Rs.3.32 is 13.99%
Net Asset Value (NAV) per share
Particulars NAV Company
Rs.
Net Asset Value as on March 2006 17.81
Net Asset Value after issue 20.30
Issue Price 24.00
The Issue Price of Rs.24/- per Equity Share is determined on the basis of
the above ratios, is justified
4. The ratios of some of the companies in the same industry group are as follows:
Company EPS(in Rs.) P/E Ratio RONW (%) Book Value (Rs)
APM Industries Ltd 9.40 4.30 12.50 75.10
Deepak Spinners Ltd. 8.10 4.50 10.90 78.90
Hanil Era Textiles Ltd. 3.30 10.10 9.80 33.80
Priyadarshani Spinning Mills Ltd. 3.40 9.50 8.90 39.90
Shree Rajasthan Syntex Ltd. 1.40 8.40 3.30 48.90
Yogindera Worsted Limited 3.32 - 18.63 17.81
(Source: Capital ‘Market June 5 – 18, 2006)
The face value of Equity Shares of the our Company is Rs.10/- per share and the Issue Price is Rs.24/- per Equity Share,which is 2.4 times of the face value of the Equity Shares of the Company. However, the data of companies engaged in similar business is mentioned above for comparison. The Lead Manager believes that the Issue Price of Rs.24/- per Equity Share is justified in view of the above qualitative and quantitative parameters.
HIGHLIGHTS OF THE ISSUE
_ Huge Capacity expansions: The
industry has been on a major expansion mode to cater to growing demands of
post quota textile exports markets as well as rising domestic demands. These
shall begin contributing to earnings growth in FY 07.
_ Integrated facilities: The players in the industry are increasingly integrating their manufacturing facilities to cut down costs and improve efficiency in production, signifying better growth going forward.
_ Moving up the value chain: Manufacturers are keen on increasing efforts towards moving up from mere processing or spinning units to integrated ‘all-services-providers’, branching out into retailing activities. This ensures market presence and the ability to integrate changing markets dynamics into production facilities.
_ Cheap raw material and labour force encourages out sourcing: Indian manufacturers can provide good quality cheap raw cotton in abundant supply as well as inexpensive skilled workforce, which has made it a favourite outsourcing destination for global retailers after China. With export curbs being imposed on the Chinese suppliers, Indian vendors, with their expanded capacities and good client relationship, have ample scope to build on these key strengths.
_ Brand building and market consciousness: Indian textile manufacturers have increasingly resorted to strong brand building among their peers in the industry over the past years. Quality enhancement and better service has helped establish a strong brand image and provide improved realization for Indian Companies.
_ Government support: The industry being a major source for employment generation and export revenues, it has continuously been a focus of attention for the Indian Government. TUF’s Scheme to enable expansion, efforts to use better quality BT seeds for cotton to improve productivity, thrust on increasing export, relaxing duties on textile machinery, increased allocation in the budget spending, encouraging the man-made fiber segment by reducing excise duties, labour reforms, regularizing unorganized sector etc.
_ Wide product range and ability to adapt to dynamic market conditions: The garment and textile industry is prone to changing market dynamics and has to cater to customized needs of customers. Indian companies have superior designing capabilities and a wide product range and are offering value added services to clients. Designers track changing fashion trends and manufacturers are technologically equipped to provide quick responses to client orders.
OPPORTUNITIES FOR GROWTH
_ Post quota market enfolds ample growth opportunity: The abolition of quotas in the international market has expanded the scope for India as a low cost outsourcing destination for the US and EU markets, especially after tariff barriers in Chinese exports.
_ Growing domestic demand with changing
consumer demography: The urban customer in the Country today has a growing
working populace with rising brand consciousness and greater per capita
spending ability. With clothing being a necessity, its demand growth curve
can only be seen heading northwards.
_ Export curbs on China: Punitive tariffs on China and Vietnam exercised by
the EU and the US on various categories of textile exports have opened
better opportunities to diversify for Indian manufacturers.
_ Appreciation of Chinese currency: With a double digit economic growth and the Yuan appreciating, the realization numbers for China are likely to take hit, aided by anti surge measures and competition from China adding to pricing pressure. Even in a scenario where the Rupee appreciates, the magnitude of the impact would be much less for India as it is expected to appreciate less than Yuan.
_ Efficient manufacturing of world-class products: Indian Companies are increasingly investing in technology and infrastructure capacities to enhance their products mix and cater to world class customer requirement.
_ Man made fibres emerges as a significant substitute: The synthetic fibre segment currently forms less than 55% of India’s total textile consumption, diametrically opposite to the world consumption trend. With the anticipated rise in the cotton prices going forward and increasing recognition of Indian companies globally, polyester can be seen as a close substitute for cotton.
USING PROVEN TECHNOLOGY
Company has been using proven
technology for manufacture worsted yarns, which company proposes to continue
in future also. Company proposes to import Autoconers (60 heads each) from
GreenBank Terotele Mach. Sales Ltd., Cheshire, England; Cone to cone bulking
machine from Motocono, Spain; Soft package winders from XI’AN YUAN FAR
International Trade Co. China; Universal flat bed hi-speed fully fashioned
knitting machine of different gauges and models, Strap attaching machine,
Brother for thread over locking machine, Brother button sew / hole machine,
Comptel garment steam press with built in vacuum and boiler, Eastman
straight Knife cutter machine and Circular saw Neck Cutter machine from
Shamikh Textiles Machinery, U.K
BLUE CHIP CLIENTS
Company is supplying its products
to branded suppliers, engaged in manufacturing of sweaters and furnishing
fabrics in Ludhiana, Panipat and also exporting to various Countries. The
yarns made by company are being utilized by the vendors of the brands like
Adidas, Ikea, Marks & Spencer, Woolworth in South Africa. We are also
exporting to Mauritiues based knitting Company viz. Shibani Knitting Co.
Ltd, website- www.shibani.com catering to various up markets brands for
Europe and America. Besides, its products are also supplied to local leading
hosieries in Ludhiana. Company is also supplying Polyester Tops to various
units in India such as OCM, Oswal Woolen Mills Limited.
The sales made to the top ten customers as on 31/03/2006 is as under:
Sr.
No. Name of Client Sales value % to total
(Rs. In Lacs) sales
1 Sidharath Knitting Works 824.83 20.49
2 M. R. Textiles 506.60 12.58
3 Eben Haerser Breifabriek CC 343.66 8.54
4 Chandan Yarns 352.09 8.75
5 Shibani Knitting Co. Ltd 256.67 6.38
6 Pooja Wools 250.20 6.21
7 Shiva Spin-N-Knit Pvt. Ltd 210.37 5.23
8 Shiva Texfabs Ltd. 161.14 4.00
9 Gurmeet Sons 88.48 2.20
10 Anshupati Fibers Pvt. Ltd 82.62 2.05
TAKING ADVANTAGE OF ABOLITION OF QUOTA SYSTEM
Company is supplying to good brands
making up market sweaters and furnishing fabrics in Ludhiana, Panipat and
also exporting its products to various Countries. The foreign customer of
our Company includes vendors of brands like Adidas, Ikea, Marks & Spencer,
and Woolworth in South Africa. We also export to Shibani Knitting Co. Ltd,
based in Mauritius, who cater to various up markets brands for Europe and
America. Our Company supplies Polyester Tops to units like OCM, OWM and our
other products are supplied to local leading hosieries units in Ludhiana.
Keeping in view the abolition of quota system, the export potential for
Indian textile products has gone up substantially. Moreover, Indian textile
industry has comparative advantage in terms of raw-material cost and labour
cost in manufacturing of yarns and garments. Considering the advantages,
India can be an out-sourcing destination for US and EU markets, especially
after barriers in Chinese exports. Our company has presence in the
international market supported by tested and trusted quality standards being
maintained at our unit.
(Rs. In lacs)
Year Total Sales Exports % of exports
to total Sales
2005-06 4026.10 742.75 18.45
2004-05 3281.84 635.95 19.38
2003-04 3009.65 720.84 23.95
2002-03 2432.92 247.78 10.18
With the ready acceptance of finished yarns, contacts in hosiery market, and
rich experience in the textile industry, the Promoters are confident of
successfully managing and marketing the post-expansion production.
BUSINESS STRATEGY
Enhancing customer base Company
intends to grow business continuously by adding new customer both in
domestic as well as in International markets. Company plans to do this be
leveraging of our marketing skills and relationship and enhancing its
customer satisfaction.
Improving product portfolio and addition of new products Company’s strategy is to focus on fancy yarns and blends of synthetic yarns, to add more value to its products – always pushing up the quality of production, whilst keeping costs at its minimum. Being able to supply customers with the latest technology is an absolute “must”, in order to remain in this very competitive market. It created and produced 10 types of fast moving and widely accepted yarns in various blends and counts in the last 2-3 years on industrial scale, exemplifying the promoters’ focus and importance to research and product development.
GEARED TO DEVELOP GOOD EXPORT MARKET
Company is exporting to Hungary,
Iran, Jordon, Kenya, Mauritius, Spain, South Africa and United Kingdom due
to limited resources, while yarn and fabrics from India are exported to
around 80 countries from various textile mills of the Country. With the
expansion and the proposed project, Company would be geared to develop new
markets and increase presence in the global markets.
TRIGGERS OF GROWTH TO BOOST DEAMND OF ACRYLIC YARN
The Company envisages increase in
demand of Acrylic Yarn in domestic market on the following grounds:
i. Limited availability of wool; and Fabric made from 100% acrylic yarn has
better qualities than blended fabrics.
ii. Increase in export to countries like South Africa, Mauritius, Bangladesh
and Europe.
iii. Various applications, such as hand knitting, non bulky hosiery and
weaving/furnishing to produce items such as shawls, knitwear, Blankets,
carpets, suiting and furnishings.
Similarly, increase in demand for Polyester Yarn is based on the following
facts:
i.
Suitability for industrial fabrics on account of its high tenacity and
strength.
ii. Usage in tyre cord and protective airbags in automobiles.
iii. Export of value added textile items manufactured from polyester spun
yarn.
ECONOMIES OF SCALE & GOODWILL TO BOOST PROFITS
a) Company shall have benefit of
economies of scale with the total installed capacity of unit increasing to
9200 Spindles for acrylic and woolen blended yarns after implementation of
the expansion project.
b) Company has built its goodwill and finished products’ acceptability with Ludhiana’s major end users in fabrication line.
c) Company is diversifying into production of ready to wear garment with a capacity of 2.52 lacs pieces per annum, which will boost its revenues and profitability, resulting in enhancing shareholders value.
BULLISH ON FUTURE
Company is planning to set up a
unit for manufacture of ready to wear garments with annual capacity of 2.52
lacs pieces per annum which will boost its revenue and profitability,
resulting in enhancing shareholders value.
Milestones achieved by the Company:
Year Milestones
1997 Incorporation of the Company
1998 Commencement of Commercial Production
1999 Installed Worsted Spinning Unit with 4000 spindles
2001 Capacity increased to 5000 spindles
2004 Capacity further increased to 6040 spindles, besides addition of 435
spindles of Fancy Chenille Yarns
2006 Installed Imported Fancy Yarns machines and Speciality Dyeing machines.