By Research Desk
about 14 years ago

SEL Manufacturing Company Ltd. is entering the capital market on 26th July 2007 with an issue of 41.38 lakh equity shares of Rs.10 each in the price band of Rs.80 to 90, per equity share.


The company is a vertically integrated multi-product textile company, manufacturing and exporting cotton yarn, knitted fabrics and knitted garments with its manufacturing facilities located at Baddi in H.P. and Ludhiana in Punjab. The present capacity of the company is 49,056 spindles for cotton yarn, 4,050 TPA of fabric knitting, 3,000 TPA of fabric processing and dyeing with consolidated capacity to manufacture 6 million garment pieces per annum. The company is mainly exporting its products to Russia and Dubai.


For FY 07 the total income of the company was placed at Rs.182.64 crores with EBITDA of Rs.40.87 crores resulting in a margin of 22.38% with PBT of Rs.28.50 crores and PAT of Rs.23.60 crores on equity of Rs.9.82 crores resulting in an EPS of Rs.24.03. The present equity of the company is at Rs.11.08 crores.


The company is now expanding its capacities with an outlay of Rs.184.57 crores, and post expansion the capacity of the company would rise to 74,256 spindles, 7.50 million pieces per annum of garments, 7,050 TPA of knitted fabrics per annum and 3,000 TPA (unchanged) of fabric processing and dyeing. The expansion is being carried out in two phases with first phase of Rs.73.23 crores having commenced production from March 07. Next phase with outlay of Rs.111.34 crores would commence production in phases from August - September 07. These expansions are judiciously financed with rupee term loan of Rs.103.79 crores and remaining Rs.80.78 crores from proposed issue and internal accruals. This issue at the upper band could mobilize Rs.37.25 crores while preferential allotment to Exim Bank and another investor at Rs.65 and Rs.75 per share respectively, had mobilized Rs.8.70 crores. So remaining Rs.34.83 crores had to come from internal accruals.


Apart from these expansions, the company has also lined up almost 100% expansion in yarn making and processing capacity for Rs.410 crores which is proposed to be financed from term loan of Rs.273.50 crores and internal accruals of Rs.136.50 crores. One fails to understand the necessity of revealing these expansion plans, as it has no relation, whatsoever, with the present, expansion plans or the proposed issue. Won't this be termed as future projections, merely to lure the prospective investors by revealing its ambitious growth plans?


Considering all these, the conclusion is that the company is an established player, though not very high profile but with good profitability. EPS for FY 07 of Rs.24 instills confidence. Availing rupee term of Rs.104 crores, under TUFS for an expansion of Rs.185 crores is also noteworthy. Though the textile stocks are not highly fancied by the market, this company is good as the share is reasonable priced. Even at the upper band of Rs.90, share merits attention.



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