KPR Mill: A Rough-cut Diamond?
Coimbatore in south west Tamil Nadu is known as the Manchester of south India and, no wonder, that in the 1970s and 1980s, it offered a varied palette of companies in the manufacture of textiles and related businesses to the trading floor of the then vibrant Madras Stock Exchange. 
Most of those illustrious names have, in some sense, passed into oblivion, though some of them are still traded on the national exchanges, with the regional one having been moth-balled.
Is it any wonder then, if a star sparkles out of the same city in more recent years?  KPR Mills Ltd, with a market cap that is almost close to the Rs20,000 crore bracket, has shown a stellar performance on the bourses ever since its public float in 2007 with a small capital raise of under Rs150 crore! 
The company is a full-scale textiles manufacturer with an overt thrust on value added garment segment that, in revenue terms, currently towers over the typical commodity business of yarn and fabric that most textile mills account for across the country.
The top-line, that includes an unrelated diversification into sugar and allied products, is an imposing Rs3,550 crore in the last accounting year ended on 31 March 2021. The component of export sale, which is at a flattering 35% of the top-line, signifies the foray the company has made into the highly competitive international market navigating multiple challenges of quotas and tariffs.
But the stark surprise is the operating margins it makes which propels its free cash-flow in the consolidated books for the same period to an astonishing Rs815 crore before coughing up to the exchequer the taxes! 
It is no mean a feat in a business, where the competition is from other tigers in Asia like Bangladesh and Vietnam, that enjoy a very supportive regulatory and business climate, which is still an unfulfilled aspiration for us.
 Nothing puts the matter in perspective as the fact that a legend in branded textiles business that has been around far longer and with a formidable presence across the value chain right up to retail and proclaims itself as the ‘complete man’ has a market-cap a little less than a quarter of KPR’!! 
It is not an accomplishment that can be missed even by the most superficial, for what is essentially a family organisation that has taken listing more for status than to actually access funds from the market and has returned many times over the initial investment in initial public offering (IPO). Yet it remains quite low-profile in a tier-2 city in a state generally considered less entrepreneurial!
Is the case of KPR an unalloyed 24- carat yellow metal? Apparently not! The organisation has not come out of a family-partnership mindset. It can be no one’s grievance that the three promoter families own exactly the same amount of stake. A very healthy fact to ensure comity amongst them. But they also take an identical salary, though there may be a justification that the overall number is still reasonable in the context of what is happening elsewhere in corporate India.
The main business can only get better. The business is very efficiently managed. Cash will keep gushing. Keep performance roaring and move the needle to get the governance soaring!
NOTE from Editor: KPR Mill Ltd is one of the companies shortlisted for Moneylife’s first ever Corporate Governance Awards that is based on direct nominations from active investors, rigorously processed and analysed to eliminate biases.
Thursday, 6 January 2022
(Ranganathan V is a CA and CS. He has over 43 years experience in the corporate sector and consultancy. For 17 years, he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.)
11 months ago
They try whether they can have the same amount of luck exists in other industries. Though it is not a crime to diversify into unrelated areas but what they should ensure is that they pick the right industry for diversification. I have seen many people losing money in sugar industry which is seasonal and cyclical. . Hope KPR Mills will earn enough surplus to sustain their sub in case they need cash support.
11 months ago
Sir as a resident of Coimbatore I take pride that KPR is a jewel in the Coimbatore Crown.
It is a well managed Family enterprise and every business they are involved into has contributed substantially . I agree with Mr. Shumital that the KPR group deserves more respect than you are trying to shower.
11 months ago
Sir with due respect to you, what is the gist of this article???? It gives me the impression that you were digging deep to look for a diamond, you found one, but then instead of appreciating the diamond you started looking for flaws ! And what are you complaining about ? The proof of the pudding is in the eating! The Management has made each diversification a profitable venture. So whats the problem if they have a free hand in running the business.
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