Siyaram Silk Mills posts decent 9% sales growth despite stiff competition and economic challenges

Moneylife Digital Team 29 October 2012

The Poddar-owned company has weathered economic difficulties quite well by managing to keep sales steady and finance costs down

Siyaram Silk Mills, known for its upscale suiting range and premium garments, has posted decent net sales and net profit considering an otherwise challenging quarter for textiles. Its net sales were up 9% year-on-year (y-o-y) when compared to its three-quarter y-o-y average growth rate of 11%, despite stiff competition and a benign economy. It clocked Rs267.28 crore worth of textiles and textile-related sales for the quarter ended 30 September 2012. Similarly, its net profit was marginally up by 5.54% y-o-y, from Rs16.98 crore to Rs17.92 crore.

Higher cost of goods sold (up 7.37%) and salaries (38.05% higher) dented its Siyaram Silk Mills’ operating profit which declined 22% to Rs25.59 crore. However, a closer analysis found out that Siyaram Silk Mills’ operating profit declined only twice in the last three years. The fall in operating profit was made up by some prudent interest-cost management. It managed to rein in finance cost and keep it steady. This meant the bottomline wasn’t affected that much. The valuation of this company is on the lower end, with market capitalisation quoting at just 2.73 times operating profit while its return on equity is impressive at 22%.

Earlier this year, in April, it had announced plans to invest Rs160 crore in FY12-13 to enhance its fabrics and garments manufacturing capacity. The firm operates four plants at Tarapur near Mumbai for weaving and yarn dyeing, two at Daman for garments and one at Silvasa for weaving. It produces around 700 metric tonnes of yarn per month, in a wide variety of compositions ranging from polyester, cotton, viscose and wool to linen. In the area of fabrics, Siyaram Silk Mills produces premium suiting, work-wear fabrics, shirting fabrics, and such. It owns brands like J Hampstead, Oxemberg, Siyaram MSD. It plans to open 40 stores during the fiscal, mostly through the franchise route.

Siyaram Silk Mills stock price ended the day up 0.12%, at Rs299 on Bombay Stock Exchange (BSE).

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