Swing trading stock: Small-cap company with Rs 981 crore capex plan has over 5 per cent stake held by Madhusudan Kela's wife

A glimpse into SIL's Capex plan reveals various expansion projects that speak to the company's growth ambitions.

Ah, the captivating tango of the market! Like a skilled dancer, our Indian benchmark indices have gracefully glided through a splendid bullish run, enchanting investors with their charm and allure. However, as if to add a dash of excitement to the proceedings, recent trading sessions have seen a change in the rhythm, introducing a bit of volatility to the floor. Those once-smooth intra-day breakouts have turned coy, leaving traders twirling with uncertainty in the air.

Yet, amid this whirlwind of fluctuations, seasoned market observers understand that short-term turbulence is a familiar partner, even during the course of a sustained rally. It appears that the markets are now engaged in a subtle phase of time correction, urging participants to adopt a more discerning approach, focusing on individual stocks that hold potential amidst the tempestuous backdrop. One such captivating contender that comes to mind is none other than Sangam (India) Ltd (SIL). The stock is a Small-Cap stock with a market cap of Rs 1445 crore.

In the midst of a fragile market, SIL stands tall, trading higher by nearly 1.5 per cent. Its recent performance, highlighted by a swing high of Rs 354 on NSE, was prompted by the appearance of a notable name in the shareholding pattern for the quarter ended June 2023. The intriguing presence of Madhuri Madhusudan Kela, wife of the esteemed market veteran Madhusudan Kela, holding a 5.36 per cent stake in the company, has undoubtedly sparked curiosity among market watchers.

Delving deeper into the allure of Sangam (India) Ltd, we uncover a compelling tapestry of businesses and capacities. As one of the top three producers of PV dyed yarn in India, boasting a substantial spindleage capacity of 273,312 spindles, SIL weaves a story of dominance in the fabric industry. With a staggering 30 million metres per annum (mmpa) ready-to-stitch fabric manufacturing capacity, 72mmpa fabric processing capacity, and 48mmpa denim fabric manufacturing capacity, the company threads its way into the fabric of India's textile landscape.

Management reports suggest that SIL commands an impressive 20-25 per cent market share in India's PV dyed yarn market. The company's business model exhibits diversification, spanning PV yarn, cotton yarn, suiting, denim, and fabric processing. A notable advantage lies in its integrated approach, with in-house yarn production for the suiting and denim divisions, ensuring resilient operating margins compared to pure yarn manufacturers. In FY23, the turnover contribution from yarns, denim, and fabrics amounted to 47 per cent, 25 per cent, and 22 per cent, respectively. Additionally, value-added segments such as seamless and rope-dyed denim yarns contributed under 3 per cent and 4 per cent, respectively.

From a technical standpoint, SIL's dance on the trading floor has been nothing short of fascinating. Having established a 52-week low of Rs 194.65 on NSE in February, the stock has embarked on an enchanting journey, forming higher highs and higher lows. After reaching a crescendo with a swing high of Rs 354, the stock gracefully entered a counter trend phase, finding support around the 23 per cent retracement of its impressive up-move from February's low to the high point. The stock is currently trading above its 20, 50, and 200-day moving averages, with all these indicators trending higher and in the desired direction, painting a picture of strength and allure.

A glimpse into SIL's Capex plan reveals various expansion projects that speak to the company's growth ambitions. Noteworthy among them are the Cotton Expansion project (Rs 139 crore), the Garment Project (Rs 157 crore), the Denim Expansion Project (Rs 180 crore), the PV Fabric Expansion Project II (Rs 178 crore), and the Yarn Expansion Project (Rs 327 crore). These ventures encompass diverse sectors, adding significant capacity and anticipated operational dates in the near future.

It is crucial to remember that the views and opinions expressed in this article are solely for informational purposes and do not constitute financial, investment, or any other form of advice. Investors are advised to conduct thorough research and seek guidance from professional financial advisors before making any investment decisions.