Differentiating To Grow

Please walk us briefly through your company, its product and outlook going forward?

Sutlej Textiles and Industries Ltd (STIL), a Company promoted by Dr. K.K. Birla, is an integrated textile manufacturer with presence across the value chain, from yarn to home textiles. STIL is one of the country’s largest spun dyed yarn manufacturers with a capacity of 2,93,544 spindles and a leading player in value added/specialty yarns segment. STIL is  one-stop-shop for all kinds of spun yarn from natural or manmade fibre across any blend in the count range of 6s-50scomprising single-ply, double-ply,multi-fold grindle, roving grindle core spun, slub and other fancy yarns.STIL also manufactures cotton and cotton-blended dyed and mélange yarn. STIL is also one of the few fibre-dyed yarn manufacturers with ability to provide virtually any shade. It is also among the few exclusive spinners of specialty yarns like modal, lycra, tencel, linen and other value-added yarns.

STIL has also recently started focusing on scaling its presence in Home Textile division which will enable further strengthening of its end to end operations – Yarns to Home Textile.  The outlook for the business looks promising, as the Company’s conscious efforts for creating a niche position for itself by prioritizing quality over quantity in the value added yarn segment has enabled it in developing a strong connect with its customers in domestic and international market.

In 9M FY15, there has been only marginal increase in revenue of the company, while we witnessed a fall in profit after tax. What was the reason for such performance? 

Soft performance during the period was mainly on account of consistent decline witnessed in prices of finished goods on the back of raw material prices namely cotton and polyester. Profitability is affected in such a scenario.The impact of the same was visible across the textile segment.

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What is your total capacity in both yarn and home textiles at the end of December 2014?

STIL’s total capacity comprised of 293,544 spindles and Home Textiles:62 looms.

What is your current capacity and at what is your utilization rate?

STIL’s capacity utilisation in the yarn segment for FY14 stood at 95.52 per cent, the highest in the Company’s history as against 94.41 per cent during FY13. STIL has always prioritised and paid utmost attention towards improving its performance and operational efficiencies by way of regular modernisation and balancing equipment costs. The combination of the same has helped STIL improve its efficiency and utilisation level consistently over the years. As far as Home Textile division is concerned, the capacity utilisation for the same stood at 80.54 per cent during FY14 as against 77.36 per cent during FY13.

Please update us on your capacity expansion and modernization plan?

STIL recently started commercial production of value added cotton mélange and cotton blended dyed yarn from its newly added capacities (31,104 spindles) at its unit at CTM, Kathua, J&K.  Post completion, the Company’s total yarn spinning capacity stands at 293,544 spindles, of which 96,720 spindles are utilised to make Cotton Mélange and Cotton Blended Dyed Yarn. The addition of new capacity will enable the Company to further strengthen its position as a leading player in the niche Cotton Mélange and Cotton Blended Dyed Yarn segment. Further, the Company has decided on increasing its presence in the Home Textile segment. The decision follows the Company’s evaluation of the business prospects which the segment has to offer and as such has decided in increasing the capacity to 9.6 Mn metres p.a from 2.5 Mn metres p.a. at present at one of its units viz, Damanganga Home Textiles, Daheli, Bhilad Gujarat at a cost of Rs. 88.50 crore. The project will be implemented in FY 16-17 and once completed, should contribute significantly to the Company’s overall revenue and profit generation. Further, the Company has invested Rs. 55 crore upto December 31, 2014 out of Rs. 80 crore earmarked for FY 2015, towards technology up-gradation, debottlenecking, etc. which should result in improving efficiency and cost reduction.

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What part of your total current topline comes from sales outside India and how do you see it going ahead?

Exports as a proportion of overall sales in FY14 were in the region of around 25%. STIL by virtue of its presence across globe exports to 60 countries and has presence across Australia, Argentina, Bangladesh, China, Egypt, England, France, Germany, Greece, Hong Kong, Indonesia, Pakistan, Panama, Philippines, Sri Lanka, Turkey, United States of America, the United Arab Emirates (UAE) and Vietnam, among others. The Company recently bagged the Prestigious “Niryat Shree” and “SRTEPC” award in recognition of its excellent performance in the field of exports.  Going ahead, the proportion of exports is expected to remain same, with majority of the earnings coming from domestic market.

What will be the key triggers of growth for your company going forward? What are the current opportunities and challenges that you see in your sector?

The Company recently started commercial production of value added cotton mélange and cotton blended dyed yarn from its recently added capacities (31,104 spindles) at its CTM unit in J&K. The same is expected to benefit the Company immensely in terms of revenue and profitability generation as speciality product -Cotton Mélange and Cotton Blended Dyed Yarn fetch higher margins. Further, efforts towards scaling up presence in Home Textile should provide new growth avenue to the Company. The Board of Directors of the Company have recently approved the purchase of Birla Textile Mills (BTM) as a going concern on slump sale basis effective from 1st April 2015, subject to approval of shareholders and other statutory clearances. The facility has 83,376 Spindles and manufactures Cotton, Synthetic and Blended yarn in Grey and Dyedforms. This will raise the total spinning capacity of the Company to 376,920 Spindles.

What is your revenue and profit guidance for next couple of years?

We expect revenue and profitability growth rate to improve in coming year. The Company is presently in the midst of undertaking several growth oriented projects which will ensure sustainability of growth momentum in the future. Further, higher output of margin accretive value added products from its recently commissioned project in Kathua, J&K will ensure higher revenue and profitability performance.

Any other aspect(s) you may deem necessary about Sutlej Textiles and Industries Limited

Sutlej Textiles and Industries Ltd has always kept the interest of its shareholders /stakeholders at the forefront. STIL, believes that shareholders value is not a strategy / target in itself but an outcome of efficiently and ethically conducting its operations. Further, the Company strives towards meeting its commitments towards its employees, customers, and other stake holders. In addition, the Company also observes highest corporate governance standards, and discloses all the relevant information to its shareholders as it believes that better disclosure enables lowering investor uncertainty. STIL, has always believed in sharing the rewards with its shareholders by means of either awarding dividends or issuing bonus shares. While, the Company has an impeccable track record of dividend payment, it has also issued bonus shares recently.