Indo Rama: A play on the cycle - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Indo Rama: A play on the cycle

Jun 22, 2001

Indo Rama Sythetics Ltd, the Lohia group company, has made a return from the red in FY01. The company recorded losses for three consecutive years prior to fiscal ended March '01. However, the company's sales had been sliding since FY95. The company is primarily into the manufacture of polyester staple fibre (PSF), polyester filament yarn (PFY) and polyester chips. Polyesters contribute 72% of the revenue. Other key product of the company is texturised yarn. With declining profits since mid-nineties the company slid into the red with the polyester cycle taking a downturn from FY98. Over FY98 and FY99 polyester prices continued to dip taking the company down along with it. Also, the heavy debt burden put added pressure on the company's earnings. The heavy debt burden meant that any downturn in business would lead to the company being over leveraged.

In FY00 and FY01 polyester prices have recovered enabling the company to come back into the black. However, FY01, was a challenging year for the polyester industry with end products not registering commensurate rise in prices as compared to feedstock prices, PTA and MEG. Prices of polyester end products have weakened over 1QFY02 with domestic and global economic growth slowing down. Weakness in feedstock prices is a consoling factor, which could protect margins. Though revenue growth could take a hit.

Debt pulls it down
FY99FY00FY01
Net sales 11,624 14,871 17,495
EBITDA 1,256 2,664 2,868
OPM10.8%17.9%16.4%
Interest 1,791 1,707 1,739
Interest cover 0.7 1.6 1.6
PAT (1,596) (77) 187
Net Worth 3,088 5,842 5,842
Debt 14,321 13,611 13,611
Debt/equity 4.6 2.3 2.3

The company continues to remain highly leveraged. The decline in debt / equity ratio is due to the company revaluing its assets in FY00, which added Rs 2886 m as revaluation reserve to the networth. Adjusting for this book entry the debt / equity remains at the previous level of 4.6x. Although during the up-cycle in polyesters the interest burden is manageable any downtrend in business prospects could put the company back in the red. The high leverage prevents the company from enjoying a buffer in case of a slowdown in business.

The stock price of Indo Rama has ranged between Rs 5 and Rs 9 during the past 12 months. At the current price of Rs 7 the company trades on a multiple of 6.2x FY01 earnings of Rs 1.1.

Equitymaster requests your view! Post a comment on "Indo Rama: A play on the cycle". Click here!

  

More Views on News

INDO RAMA SYN 2020-21 Annual Report Analysis (Annual Result Update)

Nov 8, 2021 | Updated on Nov 8, 2021

Here's an analysis of the annual report of INDO RAMA SYN for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of INDO RAMA SYN. Also includes updates on the valuation of INDO RAMA SYN.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

INDO RAMA SYN SHARE PRICE


Dec 7, 2021 11:53 AM

TRACK INDO RAMA SYN

  • Track your investment in INDO RAMA SYN with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

INDO RAMA SYN - SUNCITY SYNT COMPARISON

COMPARE INDO RAMA SYN WITH

MARKET STATS