X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Rayon: A snapshot - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 22, 2003

    Indian Rayon: A snapshot

    Indian Rayon, a Rs15 bn diversified conglomerate, is a part of the Aditya Birla Group. The company has presence in various sectors like viscose filament yarn (VFY), carbon black, garments, textiles, garments, insurance and information technology. It is India's second largest producer of VFY and carbon black. The companyís presence in software and insurance are through its holding in subsidiaries.

    The topline of the company has grown at a CAGR of 1% over last three years. However, bottomline has grown at a faster pace (35% CAGR). This was mainly due to reduced interest cost (down 66%). As evident from the graph below that details the revenue mix of the company over the last years, contribution from textile and garment segments has been stable at around 24%, where VFY contribution has increased from 19% in FY01 to 23% in FY03. Backed by strong growth in demand from tyre manufacturers in line with the recovery in the auto sector, carbon black businessí contribution has increased over last three years from 18% to 23% in FY03.

    Having looked at the broader trend, it is pertinent to look at segment-wise performance in the last three years. The textile division is highly reliant on exports for growth considering the mature nature of the industry in the domestic market. Contribution from exports in FY03 stood at 52% of textile sales as compared to 50% in FY02. Going forward, exports would continue to remain the growth driver, albeit at a slower rate. However, margins are expected to improve in light of expected fall in raw material prices.

    VFY segment has grown at a CAGR of 21% in last three years mainly on the back of favorable pricing environment. The outlook for VFY business is positive, as VFY is gaining increasing acceptance in the fashion industry. Besides, the company is increasing the capacity of VFY by about 1,000 tones with an investment of Rs 280 m, which will add to the topline growth in FY04. Going forward, company has stated that it will focus on premium segment and will try to increase the sale of first quality yarn to 76% of total VFY business (62% now).

    Higher volumes have helped company to achieve 13% CAGR growth in revenues from carbon black business. The outlook for carbon black division remains positive because of growth in auto sector (carbon black is one of the key raw material for tyre manufacturers). Companyís brown-field expansion involving a capex of Rs 600 m will raise the existing plants capacity by 40,000 tones (36% of existing capacity).

    Over a three-year period, revenues from the garment segment have remained stagnant. This was mainly on account of poor performance in FY03 (down 8% YoY), as players were forced to increase prices to pass on higher excise duty incidence. Competition from unorganised and regional brands also increased. The segment posted losses at PBIT level due to heavy expenditure on advertising for its branded products. But, the long-term outlook for the garments business remains positive, fuelled by the economic growth and increasing brand consciousness among the customers. However, things will not be easy, as the competition in garment business will remain high. While the companyís launch of low-end products has provided a fillip to sales in 1QFY04, at the operating profit level, we do not expect significant improvement in the medium-term.

    At the current price of Rs 175, the stock trades at the P/E multiple of 10x FY03 earnings. The company's venture into areas like insurance and software has raised apprehension about the focus of the management. Indian Rayon seems to be the vehicle of the Aditya Birla Groupís diversification into new growth areas.

     

     

    Equitymaster requests your view! Post a comment on "Indian Rayon: A snapshot". Click here!

      
     

    More Views on News

    Sorry! There are no related views on news for this company/sector.

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ADITYA BIRLA NUVO SHARE PRICE


    Jul 4, 2017 (Close)

    TRACK ADITYA BIRLA NUVO

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

    MORE ON ADITYA BIRLA NUVO

    ADITYA BIRLA NUVO - EVEREADY IND. COMPARISON

    Compare Company With Charts

    COMPARE ADITYA BIRLA NUVO WITH

    MARKET STATS