FairWealth Equity Research

23rd October’2010

BANSWARA SYNTEX LIMITED TEXTILES

BUY

Banswara Syntex Limited is a 34 year old vertically integrated textile company.

Long Term Buy The company’s business profile includes spinning, weaving & processing and
garmenting. It manufactures man-made synthetic blended yarn, all type of suitings
CMP Rs.135
and Jacquard Furnishing and technical fabrics. BSL also produces Readymade
Target price Rs.175
Potential Upside 30+ Garments and made-ups.
Estimated EPS Rs.36.11
Projected PE 5-6 Key Investment Rationale:
Investment period 12 months
Huge expansion plans: The company is undergoing rapid expansion,
modernization and diversification in textiles, spinning, dyeing, weaving, fabric
Stock Info (TTM Basis) processing and readymade garments.

Sector Textiles-Spinning- Strong Clientele Base: BSL is the key supplier to well known brands across the
Synthetic/Blended globe which includes Allen Solly, UCB, Wills, Arrow, Peter England, NEXT, GAP
Market cap Rs.190.27cr and Carreman. The key customers of BSL includes Aditya Birla, ITC and Arvind.
Face value 10.00
Book Value 88877 82.16 JV with Carreman, France: BSL has entered into a 50:50 JV with a French
EPS Rs.20.89 company, Carreman France. Carreman Fabrics India Ltd. was incorporated in
52 week H/L6666 142/59.10 2006 and has state-of-art weaving plant that has 60 brand new Picanol Rapier
Avg. Daily Vol (2wk) 0.32lacs Looms. It is being managed by the French technicians who do the job weaving
Dividend K8820% work for BSL.
Managing Director R.L Toshniwal
Listed At NSE/BSE Future Valuation:
Equity capital Rs.14.75cr
At the current price of Rs.135, the stock is trading at 3.73x and 2.62x of our
estimated FY11E & FY12E earnings. We thus recommend a ‘BUY’ with a
Price target of Rs 175.

Shareholding Pattern
Particulars (In crores) FY10 FY11E* FY12E*
Promoter Holding : 53.19%
FIIs : 0.00% Net Sales 622.25 777.81 917.82
DIIs : 0.03% %change in Sales - 25% 18%
Public & Others : 46.78%
Expenditure 532.95 668.91 780.15
PBIDT 107.08 131.21 159.98

FairWealth Equity Research Desk Profit After Tax 30.88 47.23 67.37
www.fairwealth.in/research.aspx %change in PAT - 52.95 42.64

E-mail: research@fairwealth.in EPS 23.55 36.11 51.51

DirectLine: 0124-3009218/216 PE Ratio 5.73 6.73 4.72
OPM % 17.21 16.87 17.43
NPM % 4.96 6.07 7.34
E* stands for Estimated
Banswara Syntex Limited
COMPANY PROFILE

Banswara Syntex is a Rajasthan-based based blended yarn and fabric

manufacturer. The company manufactures all types of blended yarns,
namely polyester, viscose, woolen, acrylic and cotton. It also manufactures
fabrics and garments on made to order basis and supplies them to all top
retail brands.
Banswara has entered into a 50% joint venturevent with French textile
company Carreman for a weaving plant of 60 looms. The company has
started production of technical textiles and also manufactures Lycra
branded fabrics especially for women fashion clothing, women office
clothing and school uniforms.

Segments of BSL

Spinning Weaving Readymade Markets

Installed Capacity Installed Capacity Installed Capacity

Ring Spindles – 119188 Shuttle-less looms – 198 Jacquard madeups–

madeups 12500pcs/mnth

Worsted Yarn Spindles – 14400 Jacquard looms – 20 Readymade trousers –250000

pcs/mnth
Air Jet Spindes - 576 Fabric- Processing Capacity –
4 million mtrs/mnth Readymade Jackets
Jackets– 10000
pcs/mnth

Spinning: BSL specializes in producing blends of viscose, staple

fibre, polyester staple fibre, acrylic staple fibre, cotton, lycra, linen
Segmental Revenue & wool. It produces 30000 0000 tones of yarn per annum which
comprises 28000 tones polyster blended dyed yarn & 2000 20 tones
4% wool mix yarn.. The company specializes in production of various
9.27
types of fancy spun yarns.

45.83 Fabric-Weaving & Processing:: BSL produces high-quality,

high hi-
performance textile wear, technical & jacquard finished fabrics
fabric for
both domestic & exports. The company produces technical fabrics
40.97 from fibre stage to yarn, weaving, finishing & garments.
garment BSL
specialises in stretch fibres, fire retardant fabrics, fabric design &
development innovations and laminated technical fibre.

Readymade Garments: The plant for readymade garments is

Yarn Fabrics Garments Others located in Daman & SEZ Surat. BSL specialises in trousers and
jackets.

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Fairwealth Research Desk
Banswara Syntex Limited

Key Investment Rationale

Consistent Revenue Growth: BSL’s revenues have been consistently growing
from the past five years. The revenues have grown at a CAGR of 18.60% for the
past 5 years.

Robust growth in bottomline: The company robust bottom line numbers were
mainly on account of new product development and the strong relation that the
company shares with its valued customers. In FY10, the PAT grew massively by
222% thereby posting the number to Rs.30.88cr from Rs.9.59cr.

Huge Expansion Plans: The company is undergoing rapid expansion,

modernization and diversification in textiles, spinning, dyeing, weaving, fabric
processing and readymade garments. The company will add about 7000 spindles
in spinning and 64 looms in weaving. It will also increase processing capability
from 28 lakh meters to 40 lakh meters. BSL has also started additional lines for
production of trousers and jackets at its Surat SEZ Plant.

Rich Dividend payments: BSL management believes in wealth maximization of

its shareholders. The regular payment of dividend show that the company has
been enjoying handsome profit.

Strong Clientele base: The company enjoys valuable customer base across the
globe. The key customers of BSL include Aditya Birla, GAP, Marks & Spencer,
Arrow, Provogue, Westside, Blackberrys, Park Avenue, Banana Republic,
Pantaloon etc.

Backward Integration: The company has set up first unit of 15/18 MW Thermal
power plant in the year 2006 and has also planned for an additional 15/18 MW
thermal based power plant which is expected to commence operation at the end
of 2010. The power generated by this plant would primarily be used for internal
consumption and surplus for sale.

Recognized Exporter: The company is a well recognized exporter of quality

dyed blended yarns in 100% acrylic, 100% viscose, 100% polyster. The company
exports to more than 50 countries worldwide and approximately 65% of the total
revenues come from exports.

JV with Carreman, France: BSL has entered into a 50:50JV with a French
company, Carreman France. Carreman Fabrics India Ltd. was incorporated in
2006 ans has state of art weaving plant having 60 brand new Picanol Rapier
Looms. It is being managed by the French technicians and also does the job
weaving work for BSL.

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Fairwealth Research Desk
 Banswara Syntex Limited
PEER ANALYSIS

Particulars (In crores) Banswara Textiles RSWM APM Indus Sangam India
Market Cap 195.66 399.22 42.42 196.9
Sales 651.32 1601.13 206.29 911.65
PBIDT 104.34 206.27 20.33 136.07
Net Profit 30.82 62.36 8.68 22.9
EPS 20.89 26.94 20.09 5.81
P/E 6.46 7.13 4.98 8.78
EV/PBIDT 6.06 7.11 5.01 6.49
P/BV 1.61 1.74 0.96 1.04
Equity 14.75 23.15 4.32 39.42
OPM % 16.02 12.88 9.86 14.93

Banswara Textiles is available at a relatively low P/E of 6.46. The Industry P/E stands at 11.23.. The OPM of BSL is 16.02 which
is highest among its peers. The EV/PBIDT and P/BV stands at 6.46 and 1.61 respectively.

Debt-Equity Ratio Dividends

800 4.5 25%

700 4 20% 20% 20%

20% 18%
600 3.5
3
500 15%
2.5 12% 12%
400
2 10%
300
1.5
200 5%
1
100 0.5 0%
0 0
2006 2007 2008 2009 2010

Total Debt LHS Debt-Equity

Equity Ratio RHS

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Banswara Syntex Limited
QUARTERLY ANALYSIS:
Particulars (In crores) Q1FY10 Q1FY09 Var % Q4FY09 Var %
Net Sales 178.9 149.9 19.35 179.44 -0.30
Other Operating Income 2.06 0.9 128.89 2.92 -29.45
Other Income 1.64 4.17 -60.67 0.9 82.22
Total Income 182.6 154.97 17.83 183.26 -0.36
Total Expenditure 152.73 128.76 18.62 154.54 -1.17
PBIDT 29.87 26.21 13.96 28.72 4.00
Interest 9.78 9.01 8.55 7.84 24.74
PBDT 20.09 17.2 16.80 20.88 -3.78
Depreciation 7.87 7.47 5.35 8.07 -2.48
Tax 3.59 3.31 8.46 3.35 7.16
Profit After Tax 8.63 6.42 34.42 9.46 -8.77
Extra-ordinary Items 0.39 2.33 -83.26 0.6 -35.00
Adjusted Profit After Extra-ordinary item 8.24 4.09 101.47 8.86 -7.00
EPS (Unit Curr.) 6.04 4.91 23.01 7.22 -16.34
OPM % 16.70 17.48 -4.51 16.01 4.32
NPM % 4.82 4.28 12.63 5.27 -8.50

Banswara Syntex Limited posted good set of numbers for its quarter ended June 2010.On Y-O-Y Basis, the top-line increased
19.35% to Rs 178.9cr in comparison to Rs.149.9cr in the corresponding quarter previous year. The operating profit of the
company witnessed a growth of 13.96% to Rs 29.87cr as against Rs.26.21cr. The bottom line of the company grew 34.42% to
Rs.8.63cr in comparison to Rs.6.42cr in the similar period previous year. The OPM and NPM stood at 16.70% and 4.82%
respectively. The EPS for the quarter ended June’10 is 6.04.

On Q-O-Q Basis, the top line decreased marginally by 0.3% to Rs.178.9cr. The bottom line declined by 8.77% to Rs.8.63cr in
comparison to Rs.9.46cr.

Stock Performance
160
140
During the 52 week period, BSL stock price
120
was highest in the month of Dec’09. Since
100
80
Apr’10 the stock has been moving in line
60 with the SMALLCAP Index.
40
20
0

Banswara BSESMALLCAP

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Fairwealth Research Desk
Banswara Syntex Limited

PAST YEARS PERFORMANCE

Particulars (In crores) 201003 200903 200803 200703 200603

Net Sales 622.25 546.14 436.39 377.74 314.13
Other Income 9.07 3.72 0.89 4.77 6.57
Other Operating Income 8.71 2.79 1.71 - -
Total Income 640.03 552.65 438.99 382.51 320.7
Total Expenditure 532.95 475.68 387.79 325.66 277.31
PBIDT 107.08 76.97 51.2 56.85 43.39
Interest 33.01 36.29 23.73 17.81 14.37
PBDT 74.07 40.68 27.47 39.04 29.02
Depreciation 30.73 29.39 21.8 16.26 13.31
Tax 12.46 1.7 1.25 7.84 6.45
Profit After Tax 30.88 9.59 4.42 14.94 9.26
Extra-ordinary Items 4.34 -6.6 -0.09 - -
Adjusted Profit After Extra-ordinary item 26.54 16.19 4.51 14.94 9.26
Equity 13.08 13.08 13.08 12.52 7.77
Face Value 10 10 10 10 10
EPS (Unit Curr.) 23.55 7.29 3.34 11.93 11.92
OPM % 17.21 14.09 11.73 15.05 13.81
NPM % 4.96 1.76 1.01 3.96 2.95

BSL Revenues
80
70 BSL revenues come majorly from
60 exports. In FY10, the total revenues
50 were Rs.622.25cr out of which 65.15%
In %

40 came from exports and rest 34.85%

30 from domestic sales. The company
20 exports to approx 50 countries across
10
the globe.
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Exports 60.86 64.23 65.22 64.26 66.75 65.15
Domestic 39.14 35.77 34.78 35.74 33.25 34.85

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Fairwealth Research Desk
Banswara Syntex Limited

BALANCE SHEET
Particulars (In crores) 2009-10 2008-09 2007-08 2006
2006-07 2005-06
Net worth 117.81 91.03 84.26 81.73 60.76
Loans-term 279 257.46 250.33 178.18 122.34
Loans-working capital 162.66 111.12 94.87 67.54 69.57
Deferred tax liability 27.23 21.93 20.53 19.56 18.41
TOTAL 586.7 481.54 449.99 347.01 271.08
Net block including WIP 362.55 330.9 319.15 244.52 170.38
Investments 6.67 6.63 6.63 6.53 2.78
Net working capital 217.48 144.01 124.21 95.96 97.7
Deferred revenue expenses 0 0 0 0 0.22
TOTAL 586.7 481.54 449.99 347.01 271.08

Industry Over-View

Textile Sector Contribution:

According to the Annual Report 2009-1010 of the Ministry of Textiles, the

Indian textile industry contributes about 14 per cent to industrial
production, 4 per cent to the country's gross domestic product (GDP)
and 17 per cent to the country’s export earnings, according to the
Annual Report 2009-10 10 of the Ministry of Textiles. It provides direct
employment to over 35 million people and is the second largest
provider of employment after agriculture.

According to the Ministry of Textiles, the cumulative production of cloth

during April’09-March’10
March’10 has increased by 8.3 per cent as compared to
1000 the corresponding period of the previous year.

800 Total textile exports have increased to US$ 18.6 billion during April’09-
April’09
300 January’10, from US$ 17.7 billion during the corresponding period of
600 the previous year, registering an increase of 4.95 per cent in rupee
260 terms. Further, the share of textile exports in total exports has
219 238
400 increased to 12.36 per cent during April’09-January’10
April’09 (according to
505 the Ministry of Textiles).
200 311 345 390
As per the Index of Industrial Production (IIP) data released by the
0 Central Statistical Organisation
ation (CSO), cotton textiles have registered
2006 2007 2010 2015 a growth of 5.5 per cent during April-March
March 2009-10,
2009 while wool, silk
and man-made
made fibre textiles have registered a growth of 8.2 per cent
while textile products including wearing apparel have registered
regi a
Apparel Textiles growth of 8.5 per cent

Source: Company’s report

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Fairwealth Research Desk
Banswara Syntex Limited

Technical Textile Segment:

According to the Ministry of Textiles, technical textiles form an

important part of the textile industry. The Working Group for the
Eleventh Five Year Plan has estimated the market size of technical
textiles to increase from US$ 5.29 billion in 2006-07 to US$ 10.6 billion
in 2011-12, without any regulatory framework and to US$ 15.16 billion
with regulatory framework.

The Scheme for Growth and Development of Technical Textiles aims

to promote indigenous manufacture of technical textile to leverage
global opportunities and to cater to the domestic demand.

Government Initiative for Textile Industry:

According to the Ministry of Textiles, investment under the Technology

Upgradation Fund Schemes (TUFS) has been increasing steadily.
During the year 2009-10, 1896 applications were sanctioned at a
project cost of US$ 5.23 billion. The cumulative progress as on
December 31, 2009, includes 27,477 applications sanctioned, which
has triggered investment of US$ 45.5 billion. The amount sanctioned
under TUFS is US$ 18.9 billion of which US$ 16.4 billion had been
disbursed till the end of April, 2010.

Future Prospects:In May 2010, the Ministry of Textiles informed a

parliamentary panel that it proposes to allocate US$ 785.2 million for
the modernisation of the textile industry.

The Scheme for Integrated Textile Park (SITP) was approved in July
2005 to facilitate setting up of textiles parks with world class
infrastructure facilities. 40 textiles park projects have been sanctioned
under the SITP. According to the Minister of State for Textiles,
Panabaaka Lakshmi, under the SITP, a cumulative expenditure of US$
204.3 million has been incurred against allocation of US$ 220.7 million
in the last three years.

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Fairwealth Research Desk
 Banswara Syntex Limited

Facts & Figures related to report taken from Capitaline database, Company’s website and Company’s reports.

Stock Ratings
BUY The stock's total return is expected to exceed 20% over the next 12 months
ACCUMULATE The stock's total return is expected to be within 10-15% over the next 12 months
REDUCE The stock's total return is expected to be within 0-10% over the next 12 months
SELL The stock's total return is expected to give negative returns over the next 12 months
NOT RATED The Analyst has no recommendation on the stock under review

Disclaimer:
This publication has been solely prepared for the information purpose and does not constitute a solicitation to any person to buy or sell a
security. While the information contained therein has been obtained from sources believed reliable investors are advised to satisfy themselves
before making any investments. Fairwealth Securities Ltd does not bear any responsibility for authentication of the information contained in the
reports and consequently is not liable for any decision taken based on the same. Further Fairwealth Research report only provides information
updates and analysis. All opinions for buying and selling are available to investors when they are registered clients of Fairwealth Investment
advisory services. As a matter of practice, Fairwealth refrains from publishing any individual names with its reports. As per SEBI requirements it
is stated that, Fairwealth securities Ltd, and/or individuals thereof may have positions in securities referred herein and may make purchases or
sale while this report is in circulation.

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Fairwealth Research Desk