MAFATLAL INDUSTRIES LTD - BUY

  

  

Even though we turned as parents or grandparents , how many of us can forget our old school days. For many of us ,the first entry into school by hanging on the finger tips  of our father ,our old teachers , our loved school mates  ..etc are still part of  of our sweet nostalgia. The special smell of new text book and new uniform is always part of our fond memories. At that time we were not bothered about brands of anything .But even if you are  at 100 now ,uniform brand you used in those days may be the same one your grand children using now  - MAFATLAL .

                                                               'Mafatlal' is a brand need no introduction to Indians. Mafatlal Industries Ltd (MIL)  started operations in early 1900's  and still this brand is a synonym for quality fabrics. Company is the supplier of corporate uniforms for well known firms like Toyota ,HP ,Intel..etc. It is not only producing uniform textiles but is an integrated player manufacturing Shirtings, Suitings, Voiles, Prints, Linens, Bleached White Fabrics, value added and fashion Denims, Corduroys, Bed & Bath Linen and Readymades in Cotton, Linen, Polyester/ Cotton, Polyester/Viscose, Cotton/Lycra, PV/Lycra, Terry Rayon and Polyester wool blends...etc . Ready made men's wear is  selling under the brand 'TRENDZ' .Even if this company still keeping the quality of its products ,its financial performance was not so bright for many years. Old machinery,out dated technology,excess work force ,lack of focused approach by the management ..etc derailed the operations of the company .Company ended in deep trouble  mainly due to its mounting debt burden and later referred to BIFR in 2002.Even management tried to revamp their company in the past they could not succeed due to many reasons.The real turning point came in the form of monetizing its 7 acre land at Mumbai for Rs.605 Cr in 2011.Ever since they realized this amount ,management started many steps to bring back the company into past glory.

                                                          Company paid back substantial portion of its debt and this once debt ridden company’s debt equity ratio now brings down to just 0.25 .During last year ,an amount of Rs.43 cr spend for installing State-of-the-art machines in place of out dated machines.This helps the company substantially to  reduce the workforce and it reduce the strength of workers by 37% .More than 1100 employees removed from pay roll by offering VRS in last year.In order to reduce power cost ,company is now setting up a 3MW co-generation plant which will be operational within 3 months from now. In last year MIL merged two companies – Mafatlal Denim and Mishapar investments -with itself. Company spend Rs.25 Cr in last year to expand this denim production facility at Navsari and now it is running at 100% capacity utilisation.Mafatlal Denim supplying its products to renowned brands like Wrangler ,Lee,Mark & Spencer..etc and also selling under own brand. With the merger of this denim facility ,MIL become a one stop shop for all textile needs having presence in the entire value chain which extents from spinning, weaving, dyeing, processing to finishing.Management’s efforts to revamp the company not only limited to  production side but many new initiatives introduced in marketing part too.Many new products introduced during last year including home furnishing items,linen fabrics..etc.Company is now in the process of expanding the number of its retail outlets (Mafatlal Familiy Shops ) from the current 100 to 150. In addition to family shops ,its products are currently available through 400 dealers and 35000 (Thirty Five Thousand) approved retailers across India. MIL also exporting products to various countries and reported a jump of more than 100% in exports during last year over previous year. As a result of all these efforts ,Company’s overall financial performance started to improve from FY 2012-13 .After a gap of many years company reported sharp improvement in sales and profitability in last year.Click on the below image for comparative data .

 

  
* FY 2012 figures for 9 months only

If the better performance in 2013  included an other income component ( Out of this Rs.15 cr is interest income from bank deposits) MIL reported  its good numbers  in the first half of this FY  even after deducting such items.( Some seasonality is  there in the sales of MIL  due to uniform sales ). Stability in cotton price due to good monsoon is also expected to help the company to protect their margin in the coming year.

I believe the brand ‘Mafatlal’  having very good brand recall  and now promoters are taking every efforts to renovate the company and exploit the potential of this brand.Actually they are working one by one and already turned around their another company Navin Flourine.Another point to note is ,management is very liberal in dividend distribution. After a long gap of many years MIL declared a dividend of 50 % ( 30 % + 20 % special dividend) in last year ,as soon as they returned to profitability. Other group company – Navin Flourine- distributed a dividend of Rs.75 ( not 75 %) in last year. Mafatlal Industries is one of the very few companies which is integrated by all means (from spinning to own shops)  .Company  is now ready for a second innings  and it is the time to buy this stock for long term . MIL listed  only in BSE (CODE :500264) @ CMP is  Rs.148

  

 

Link to Company's new website HERE 

Disc : I have vested interest in MIL