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
