Fundamental Analysis of Siyaram Silk Mills: In the ever-changing world of fashion, the textile industry plays a big part in deciding what clothes we wear. India is well-known for making clothes and fabrics, with a long history of expertise in this field. Within this industry, there’s a stock called Siyaram Fashion Mills that has consistently delivered returns to its shareholders since its listing.
In this article, we will conduct a fundamental analysis of Siyaram Silk Mills and try to identify the company’s future potential.
Fundamental Analysis of Siyaram Silk Mills
We’ll begin our Fundamental Analysis of Siyaram Silk Mills by becoming acquainted with the company’s operations and products. Following that, we’ll go into the stock’s financials. The article concludes with a highlight of future plans and a summary.
The Indian Textile and apparel industry is the second largest in the world employing 3.5 million handloom workers across the country. This industry contributes 13% of industrial production, 12% of exports and 2.3% of the country’s GDP. By 2029, this industry is expected to be worth more than $ 209 billion.
India is anticipated to achieve a total of US$ 65 billion in textile exports by FY 2025-26 due to the revival in global demand and the implementation of crucial initiatives by the government.
The government has launched a number of initiatives to boost textile and apparel manufacturing and exports. It allowed 100% FDI in the sector through the automated route.
Additionally, the PLI Scheme outlay of Rs.10,683 crores over a five-year period for textile items such as MMF clothing, MMF fabrics, and technical textiles will provide a significant boost to the sector.
Siyaram Silk Mills Limited, incorporated in 1978, is one of India’s most trusted brands and marketers of fabrics, ready-made garments, and other textile products. The company is well-known for its high-quality fabrics and garments manufactured from polyviscose, cotton, wool, linen, bamboo, and stretch mixes.
The Company’s manufacturing facilities are strategically positioned in Tarapur, Daman, Amravati, and Silvassa and are seamlessly interwoven by a supply chain network to create and supply world-class products.
The company offers its products under a variety of brands, including Siyaram, J Hampstead, Oxemberg, and Cadini, all of which have a strong recall value among consumers.
Currently, the company has over 800 distributors and 225 retail stores spread across India. Additionally, it has established its presence globally and exports fabrics to the UK, Europe, North America, Latin America, Gulf countries and Southeast Asia.
In terms of revenue breakdown, the company earned a total of ₹2272 crores in FY23. Out of this, 77% of the revenue came from the fabric segment, 17% came from the readymade garment segment, and 6% came from the Yarn/knitting and other segments. Furthermore, 81.20% of this revenue was derived from domestic sales and 12.80% was derived from exports.
Financials of Siyaram Silk Mills
Using the annual reports declared by the company, we will now conduct a fundamental analysis of Siyaram Silk Mill’s
Revenue and Net Profit Growth
The company’s profit and loss account shows a significant decrease in revenue during FY21 due to the COVID-19 pandemic. However, it quickly recovered in the following financial years.
For FY23, the company has recorded a total revenue of ₹2272 Crores. This gives the company a CAGR growth of 5.36% on its revenue between FY19 and FY23.
The profits of the company have also followed a similar trend reporting a net profit of only ₹3.5 croroes FY21. But on an overall basis, the company’s profit has increased from ₹99 crores in FY19 to ₹250 crores in FY23. This gives the company a CAGR growth of 26.06%.
The table below shows the Total income and net profit of Siyaram Silk Mills for 5 financial years:
|Year||Total income (In crores)||Profit after tax (In crores)|
The profits of the company have increased exponentially compared to the total revenues during our period of analysis. Let us now study how the company has performed on the margins front.
While both the operating profit margins and net profit margins of the company declined until the Covid pandemic, these margins increased in the following financial years. For FY23, the company reported operating and net profit margins of 16.50% and 11.24%, respectively.
An increase in operating profit margin can be attributed to the asset-light approach for manufacturing and distribution followed by the company. An increase in net profit margin also implies that the company effectively managed its financial obligations and taxes.
The table below shows the operating profit margins and net profit margins of Siyaram Silk Mills for 5 financial years:
|Year||Operating Profit Margin||Net Profit Margin|
Return Ratios: RoCE and RoE
If we take a look at the return on equity of the company, we can see that it has a good return of shareholders capital with the exception of FY20 and FY21. This means that the company has been consistently generating higher returns on the capital invested by the shareholders.
The five-year Roce of the company is also following a similar trajectory. For FY23, the company has reported an ROE and RoCE of 24.24% and 28.82%, respectively.
This indicates that the company has effectively utilized its resources to generate a strong return. The high return ratios can also be attributed to the company’s asset-light approach.
The table below shows the ROE and RoCE of Siyaram Silk Mills for 5 financial years:
Debt & Interest Coverage Ratio
If we take a look at the leverage situation of the company, we can notice that the debt-to-ratio consistently decreased over the last five years. During FY23, the company reported a debt-to-equity ratio of 0.13.
This suggests that the company is under fewer financial pressures because it is depending less on borrowed capital to fund its operations and expansion. The decrease in debt can also be attributed to the company’s asset-light approach.
With the reduction in the company’s debt and an increase in its profit margins, the company has also been able to increase its interest coverage ratio in the previous two financial years.
During FY23, the company reported an interest coverage ratio of 17.75. This indicates that the company has earned enough gross profits to meet its interest expenses 17 times.
This also implies that the company is in a position to borrow additional funds for the purpose of expansion and growth.
The table below shows the leverage ratios of Siyaram Silk Mills for 5 financial years:
|Year||Debt to Equity||Interest Coverage Ratios|
Future Plans Of Siyaram Silk Mills
So far we looked at the previous fiscals’ data for our fundamental analysis of Siyaram Silk Mills. In this section, we’ll try to make sense of what lies ahead for the company and its investors.
- The company has been adopting an asset-light model in order to expand its business. It will further ensure that there is an optimal balance between in-house production and outsourcing which will enable it to optimally allocate its resources.
- The company is adopting a franchisee model for retail expansion. Through this, it can expand rapidly, maintain low debt levels, and enhance return on capital.
- The company intends to increase its spending on advertising and marketing in order to strengthen its existing brands and effectively reach out to new audiences.
- The company is planning to enhance its distribution network by optimizing existing channels and forging new strategic partnerships. This will help it increase its market penetration and solidify its position as a leader in the industry.
- The company is focusing on training tailors across geographies to revive and promote tailor-made clothing. This will help them provide personalised and customised solutions to their customers.
We are almost at the end of our fundamental analysis of Siyaram Silk Mills. Let’s take a quick look at the stock’s important metrics.
|CMP||₹ 570.15||Market Cap (Cr.)||₹ 2,671.36 Cr|
|Promoters Holding||67.18%||Debt to Equity||0.13|
|Net Profit Margin(%)||11.24||Operating Profit Margin(%)||16.5|
As we conclude our fundamental analysis of Siyaram Silk Mills, we can draw the conclusion that the company’s asset-light model has enabled it to expand and decrease its costs which has helped it earn more profits in recent years.
Based on the expansion plans placed by the company which are accompanied by the industry’s potential growth, there is scope for the stock price of the company to rise further, provided it maintains the same growth every year.
Written By Aaron Vas
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