VTM LTD – A CASH RICH TEXTILE COMPANY

I always endeavour to search a company with track record of trustworthy promoters, profit making, dividend paying, lower valued by the market and available at Happy Price Menu. These factors give a chance to small investors to invest in a lower risk company and get higher returns.

One of the such company is VTM LTD (BSE CODE: 532893)

Company Profile

VTM LTD was established in the year 1946, by a well established South India based Thiagarajar group. It has one subsidiary Colour Yarn Ltd.

The company has installed 270 state of the art looms to produce 10 lacs meters of fabric every month. Company is related to consumption story, where demand never ends.

DNV has certified the company ISO 9002:2000 that endorse various specifications complies with the internal standard.

The company has got one Gold Award and three Bronze Awards for outstanding export performance by the Cotton Textile Export Promotion Council - a body sponsored by Government of India.

Products of VTML – Bed Linen and Shirt Fabric

Company Performance

Financials for the last three years are as under:

Particulars	Comparative Figures (Rs. In crores)
FY	2012-13	2013-14	2014-15	2015-16 6 months
Sales	143.18	169.16	167.82	76.62
Net Profit	12.32	11.31	7.96	7.46
Dividend	70%	70%	63%	-
Bank Loan	0.78	0.62	4.26	5.27
Finance Cost	0.08	0.25	0.18	0.17
Net Worth	104.95	112.96	118.66	126.63
Investment in debt Mutual Funds	0.00	17.00	33.27	47.29
Cash and Bank Balance	15.99	16.26	9.37	2.09
Total Cash Equivalent	15.99	33.64	43.02	49.38
Other Income	3.09	2.51	3.19	2.13
Face Value (Rs)	1	1	1	1
Promoter Holding	75%	75%	75%	75%
Shares pledged by Promoters	0	0	0	0

TEN Reasons for choosing this company are as under:

1.   In first half of this year profit of the company is around profit of previous full year. Looking to half year performance we may expect that for full year profit will be around Rs.16 crores, almost double of previous year.

2.   As per data available since 2004 it is continues profit making and dividend paying company. Due to higher profit, this year company will increase dividend payment.

3.   VTML is a Cash Rich company. As on 31.03.2015, it has invested cash surplus of Rs.33.27 crores in various debt mutual funds, which market value were Rs.34.49 crores as on 31.03.2015. As on 30.09.2015 its investment in debt mutual funds reached to Rs.47.29 crores (Rs.12.00 per share), which is 37.34% of its net worth and it will be further increase in year end.

4.     During 1994-95, VTML issued bonus shares in the ratio 5:1. Looking in view of a small capital of Rs.4.00 crores and cash surplus position of Rs.12.00 per share, it is a potential bonus candidate.

5.    Promoter’s holding is 75% shows their great interest in the company. Promoters are credit worthy and they have not pledged any share.

6.   The company has own two Wind Turbines, capacity of 2.1 MW each, established by Suzlon. Market value of these wind mill generators is Rs.25 crores assuming Rs.6.00 crores per MW. These wind mills have generated 5314729 Units electricity in FY 2014-15. It is one third of total unit electricity consumed by the company.

7.  Working capital loan to the company is zero and it is virtually debt free. A small amount of finance cost paid to the banks. To make it more competitive in both International and Domestic markets, the Company is modernising its plant & machinery under TUFS at and taken a term loan of Rs.6.00 crores from SBI in FY 2014-15. The company has received TUFS subsidy of Rs.1.25 crores for this loan. Therefore, actual cost of this loan is very low.

8.    The company has a large land bank. For further expansion it need not require to buy additional land. Cash surplus of Rs.47.29 crores is more than sufficient for further expansion without taking any loan for banks.

9.   Market Cap of the company is Rs.96.00 crores.  Looking in Cash surplus Rs.47.29 crores in books, Value of Wind Turbine of Rs.25.00 crores; present market value of the company’s textile business is only Rs.23.71 crores.

10. It is trading at very cheap price 24/- (Closing price of 04.12.2015) compare to company’s Cash surplus position, Reserves, Assets Value, Low Equity, Profits, Dividend yield and Future potential. 

Disclaimer: I am not a research analyst. Please take your own decision after reading the results, annual reports, other informations available about the company.

One year completed by this blog. Investors got multiplier returns.

This blog was created in last year on a auspicious day of ‘Ganesh Chaturdashi’ which is also celebrated as ‘Anant Chaturdashi’ in various part of the our country. Today it has completed one year. Till date this blog has received 14,600 hits and Lord Ganesh had blessed all investors, who had invested after reading stock on this blog.

1.   Stock idea of Nitin Spinners was posted on 07^th September 2014, when it was trading at Rs.27/- has touched Rs.107/- on 6^th August 2015.

2.    Stock idea of Vidhi Dyestuffs was posted on 18^th May 2015, when it was trading at Rs.20/- has touched Rs.57/- on 24^th September 2015 and it is continuous hitting new 52 week high despite volatile market.

3.    Stock idea of Karnataka Bank was posted on 12^th July 2015, when it was trading at Rs.150/-. Due to negative sentiments about banking stocks, it has gone down. But, it is still a lowest valued private sector bank available at attractive price with good dividend yield track record. Recently Government has allowed 100% FDI in private banks. Rate cut from RBI is expected by all due to continuous lower CPI. IDFC Bank is going to start operations from 1^st October 2015, which need to establish large number of branches to compete with big counterparts like ICICI, AXIS and HDFC Bank. KOTAK and YES Bank also needs larger network to continue in race with these three big private sector banks. To increase the network size in short term only ONE way, i.e. merge another private sector bank with good branch network. In earlier days ICICI, AXIS, KOTAK and HDFC Bank has already implemented merger idea to get bigger size. Whether Karnataka Bank will be next merger candidate, only time will tell.

VIDHI DYESTUFFS- AGM UPDATES

AGM of Vidhi Dyestuffs shareholders held on 16^th September 2015 at Mumbai. Some important points of speech of Chairman Mr. Bipin Manek in AGM are as under:

1.    Vidhi Dyestuffs has expanded the production capacity of edible food colours from 2600 MTPA to 4000 MTPA, i.e. 54% increase in existing capacity.

2.    After expansion now Vidhi Dyestuffs ranks third in world with capacity of 4000 MTPA. First is Synsient with capacity of 20000 MTPA and second is Roha Dychem with capacity of 9000 MTPA.

3.    Commercial production started from expanded capacity from 5^th September 2015.

4. Cost of expansion is Rs.12 crores, for which Rs.6.50 crores used from internal accruals and Rs.5.5 crores loan taken from banks.

5.    Company is further planning for expansion for double the capacity from existing 4000 MTPA to 8000 MTPA in next four years, i.e. by 2019.

6.    After further expansion company is targeting revenue of Rs.500 crores by 2019.

7.    Company is also planning to entry in new segment of Natural Colors in next two-three years.

VIDHI DYESTUFFS – WONDERFUL Q1 (June 15) RESULTS

Vidhi Dyestuffs was posted on this blog on 18^th May 2015 when it was trading @21/- and touched 53/- on 10.08.2015. On 12.08.2015 company has announced results for the quarter ended 30^th June 2015.

Company has shown wonderful performance in Q1. Comparison of key figures is as under: (Rs in crores)

Particulars	Comparative Q1 Figures
FY	Q1 2014-15 Actual	Q1 2015-16 Actual	Growth
Sales	40.26	59.05	47.23%
Net Profit	2.44	3.80	55.74%
Net Profit Margin	6.06%	6.44%	0.38%
Capital	5.00	5.00	-
Face Value (Rs)	1	1	-
EPS (Rs)	0.49	0.76	55.10%
Dividend	0	20%	-

We assume that company will maintain same growth momentum in remaining three quarters in FY 2015-16. Company has increased the manufacturing capacity and commercial production since started. Therefore, results of coming quarters will be better than Q1. Comparison Audited figures for FY 2014-15 and projected figures for FY 2015-16 is as under: (Rs in crores)

Particulars	Projected Comparative Figures
FY	2014-15 Actual	2015-16 (Estimated)	Growth
Sales	188.77	300.00	58.92%
Net Profit	12.42	20.00	61.03%
Net Profit Margin	6.58%	6.67%	0.09%
Capital	5.00	5.00	-
Face Value (Rs)	1	1	-
EPS (Rs)	2.48	4.00	61.29%
Dividend	50%	80%	60%

POSITIVE DEVELOPMENTS

a)    On 05.08.2015, Mr. Nikhil Vora has bought 4.97 lacs shares @47.40. At present he is CEO of Sixth- Sense-Ventures, which has got multiplier returns on earlier -14- investment made by it. Earlier, Mr. Nikhil Vora was Managing Directors and Head of Research at IDFC Securities. He was voted as number one analyst by Asia Money polls in 2012.

b)    On 13.08.2015, Firstcall Research has published research report on Vidhi Dyestuffs and given buy call for a target of Rs.52/-. However, stock has already touched Rs.53/- on 10.08.2015.

c)    Company has announced Vision for 2020, with Q1 results and targeting 20% of global capacities with EBITDA margin of 20% by moving in to value add segments.

d)    Earlier the company was announcing interim dividend @25% on half yearly basis. This time company has announced interim dividend @20% after Q1 results. Last year company has announced 20% of EPS (Rs.2.48) as dividend. This year it is expected that company will announce 20% interim dividend for each quarter and total dividend will be 80%, which will be 20% of estimated EPS (Rs4.00) in FY 2015-16.

In view of positive developments stated above, I believe that stock will trade in three digits in coming months.

Disclaimer: I am not a research analyst. Please take own decision after read the results, annual reports.