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.