Nitin Spinners - Spinning the Threads of Growth

CMP  114

Nitin Spinners is one of the leading producers of  cotton yarn ranging from Ne 6 to Ne 80 in single, multifold slub, compact, core spun, elitwist yarns and knitted fabrics of single jersey, rib, interlock fabric, lycra blended fabrics and other possible structures. 

The company has started its production facilities with 384 rotors in 1993. It has gone for regular expansion and  today with the combined installed capacity of nearly 223056 spindles & 3000 rotors, manufacturing 50000 tons of yarn and threads per annum, the company has carved a niche for itself on the textile map of the country. Later company has gone for value added products with forward integration and established Knit Fabric Division with 63 Knitting machines, having production capacity of 9,000 tons of fabric per annum,  top quality fabric is already making its presence felt in the global textile industry. The company exports about 56% of its production to more than 50 countries across all the continents.

Integrated manufacturing plant is located at Hamirgarh, District Bhilwara (Rajasthan) equipped with latest technology machineries and coal-based captive power plant of 10.50 MW. The company has all quality certifications as per International Standards like ISO 9001:2015, Environment and Energy Management System Certifications ISO 14000 & ISO 50001, OSHAS and SA 8000. It is also certified by OEKO TEX Class I, GOTS, OCS for Organic Cotton, BCI certification for Better Cotton Initiative, SUPIMA Certified, Cotton USA and Government of India recognized Export House

Products Portfolio 

Yarns

The company produces a wide range of cotton yarns ranging from Ne 5 to Ne 24 in Open-end and Ne 10 to Ne 80 in Ring-spun yarns, with single and multi-fold types. It also produces value added yarns like Slub, Compact, Core Spun, Organic and BCI/TBC certified yarns and yarns manufactured from Supima and Giza cotton.

Knitted Fabrics

The quality Yarns is used to manufacture top quality grey fabrics which is consumed by the global apparel industry.  knitted fabric division is equipped to knit various type of structures to meet varied demands of customers for different end applications.

Product Applications

Company's products are used for multiple applications such as high value apparels, terry towels, all types of knitted garments, denims, furnishing fabric, sheetings, medical and industrial fabrics, mattress stickings, tea bags etc.

Market and Clients

The Company has marquee clients across the European, US and Asian Pacific countries and the domestic market as well. The company caters to textile companies like Arvind, Raymonds, Alok, Bhaskar, Nandan, RSWM etc. About 56 per cent of the production goes to more than 50 countries across the globe including the US, Latin America, Middle East, Far East, European Union, Africa etc

Investment Rationale 

New capacity expansion will drive the top line growth because company has more than tripled its spindle count in the past 3 years from ~77,000 spindles to 223,000 currently. Recent expansion of spinning capacity in compact spindles will further enable the company to produce superfine premium yarns for high-value apparels and finishing fabrics. Company plans to move further into value -added products, which includes dyed and melange yarns. Company is enjoying economies of scale by having one of the largest spinning capacities at a single location and large diversified product range catering to varied customer needs.

Company is using state of the art latest technology from world renowned machinery manufacturers. All plants are updated with latest technological developments and supported by experienced professionals. Well equipped lab to monitor quality and develop new product for customers. 

Raw cotton is major cost component in spinning business and cost is expected to remain stable in future. Company is strategically located in the cotton growing belt giving logistics and cost advantages. Steady domestic consumption along with high average sales realization wil help to domestic manufacturers.

Company’s facilities are centrally located provides added advantage of lower logistics cost along with economies of scale. Existing projects enjoy benefits of interest subsidy under TUFS and interest subsidy & electricity duty benefits under RIPS.

Experienced promoters have excellent capabilities and vision to grow small spinning unit into  worldwide recognized company as the industry leaders for spun yarns. 

Now business sentiments has started improving from Q3 after getting impacted due to implementation of  GST in Q2. The Indian apparel market is expected to grow at a CAGR of 10 -15%, on back of various growth drivers like Increase in per capita income, large youth population, Increase in aspirational buying, Increase in urbanisation, Increased standards of living in the rural areas and Increased penetration of online retailers. Export demand is picking up for India made cotton products. 

Company is consistently increasing its focus on domestic market and gradually reducing its exposure from exports market.  Going forward company planning to move up the value chain by increasing share of fabrics to further drive margins. The gradual improvement in domestic demand will result in better realization of yarn products.

Indian textile industry has lot advantages due to availability of a wide variety of cotton fibre, fast growing synthetics-fibre industry, wide range of cotton/spun yarn, presence across the value chain, trained manpower and all these factors  presents an enormous growth potential for Indian textile and apparel sector.

The domestic fibre consumption of less than three kg, is one of the lowest globally. Increasing population, favourable demographics, rising per capita income, affordability and global trend awareness will further drive the domestic growth. As a result, the fibre consumption is expected to grow from the present levels of 9 Million tons to above 14 Million tons by 2020.

In 2017 company has successfully implemented expansion project of Rs. 290 Crores and to reduce the debt, company has successfully raised additional equity capital of Rs 108 crores through QIP in November 2017 and allocated 93,85,765 equity shares to major mutual fund companies @ Rs 115 per share

Aditya Birla Sun Life Small and Midcap Fund =  21,73,913

L&T Emerging Business Fund = 25,29,236

IDFC Sterling Equity Fund = 16,30,000

Edelweiss Tokio Life Insurance = 8,69,000


Company has Issued 10,00,290  preferential equity shares to promoters @  Rs 120.50 per share in December 2017.

http://www.bseindia.com/xml-data/corpfiling/AttachHis/0f7d86df-85b9-48e4-8256-373c5c8d2ac4.pdf


http://www.bseindia.com/xml-data/corpfiling/AttachHis/440534b2-cb09-404d-b1cf-ae5bf3f57cc9.pdf

There will be significant reduction in debt due fund raised through QIP & preferential issue. The company will able to show better earning and better financial leverage for future expansion project.

Further company plans to put up Integrated Textiles Units as a greenfield project.  The proposed project will have facilities from spinning to processing, value-added segment to manufacture blended cotton yarns, melange yarn, dyed yarns, dyed and finished knitted fabrics and a new category in finished woven fabrics in cotton and its blends. The company has already purchased about 50 acres of land around 70 Kms from existing site and the same has been converted for Industrial use. For further details refer below link


http://www.bseindia.com/xml-data/corpfiling/AttachHis/5ae0af96-42f6-4486-996b-e6976e7be567.pdf

Conclusion

The Textile Industry plays a significant role in the Indian economy. It  constitutes 20% of industrial production, contributes around 10% to the export revenues and 20% to the employment in the industrial sector. This shows India’s potential to emerge as a global manufacturing hub  for textile and clothing. The domestic market also offers significant growth opportunities for Indian textile industry. 

Nitin Spinners has delivered industry-leading growth in past  and it will continue to outperform its peers in the future. Nitin Spinners is aggressively expanding its capacities to capitalise on the expected high future demand in textile sector. 


Nitin Spinners stock at cmp Rs 114 is very good investment opportunity for both short  term and long term ( 1 year to 4 years ). It can be bought + / - 10% from cmp with 10 -20% of portfolio allocation.