Shares of Indo Count Industries rose 10 per cent to Rs 186 on BSE in day trade on Monday, gaining as much as 17 per cent in the previous two trading sessions after the company completed the acquisition of GHCL’s home textile business. Indo Count is now the largest global manufacturer of home textiles.
In December 2021, Indo Count Industries and its subsidiary acquired GHCL’s home textile business in India and assigned the assets (inventory and intellectual property) of the US subsidiary Grace Home Fashions LLC (GHF) for a cash consideration of Rs 593 crore.
With the recent acquisition of GHCL’s home textile business (about 45 million meters), Indo Count has become the largest textile home furnishing company, globally, with an annual capacity of 153 million meters. The acquisition will see a potential addition of around Rs 1,300 – 1,500 crore per annum to the company’s line of business at its maximum capacity.
The company will be able to add a whole new avenue to the customer base, which has not been exploited, thereby increasing its share in the global market. Indo Count plans to sell its value-added categories (Fashion, Enterprise and Utility categories) to existing customers of GHCL.
Despite sharp gains in the past two days, Indo Count stock has underperformed the market by dropping 35 percent in the past three months, compared to a 1 percent rise on the S&P BSE Sensex. The stock hit a record high of Rs 315 on October 11, 2021.
At 02:39 pm the stock was trading 9 per cent higher at 184 rupees, versus 2.2 per cent on the benchmark index. Volume at the net more than doubled as 1.5 million shares of stock traded on the NSE and BSE exchanges.
In the October-December quarter (FY22 third quarter), company size declined 12 percent year-over-year (y-o-y) to 21.1 million meters due to unprecedented supply chain challenges and lower demand in key geographies due to the third wave of epidemic.
Price wise hikes and better product mix translated into an increase in average deliveries of 9 per cent YoY to Rs 344/meter. Revenue decreased by 3% YoY to Rs.756.4 crore. Conscious efforts to sell value-added products allowed the company to combat inflationary pressure and maintain 50 percent plus gross margins (up 380 basis points year over year). EBITDA margins decreased 176 basis points year on year to 15.3 percent.
While challenges may persist in the near term, we like Indo Count Industries as a long-term structural story to play in the home textile export space. We expect capacity utilization from the existing plant to improve from 70 percent in FY22 to 85 percent in FY23E and a factor of 50 percent capacity utilization from new acquisitions bringing total volumes to 110 plus 1 million m in FY23E, ICCI Securities said in the update result.