Expect spinning biz to give 28-30% margins ahead: Sintex

Sunil Kanojia of Sintex said the company got into the spinning business after it spotted a positive trend for India in this segment in the global market.

Gujarat's textile policy has made the sector attractive.

Sunil Kanojia

Group President

Sintex Industries

Sintex Industries , which is primarily into manufacturing plastic products (water tanks) and textile, is setting up a spinning unit with 0.3 million spindles at a cost of Rs 1,800 crore in Gujarat and later plans to ramp it up to 1 million spindles with a total capex of over Rs 5,000 crore over the next five years.

"Textile is more a finished product, whereas spinning (yarn) is an industrial product. The business model dynamics are totally different," Sunil Kanojia, Group CEO of Sintex told CNBC-TV18's Latha Venkatesh and Sonia Shenoy.

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He said the company's got into the business after it spotted a positive trend for India in this segment in the global market. Kanojia said India is becoming more competitive than China in this space.

Situated in India's largest cotton producing state and due to its proximity to Pipavav port (just 20 kms away), the plant would have the advantage of lower inward / outward lead distances and freight cost. Additionally, Gujarat state policy renders benefits of lower interest cost on capex (adjusted for 7 percent state subsidy, net interest cost reduces to 2-3 percent), and power subsidy, which make overall profitability healthier.

The company expects to commission the first phase of 0.3 million spindles in Q4FY15 with full commencement in October 2015.

Kanojia said the company expects an annualized revenue of Rs 1,800 crore (1x capex) from FY16, with EBITDA margins of 27-30 percent and IRR of 18-20 percent, considering that export to domestic ratio is about 70:30.

Sintex Ind stock price

On June 19, 2014, at 11:12 hrs Sintex Industries was quoting at Rs 94.00, up Rs 1.20, or 1.29 percent. The 52-week high of the share was Rs 107.45 and the 52-week low was Rs 16.90.

The company's trailing 12-month (TTM) EPS was at Rs 10.17 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 9.24. The latest book value of the company is Rs 94.32 per share. At current value, the price-to-book value of the company is 1.00.

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