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Information Memorandum
August 2011
1
This Information Memorandum is being delivered on behalf of Shri Lakshmi Cotsyn Limited(“Company”). The sole purpose of this Memorandum is to assist the recipient in deciding whether toproceed with a further investigation of the Company, in connection with the proposed investment inlisted shares of the Company. This Memorandum does not purport to be all-inclusive or tonecessarily contain all the information that a prospective investor may desire in investigating theCompany.
By accepting this Memorandum, the recipient agrees to keep permanently confidential theinformation contained herein or made available in connection with any further investigation of theCompany. This Memorandum may not be photocopied, reproduced, or distributed to others at anytime without the prior written consent of the Company or Destimoney Securities Private Limited(DSPL). Upon request, the recipient will promptly return all material received from the Company orDSPL (including this Memorandum) without retaining any copies thereof, all in accordance with suchConfidentiality Agreement.
This Memorandum has been prepared for informational purposes relating to this transaction only andupon the express understanding that it will be used for only the purposes set forth above. Neither theCompany nor DSPL makes any express or implied representation or warranty as to the accuracy orcompleteness of the information contained herein or made available in connection with any furtherinvestigation of the Company. Each of the Company and DSPL expressly disclaims any and allliability which may be based on such information, errors therein or omissions there from. Therecipient shall be entitled to rely solely on the representations and warranties made to it by theCompany in any final private placement agreement.
In furnishing this Memorandum, neither the Company nor DSPL undertakes any obligation to providethe recipient with access to any additional information. This Memorandum shall not be deemed anindication of the state of affairs of the Company nor shall it constitute an indication that there hasbeen no change in the business or affairs of the Company since the date hereof. Except whereotherwise indicated, this Memorandum speaks as of the date thereof. The Memorandum includescertain statements, estimates and projections provided by the Company with respect to the anticipatedfuture performance of the Company. Such statements, estimates and projections reflect variousassumptions, which may or may not prove to be correct. No representations are made as to theaccuracy of such statements, estimates or projections.
2
Disclaimer
1 Investment Highlights
2 Company Overview
3 Group Structure
4 Management
5 Textiles Portfolio
6 Defense Products Portfolio
7 Existing Capacity and Planned Capex
8 Investment Opportunity
3
Contents
Investment Highlights One of the largest textile manufacturers in Northern India with a diverse product range
Shri Lakshmi Cotsyn Limited (SLCL) is a multi-product company involved in the manufacturing of cotton and
blended fabrics, embroidery, quilting, fusible interlining, denim, terry towels, bottom weights, home furnishing etc.
Presence in the high margin, value added textiles segment (Technical and Safety Textiles)
SLCL is manufacturing Water Repellent Bed Linen, Vitamin E bed Linen, Fire Retardant Fabrics, Organic
Bedspread, Water Proof Repellent fabric, Breathable Fabrics, NBC Fabrics, MSCN Fabric, Flex Fabric, Black out &
ECW ( Extreme Cold Weather) Fabric
Presence in the Defence sector
SLCL is an approved supplier to government defence establishments ( Indian Army, Navy, Air Force and State Police)
and is registered with several regulatory agencies. This ensures acceptance of its products
The Company is supplying Bulletproof Jackets, Bullet proof Helmets, as well as 360* protected Armoured Vehicles
State of the Art manufacturing facilities with focus on R&D
Gradual change in revenue mix with high margin business verticals like technical & safety textile and retailing etc
In-house chemical auxiliary unit
Focus on nanotechnology that would enable the company to manufacture smart fabrics.
Value creation from waste products like conversion of RHA into value added products like sodium silicate and
precipitated silica.
Experienced and Professional Management team led by Dr. M.P. Agarwal
Headed by Dr. M.P. Agarwal, CMD, entrepreneur with over thirty-eight years of experience
Supported by an experienced second in line management team
Solid financial performance Over a period of time generating value for shareholders:
SLCL‟s revenues have been growing at a C.A.G.R. of 24.67% over the past 3 yrs. The revenues have increased by
17.12% y-o-y from 15354.8 mn to 17983.8 mn and the profits increased by 15% y-o-y from 916.5 mn to 1052.9 mn. for
the year ended June 2011.
SLCL stock trades at a FY12 P/E of 1.69x, making it a growth stock available at a very low valuation 4
Net Sales (INR Mn) PAT (INR Mn)
EBITDA (INR Mn) EPS
1346.7
1739.2
2057.8
2501.0
0
500
1000
1500
2000
2500
3000
FY2008 FY2009 FY2010 FY2011(Prov.)
577.1629.6
916.4
105.29
0
200
400
600
800
1000
1200
FY2008 FY2009 FY2010 FY2011(Prov.)
9,281
11,580
15,355
17,983.8
-
5,000
10,000
15,000
20,000
FY2008 FY2009 FY2010 FY2011(Prov.)
39 4045
49.92
0
10
20
30
40
50
60
FY 2008 FY 2009 FY 2010 FY 2011(Prov.)
5
Snapshot of Financial Performance
6
CMP = Rs. 80.7 (as on Aug 16, 2011) FY11 FY12f
Market Cap INR Mn 1,702
Net Sales Revenue INR Mn 17,984 23,422
EBITDA INR Mn 2,647 3,467
PAT INR Mn 1,053 1,078
EPS INR 49.92 51.11
EPS Growth % 8.70% 8.70%
ROE % 19.70% 18.17%
P/E x 1.62 1.58
SLCL is available at a FY12 P/E of 1.58x which is very low as compared to the underlying fundamentals of the company. – Large size player in value added textiles– Increasing demand for products manufactured by SLCL – home furnishings, shirting, technical
textiles, denim fabric, safety textiles and defence products– Branding of products is expected to improve margins– Emerging player in defence products– Capacity expansion nearing completion and is expected to boost revenues and profitability
This presents a great investment opportunity for a savvy investor
Valuation
Source: CRISIL
Shareholding Pattern
(as on June 2011)
Company Overview Shri Lakshmi Cotsyn was established in 1993 and today is a well established multi-products company
with multi-markets
Core expertise in manufacturing of Denim, Terry Towel, Bottom weight, Home furnishings, Garments and
Technical & Safety textiles
One of the leading manufacturer and supplier of Technical & Safety Textiles and Fabricated items for the
defence sector
Listed on NSE, BSE, UPSE and SGX (Bonds)
7
Public, 54.67%
Promoter & Promoter
Group, 41.33%
Institutions, 4%
Commenced production of
Quilted Fabrics(0.4
mmpa)
Commissioned Technical Textiles (6 mmpa)
1993 1995 1998 1999 2002 2005 2006 2007 2008 2009 2010
Capacity Expansion of poly-fibre filled quilted to 0.8 mmpa.
Expansion of Suiting/Shirting to 12 mmpa
Manufacture of Fusible Interlining Fabrics with 10 mmpa
Entered domestic retail through ‘Weaves’
Commenced garment production at Roorkee (6.6 mn pcs)
• Launched DYFI Brand of Garments
• Setup of Spinning unit with 10,000 Spindles.
Commenced production of
suiting/shirting (6 mmpa)
Manufacture of embroidery
fabric (0.8 mmpa)
Expansion of Suiting/Shirting division to 18
mmpa
Expansion of Suiting/Shirting
division to 24 mmpa
Expanded /Diversified to:
Commenced production of 360 degree protected armoured vehicles
Acquired unit at Noida to manufacture comforters (3 lac pieces p.a.)
Setting up 16 Mw co-generation plant for captive use
Wider width fabrics (12 mmpa)
Bottom weight fabrics (6 mmpa)
Terry Towels (3000 tpa)
Denim Fabric (20 mmpa)
Yarn Dyeing (1500 tpa)
Nylon coated fabric (1.25 mmpa)
Home furnishings (5 mmpa)
Milestones
8
Locations Headquartered in Kanpur; six manufacturing facilities spread in Uttar
Pradesh, Uttarakhand and Haryana
A strong dealer and distributor network across India with retail presence through 1150 multi-brand outlets (MBO)
9
Group Structure – Integrating Growth
Shri Lakshmi Group
Shri Lakshmi Cotsyn Limited
Listed
Shri Lakshmi DefenceSolutions Limited
SLCL Overseas (FZC), UAE
100% 100%
10
Board of DirectorsDr. M. P. Agarwal,
CMD
•He has been a guiding force behind the sharp rise in Company‟s turnover over the last 18 years
•An ICWAI and Doctorate in Textile Costing
Mr. Pawan Kumar
Agarwal, Jt. MD
•Responsible for production, quality controls and marketing
Mr. Devesh Gupta,
Dy. MD
•A Chemical Engineer by qualification
•He is responsible for looking after technical plant
Mr. Dileep Bajaj, ED •He has more than 31 years of experience in project and financial management especially in textile
industry
Mrs. Sharda Agarwal,
Director
•She is actively involved in Company‟s business and management
Dr. G. N. Mathur,
Independent Director
•An eminent senior scientist and ex-Director Defence Materials and Stores Research and development
Establishment
•He is working on Nano technology and its application in textiles to manufacture smart textiles.
Mr. Ram Sharan
Srivastava, Independent
Director
•A retired IAS Officer. Had been in administration for more than 30 years.
Dr. J. V. Rao,
Independent Director
•He has over 30 years of experience in textile technology
•He is also a director in Northern India Textile Research Association (NITRA) Ghaziabad
Mr. R. K. Garg,
Independent Director
•He has over 30 years of experience and has previously worked with DLF and DCM
Mr. K. D. Gupta,
Independent Director
•A retired IRS Officer
•Ex. Administrator U.P. Stock Exchange Association Ltd.
Mr. S. K. Mangol,
Independent Director
•He has around 40 years of experience in the field of Textile Industry.
11
Textiles Defence Production
Legacy Business Suiting and
shirting Embroidered Quilted Fabrics Lace &
embroidery
Export Oriented
Terry Towel Bed Sheets Comforters Pillow Covers
Others
Denim Garments Bottom weight Zippers
Technical Textiles Safety Textiles
Fusible Interlining Black out Fabric Flex Fabric MSCN/IRR Fabric NBC Fabric PU/PVC coated fabric Water Repellent
Fabric Breathable fabric Fire retardant fabric
Bulletproof Jackets
Coat Combat Sleeping bags Infra-red
camouflage nets Ballistic body
armour Bulletproof
helmet Mosquito net
Brand Name Product Launched Specialty
Star Track Fusible interlining fabric 1997 40 varieties of fusible interlining (with zero shrinkage)
Galaxy Embroidery 1997 Range of embroidery like chikan, etc
Alisha Clothing Accessories 2000 Range of clothing accessories, lace, etc
SVL Zippers 2006150 shades with different zippers for garments, bags and luggage
Weaves Home Furnishings 2008Home furnishing – value-added bed sheets, bed covers to terry towels, pillows, cushions, comforters, table covers
“DYFI” Garments 2010 Stitching through technology driven machines
Textiles: Diversified Product Portfolio
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Home furnishings
Product Specialty
Water Repellent Bed Linen
Ideal for nursing mothers
Vitamin E Bed linen Protects body tissue from damage caused by unstable substance
Fire retardant fabric Specialized fabric which does not catch fire
Organic bedspread 100% pure organic materials such as cotton, bamboo, linen and hemp blended together
Technical & Safety Textiles
Product Specialty
Waterproof Repellent Fabric
Protects the soldiers from getting wet
Breathable fabric100% cotton made and carbon coated to make it easily breathable and light weight
Fire retardant fabric Protects soldiers from fire
NBC FabricProtects soldiers in nuclear war. Nitrogen packing enables use even after 10 years
High altitudeSoldiers will feel warm even at -40 degree centigrade
Dual shade fabricCamouflages and prevents enemy detection
Bulletproof jackets and helmets
Officers protection
Infra-red reflector fabric
Cannot be detected by infra-red rays
Sleeping bags Comfortable and portable
13
Textiles - Value Added Products
Terry Towels
Commenced production of terry
towels in March 2007 (3,000 TPA)
One of the leading manufacturer of
entire gamut of Terry Towels in
India
High quality ranging from 380 to
800 GSM towels and for bath mat
500 to 2000 GSM
Producing towels in all sizes from
Wash, Guest, Kitchen, Hand, Bath,
Bath sheet, Beach towels, Bath mat
and Bath Robes
Product range is available in
Dobby, Jacquard, Embellished and
Embroidered towels
Bed Linen
Commenced production of bed linen in
October 2007 (12 MMPA)
SLCL has the capacity to
weave, process, embroider and finish
1,60,000 sets every month
The range is available in
cotton, polyester cotton blend, percale
and satin and prints upto 16 colours
SLCL is fast emerging as a preferred vendor partner to global buyers in the home textile space
14
Terry Towel and Home Furnishings
Embroidered fabrics & Lace
Computerised multi-needle embroidery machine, imported from Switzerland
Team of designers design the fabrics (both in cotton and tissue) and Lace
Marketed under the brand name of “Alisha Embroidery”
Denim
Product range comprises of cross-hatches, rains satins, drills, tussors, linen, Lycra, ecru and dobby
designs in varied deep indigo and blue black combinations
The products climb the value chain by special treatment of mercerizing, over dyeing etc
To introduce nep denims, chambrey greens cast and vintage fabrics in the future
Garments
SLCL has state of the art technology for manufacturing garments from Italy and Germany
We manufacture knitted t-shirts, skirts, denim jeans and uniform dresses
Fusible interlining
SLCL manufactures Microdot fusible interlining, fusing fabric for shirt collars, cuffs, belt rolls and
Packlets
Marketed under the brand name of “Star Track”
Zippers
Imported the largest zipper manufacturing plant from Taiwan
The product ranges from (a) IFC and CFC zippers used in trousers, (b) concealed invisible zippers
used in salwars, skirts and evening dresses, (c ) Metal Zippers for Jackets and Jeans, and (d) Long
chain zippers used in suitcases, bags and shoes
15
Textiles - Others
16
Shri Lakshmi in Defence businessSLCL manufactures uniforms, fabrics and fabricated textile items for the armed forces
SLCL‟s subsidiary, Shri Lakshmi Defence Solutions Limited (SLDSL), incorporated in 2006-07, manufactures
the following for the defense and homeland security sector:
•Ballistics
•Body armour
• Bulletproof helmets
• Bomb Blanket
•Bomb Suits
•Composite armour panels for vehicles
•Armoured Vehicles (360* protection)
•DHRUV – Armoured Troop Carrier
•DRONA – Blast and Mine Protection Vehicle
•VIPER – Fast moving attacking armoured vehicle
•SHERPA MK7 – Latest armoured protection vehicle
SLDSL is approved supplier for
Indian Army
Navy
Air Force
SLDSL is registered with
•Directorate General of Supplies & Disposal
•Director General of Quality Assurance
•Forces Ministry of Defence (Navy)
•Defence Material Stores R&D Est
Growth Drivers –
Modernization programs to upgrade the Indian Defence
Recent terrorist attack on India
Threat from terrorists, naxalites, etc. in different parts of the country
Threats from neighbor countries
Strengthening the Indian Army
Protection of VVIPs
Ordnance Factories
All central paramilitary and State Police forces (BSF, CRPF, ITBP, NSG, SSB)
Indian Railways
•Federation of Indian Export Organization
•RDSO (Indian Railways
•Indian Postal Department
Police Vehicles
Army Vehicles
Ambulance & Special Vehicles
Passenger Vehicles
VIP Vehicles
Sports Utility Vehicles
Cash –in Transit Vehicles
Peace keeping force vehicles
Engineering machines for Mine
Blast protector
17
Shri Lakshmi Defence Solutions SLDSL has entered into the following agreements with leading players in defense systems
Agreement with Ford India Ltd. for armouring vehicle on Ford chassis.
MOU with RHEIN METALL AIR DEFENCE Switzerland for supply of SKY RANGER air defence system.
Agreement with Adcom Military Industries, Abu Dhabi for marketing the vehicles in Middle East & Africa
The Major markets for SLDSL products include:
India
USA
Canada
Europe
Australia
Middle East
Africa
Asia
SLDSL has developed indigenous manufacturing facilities for technical and security related fabrics for all types of military usage. It has a range of ballistic products and an established network and affiliates around the world, backed
by long-term strategic alliances with local as well as global manufacturers
Ballistic Blanket
Ballistic Shield Sniper SuitFire Resistant
SuitSleeping Bag
Smart Uniforms
Body ArmoursBulletproof
VestsBulletproof
JacketAnti-riot helmets
Sleeping Bag Armour Plates
18
Technical and Safety Textiles
19
Extremely Cold Weather (ECW) clothingsFire Retardant Fabrics & Suits Nuclear, Biological, Chemical (NBC) Protective Suits and Gear
Multi Spectrum Camouflage FabricConductive Fabrics and Health Monitoring Sensors
Capabilities in Technical and Safety Textiles SLDSL has already developed the capabilities in the following high end technical and safety textiles and gear
Existing CapacityExisting Capacity
Suiting & shirting
QuiltedFabric
Embroidery Fabric
Fusible Interlining
Technical Textile
Denim Bottom Weight
Terry Towel
Wider Width
Nylon coated
Comforters Garments
24 MMPA 0.8 MMPA 0.8 MMPA 12.5 MMPA 6 MMPA 20 MMPA 6 MMPA 3,000 MTPA 12 MMPA 1.25 MMPA 0.3 Mn. Pcs. 6.6 MnPcs.
ExpansionOngoing Expansion
Fusible Interlining Fabric (12.5 mmpa)Technical Textiles (44 MMPA)(Black Out Fabric, Flex Fabric, Nuclear Bio – Chemical Fabric, IRR Fabric
Denim Fabric Expansion (20 mmpa to 40 mmpa)Wider Width Fabric (12 mmpa to 30 mmpa)
December 2011Add value to the
existing operations, with greater margins
20
Existing Capacity and Ongoing Capex
December 2011
2008 •Nano Technology - to produce smart textiles e.g. smart caps, vests and bed sheets equipped with Nano Carbon Sensors and manufacturing of value added bed sheets viz water repellent, mosquito repellent, vitamin E etc.
2007•Screen Making Technology with 1600 resolutions
2006•Sets up a Denim manufacturing plant with Rope Dying Technology
2004•Facilities to manufacture Technical Textiles like NBC (Nuclear Bio-Chemical) fabric, IR (Infrared Reflective) fabric
2003 •Signed TOT (Transfer of Technology) agreement with DMSRDE (A DRDO unit) to manufacture Glacier Tents and High Altitude Sleeping Bags
1999•Installed Fusible Interlining plant with Microdot Coating Technology
1998 •Developed an in-house technology to manufacture Textile Auxiliary Chemicals for Captive Consumption resulting in better fabric quality at cheaper rates
1995•Installed 130 " wide Fully Electronic Lockstitch Swiss Quilting machine with 360 degree quilting facilities, first of its kind in India
2009
2010
•Launched WEAVES brand in Home Textile segment
•Acquired a comforter unit at Noida with the capacity of 3 lac numbers per annum.
•Completed Terry Towel Expansion from 3000 TPA to 15000 TPA and launched DYFI brand offering garments stitched through technology driven machines.
21
Innovation through the years
Nanotechnology
Working on Nano technology fabrics and smart textiles with NCT technologies under guidance and supervision of Dr. G. N. Mathur Ex- Director of DRDO
To access flexible sensor technology to monitor fatigue stress heart condition and blood pressure
Functional Fabric
Water proof, wind tight, breathable, humidity, transport etc
Optimized material properties e.g. Colour fastness tensile and abrasion resistance,
Heat proof and cold resistant
Smart Intelligent Fabric
Smell release or odour control
Advanced wearing comfort and heating insulation
Microcapsules with phase change materials
Reflection materials
EIV fed protection
UIV Protection
Developments
with additional
electronic
functions.
Developments with
new raw materials
22
From Functionality to “Intelligent” textiles
Received an award from Community of
International Sewing Machine Industry , India
(CISMI) by GARTEXMA for valuable support in
apparel and home textiles machine industry (11th
October, 2010).
Ranked 319th among the top 500 companies of
India, published in ET-500, October 2010 issue.
Ranked 117th among the top 400 manufacturing
companies in India (source : Dalal Street Journal –
Mid Cap 400 issue 2011)
Ranked 231th among the top 500 manufacturing
companies Technology Management (Source:
Industry 2.0 – Technology Management for
Decision makers, September 2009).
Possessing certificates like ISO 9001-2008,ISO
14001-2004, OHSAS – 18001-2001, GOTS, OE-
100, Oelotex and Reach
Ranked Star Export House by the office of the
Joint Director-General of Foreign Trade, Ministry
of Commerce and Industry.
23
Accreditations and Accolades
Integrated Textile Player
Completely integrated from yarn dyeing to processing to garmenting and retailing giving it cost benefit
Diversified product portfolio
High margin and value added products in each product segment
Established brands through distributors and MBO
Manufacturing Capabilities backed by innovation
Six manufacturing facilities strategically located in Uttar Pradesh and Haryana
In house chemical auxilliaryunit to enhance colours and designing capabilities and captive power plant for cost efficiencies
Continuous R & D in nanotechnology to bring in innovative fabrics like ‘smart farics’ and value added products across segments
Capitalize on opportunities in the Defence Sector
Plethora of opportunities – grown from uniforms to ballistics to Armoured Vehicles
Increase in use of Armored Vehicles due to increase in terrorist activities and demand from defence sector
R & D in the field of ballistics, blast protection and development of unique vehicle models for military use
Registered with many organisations like army state police forces etc.
Embarking on a large expansion strategy
Terry Towel division-capacity expanded to 15000 TPA in view of pending orders and future demand from international buyers
Diversification of product portfolio in Technical Textiles (Black out fabrics, flex fabrics, carbon fabrics and infra red fabrics
Backward integration in Spinning or cost and quality benefits
24
SLCL is poised for high growth
(in INR Million)
25
Consolidated Financial Performance
SLCL has delivered high growth in revenues despite economic downturn
It is a large size player in value added textiles segment
In FY11, the EBITDA margins have improved over the previous year
The revenues are expected to increase post completion of the expansion plan in December 2011
SLCL is an undervalued stodgy player in textiles and defence sector. It is poised fro high growth on account of
increase in capacities, more visibility of its brands and launch of new brands, increased demand for technical and safety
textiles and increased demand for defence products.
FY 2008 FY 2009 FY 2010 FY 2011 (Prov.) CAGR
Profit & Loss Account
Net Sales 9,281 11,580 15,355 17,984 25%
Growth 44% 25% 33% 17%
Other Income 89 114 113 146 18%
Total Expenditure 8,590 10,317 11,418 15,483 22%
EBITDA 1,347 1,739 2,058 2,647 25%
Margin 14.5% 15.0% 13.4% 14.7%
Interest 441 680 738 1,058 34%
Depreciation 224 252 270 295 10%
EBT 682 807 1,050 1,294 24%
Tax 104 174 133 241 32%
PAT 577 630 917 1,053 22%
Margin 6.2% 5.4% 6.0% 5.9%
Balance Sheet
Share Capital 148 156 200 211
Share Warrant 220 1,280 847
Reserves and surplus 2,176 2,839 3,995 4,874
Total Debt 6,314 8,239 11,289 16,454
Net Fixed Assets 4,188 4,360 4,455 7,663
Capital Work in Progress 500 796 1,709 2,295
Current Assets 4,528 6,940 10,369 12,640
Current Liabilities 390 527 811 857
26
Contact Details
R. Ranjan
EVP & Head- Investment Banking
Destimoney Securities Private Limited
Phoenix House, „B‟ Wing, 2nd floor,
Senapati Bapat Marg, Lower Parel (W),
Mumbai 400013
M : +919820481548
L : +91 22 67484700 : Ext 714
F: +91 22 67484710
Email: [email protected]
Contact Details