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Vardhman Textiles - Stock split ex-date on March 24, 2022
What’s Buzzing
Vardhman Textiles has fixed a record date of March 26, 2022 for the purpose of sub-division/stock split of Rs 10/-per equity share of the company into equity share of Rs 2/- each.
Context
On the ex-date (March 24, 2022), the share price would be reduced to one fifth of the stock’s market price.
Our Perspective
The stock split would improve the liquidity for the company’s share and could enable the entry of new investors. Vardhman Textiles (VTL) is part of the Vardhman Group, a large textile conglomerate with a presence across the textile value chain. Vardhman is among few textile companies that have been able to maintain a debt equity ratio below one despite continuous capacity addition. Healthy cash flows have enabled VTL to reduce debt by ~Rs 152 crore in FY21 (D/E: 0.3x in FY21). We expect D/E ratio to stay at ~0.3x in FY24E. Global retailers are looking at de-risking their supply chains and VTL is expected to be a beneficiary in the yarn and fabric segment. Strong demand coupled with supply constraint owing to closure of ~5-6% of capacities due to impact of pandemic is expected to result in stronger spreads in the yarn business. Owing to strong demand from customers the company is expanding its yarn spindle capacity by installing 1,65,000 spindles with a capex of Rs 1400 crore. Further, it is expanding capacity by 70000 spindles with capex of Rs 600 crore. The 1 lakh spindles are expected to be operational from October 2022. The other expansions projects are expected to be operational in phases by FY24. The enhanced capacity would enable VTL to benefit from the strong demand scenario for cotton textiles exports, garner higher share in the global market and improve its revenue growth trajectory over the next few years.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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