“We are working to become a zero net debt company within the next 2 years”: P Sundararajan

Representative image | Photo credit: iStock Images

Highlights

  • Plans to add 2 more major retailers in UK and US; activity should start from T3FY22
  • The company expects to be debt free within the next two years
  • Estimates additional 15-20% growth potential beyond FY22E

Mumbai: The textile industry is currently focusing on the back of increasing exports as the “unblocking theme” gains momentum. P Sundararajan, CMD, SP Apparels joins ET NOW to help us understand the unlock trade, an overview of the apparel industry and what are the key triggers for the stock’s rally.

The company is one of the leading manufacturers and exporters of infant and children’s knitted garments in India. It exports to department stores in the UK, Europe and the US and has a significant presence.

Currently, the market situation is favorable and the company is taking advantage of various opportunities to expand its business. The company plans to add 2 more major retailers in the UK and US; activity should start from T3FY22. Given the current size of the order book, the company plans to increase its operational capacity to meet dynamic demand.

The company is currently working on adding 2-shift operations at a few of its manufacturing plants by Diwali to meet its increased demand. Order entry requests to increase existing operating capacity, says P Sundararajan.

SP Apparels is currently working at 60-75% operational capacity and aims to reach 85-90% capacity after the capacity increase. Management is confident that this decision will lead to growth of approximately 15%.

Likely to generate revenue of 1100cr, PAT ~150 cr FY23E and ROCE of 20%+. He believes the business has the potential to grow 15-20% beyond FY22E.

The company has made a conscious effort to reduce its level of debt over the past few years. “We are working to become a zero net debt company within the next two years,” says P Sundararajan.

Ann J. Cox