Top 5 textile stocks by Market cap in India - YouTube

Hello, I am Gunjan Grover, today we will talk about India's textile industry.

This is one of those evergreen industries whose demand is from the beginning of human civilization.

Food, clothing, and shelter, are three necessities to live. Nowadays the internet has also joined the needs. Jokes apart.

The textile industry in India is a vital source of commerce and employment.

But most of us do not know how the textile industry works and why it is important for the Indian economy.

So, today we will talk about how in India the textile industry grew, and why it’s so important for the Indian economy,

How this industry works, what are the growth drivers in the industry, what are the issues the industry is facing, and finally,

which according to market cap, which is the top 5 companies.

Before that like this video And subscribe to the channel. First of all, we will talk about how the textile industry evolved in India and why it is so important for the Indian economy.

If we go back in time, until 1750, 25% of the world's industrial textile output was produced by India,

even during the Mughal rule, the largest industry in India was textile manufacturing.

Particularly cotton textile manufacturing like piece goods, calicos, and muslins production was also involved.

The historical importance of the textile industry can also be guessed from the fact that Charkha or to make threads

from the spinning wheel has become a national symbol during the time of Mahatma Gandhi’s fight for Independence.

Swadeshi Movement to make Khadi became one of the biggest independence movements to reduce economic dependence on the British Raj.

The textile industry is India's second-largest employment generator where 45 million industry workers work.

The industry also accounts for 7% of industrial output in terms of value, 2% of GDP, 12% of export earnings.

India’s Textile industry’s around 60% is based on cotton.

India is the world's largest cotton producer and exporter as well.Other than cotton, India has silk, jute, wool and synthetic fiber like nylon are also used in making textiles.

India is cotton and jute’s largest producer whereas silk is the second-largest producer.

The textile industry is present in four zones and each zone has its specific focus.

Most of the spinning operations are present in Maharashtra, Gujarat, and Tamil Nadu.

In the textile industry, natural fibers like cotton, silk, wool, and synthetic fiber is processed let to make usable materials.

Now to process cotton, we will see the basic steps. The first step is Ginning.In which the cotton seeds are separated from the fiber.

The second step is spinning. In which the fiber is twisted to make threads or yarns.

The third and last step is weaving. In which yarn and threads are knit or braided to make cloth or fabric.

This fabric is used in the home or industrial for clothes, Ropes, sheets, and other items. Now to make natural plant-sourced clothes, these 3 processes need to be followed.

While to make other sources like wool, silk, and synthetic fiber, only the ginning process is removed.

Now we will try to understand what is the growth driver for Textile Industry.

This industry has been important in the Indian Economy since Pre British era and still is a vital industry that generates huge Employment and more export potential for the country.

The first is the Competitive Cost Advantage. India's biggest advantage is its cheap raw material which is because of huge cotton production

India also has skilled labor in both industrial textile and handmade textiles production so the overall cost of production compared to the world’s major textile producers is quite less.

The second is robust demand. Textile’s domestic demand is quite good for increase industry

penetration, organized retail, favorable demographic, and rising income level it is steadily increasing.

It also has the cost advantage due to western economies’ fast-growing fashion influence, export demand has also increased.

The third is policy support. Due to the huge advantage of this industry, the Government of India to support this sector has also proposed many policies.

What are those major policies, let me tell you. The first is to raise the FDI limit for the textile sector to 100%

Rs 1480 crores was proposed for National Textile Mission to make technical textile-like PPE suits and other equipment.

To support manmade and technical textile, PLI schene worth Rs. 10683 crores were announced.

To support handloom and handicraft sectors, weavers, artisans, and other related efforts were provided special loans scheme.

Rising investment in this sector, due to an increase in FDI limit up to 100%, many foreign investors will be attracted to this sector.

Now we will understand the issues of this industry, what issues are being faced by this industry. Like all the industries have their issues,

similarly, the textile industry also has its issues, some of the prominent issues that we will be discussing are-

The first issue is the lack of pricing power. Textile industry deals in fabric and materials whose raw material is for other industries like apparel.

So due to these commodity-nature goods, the industry lacks pricing power.

Due to less pricing power, the textile industry’s margins get reduced as this industry has a lot of pricing competition.

The second issue is the cyclic nature of the industry. Be it any industry, steel, cement, textile, etc.

everywhere there is demand and supply mismatch due to which cycle comes.

At the time of oversupply, prices have to be reduced in the textile industry due to which the down cycle starts.

The third is Dependency on cotton. As the majority of the industry is driven by cotton so the industry is vulnerable to that risk which affects the cotton industry.

A few of these risks are plant diseases, irregular monsoon, and other agricultural risks.

The fourth issue is High industry fragmentation.The textile industry has massive fragmentation, due to this fragmentation, productivity

reduced and technology issues arise in comparison to competitors from developed countries.

Now we will talk about India’s textile industry’s top 5 players.

In India, due to the textile industry’s long history and critical nature,there are many industries that started as textile companies

and with time evolved as major industries like Reliance Industries and Grasim Industries.

But today we will cover only pure-play textile industries that have majorly focused on Textiles for our List of Top Five Textile Industries in India.

First is Welspun India Limited whose market cap is 13408 crores. This company operates in a Vertically Integrated manner designed from the Farm to the Finish model.

They operate in 5 main categories.Retailer Solutions, Hospitality Solutions, Retail Brands, Flooring Solutions, Advance Textiles

The company’s 94% sales come from exports.

This company provides products for many famous brands like Martha Stewart, Wimbledon, Disney, Minions, Royal casket, Manchester city, etc.

96% of the Sales in FY21 came from home products. Welspun’s major strengths are its wide export reach, rising brand value in the domestic market, and vertically integrated operations

which enhances the working efficiency. The company’s only major weakness is its flooring business which has a completely different sales model as compared to its co-home textile

business and even now it is operating in a negative EBIDTA. Thus, this business’s development is reducing the company’s earnings till it becomes profitable.

Welspun India’s PE ratio is 18.9, Return on Equity is 16.3%, NPMA is 7.5%, Debt to Equity ratio is 0.77 while the 1-year return is 240%.

The second company is KPR Mills whose market cap is 12957 cores. KPR Mill is another vertically oriented textile that operates in farm to operation model.

This company in the textile industry operates in 3 major categories. Yarn which is accountable for 41% of sales, The fabric which is accountable for only 2% of sales, Knitted garments which are accountable for 41% of sales

The remaining 16% comes from sugar production and other non-textile businesses. Around 58% of the sales are exported to more than 1200 customers in over 60 countries.

In India, KPR also operates its brand named FASO. KPR Mill’s biggest strength is the International apparel sector’s wide export and large customer base.

KPR Mill’s one and only weakness are its branded apparel sector are overcrowded with lots of tough competition.

Thus, to grow in the retail apparel sector can be a difficult task for the co.

KPR Mills’ PE ratio is 20.8, Return on Equity is 24.4%, NPMA is 14.6%, Debt to Equity ratio is 0.26, Current Ratio is 2.55 while the 1-year return is 349%.

The third co. is Vardhman Textiles whose market cap is 11,011 crore rupees. In India, this co. is one of the long-standing textile brands, particularly in the sewing thread space.

The co. operates in 4 core segments which are yarns, acrylic fibers, garments, sewing threads, and steel. Around 40% of its sales come from exports.

Over 50% of the sales come from yarns while 40% of the sales come from fabric sales to domestic brands like Raymond, Arrow, Peter England, etc., and international brands like Nicola, CK, Gap, H&M, etc.

Co.’s, main strengths are its thread space’s wide domestic reach whichis used in every possible end-use case, and the co.’s long brand history.

Co.’s main weakness is its poor compounded sales growth which was 1% in the past 5 years and its low margin profile as it mainly operates in B2B space.

Vardhman Textiles’ PE ratio is 14, Return on Equity is 6.55%, NPMA is 6.88%,Debt to Equity ratio is 0.29, Current Ratio is 3.64 while the 1-year return is 187%.

The fourth co. on the list is Trident whose market cap is 10523 crores. It is Trident Group’s flagship co. Tridentis the worlds leading integrated home-textile maker and the largest wheat-straw-based paper manufacturers.

The co. derives 84% of the revenue from textiles while the remaining 16% comes from paper. Exports account for 68% of co.’s sales. In 84% contribution from textiles,

27% comes from cotton yarns and 55% comes from home-textile products. Co. operates multiple brands in home-textiles like nectar-soft, Organica, etc.,

and makes products for many other famous US retail brands like IKEA, sams club, etc. Co.’s main strength is its good presence in the US market and its wide range of US retails brands that sell the co’s products.

Co.’s only weakness is its high valuation compared to the top 5 industry players.

Co.’s Current ratio is 0.99 which provides a very small margin of comfort in terms of co.’s liquidity profile. Trident India Ltd’s PE ratio is 32,

Return on Equity is 10.3%, NPMA is 7.25%, OPM is 18.2, Debt to Equity ratio is 0.46, Current Ratio is 0.99 while the 1-year return is 208%.

Last, co. which is on the list is Indo Count Industries whose market cap is 5199 crores.

This is another textile co. which is mainly involved in home textiles particularly in bed linens where it’s the largest exporter.

Co. has 14 in-house brands in this category and derives over 94% of sales from exports.

Co.’s main strength is its specialization in bed-linen space in USand its brand range. And main weakness is its limited addressable market because it only concentrates on

bed-linen and like other textile players, it’s not thinking of expanding in adjacent home-textile.

Indo Count’s PE ratio is 20.7, Return on Equity is 22.1%, NPMA is 9.85%, Debt to Equity ratio is 0.43, Current Ratio is 1.92 while the 1-year return is 305%.

So these are the textile industry’s top 5 players. I should tell you again that we don’t recommend any stock and all these are for educational purposes.

On that note, this is me, Gungan Grover signing off. Bye-bye. Take care. Keep calm and invest on