JCT Limited Date: 17 th February, 216 Stock Performance Details Shareholding Details September 215 Current Price : ` 5.49^ Face Value : ` 2.5 per share 52 wk High / Low : ` 1.99 / 2.55 Total Traded Volume : 2,7,774 shares^ Market Cap : ` 35.7 crore^ Sector : Textiles EPS (H1 FY16) : `.4 per share Equity Share Capital : ` 163.2 crore P/E (TTM) : 34.31 (x)^ P/BV (TTM) : 7.95 (x)^ Financial Year End : 1 st April 31 st March BSE Scrip Name : JCTLTD BSE Scrip Code : 5223 ^ as on 15 th February, 216 Particulars Shareholding Nos. (%) Promoter & Promoter Group Holding 22,32,75,874 4.1 Total Institutional Holdings (FIIs & DIIs) 12,56,34,222 22.56 Public Holdings 2,78,82,553 37.34 Total 55,67,92,649 1. Background JCT Limited (JCTL) a Textile company, incorporated in 1946 is part of the Thapar group in India. The business operations of the company are headquartered at Delhi JCTL is engaged in the business of manufacturing and selling textile products and filament yarn products in India. It also provides textile materials such as cotton, polyester and nylon as well as blends of fabric like cotton/polyester, cotton/nylon, polyester/viscose etc. These materials manufactured by the company are used in the manufacture of fashion wear, sports wear, outerwear, active wear for defense and school uniforms as well as for manufacturing infant wear and medical wear. Besides offering fabric yarn it also provides finishes and coatings, prints and yarn dyes, organic cotton fabric etc for apparel, home textiles and semi-industrial products. Besides, JCTL offers performance fabrics like fire retardant, anti-static, oil and water repellent, hi-visibility, moisture management, anti-wrinkle, anti-bacterial, anti-uv, aroma, protein resistant and other speciality fabrics. The company faced legal proceedings in Malaysia for being allegedly involved in financial irregularities, foreign exchange violation and siphoning off funds from their Kaula Lumpur factory. However, the KLM Court of Appeal, Malaysia ruled in favour of the company thus setting aside the orders of KLM High Court. An Initiative of the BSE Investors Protection Fund1
Financial Snapshot Particulars Standalone (` Million) Income Statement H1 FY16 H1 FY15 Income from Operations 4,36.3 4,595.1 Y-o-Y Growth (%) (6.3) 6.2 EBITDA 21.7 93.5 Y-o-Y Growth (%) 115.7 (148.5) EBITDA Margin (%) 4.7 2. Net Profit 19.8 31.1 Y-o-Y Growth (%) (36.3) (113.) NPM (%).5.7 Balance Sheet Fixed Assets 3,88.2 3,958.7 Cash & Bank Balances 292.9 164.5 Inventories 1,559.5 1,517. Net Working Capital (69.7) (1,182.6) Net Worth 1,112.5 1,47.3 Balance Sheet Ratios ROCE (%) 6.3 6. RONW (%) 1.8 3. Source: Capitaline From the Research Desk of LKW s Gurukshetra On a Standalone basis, Revenue from Operations stood at Rs. 4,36.3 million in H1 FY16 which is a decline of 6.3% from Rs.4,595.1 million reported in H1 FY15. Material Cost declined to Rs. 2,436.1 million in H1 FY16 from Rs. 2,84.7 million in H1 FY15. Employee Cost increased by 1.% on a y-o-y basis to Rs. 635.5 million in H1 FY16 from Rs. 578.5 million in H1 FY15. Other Expenses were lower at Rs. 475.9 million in H1 FY16 as compared to Rs. 495.4 million in H1 FY15. Despite the lower Topline JCT s Operating Profit increased by 115.7% y-o-y to Rs. 21.7 million in H1 FY16 as compared to Rs. 93.5 million in H1 FY15 on the back of lower operating expenses like Raw Material Costs, Other Expenses and Power and Fuel costs. Interest Cost and Other Income stood at Rs. 196.8 million and Rs. 87.7 million respectively in H1 FY16. While, company reported a rise in EBITDA, the PAT came in lower by 36.3% y-o-y due to higher Interest costs and lower Other Operating Income. In H1 FY6 PAT stood at Rs. 19.8 million as compared to a Net Profit of Rs. 31.1 million in H1 FY15. Operating and Net Profit Margins stood at 4.7% and.5% respectively during H1 FY16. Inventories of the Company increased to Rs. 1,559.5 million in H1 FY16 from Rs. 1,517. million reported in H1 FY15. For H1 FY16, Trade Receivables of the Company stood at Rs. 83.7 million as against Rs. 762.8 million in H1 FY15. An Initiative of the BSE Investors Protection Fund2
The Total Debt on the books of the company for the period ended 3 th September 215 stood at Rs. 2,388.3 million compared to Rs. 2,272.4 million thus marking an increase of 5% on a y-o-y basis. As a result, the Debt to Equity ratio also remained at 2.2x the same as reported in the corresponding period of the previous fiscal. Some key observations by the auditors on the Company s financials included points such as non-confirmation/reconciliation of balances in the accounts of few parties, reasons for preparing the financial statements on a going concern basis although the accumulated losses have resulted in the erosion of substantial net worth, the company s current liabilities exceeded its current assets at the year-end and uncertainty related to the outcome of the appeal filed with the Courts of Appeals at Malaya by the Company of a claim of Rs. 78.8 million by ex-employees of CNLT, Malaysia (Associate Company) on account of advances and compensation paid to JCT by CNLT, Malaysia. Further, it was pointed out that JCT has not accounted for default interest on an accrual basis as it intend to charge the same to its Profit and Loss Account as and when the instalment is paid. The same is not in compliance with the Accounting Standards and the provisions of the Companies Act, 213. Performance on the Bourses % 3 25 2 15 1 5 Stock Performance JCT BSE Small Cap as on 11th February, 216 Peer Comparison The following table gives a snapshot view of the Company s performance vis-à-vis its closest peers for H1 FY16. (` In millions) Particulars JCT Digjam Raymond Income from Operations 4,36.3 642.3 12,56.5 EBIDTA 21.7 (8.2) 642.4 Net Profit 19.8 (66.1) 83.8 EBIDTA Margins (%) 4.7 (1.3) 5.1 PAT Margins (%).5 (1.3).7 Book Value Per Share.7 (.3) 19.3 P/E (x) 29.46^.* 3.5* P/BV (x) 6.71^.* 2.25* RONW (%) 1.8 (146.6).7 Source: Capitaline; Financials on Standalone Basis ; ^ On a Standalone Basis as on September, 215 (TTM Basis); * On a Standalone Basis as on December, 215 (TTM Basis) An Initiative of the BSE Investors Protection Fund3
About the Industry Management Outlook The Indian Textile Industry is one of the largest contributors of employment as well as to the overall trade exports of India. The Indian Textile industry is spread across the length and breadth of the country and in terms of employment is labour intensive. The industry is divided between two prominent segments, that is, hand spun and hand woven segment as against a capital intensive sophisticated mills segment. Not just being amongst the largest employers, the Textile industry has also contributed to the trade exports of the country quite significantly over the years. The industry realized export earnings worth US$ 41.4 billion in FY215, marking a growth of 5.4% as per data from The Cotton Textiles Export Promotion Council (Texprocil). Another important characteristic of this sector is the dominance of unorganized segment which consists of handloom, handicrafts sericulture which operates on a small scale and adopts traditional manufacturing tools. In contrast to this, the organized segment though as a percentage of the overall industry is small, it brings to the table economies of scale and contributes a large part of the total textile export earnings of the country. It is estimated that the Indian Textile industry could reach US$ 223 billion over the next 5-6 years from the current size of US$ 18 billion. This indicates that the industry growth would more than double in the next 5-6 years. As a percentage of the Indian GDP and Index of Industrial Production, this industry constitutes about 5% and 14% respectively. Given the importance of this industry to overall GDP growth, the government has allowed 1% FDI in this sector under the automatic route; the TUFS Scheme, Textile Parks etc are the other initiatives taken by the Government to promote manufacturing of textiles and thereby increase export revenues for the industry. Besides, the government has also provided for subsidies on machinery and infrastructure. The Indian Government has signed a MoU with Kyrgystan seeking to strengthen bilateral co-operation in the fields of Textiles, Clothing, Silk and Sericulture and Fashion. The future prospects of the Indian textile industry appear satisfactory, buoyed by both, strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players into the Indian market. The organised apparel segment is expected to grow at a CAGR of more than 13%over a 1-year period. A number of initiatives taken by Government includes implementation of several export promotion measures such as Focus Market Scheme, Focus Product Scheme and Market Linked Focus Product Scheme for increasing share of India s textile exports, proposal to extend 24/7 customs clearance facility at 13 airports and 14 sea ports resulting in faster clearance of import and export cargo and allowance of 1% FDI in the Indian textiles sector under the automatic route. Further, an improvement in the international markets augurs well for the Company given that it exports its products in USA, Canada, Australia, Europe, Middle East & Far East countries. Despite the efforts being made by the Government to revive the economy, sluggish global demand and declining export competitiveness, the situation at ground level are not showing the improvement as expected after the formation of the new Government. At the same time, certain risks such as increased intensity of competition from local and global players, increase in the raw material prices and the overheads which are not fully passed on to the consumers in the depressed market environment may affect the performance of the Company. The subdued performance of the company over the past couple years, high debtor and inventory days and a large debt on the books are factors that pose a near to medium term challenge to the company. Amongst the key factors affecting growth of Indian Textile Industry is its labour intensive nature, high dependence on monsoon and capital intensive nature. Also, its fragmented nature is hurting the quest for consist An Initiative of the BSE Investors Protection Fund4
Financial Graphs 48 Income from Operations 46 ` in Million 44 42 4,595.1 4,36.3 4 H1 FY15 H1 FY16 25 2 EBITDA & EBITDA Margin 4.7 5 4 ` in Million 15 1 5 2. 93.5 21.7 3 2 1 % H1 FY15 H1 FY16 EBITDA EBITDA Margin PAT & PAT Margin 4 1 ` in Million 3 2 1.7 31.1 H1 FY15.5 19.8 H1 FY16 % PAT PAT Margin An Initiative of the BSE Investors Protection Fund5
Disclaimer All information contained in the document has been obtained by LKW s Gurukshetra from sources believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information herein is true, such information is provided as is without any warranty of any kind, and LKW s Gurukshetra in particular makes no representation or warranty express or implied, as to the accuracy, timeliness or completeness of any such information. All information contained herein must be construed solely as statements based on available data, and LKW s Gurukshetra shall not be liable for any losses incurred by users from any use of this document or its contents in any manner. Opinions expressed in this document are not the opinions of our company and should not be construed as any indication of our recommendation to buy, sell or invest in the company under coverage. Disclosure Each member of the team involved in the preparation of this report, hereby affirms that there exists no conflict of interest. The report has been sponsored and published as part of Initiative of BSE s Investors Protection Fund About Us LOTUS KNOWLWEALTH (LKW) commenced business in 1991 and is currently engaged in providing CAPITAL MARKET RESEARCH, INVESTMENT ADVISORY and STRATEGY services. GURUKSHETRA is the Research and Training arm of LKW. LKW Investment Advisers is the SEBI registered Investment Advisory arm of LKW. 5 Contact Us LOTUS KNOWLWEALTH Pvt. Ltd. Regd. Office: B Wing, 55-56, Fairlink Centre, Off Andheri Link Road, Andheri (W), Mumbai 4 53. Email: enquiry@lotusknowlwealth.com Tel: 22-41 5482 41 5483 Website: www.lkwindia.com An Initiative of the BSE Investors Protection Fund6