Promoters raising stake in textile companies on bright outlook

The Indian textile sector has now seen positive growth and a speedy recovery for more than seven quarters now.

While the financial performance has picked up, promoters of these textile companies are positive that share valuations would increase soon. To benefit from this expected higher valuation, many promoters are busy increasing their shareholding.

Aditya Birla Nuvo, Arvind Ltd, Nahar Spinning and Himatsingka Seide are some of the companies that have increased their promoter and group shareholding in the past one year (See Table).

Major increase in the shareholding percentage has been witnessed among small-cap players like Digjam Ltd, Gini Filaments, Nitin Spinners and Nahar Poly Films. Fabric manufacturer, Digjam Ltd, has witnessed the highest increase in its promoter shareholding by around 8.87%, while Ginni Filaments increased its promoter holding by around 7.37%.

“The industry has been doing well for the past one-and-a-half year. Though increase in raw material prices is an issue, it has been passed on to the customers till now. The coming months look positive for the industry,” said Shishir Jaipuria, managing director, Ginni Filaments.

Officials from Spentex Land TT Ltd agree textile stocks are expected to perform well in the coming future and thus it makes sense for the company to increase its promoter holding.

“We believe the company has a bright future and expect better valuations. At the current valuation, we thought it was a good opportunity to increase holding,” said Mukund Choudhary, managing director, Spentex Ltd. Spentex has increased its promoter holding by around 4.34% in the past one year.

“A number of players are looking at increasing their promoter holding as it is a good time to do so. We, as a company, have also increased it and will continue to be on a lookout for such opportunities. The main idea is currently a number of textile stocks are under-valued and there is an expectation that valuations will increase in future,” said Sanjay Jain, joint managing director, TT Ltd.

The company, which has presence in the yarn, fabric and apparel segment, increased its promoter shareholding by around 0.34% and plans to increase it further.

Other than expectations for better valuations, huge capacity expansion plans is also being stated as a reason for increase in promoter holding.

“In order to expand business, a lot of capital infusion has taken place. Thus, the promoters want to ensure they have a major hold on the company,” said Gopal Agarwal, CFO, Ganesh Polytex Ltd. In the past one year, the company has increased promoter and promoter group shareholding by around 5.04%.

In the coming months, the company also plans to convert warrants worth 24 lakh shares into equity. This will take the company’s promoter holding from the current 52% to around 55%.

Jayesh Shah, director and CFO, Arvind Ltd, said, “The company had converted some warrants a year or so ago. Thus, the shareholding increased.” However, he refused to comment from an industry perspective.