Gokaldas Exports surges 5% on strategic tie-up with BRFL Textiles | News on Markets

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A file photo of a sewing line at Gokaldas Exports

Gokaldas Exports BRFL Textiles news: Shares of Gokaldas Exports surged 5 per cent to Rs 873 on the National Stock Exchange (NSE) in Thursday’s intraday trade, in an otherwise subdued market, after the company announced its strategic tie-up with BRFL Textiles Private Limited (BTPL), one of the largest single-location fabric processing companies in India.

With the strategic investment in BTPL, Gokaldas Exports intends to stand largely self-reliant in fulfilling its raw material requirements for manufacturing. The management believes that the investment in BTPL would accelerate Gokaldas’ growth, leveraging the unique capabilities of BTPL. At this point, investment in a fabric processing mill would play an important strategic step for the company, the company said.

In its first tranche, Gokaldas Exports will subscribe to Rs 50-crore Optionally Convertible Debentures (OCDs), with the remaining OCDs worth up to Rs 300 crore being subscribed subsequently in multiple tranches, depending on the funding requirements.

These funds shall be utilised mainly to meet the working capital needs, with a smaller portion towards the capex requirements. Further, subject to the fulfillment of certain conditions and receipt of applicable regulatory, statutory, or other required approvals/consents, a possible merger or acquisition will be explored by June 30, 2025, the company said in an exchange filing.

With an annual revenue from operation of Rs 2,379 crore in FY24, Gokaldas Exports is one of India’s largest manufacturers and exporters of apparel, exporting to more than 50 countries. Following the acquisition of Atraco and Matrix, Gokaldas Exports currently has over 30 production units and more than 30,000 advanced machines that can produce about 87 million garments annually.

To prepare for the next phase of growth, the company has added talent to its management bandwidth and at multiple levels. The long – term prospects for the industry remain intact with a continuing shift of global sourcing away from China, supplier consolidation towards efficient and well-capitalised players, and supply-side instabilities in several countries. 

Favourable currency, Production Linked Incentive (PLI), and Free trade Agreements (FTAs) with key markets should drive the company toward a strong future, the management said.

Brokerage firm Spark Institutional Equities has a ‘buy’ rating on Gokaldas Exports with a target price of Rs 1,095 per share.

“We see strong demand traction for the existing entity, while the newly acquired entities will require handholding for about two to three quarters to ramp up the demand from existing levels. Our expectation is that by the second half of the year, both acquired entities should go to at least close to 100 per cent capacity utilisation based on early indications from the market, from a demand perspective. As the situation improves going forward and the demand is coming back, the pricing power will come back,” analysts said.

The management’s aggressive approach to building capacities makes the company better placed to capitalise on the Indian garments upswing story. Consolidating the recent Atraco / Matrix acquisitions, we factor in a revenue / Ebitda CAGR of around 25 per cent/34 per cent, respectively, over FY24-28. The management’s ability to synergise recent acquisitions and allocate capital towards incremental capex is likely to be the key near-to-medium-term monitorable, the brokerage firm said in its textile sector update report.

That said, thus far in the calendar year 2024, Gokaldas Exports has underperformed the market by gaining 6 per cent as compared to 8 per cent rally in Nifty 50. The stock had hit a record high of Rs 1,022 on December 5, 2023.

First Published: Jun 20 2024 | 10:37 AM IST

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