The Hindu Business Line : Zodiac Clothing jumps on dividend, acquisition move

On Tuesday, the company announced a dividend of Rs 7 per equity share. The company also informed the stock exchange about the acquisition of a shirt-manufacturing unit in Dubai through a wholly-owned subsidiary. This was funded through a preferential issue of equity shares in December 2004.

Though the current spike in the share is attributed to the dividend and acquisition announcement, analysts say the prospects of the company are also shaping well.

Zodiac Clothing has been consolidating its operations and sales over the last two years with an eye on the WTO quota deadline in January last. Analysts expect the management and operational changes that have been implemented to have a positive bearing on the company's revenues — both from domestic sales as well as export earnings.

The strong point of Zodiac Clothing is its ability to take on large orders and keep cost of production low, said an analyst who tracks the textile sector. The company has well-established relationships with buyers in Europe and North America and has sales offices in some international locations. These are expected to unlock value now with the abolishment of the quota system, he said. The Dubai acquisition is expected to provide a further fillip to the international business of the company.

With the focus on growth in the retail sector and the expected expansion of malls in metros, mini-metros and large towns, Zodiac Clothing is poised to report significant growth in domestic revenues as well, predict analysts. "Zodiac is perceived as a premium brand in India and the mushrooming of malls will give it higher visibility and footfalls. The brand image of the company sits in well with the profile of population that visits these malls," an analyst said.

The company reported net sales of Rs 150.27 crore for the year ended March 31. It earned a net profit of Rs 7.44 crore, posting earnings per share of Rs 20.31.

Currently, Indian shareholders, primarily the Noorani family, hold 25 per cent stake in the company, while foreign promoters control 35.02 per cent. Foreign institutional investors own 12.47 per cent in the company. Reliance Energy Investments Private Ltd had picked up stake in the company in two lots during the preferential issue, totalling 7.17 per cent of the total equity of the company.

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