The Hindu Business Line : Yogindera Worsted: Avoid

Investors may avoid subscribing to this offer as it is not a preferred exposure in the textiles space; the company's focus segment of acrylic yarn is not particularly attractive from an investment perspective.

At the offer price of Rs 24, the stock is priced at about 11 times its likely per-share earnings for FY-07 on an expanded equity base.

Within the textile space, there are superior options in the secondary market that trade at more attractive valuations.

Yogindera Worsted is a manufacturer of acrylic and blended yarns, which find application in terry towels, apparel, furnishing and industrial fabrics. Based out of Ludhiana, Punjab, a woollen-textile hub, the company's products have access to a good domestic market. Exports account for 20 per cent of its sales.

The object

The proceeds of the offer will fund a 50 per cent expansion of its yarn facilities as well as the setting up of a new garment facility that will have an annual capacity of 2.5 lakh pieces.

The new capacities are expected to come on stream by March 2007. While the forward integration could enhance margins, the company does not have any experience in garment design.

The capacities are also not significant enough for the company to emerge as a major player in this segment in the near-term.

Yogindera has recorded an annual growth rate of 15 per cent in revenues between FY-02 and FY-06. Profits grew at 35 per cent over the same period, although on a small base.

Operating margins are at a healthy 15-18 per cent range. The offer opens on January 16 and closes on January 22.

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