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Rajapalayam Mills Ltd, a part of the Ramco Group, will spend ₹400 crore in capex in the current financial year mainly on looms expansion and establishment of a new fabric processing unit. Both projects are expected to be commissioned during Q2 of the current fiscal. The funding will be from the proceeds of Rights Issue, internal accruals and term loan from Banks, according to the company’s 2022-23 annual report.
Given the demand for quality fabric, the company is confident of running the new expansion with full utilisation of machinery within a short period of time.
On the prospects for the current fiscal, the company said the volatility in cotton prices are continuing and the prices of cotton and yarn are widely fluctuating. Although there was an improved arrival of cotton in the market during the later part of the current cotton season, prices continue to rule higher due to improved domestic demand for cotton.
The ongoing unfavourable weather conditions in the cotton growing regions of the US is a matter of concern, as the company imports a large volume of long stable cotton from the US for its value-added production.
Large volume orders are not being placed by buyers due to uncertainty and high inflation globally. The rise in the raw material prices has resulted in high priced textile items, which are not absorbed in the retail value chain.
Many brands in domestic and international markets are approaching the company for sourcing yarn and fabric, the report said.
In 2022-23, the company shifted its focus on more value added counts and more volume of high quality cotton was imported when the prices were at a reasonable level. This in turn helped the company to protect the operating margin in 2022-23, the report said.
The company maintained its yarn production volume at 137.60 lakh kg during 2022-23, which was the same level of 136.36 lakh kg of the previous year, and despite producing more volume of finer counts. During 2022-23, it sold 127.51 lakh kg of yarn, a slight decrease from 133.75 lakh kg in the previous year. However, the sale value of yarn increased to ₹679 crores (₹550 crores), up by 23 per cent.
On exports, the company achieved its highest export of cotton yarn, including merchant exports, during the financial year 2022-23 with a value of ₹326 crores (₹188 crores), a 74 per cent growth. Focus on product enhancement through technology advancement, traceability of the entire production process, continuous customer centricity and production of unmatched quality helped it to achieve this export growth, the report said.
For the fiscal ending March 31, 2023, the company’s net profit increased by 68 per cent to ₹32 crore (₹19 crore) on revenue of ₹857 crore (₹679 crore), a 26 per cent increase.
In April, CRISIL Ratings upgraded its long-term rating on the bank loan facilities of Rajapalayam Mills Limited (RML) to ‘CRISIL A+/Stable’ from ‘CRISIL A/Positive’. Its ratings on the short term debt facilities of RML have been reaffirmed at ‘CRISIL A1’.
The upgrade reflects CRISIL Ratings expectations that RML will continue to benefit from its established position in the domestic spinning and yarn segment, post completion of its sizeable capacity expansion, with stable demand from both domestic and export market.
At the time of filing this report, the company’s share price on the Bombay Stock Exchange was trading at ₹740, up by ₹9.85 or 1.35 per cent.
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