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Denim and fabrics player Vishal Fabrics Limited (VFL) looks to strengthen export business with its entry into European and Latin American markets. The company is adding new capacities to cater to the expanded global geographies and increase the revenue share of exports, a top company official said.
The company currently focuses on domestic market. Exports account for about two per cent of the overall revenues of ₹960 crore recorded in fiscal 2020-21. It exports to countries in East Africa, South Africa and South Asia.
Vinay Thadani, COO, Vishal Fabrics, said, "As the export market proves to be profitable, the company is targeting the European and Latin American markets for enhancing its exports share." By the end of 2022, the company eyes 10 per cent revenues to come from exports.
Additional capacity
Vishal Fabrics has added a new denim line with capacity of 10 million meters per annum that started commercial operations at the end of March. It is adding a second denim line with 10 million meters per annum capacity, which is expected to commence operations by the second half of fiscal 2023. This will take the company's current installed capacity of 80 million meters per annum to 100 million meters per annum at Dholi unit in Ahmedabad.
The company has invested ₹30 crore in expansion .. It expects to increase revenue by about ₹160 crore per line considering the full year of operation.
The two new lines will cater to domestic and export demand for denim fabric, Thadani said.
Stronger margins
In the first half (April-September) of the current fiscal, VFL registered topline of ₹700 crore with net profit of ₹30 crore and maintained the EBITDA margins at 10.5 per cent. “I am hopeful that we will be able to close this fiscal with ₹1,400-1,500 crore topline,” said Thadani indicating that the operational margin improvement is attributed to the increased plant utilisation and better realisation from the overseas markets.
“At 68 per cent capacity utilisation, we were able to absorb our all fixed costs. Now we are running at 88 per cent plant utilisation, so we have additional 20 per cent utilisation which is directly contributing to our bottomline,” Thadani told Businessline.
In 2019-20, company's overall EBITDA margin was 7.97 per cent, which increased to 10.5 per cent in the fourth quarter of last fiscal.
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