After failing to market its natural dyes, venturing into producing value-added fiber dyed yarns
Alps Industries's business model is focused on production and marketing of home furnishing and fashion accessories produced by its textile division. The company manufactures fabrics and made-ups and a range of fashion accessory products like shawls, stoles, mufflers, wraps, and scarves. Besides, the company has a range of interior decorative products such as window coverings (venetian and vertical blinds, and drapery rods), awnings, garden umbrellas and wooden floorings. In the domestic market, the products are marketed under the brand, Le Pashmina and Vista. It has its presence in the overseas markets,too. In FY 2005, exports contributed around 27% to the sales.
Alps Industries's exports to reputed stores like Park B. Smith; J.C. Penney; House of Fraser, UK; Marks & Spencer, UK; Pablo Panicker, EU; Springs, US; Habitat, UK and France; Sanders, Germany; and L'eclere, France. The company signed a license agreement in July 2005 with Walt Disney Company (India) Private Limited to use certain Disney characters on the specified product groups to be manufactured by it.
Alps Industries proposes to set up a 50-tonne per day plant for cotton yarn spinning. The unit will also have fiber dyeing facility. The dyed fiber will be used to produce value-added yarn. The Rs 139.51-crore project will be financed through this public issue and term loans from various banks, aggregating Rs 87 crore.
Strengths
The new plant will also have a dyeing facility will use natural dyes, a process on which Alps Industries has done considerable research over the last 14 years. Thus, by using this in-house developed technique, the company will manufacture higher value-added fiber dyed yarns with uniform colour consistency. The yarn will retain its premium eco-friendly appeal.
The project is nearing completion and will commence commercial production by October 2005.
Due to the housing boom, the domestic market for Alps Industries's existing products is growing at a healthy rate.
Weakness
Alps Industries had come out with an IPO in April 1995, offering shares at around Rs 54 per share. At that time, it had envisaged selling natural dyes in powder form. But it did not find a market. Now, it plans to produce dyed yarn using natural dyes.
A large portion of the production from the new project will have to be marketed outside. This will add to the already large number of product lines that Alps Industries markets.
Alps Industries's financial health improved substantially only in FY 2005, after three years of sluggish-to-adverse performance.
Valuation
EPS for trailing 12 months ended June 2005, on post- issue equity, works out to Rs 14.5. Currently, Alps Industries's shares trade around Rs 155. However, the scrip had crossed the offer price of Rs 120 only early June 2005. The shares are offered at a P/E of 8 times, which is reasonable considering that the project is set to be commissioned shortly amid a positive business environment on the domestic and export fronts.