Investing Reflections On India

APM Industries is in the business of producing spun yarn fibre – it is primarily an exporter of man-made spun yarn fibre. The company hasn’t shown spectacular growth in revenues over the last five years but has reasonable operating profitability given the industry it operates in.  It reported 30cr in operating profits on 240cr of revenues in the last financial year.  It operated with a reasonably high debt load of 60cr, which would sensitise its net profitability in the event of high interest rates (as we have now) and during industry/economic downturns. It is exposed to the persistent cyclicality in the textile industry marked by consistent oversupply.  Moreover, it is operating in a highly capital intensive industry and heavily subject to government regulations on imports/exports/duties/taxes etc.  It is also exposed to crude oil price spikes (impacting synthetic rubber used in man-made fibre), adverse foreign exchange movements (export-driven revenues), and a s...

Vardhman Textiles is in the textiles business with manufacturing capacities in yarns and fabrics. The company has generated consistent growth in revenues and profits – reporting about 900cr in operating profits on 3,600cr of revenues in the last financial year.   It has a relatively high debt load of 2,800cr – which would magnify the negative impact on profit during industry downturns. The business is subject to the risk of cotton price spikes since it constitutes a large proportion of raw material cost.   It is also exposed to adverse movements in USD/INR exchange rates since a large proportion of revenues comprises of exports to US buyers.   Moreover, it is vulnerable to adverse government policies on export incentives and/or other restrictions along with frequent power shortages that blight the industry.