Stocks of RSWM have rallied 55 per cent this year although its net income is suffering due to heavy capital expenditure on expansion of denim capacity and spindles. RSWM is the largest polyester viscose yarn manufacturing in India. In addition, it has cotton yarn capacity and a large melange yarn capacity.
The company is well diversified within the textile sector. Over the last four or five years, RSWM added a lot of spindles and denim capacity, along with setting up a recycling polyester plant. The company owns Mayur Suitings and has Raymond, Siyaram and Welspun as its key domestic customers. Exports contribute 45 to 50 per cent to total revenue.
The long-term debt equity ratio is 1.6. Cash accruals are strong enough for the next four or five years to pay off all this debt. However, EBITDA margins are under pressure in the textile industry and these have to be expanded. The company is operating at 100 per cent capacity now. It has around 4.5 lakh spindles in operation and produces around 14 million meters of denim fabrics a year, which will go up to 21 million meters by March. Going forward the focus will be on value added products and exports.