Sangam India's revenues were down but earnings were above CRISIL Research’s expectations. Revenues declined 2 percent year-on-year to Rs 3.7 billion primarily because of 11percent year-on-year decline in yarn sales. Denim sales increased 20 percent and PV fabric sales increased 6 percent.

EBITDA margins expanded by 330 bps and 40 bps quarter-on-quarter to 16.9 percent driven by a profitable product mix and improvement in denim margins due to subdued cotton prices. Adjusted PAT increased 52 percent to Rs 172 million. Production at the new garments production unit has begun and is running at 20-30 percent utilisation. The segment expects to add Rs 500-600 million revenues in FY16.

CRISIL views it as incrementally positive and has maintained a fundamental grade of 3/5. It has raised EPS estimates and fair value and FY16 and FY17 EPS estimates from Rs 19.3 and Rs 23.7 to Rs 21.2 and Rs 25.4 on the back of higher EBITDA margin estimates. It has lowered cost of equity from 17.8 percent to 17.4 percent due to improved stock liquidity. As a result, CRISIL’s fair value has increased from Rs 115 per share to Rs 220. At the current market price of Rs 225, its valuation grade is 3/5.