Gokaldas Exports to acquire Matrix Clothing's apparel biz; stock zooms 9%

Shares of Gokaldas Exports surged 9 per cent to Rs 985 on the BSE in Friday's intraday trade after it said it will acquire apparel business of Matrix Clothing for an enterprise of Rs 489 crore.

At 11:29 am, the stock was trading 5 per cent higher at Rs 952.65 as compared to 1.6 per cent rise in the S&P BSE Sensex. It had hit a record high of Rs 1,022 on December 5, 2023.

In an exchange filing, Gokaldas Exports said the company has signed an agreement with Matrix Clothing Private Limited (MCPL) to acquire 100 per cent of the equity share capital of Matrix Design & Industries Private Limited for an enterprise value of Rs 489 crore, out of which Rs 247.5 crore is being paid by way of preferential allotment of shares of Gokaldas Exports through share swap. The board also approved issue of 2.73 million equity shares of the company at Rs 901.14 per share to MCPL.

Matrix Clothing group is a manufacturer of high-quality men's, ladies', and children's knitwear apparel for renowned brands with major geographical exposure to Europe, the UK, and North America. The group operates out of Gurugram, Haryana, and has five manufacturing facilities (4 in Gurugram, Haryana, and 1 in Ranchi, Jharkhand).

The management believes that Matrix, with its strong track record of performance, will expand the company's offering, bringing a stronger position in the Knits category, introducing new customers, improving geographical spread to Europe, and will complement its investment in fabric processing. The management is confident that the company's growth strategy will lay a solid foundation for a strong and sustainable future.

Meanwhile, for October-December quarter (Q3FY24), Gokaldas Exports reported 25 per cent year-on-year (Y-o-Y) decline in profit after tax (PAT) at Rs 30.4 crore. On sequential basis, PAT grew 28 per cent.

Revenue grew by 6 per cent Y-o-Y and 10 per cent sequentially at Rs 559.80 crore. This is against the backdrop of Indian apparel exports witnessing a decline of 12 per cent Y-o-Y and remaining flat sequentially. This improved performance indicates the resilience of the company in face of adversity, the management said.

During the quarter, earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin stood at 12.6 per cent, improving Q-o-Q by 163 bps due to better operating leverage. However, despite an increase in statutory minimum wages in Karnataka, employees ramp up in anticipation of volume growth in Q4, start up costs at MP unit, and certain one off expenses, the company managed to contain the margin decline to 112 bps on a Y-o-Y basis, the management said.

Improving supply chain trends and leaner inventory positions with retailers have helped facilitate a return to a more normalized planning and ordering timeline bringing in greater predictability. The management is expecting a positive momentum for in the calendar year 2024 and expects sequential growth to pick up over the next quarters.

Meanwhile, the board has also approved raising of funds for an aggregate amount of up to Rs 600 crore via preferential allotment or a private placement or qualified institutions placement (QIP).