Sangam India zooms 18% on heavy volumes on stable outlook

Shares of Sangam (India) (SIL) zoomed 18 per cent to Rs 334.65 on the BSE in Wednesday's intra-day trade amid heavy volumes. Thus far in the month of June, the stock of the textile & garment manufacturing company has rallied 45 per cent. In comparison, the S&P BSE Sensex was down 0.13 per cent at 63,062 at 10:26 am.

Around 1 million shares, representing 2 per cent of total equity of SIL, changed hands on the BSE in the first hour of trade, the exchange data shows. The names of the buyers and sellers, however, could not ascertained immediately. The stock had hit a 52-week high of Rs 359.95 on August 25, 2022.

SIL is among the top three producers of PV dyed yarn in India with a total spindleage capacity of 273,312 spindles. The company has a 30 million metres per annum (mmpa) ready-to-stitch fabric manufacturing capacity, 72mmpa fabric processing capacity and 48mmpa denim fabric manufacturing capacity. Its flagship fabric brands are Sangam Suiting and Sangam Denim.

India Ratings and Research (Ind-Ra) has affirmed SIL’s long-term issuer rating at ‘IND A’ with a stable outlook.

SIL’s consolidated operating margins dipped slightly to 11.1 per cent in FY23 due to a substantial increase in raw material and power costs. The Ebitda margins, however, improved significantly to 12.6 per cent in FY22 (FY21: 9.1 per cent; FY20: 9 per cent) due to the significant improvement in realisation and volume growth leading to better-fixed cost absorption. The margins were range-bound between 8 per cent and 9 per cent over FY18-FY21 due to sectoral headwinds.

The agency expects the Ebitda margin to remain in the range of 11 per cent-11.5 per cent in FY24 and improve from FY25, supported by increased capacities, adequate demand, and sustained elevated realisations. Ind-Ra believes that the overall realisations of the blended yarn segment in FY24 will remain elevated, but slightly moderate after peaking in FY23. Also, the volumes are likely to marginally increase, despite the increase in capacities from October 2023 due to the weak export demand scenario.

Ind-Ra expects the revenue in FY24 to remain stagnant due to the weak exports demand leading to an oversupply situation in the domestic market, price correction from FY23 level, and also as the new capacities would be operational in 3QFY24.