Thanks Vivek for providing the updates.

I missed earlier on picking up this great company earlier. I believe here lies an opportunity to pick this for long term now that there is some selling pressure. The 200Cr expansion could be a good risk reward once and if it materializes. Considering the previous experience of the management in reducing the debt they should be able to work this out well.
Disc - Not invested and tracking closely.

Over TPP - Mr. Sabu touched Vietnam and Bangladesh. Can not understand why he did not say anything about Gimmell - singapore based competitor - the 2nd largest infant wear manufacturer. I understand vietnam and Bangladesh can not stand the specialization required. But gimell? Gimell supplies to Nike. Of course it has the finest qualities in the world.

Mgmt is crazy over the cash issue...I doubt the Corporate governance of the company.

I agree - brand launching is not that easy thing to do.

Over listing of KCL - it might be a good step - getting a clear picture of the valuations of the company.

Stay away as of now. It is logical to invest in page rather than investing here.

Disc: Not invested.

I am in agreement with the reservations raised above vis-a-vis currency, TPP, etc.,.
I was in queue but didn't get chance to ask questions (maybe a preference for institutions/brokers above the retail investors). Most of my questions were covered but I wanted to grill further on the TPP issue and wanted to ask about pledging point raised above earlier.

Some analyst did ask about 3% currency gap whereas interest rate at present paid by company at 9%. Mgmt. didn't answer that question clearly at all and kept repeating dollar INR to come at Rs. 67. Neither did the CFO pitch in on this query and it was Mr. Sabu who attended this query as well.

On TPP front to, the same approach as above. I mean comeon what do you mean by special garment? Why is kidswear a special garment and why wouldn't it be covered under TPP?

Answers around dividend payout were not straight forward either, however when asked for the second time, mr. Sabu did say that they will come out with a Dividend Payout policy.

I can understand that the mgmt's communication skills may not be the best but the logic and reasoning could surely be explained with whatever communication skills that they have got.

I am still invested (6% of portfolio previously 10-11%) as I had earlier sold to maintain certain allocation levels plus for new purchases and have bought at much lower levels. Would continue to hold as giving the mgmt. benefit of doubt coz of couple of other factors that are visible and also 'coz I like the business.

Cheers.

http://www.bseindia.com/xml-data/corpfiling/AttachLive/5E6C5DB3_D071_4F86_AD74_D37DCC57ACDC_131506.pdf
Q2 results came out...clockwork like execution, as per my read....but as usual, there is some reason for market to sneeze
India numbers are slightly less...so what..with all the bonhomie with Africa, this is the place to be
PS - invested..views are biased

Here are the highlights of the concall with the management of Kitex garments :
Topline guidance: Mr Sabu Jacob was very confident of achieving the topline guidance of 575 – 600 crores. He also stated that he will double the revenue with respect to FY 15 ( i.e 1000 crores ). He reiterated the guidance for the current year and said Q3 and Q4 will be best quarters as fall dispatches takes in these quarters.He further projected the growth of 20 – 25% for next year and 25 – 30% growth for the subsequent year ( so 1000 crores by FY 18- 19 ). He said he won’t add any new clients, but existing clients can increase the order size and their full focus would be on the LAMEZE BRAND and their own brand ‘LITTLE STAR’ for which the dispatch will start by fall FY16.
Any new capacity addition in the factory will be purely for the license brand and its own brand because profit margins are high ( it seems logical )
He was very sure that now his focus is on brand licensing and own brand development to fetch higher returns. LAMEZE BRAND was designed, finished and launched in one month time and got very good response than expected.
As US company is a JV of 50:50 with KCL AND KGL so profits will be divided between the two companies ( here it is conflict of interest unless KCL get listed )
He stated that company has completed the investment and procuring the Fabric and it’s time for the garment manufacturing.
Any fall in the yarn price will be beneficial to the company.
Other Income: Current year other income was 14 crores that was due to sell of wastages.
Merger: He said E&Y had given them 3 options as listed below
1. Operate as it is.
2. Do merger
3. List the KCL and than merge.
KGL choosed the third option, as per Mr Jacob he wanted the clarity in the process and no dispute on the valuation point of view. So this said let KCL get listed and discover the value and than merge with KGL.
He also stated that there is no common clients between two companies. He did not commit any timelines for the listing process of KCL, but stated he need to start the process.
Cash: The main issue. He said he locked around 10million dollar at 67 rupees, but after that RBI intervene and rupee appreciated so could not convert in the rupees.He wanted to be debt free co mpany by this quarter but will be done by Q3 ( he still expects dollar will appreciate in near future, he is timing the forex market ). KGL is holding all the cash in dollars.
2 rupees difference in dollar results in 3% increase in the interest outgo. ( KGL has 20 crores in interest )
On short term borrowing he said that the cost of fund is around 7 – 8% interest.
( I am uncomfortable on this point )
Margins: On margins side he was very confident of maintaining or improvement but no scope of contraction. ( he sounded very confident ). He stated he has invested very much in technology and training of the workers to improve the efficiency, and will still invest in the advanced technology if comes.
Dividend: Since KGL has large amount of cash and declared first time the interim dividend, so they coming up with the dividend distribution policy ( how to use cash ). He stated that dividend distribution should be done in very calibrated way.
TPP: On TPP front he said it is not a threat to the company because they are in the specialised segment and countries like Vietnam, Bangladesh cannot compete them in terms of ( quality, timelines and expertise ). The companies which will be most effected would be those who manufactures the garments, denim etc in bulk.
They already paying import duty in the range of 7 – 12% in US.
Capex: On capex front company said that they have already invested enough in the fabric segment so not much capex required for future, but on garment segment would require capex of 20-25 crores so for four years it would be around 80 crore maximum
OPPORTUNITY SIZE: On opportunity size management told that the infant market size in US is $ 50 billion. Moreover the birth rate in US has increased by 1% which in coming times can add 2-3% growth on sales.
With birth rate going up coming years would be good.
BUSINESS EXPANSION: Management stated increasing business is not a big task, he still double the sales but the issue is the speclization
He said Fabric production is very easy ,one can invest in machines and start the production but when you go to the garment manufacturing one needs trained workforce. He said it takes 3 month of training for a fresher and takes 9 months for that worker to reach full efficiency. So according to him increasing turnover is not an issue but skilled manpower and training is the main constraint in this segment.
BRAND LAUNCHING: Management is very clear that they won’t launch any brand in India, they will totally focus on the US and EUROPE market.
POLITICS: Reports in newspaper that KGL have jumped in the panchayat elections as 20:20 party. He cleared that neither he or his family members is contesting the elections, but it is group of industrialists ( including KGL ) who has created this party to contest the election for the community development agenda.
FINAL NOTE : Lot of issues are been answered I have tried to cover all the issues which are discussed in forum. If anybody has any queries please let me know, if I could help.