Indo Count Industries ~ Global Home Textiles Bedding Segment Leader

Indo Count Industries Ltd

Indo Count is one of India’s largest home textile manufacturer and exporters with an extensive product range, which spans across bed sheets, quilts and bed linen. It has a presence in top nine out of 10 top big box retailers in the US.

• Exports to 50+ countries, with US as largest market contributing to 70-75% revenue, company commands 20% market share in US
  • They also have strong presence in Europe, Australia etc
  • 97% revenue is from export and 3% from Indian market (
• Company is focusing on several D2C brands( direct to customer ) for Indian market
• Company has 4 Manufacturing facilities with ~153 million metres per annum

Investment Rationale

• Company aims to double revenue in three-to-four years. It is focused on increasing the contribution from institutional bedding, fashion utility, e-commerce, and the domestic business.

  • Revenue double on optimum capacity utilisation without incurring additional material capex.

• The management expects demand in the US market to be better in FY25 as compared to FY24 and market to grow by 5-6%.

  • The management is focused on the bed linen market, which constitutes 50% of the home textile market. It commands a 20% share in the US bed linen market.

• ICNT gains from the rising share of Indian home textile players in the US market driven by the China+1

  • Indian exporters have gained market share from China due to the US ban on cotton from the Xinjiang region, higher manufacturing cost, and its focus on the domestic market.

• The management is confident of achieving volumes of 90–100mn meters with 16–18% margin.

• Greater contribution from value added and fashion bedding to 30% from 19% in FY23 and operating leverage will result in margin expansion.

  • It has invested INR70cr with value addition in focus.
  • It aims to raise contribution to 30% over the next three to-four years which will result in margin expansion.
  • Premium products offer higher realisation (~20%) than conventional utility bedding. Capacity utilisation stands at 62%.

• Company aims to grow the domestic businesses at an exponential rate and expects 10% contribution from the e-commerce segment.

  • The management feels India’s market share can grow to 80%.
  • D2C initiatives
  • India grows into a 5 to7 trillion economy definitely the middle class is aspiring for better end good

• Cotton arrivals in the market are healthy. Higher international prices are behind the recent run-up in cotton prices. The management said this run-up was driven by speculation and added that it doesn’t affect the company as it has hedged input cost till October.

• Focusing on increasing market share in non-US markets
  • size of the EU/US home textile market is pegged at USD35bn/USD32bn. UK and Japan are USD5bn each.
  • ICNT commands 7–8% share in the UK sheets market. It has a showroom and offices in the UK.
  • New customer addition: Across Australia ,Japan and UAE
  • EU – Pakistan and Bangladesh who are having 35% and 25%;
• signing of FTAs with Australia and the UAE and a higher likelihood of an FTA with the EU and the UK
• B2C & D2C Segments: Strategically moving towards B2C, B2B, and D2C segments with a focus on better margin and value proposition business.
• Experienced promoter in the home textile segment
  • ICIL was established in 1988 by Anil Kumar Jain, Executive Chairman, who is a first-generation entrepreneur and has experience of more than three decades in the textile industry.
  • He has been instrumental in establishing ICIL as one of the leading home textile export houses.
• Aggressive capex in last few years
  • ICNT has expanded capacity to 153mn metres from 90mn metres.
  • It completed brownfield expansion of 18mn metres in FY23 and acquired the textile unit of GHCL (45mn metres).
  • Expected 17% volume CAGR over FY23–26 on market share gains in the US and healthy replacement demand.
  • As a company have recently established and invested around Rs. 60 Crores in a fashion bedding unit
  • Hence has adequate capacity to meet the needs of growth
• ICNT can achieve an optimum capacity of 145mn metres. It has a 76-acre parcel in Bhilad (Gujarat). It has utilised 38 acres and can expand capacity by 45mn metres to reach a total capacity of 200mn metres
  o It uses 1.4lk spindles for captive consumption which constitutes 25% of its total requirement.
• The company is investing in renewable energy to optimise energy cost.
• India’s cotton yield per hectare is 466kg and can grow to 600kg as efforts are underway to improve it.
• industry is growing at 7-9% and we are growing at 10 to 12% ahead of the industry.
• 25-30% Volume growth for Year , Margin guidance is 16-18% for FY24

Fundamental Analysis

Market cap = 7013 (>1000 cr)
PE = 20.6 < 43 industry PE)
PEG = 1.20 (should be < 1)
ROCE = 15.1%
ROE = 15.43% ( neutral)
D/E = 0.47 ( should be < 1)
CAGR sales growth 3 yrs = 13.1%
CAGR profit growth 3 yrs = 21.8%
EV/EBITDA = 13.4 (which is > 10)
Operating margins = 16.6%

Total reserves increased = YES
Total borrowings decreased = YES ( from 2022)
Total fixed assets increased = YES

Cash flow from Operations in Last 3 years (Positive + sequential growth ) = No, sequential growth
Net Cash flow for last 3 years (Positive + sequential growth) = No, sequential growth

Debtor days – reduced from 62.6 to 49.6
Inventory days – reduced from 238 days to 220 days
Days payable – increased from 40 to 61
Cash conversion cycle – reduced 258 to 224
Working capital days – slight decrease from 189 to 150

• Consistent growth of FIIs and DIIs and Stable Promoter holdings

Peer Analysis

Segment Analysis

UK and Europe together around 15% of business on the revenue side

Market Growth

Home Textile Market: 2.5 billion dollar
Value Added Market: 11 billion dollar

Key Risks

• The Red Sea crisis has increased lead times to 35 days from 20 days. Challenges in global logistics
• Risk of product, customer, and geographic concentration
  • ICIL’s revenue profile continues to be concentrated, with the top client contributing around 21% (PY: around 26%) and the top five clients contributing nearly 46% of the total sales in FY23 (PY: around 66%), although the risk is mitigated to some extent given the established and long-standing relationships with these customers
• Susceptibility to fluctuation in raw material prices and forex rates
  • Raw Material accounts to 50% of total expense
  • The company remains exposed to raw material movements and may have to absorb any adverse fluctuations in raw material prices.
  • However, the risk is mitigated to a certain extent, as it mainly follows the order-based production policy, which minimises the raw materials and inventory fluctuation risk
  • Being a net exporter, it is inherently exposed to foreign currency fluctuation risk
• Competitive industry
  • The global home textile market is mainly driven by demand from the US, which is the largest home textile player. This demand is catered by countries like China, India, Turkey, Pakistan, Vietnam, etc.
  • The Indian export home textile market is dominated by a few large players such as Welspun India, Indo Count, Himatsingka Siede, Trident, etc.

My Outlook on Indo Count

• Leadership in bed linens
• Management anticipate good performance in Q4, thereby affirming our volume guidance for FY24 of 90-100 million meter as compared to 74.7 last year
• Company is expected to achieve 90-92% peak operational capacity and double its revenue in next 3-4 years
• Benefit from China Plus one
• Premiumisation trend – better margins
• Expansion beyond US markets : Markets such as Europe, Australia, Middle East and in long term company reduce revenue contribution from 70% to 60% while US market will continue to grow , This reduction in contribution from US is expansion from other countries
• Expansion in Indian Market too – Through D2C brand , current revenue is 3% from domestic only – High scope
• Targeting revenue growth from 2.5% to 7-8% in the next 3-4 years from domestic business
• Focus on Digital Platforms: Across US, India, Middle East to grow its business –
• Reported 10% of revenue from e-commerce
• Expecting growth in this channel
• Enough capacity to meet 2X Demand – Current capacity 153 Million metre per Annum and Volume is 74.7 MMPA, Utilization Rate – 49%, Additionally can use Bhilad Facility to get 45 MMPA more capacity
• 50 crore Invested in Solar , which will increase the margins and reduce operational cost, Operational by Q4 FY24
• Stable cotton price: Price corrected significantly, that will help company margins
• Focus on Fashion Bedding and Institutional Bedding : As its more service oriented , hence more margin , the segment revenue growth is expected from 19-20% to 30%
  • plan to have a target market of $11 billion

Stock is showing trend to grow in near term by an upside by 30%, As company achieves volume growth guidance in Q4 and show growth in FY25,
Disclaimer: Not yet invested, Planning to invest