Ambika Cotton Mills

Stock Opportunities Not-so-Hidden Gems
42

Long Staple Cotton vs Short Staple Cotton - for yarn making?

http://www.superiorthreads.com/videos/dr-bob-cotton-staples-and-fiber-explained/

Dr. Bob: In the cotton world, have you heard of long staple? What’s a staple? It’s a fiber. You have this beautiful cotton plant, and at the top of the cotton plant youave got this fluffy two or three inch cotton boll. And when it’s nice and opened up you have all these fluffy white fibers, one cotton boll…250,000 fibers. The length of those fibers is what determines the quality of the cotton.

We’ve all heard of long staple, but we usually don’t hear the words, short staple cotton, buy me. Nothing to brag about, right? If you ever see a label oncotton threadthat says 100 percent cotton, guess what staple length it is?

Participant: Short.

Dr. Bob: Always. Because if it is long, they will brag about it. The price is higher. That’s the bragging point. It really doesnat matter the length of the fiber if youare turning that cotton into clothing, bed sheets, towels, because you can take a short staple, lower grade cotton, and by the time you weave it, you can put a nice dense weave on it and still come up with very good clothing, or bed sheets, or towels.

But in the thread world it’s a different story. In the thread world we need to take those fiber lengths, spin them together, make it very, very fine and yet make them run through a machine at high speed without problem. That’s where the length of the fiber is so important, and that’s where we talk about long staple.

Long staple cotton has been around for about 140 years. But about a dozen years ago they were finally able to develop consistently a longer fiber than long staple. What could be longer than long staple? Extra-long staple. Yes. The thing to remember now is if you see thread that is labeled long staple, it’s medium grade. The no label, which is just cotton, is going to be short, that’s the low grade. Long staple is medium. Extra-long staple is as good as it gets.

For the scientists here, here’s the difference. Short staple is an inch and an eighth. That’s the length of that fiber of the cotton plant and the cotton boll. That’s the length of the fibers. An inch and an eighth is short staple. And about 85 percent of all cotton grown is short staple. In order to qualify as a long staple, it must be longer than one inch and one eighth. It must be an inch and a quarter. Woo-hoo. An eighth of an inch difference. Yes?

Participant: What is Egyptian cotton?

Dr. Bob: Egyptian cotton? We’ll get to that in just a minute. The long staple goes from an inch and an eighth all the way to an inch and a quarter, one eighth of an inch difference. You almost need a microscope to distinguish the difference. But in the thread world that’s big because it’s a little bit longer. It takes fewer pieces spun together, which means stronger thread, less lint, cleaner machine, fewer frustrations, and a happier quilter. But it gets even better because now we have extra-long staple.

The longest fiber developed consistently in cotton is now two inches long, and that’s a huge jump. We go from an inch and an eighth which is short, an inch and a quarter which is long, as long as two inches to be an extra-long. Minimum, it must be an inch and three eighths, but it is as long as two inches. Now we have these cotton fibers in the plant that are almost twice as long as the short which means it takes only half as many fibers to spin it together, cleaner thread, stronger thread, cleaner machine, happier quilter.

Every time you go from one grade to another, your price goes up 50 percent. You will go from a short staple to a long staple, your price, 50 percent up. To go from a long staple to an extra-long staple, another 50 percent increase. It’s worth it in the thread world.

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43

Extra long staple cotton

Chapter 5 - Market segments - Extra long staple cotton

http://www.cottonguide.org/cotton-guide/market-segments-extra-long-staple-cotton/?menuID=3729

The term âextra long stapleâ (ELS) cotton typically denotes a cotton fibre of extraordinary fibre length. The recognized industry standard for the minimum fibre length of an ELS fibre is 1-3/8" or 34.925 mm. This minimum is significantly longer than traditional varieties of cotton, known as Upland cottons, where the staple length can average 26â27 mm. ELS varieties, by comparison, can see fibre lengths exceed 40mmat the top end. A comparison of the fibre lengths of Upland cottons and ELS cottons can be seen in figure 5.1, which uses data for American cottons obtained from USDA. The graph is represented in terms of percentages as the different bale volumes of Upland cotton and ELS cottons in the United States do not yield a valuable visual data set.

As well as fibre length, ELS cottons are also recognized for their superior strength and better uniformity. Figure 5.2 shows an example of a typical strength comparison between an Upland cotton and an ELS cotton.

However, even with all the benefits of the ELS fibre characteristics and its apparent desirability, it is grown only in limited quantities. ELS and LS (long staple) cottons represent only about 3% of the entire worldâs cotton production. The ELS cotton varieties are specific in their needs to produce a successful crop. A significant amount of crop management is required for ELS cottons, above and beyond that of Upland cottons. ELS cottons tend to be very vigorous plants and if not managed will grow to be large plants with minimal fibre production. Also, the relative yield of ELS cottons is never as high as their Upland cotton counterparts. Environmental conditions for ELS cottons are specific: they can be grown only in the limited areas that suit the plantâs needs for hot days and cool nights. All of these factors result in higher production costs, with increased risks compared to Upland cotton. This in turn is a major limiting factor for the production of ELS cottons.

ELS cottons have found their way into specialty products with appropriate price margins to absorb the additional production costs. An original ELS variety that was grown in the Caribbean and the United States during the 1600s and 1700s was known as Sea Island cotton in recognition of the island where it was produced â Sea Island, Georgia, United States. Other names have also been generically associated with ELS cottons. The name Pima is generally applied in the global marketplace to identify products that are purportedly made with ELS cottons. The Pima name itself comes from the United States: USDA gave the Pima name to the ELS cotton that it was breeding in Sacaton, Arizona, in recognition of the Pima Indians who were instrumental in growing the cottons and running the field trials. The Pima name is now used by other ELS producing nations such as Peru, Australia and Israel. The name Egyptian cotton is also broadly recognized as being associated with quality products. However, only a smaller percentage of Egyptian cotton produced each year is actually ELS cotton. The majority of Egyptian production is a long staple cotton variety called Giza 86. Unfortunately, the name of Egyptian cotton has been unable to maintain its high status level because of a variety of products that are made with Egyptian cotton but are most often not made with the finest cottons from Egypt. A similar thing has happened with the Pima name: it has not been controlled or managed to protect its value and market position as a premium product. As ELS cottons account only for about 3% of global cotton production, Pimaâs position in the product marketplace should stand in the top 3% of home textiles and apparel products. In order to maintain and expand ELS production, the value of the fibre needs to be maintained by protecting and promoting its uniqueness and by putting it into products that can feature and highlight the superior fibre.

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44

Donald

I spent a fair amount of time trying to understand what the “moat” of ambika is. Fortunately, one person in Chennai who is well versed with getting TUF for textile mills and is aware of ambika helped me out. According to him :

)- ambika yarn is the only yarn that companies outside India ask for by name. That is because their thread breaks far far lesser than comparable companies. They blend about 10-20 % of imported cotton from egypt and turkey (the giza cotton that you find that gives shirts a premium, well starched, shiny look) and hence command a price premium of 2-3 %.

)- That said, the general conditions in coimbatore are tough - because of increasing costs of labour and incresing cost of logistics of transporting cotton from gujarat and maharashtra (where cotton is increasingly grown)and this has resulted in ambika’s ebitda margins dropping by 300-400 bps over the years. This shows no sign of abatement and this will eventually settle ata 22 % or so.

)- on the other hand, surat/bhilwara cluster is getting increasingly competitive and a lot of companies there are now blending imported cotton, albeit slowly and they are now starting to wean away a little. However, the market is growing and ambika because of its pedigree will continue to grow ahead of the market.

The promoter is focussed on cash flows and hence is in for long haul - I won’t buy at these prices as it is still only a b2b “differentiated” commodity business and won’t buy unless below 6-7 x PE.

Infact, nitin spinners on which I hve done some research too, looks a better bet to me at 4 x PE as they are trying to catch up to what ambika is doing

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45

The research done by VP so far on this stock is phenomenal… I would like to add my 2cents based on some reading done in the past few days - very interesting and exciting company which has a lot of +ves. Here, I have primarily focused on issues/-ves in my mind as most of the +ves are already pointed out.

1). Ambika seems to be unable to pass on increase in raw material costs. Observed that there was a major drop in OPM from ~30% in 2005-2011 to ~21% in 2012 onwards. This increase in expenses is primarily due to a major surge in input costs of raw materials, i.e. cotton prices went up coincidentally at the same time (http://www.tradingeconomics.com/commodity/cotton)

However, the interesting part is that OPM did not improve significantly although the prices cooled down post that. Does it mean that Ambika does not have much bargaining power? So, I wonder if specialty cotton yarn is even a moat - definitely doesn’t seem to be a wide moat case. This is probably taking us to the same question as Irfan/Donald have asked - Is specialty yarn even a moat? Why can’t others do it? If it were really a moat, why wouldn’t Ambika have bargaining power to get back to ~30% OPM levels?

2). The number of spindles that Ambika had in 2014 is same as the number of spindles(total installed capacity of 109,872 of which 100,800 constitute compact facility) it had in 2009. So, they don’t seem to be increasing their production capacity. This could be due to two reasons-

a) They are focused on productivity improvement as of now by way of investing more on improvising the technology, i.e. replacing old spindles with the new “suessen elitwist compact system” or investing more on windmills/power generation to deal with the scarcity of power

b) Believe that they don’t expect to see growth in demand beyond what they can produce with current capacity

Although (a) seems to be more likely, I wonder how would they manage if they are growing top-line at 20% annually

3). Succession planning - Mr. Chandran’s daughter (Ms. Bhavya Chandran) is a non-executive director as of 2014. She was an executive director in 2010 - This means that she is not involved in day to day ops of the company. Is there a good succession plan?

p.s: I am new to reading financial statements. So, please feel free to correct me if my interpretations above are incorrrect.

Disc: Not invested yet

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46

Thanks Raghu for your inputs.

Your enquiries are in the right direction and valuable. Keep persisting.

As added food for thought, most players are doing almost the same things. Yet performances are very different.

http://www.cheslind.co.in/index.php?page=technology

Cheslind Textiles is a decent size player serving similar markets/customers. It employs all the latest technology, has got all the certifications.

Much more insights are needed to get to the bottom of what makes for a really differentiated player.

47

Donald,

While screening different companies while evaluating Ambika and Nitin, I found few major problems in Cheslind…

  1. All there machinery is quite old and this company plans to modernize by selling old second hand machines by buying better condition second hand machine. It didn’t sound very appealing to me.

  2. No captive power and hence exposed to vagaries of power situation in Tamilnadu.

  3. The modernization and capex cycle just started in a small way after CDR and may take a while to take propershape.

48

Hare are some data points to ponder about

Ambika

FY09

FY10

FY11

FY12

FY13

FY14

CAGR

Sales

185.41

223.14

327.24

390.13

398.05

477.08

20.81%

Exports

75.06

121.41

178.16

229.16

244.75

295.82

31.56%

% Contribution

40.48%

54.41%

54.44%

58.74%

61.49%

62.01%

RM

94.89

120.94

170.74

238.21

238.01

285.92

24.68%

RM Imports

45.42

59.02

92.88

78.97

145.24

235.54

38.98%

% Contribution

47.87%

48.80%

54.40%

33.15%

61.02%

82.38%

EBITDA %

28.37%

26.30%

29.90%

20.20%

21.84%

21.66%

RM/Sales

51.18%

54.20%

52.18%

61.06%

59.79%

59.93%

1. Ayush had mentioned that the big drop of Margins from FY 12 onwards is the worrying sign for Ambika, if any. And how do we know what is a sustainable level?

I thought we could first check if there is a direct correlation with RM prices.

The above data shows a very clear 1-1 correlation between EBITDA margin spikes/falls with RM spikes/falls. If margins fell from 29% to 20% RM/Sales also spiked up from 52% to 61% and has more or less remained there. Margins have also remained in that range

2. Specialty Giza Cotton - any clues to that being the clinching argument for superiority

I thought we could check the ratio of RM Imports as a clue - how much of imported specialty cotton are they really using. And has its use gone up over the years?

FY12 was the first year the company mentioned in its AR that they are only into specialty cotton yarn. That year RM imports were the lowest at 33%. Prior years imported RM was ~around 50%. FY13 and FY14 has seen a real ramp up though in imported RM going upto 61% and 82% !!

However the imported RM and its use - has not seen them fetching higher realisations/margins, it appears.

We have also learnt that its possible to achieve similar yarn quality - Stength & elongation parameters - with right mix of blending and twist!!

As Aveek has mentioned before, this aspect of Imported Giza Cotton prices parity versus domestic needs to be investigated and understood better. As aso, the optimum blend of local Shankar 6 and MCU varieties for achieving desired yarn characteristics

49

Is there a Geographic Market advantage for Ambika, supplying to the most premium shirtings players in developed markets?

Ambika

FY10

FY11

FY12

FY13

FY14

CAGR

Europe

43.08

42.25

14.25

14.68

26.74

-11.24%

% Contribution

19.31%

12.91%

3.65%

3.69%

5.60%

E &SE Asia

72.31

125.52

207.67

223.28

232.21

33.87%

%Contrib

32.41%

38.36%

53.23%

56.09%

48.67%

India

101.73

10.39

160.28

140.26

163.7

12.63%

% Contribution

45.59%

3.18%

41.08%

35.24%

34.31%

Others

6.02

10.39

7.24

6.79

36.87

57.31%

% Contribution

2.70%

3.18%

1.86%

1.71%

7.73%

Waste Cotton

28.12

30.88

35.08

% Contribution

7.21%

7.76%

7.35%

Exports to Europe has shown hugely deteriorating trends. While East and SouthEast Asia seems to be the mainstay. This could be the result of the actual manufacturing for the brands being understaken mostly in South and East Asia??
Also heartening to note that they are able to develop other markets - which has gone up to a significant 7%+ consistently now.
50

Finally do we see the picture getting better from here? Where is Ambika at this juncture in driving up efficiencies/margins, or will they need to now again pump in significant Capex for the next phase of growth?

Ambika

FY09

FY10

FY11

FY12

FY13

FY14

Capex

1.67

36.29

84

5.55

8.63

30.98

Spindles

109872

109872

109872

109872

109872

109872

Compact Spindles

100800

100800

100800

Wind Power

15.4

15.4

27.4

27.4

27.4

27.4

Captive Use

25.9

25.9

27.4

FY14 states that the entire 27.4 MW Wind Energy is now being utilised for Captive Power. There is not much scope for adding more Compact spindles - just around 9000 spindles.
They have made a substantial capex of 31 Cr in FY14, which most likely would have been used for capacity addition?? since there wasn't any mention of adding more Wind Mills??
Capex/Spindles data prior to Fy09 may give some clues to the cost structure
51

Posted the above, as much for illustration purposes as also for soliciting further insights into the business. Hoping someone will do a similar job at Nitin Spinners. Maybe we will get a few more insights.

The more insights we can acquire into technology, market segments, efficiency and profitability drivers - the better equipped are we to quiz professionals from the domain, and eventually the Management/Competition

Hope to see more people asking questions/forming hypothesis - and looking for supporting data that confirms/belies the hypothesis.

So far, haven’t been able to get any concrete insights into - why the hell shuld Ambika Yarn be the most preferred source for premium shirtings worldwide. It may boil down to proprietary processes/blends - that they just have been doing much better and more consistently than anyone else in the fray.

Equipment/Technology headstart is unlikely to be the answer - as there seems to be many others at higher than Ambika Capacity. Shanmugavel group has 4x Ambika’s no of compact spindles.

I am still waiting for the Industry Map - for someone to put his hands up and compile :). Believe me that’s a very important piece of data (in the puzzle) - to enable us to quiz better

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52

I talked to an industry insider today and gathered the following…

  1. Compact spinning is becoming a defacto standard for Shirting (80% of compact spinning is used for Shirting Yarn) but premium is going down as it is becoming de facto standard … In shirting people will perish if they don’t have compacting but possibly the premium won’t be there in future just for quality alone. He said five years back the premium was 5% and now it is less than 1%.(Possibly a very plausible reason why Ambika margin down and stabilized over the years)

  2. This year Yarn export to China gone down substantially and situation may remain like this for year or two.

  3. Compact Spinning are two types … a) Apron Drafting and b) Perforated Drum Drafting. Rieter / Suessen caters to both segments but complete Rieter solution comes in Perforated Drum (Steel) solution. Apron type solution (cheaper by 20%) needs regular maintenance and change of apron every 9 - 12 months increasing downtime. Energy saving, low downtime as low regular maintenance needed, higher uptime due to machine starting at 85% speed level (50% for Apron) and lower doffing time (150 sec vs. 180+ sec) are key benefits of using Compact Spinning apart from the shinier look, less hairiness, lower fly generation while knitting etc. Also it can withstand many subsequent chemical treatments.

  4. Compact can be retrofitted to old ring spinners assembly effectively. As was done in Nitin Spinners.

  5. Trouser and Hosiery fabric makers and gradually using compact machine where they use higher TM yarns … Compacting reduces softness which are needed in hosiery and bed linen and their adoption is restricted to where softness of end product is not a criteria (like mattress cover). Airjet or Rotor Spinners are best suited in these situations.

  6. Quality is a function of three things a) Technology, b) Raw Material and c) Skill of Operator. He said skill of operator is the single most factor affecting yarn quality than technology and raw material.

  7. According to him shirting yarn quality wise top three players are a) Vardhman Textiles, b) Thiagarajar Mills and c) Premier Textiles.

  8. In Hosiery / Bed linen segment Welspun is largest user of compact spinning system.

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53

Donald,

I have posted about the price parity issue (which you mentioned above) in Nitin Spinners thread. I am posting the link here again so that people who read only this thread don’t feel clueless…

Also, the Ambika vs. Nitin comparison (excel file) which I posted few days back on Nitin Spinners thread, is being attached here too … I should have done it earlier … Just missed.

AMBIKA-NITIN.xlsx (16.5 KB)

1 Like
54

Just checked Vardhman has 1 million + spindles vis a vis 110000 for Ambika.

Sales of Yarn for Vardhman is Rs. 2980 Cr. vs. Rs. 476 Cr. of Ambika. Total sales of Vardhman is Rs. 6000 Cr.+ in FY 2014.

My hypothesis — This premium shirting Yarn may not be a niche area at all with any sustainable moat – it is just marketing ploy. Manufacturing scale with right technology, sourcing skill, expert machine operators in large number, long term customer engagement etc can create a big enough competitive advantage but it’s not a moat. A moat is my understanding is something which gets wider with passage of time not narrows down over period (Coke, Google, HDFC Bank, Sun Pharmaceuticals, or a possible small future candidate may be Shilpa Medicare :slight_smile:

1 Like
55

Hi Aveek,

I think this is super work! the first piece of real-value addition in this thread - over what is generally known about Ambika Mills/Industry,thanks.

1). Point to note - Technology and Raw material being equal - most important is the operator skill in processing for the right quality at optimum efficiency. I was coming roud to the same conclusions in last couple of days - that if Ambika is one of the most sought after yarns - then it must have to be their proprietary processes/QAnthat is delivering better than most others

2). Good to know about quality output also from Vardhaman, Premier and Thyagrajar Mills.Good pointers to get a bit more deeper

3). Your Cotton import price article - was mostly about imported (contaminated, lower quality) Africa Cotton; dont think the article quoted premium quality Egyptian Giza or US Pima cotton is cheaper than local. We need to enquire more on the cotton sourcing/blending for shirting quality yarn

56

Donald,

Thanks!!

On point 3, let me explain my point in detail for better understanding…

What I tried to mean was, bulk of import of Ambika is due to cost advantage over Indian cotton sourcing. They must be importing Giza / PIma cotton along with that which is clubbed in total import.

It is obvious that 84% of their Import can’t be all Giza / Pima cotton. Industry sources tells me that 5% to 20% mix with Indian cotton is all it needs to make a great shirting fabric if Indian sourcing is efficient.

Let’s compare with Vardhman … It imported Cotton worth Rs. 209.90 Cr. in FY 14 (Rs. 157.45 Cr. in FY 13) vis a vis their total Cotton RM cost of Rs. 2073 Cr. in FY '14 (Rs. 1718 Cr. in FY '13) … So it’s about 10% of total. And probably (assumption) these are Pima / Giza cotton.

Hope my attaching the above article can be understood in this perspective.

57

Hi,

While checkinghttp://www.supima.com/locate-suppliers/ with Products selection of Textiles > Yarns > Compact, then only very few are available world wide.

India – Ambika and Rajapalayam Mills Limited (Ramco group) looks to be certified from 2003 onwards.

-Muthu

58

Good article on how CRISIL analyses this sector on credit scores. Gives some key points on which we can check Ambika and also invert these points to see why Ambika is unique.

  1. Business Analysis
  2. Market Position- Quality and Range
  3. Product Mix to insulate cotton price fluctuation
  4. Geographical mix
  5. Operating Efficiency
  6. Cotton Procurement Efficiency
  7. Cost Structure
  8. labour
  9. Power
  10. Modernization
  11. Economies of Scale
1 Like
59

Saurabh,

Thanks a lot. Good paper.

My takeway from the CRISIL paper is to focus also on understanding/investigating cotton procurement efficiencies of various players.

Will update as we get more informed.

60

Donald and other members:

I have tracked Cotton and yarn industry during 1997-2003 period. Probably one of the few analyst tracking that sector at that time. Find enclosed my view on Ambica:

  1. Cotton crop in 1998 Cotton season was around 177 Lakhs bales (of 170 kgs) which have grown now to around 400 Lakhs bales (of 170 kgs) in 2014 cotton season. The main driver to cotton crop are BT which improved yield per hectrae from 250 kgs to around 450 Kgs which is still lower than global cotton yield. Australia and USA in 2000 used to have 1000 kgs/hectare in 2002. You can check INternational Cotton Advisory Council (ICAC) which provide global cotton area, production and price forecast (measured by Cotlook A Index).

In Indian context, Jayalaxmi is the longest staple cotton which can spin yarn of around 80s counts. In case, we need to spin yarn 100s+, we have to import cotton from US (Pima) or Egypt (Giza). Egyptain Giza has superior staple length and can spun as high as 160-180s count.

Find enclosed India cotton balancesheet downloaded from Textile Commisisoner office website:

  1. Historically, India has the strong cost competitive advantage for cotton. With Cotton acccounts for around 45 of selling price in case of 100 counts cotton to more than 60% in case of 10s count cotton. 80+ Count is categoirsed as finer count. While realisation for finer count almost 3 times (say price for 20s count is 100, 80s count would be around 275 per kg. These are not current price but indications based on my memory), the production per spindle shift also decline significantly. As per BTRA (BombayTextile Research Association), the old production norm ( 1995) production per spindle shift for 10s count is 430 gms/spindle shift which decline to 128.7 gms/spindle shift and 34.3 gms/spindle shift for 80 count.

However, advtange of superior count is there are very few players. While, sales per spindle is lower, margin are more stable for these players. Also, producing quality is very difficult in 60s+ count. In India GTN, Patspin (GTN group only) and Chesling Textile were among few which have specialised in these market in 2005 (after which I stopped tracking the sector). Average count produced in Indian Cotton yarn industry is around 30s.

In FY2013, as per Ministry date find enclosed Cotton yarn countwise production

Total production 3583 million Kgs.

<10s Count: 646 mn kg

10-20s: 630 mn kgs

21-30s: 851 mn kgs

31-40s: 987 mn kgs

41-60s: 294 mn kgs

61-80s: 120 mn kgs

81 and above: 54 mn kgs

So the production of 80 count and above 1.5% of total production.

  1. Global cost competitive:

India and Pakistan were among top two cotton yarn exporter globally during late nineties. In Early 2000, India replaced Pakistan as the largest global cotton yarn exporter. Most of finer counts were exported for finer and higher value added fabric. In Domestic market, Dhoti is the lagest end use for finer counts (60s and above). With decline in Dhoti Demand and increase in Denim and normal shirting demand, share of finer count consumption decline significantly. Denim and industrial purpose textile use requires coase count (10s) while normal shirting use 20-40s count.

In 2001 ITMF Cost of production for spun yarn was as under (20/30s Carded not sure)

India: 2.51 USD/kg

Brazil: 2.69 USD/KG

Indonesia: 2.86 USD/kg

Itlay: 3.14 USD/kg

Turkey: 2.88 USD/kg

USA: 2.67 USD/kg.

India’s lower labour cost was an advantage but high power and capital cost were disadvantage. Also, wastage in India was among highest in early 2000s.

Ambica cotton would have following challenges in going forward:

  1. Cotton prices globally declined due to lower Chinese import. While Ambica, since dependent on imported cotton, have not gained majorly, one need to see whether they are able to pass on increase in cotton price. Given that the segment in which it operate has limited competition, but still there is a headwind against the sector.

  2. Typical Minimum economy size for Cotton spin inning mills is around 25,000 with capex of around Rs 40-50,000/- per spindle. In order to grow, the company need to raise debt/equity for expansion and hence free cashflow equity holder are limited.

Hope this assist the forum on assessment.

Discl: No investment

Cotton_Balance_Sheet_From_1991-92_updated_upto_31.xls (50.5 KB)

6 Likes
61

Dear Dhiraj,

Super!

Really amazed that you felt compelled to write in at just the right moment:))Grateful for some of the insights you bring in.

Next week I am planning to meet some industry people, and some of the data points that I was wondering about are exactly what you have brought up (though may be dated); we can easily get these updated

1). Realisation for finer counts vs the avarage counts - 3x

2). Borderline of finer count - 80s

3). Minimum economy of scale needed - 25000 spindle

4). Capex per spindle - 40-50K/spindle

5). Indian Extra Long staple (ELS) grades - today we hear of Shankar -6: what is the price variance for ELS india or ELS Giza or Pima.

6). Blending Mix/Twist - that can use short staple fibres also - for upto certain counts?

7). For finer counts - can use blend ELS 20% and normal staple 80%; or everything is ELS

8). Whats the typical product mix for speciality yarn guys like Ambika? How much of finer counts, and how much lower counts:

9). Market size of Finer counts - may not be very big and may be a closed market? Whereas normal count market has the volumes and is open to all. Thatswhy most players can play only the volumes commoditised game?

10). Even if you have all compact spindles - you may still be producing only normal counts and not finer couts, right. So just knowing someone has 3x Ambika compact spindles - may not mean anything?

Which are the top benchmark companies to compare Ambika against - for apples to apples comparison - Vardhman, Premier and Thiyagarajar?? like Aveek mentioned after his talk with an equipment supplier

What about Shamugavel group, LS MIlls group, Sportking?

I am sure you can come upto speed faster than us - enquire with your friends and equip us better to quiz industry folks/Management?

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