AYM Syntex (was Welspun Syntex)

Found no thread for the company hence starting one… I have no investment here. Just starting a discussion on a pure commodity story to see if any investment thesis can come out through deliberation.

Welspun Syntex is a company in Welspun Group manufacturing POY (Partially Oriented Yarn) and FDY (Fully Drawn Yarn) … The product list is available here


The finacials of the company can be checked from Screenr site.

The Global and Indian demand supply scenario is available here DEMAND SUPPLY.pdf (158.9 KB)

The main Raw Materials are PTA (Purified Terephthalic Acid) and MEG (Mono Ethylene Glycol). Both are downstream products of Naptha as depicted in the following diagram Naptha Downstream.pdf (270.1 KB)

60% to 80% of the product cost of POY and FDY are PTA and MEG. Also, as per Welspun "Margins of POY producers are calculated as domestic prices of POY (126 D) less the raw material prices of PTA and MEG (0.86 units of PTA

  • 0.33 units of MEG per 1 unit of POY)".

Presently cost of PTA is about Rs. 68 - 72 per kg and MEG about Rs. 63 - 65 per kg. Sale price of POY is about Rs. 110 - 125 per kg. (All data from Filatex Limited 2014 AR) . But fully drwan, dyed, texturised arn price varies significantly depending on various quality parameters. One can get a good idea of the wide price range from the below link

Main PTA producers are BP, Amoco Chemicals, Alfa Mexico, Reliance Industries Ltd, Mitsubishi Chemical Corporation (MCC), Sinopec, Zhuhai Biyang Chemical Co., Luoyang Petrochemical Co., Tianjin Petrochemical Co., Xiamen Xianglu Petrochemical Co., and Jinan Qilu Group Synthetic Fiber Co.

Technology licensors for PTA are Dupont, Mitsui, Dow/Inca, Mitsubhishi, Tuntex, Interquisa, Eastman, Lonza and Hüls/Witten.

Main MEG producers are Shell, Equistar SABIC, INEOS, LyondellBasell, Reliance Industries Ltd, Akzo Nobel, BASF, Clariant, Dow Chemical, Huntsman, LG Chem, Mitsubishi Chemical Corp, Mitsui Chemicals, Sasol, Shanghai Petrochemical, and Sinopec.

In India PTA capacity is about 7.1 million TPA and main producers are RIL, IOC (Panipat), MCPI (Haldia) and MRPL.

In India main MEG producers are RIL. IGL and IOC. Total capacity is about 2 million TPA. India has presently shortfall of MEG and import is made from Saudi Arabia, Kuwait and Singapore.

POY and FDY are inputs for making Polyester Fabric and global usage pattern of pattern of Polyester / Cotton is 60 / 40 while in India it is reverse (40 / 60) and varies inversely with Cotton Price. In India the demand is rising around 4% - 6% per year.

Industry characteristics are well summarised in Welspun Syntex AR 2014. It says,

“Overcapacity is the main characteristic of the domestic POY industry with operating rates declining to about 61 per cent in 2012-13 from 67 per cent in 2011-12. Demand for POY is mainly impacted by the comparative prices of cotton yarn, blended yarn, and VSF, and also their relative availability. In 2012-13, margins for POY players remained under pressure to average at Rs 13 per kg because of high input prices and overcapacity.”

Margin of POY players were about Rs. 24/- per kg in 2008. However, as Welspun is continuously increasing the sale of Dyed Texturised Yarn (almost 85% of sales), it would be interesting to know their average price realization per kg of the FDY.

Their export sales is about 25% of total revenue.

In India the main competition is from Filatex, JBF Industries, Indo Rama, Raj Rayon etc. but Welspun as lowest RM cost among them at about 60% - 65% compared to 70% + for all others. Also in 2015, their EBITDA margin on YOY basis improved from 7% to 10% … During this period PTA and MEG price didn’t go through any wild variation. Net profit more than doubled between 2014 and 2015.

Technology and Infrastructure is almost standardised in this industry… Either you get it from PFY manufacturing company like Dupont, Samsung, Hitachi, Teijin, Enka or from Engineering companies like Zimmer, Lurgi, Chemtex, Didier, Inventa, Oerlikon Barmag, TMT Machine (Japan) … Second option is cheaper and less efficient but seems from the technology used by Welspun, they preferred a bespoke engineering route to create its capacity.

Presently, none of the financials look very appealing … Profit fluctuating, uncomfortable interest coverage and huge repayments (about Rs. 23 - 25 crore for next 4 years) due in coming years… However, promoters increased their stake by about 5% in last six months through open market purchase.

How they go up in the value chain in coming years, if at all in this commoditised industry may be something interesting to watch out. Generally, one / two players always come out winner in a commodity play.

Add your inputs …


Hi Aveek,

Thanks for starting a thread on Welspun. We have been tracking this company for sometime now - http://dalal-street.in/2010/06/welspun-syntex/.

If we really go back into the history of the company - then yes, it was a written off case due to intense competition in the polyester yarn sector due to competition from biggies like Reliance, Indo rama etc. However, what interested us was that till about 2006 or 2007, the company was totally stagnant at about 250 Cr turnover and was making losses. But by 2010-11 there was consistent rise in turnover and if one looks back - there was a lot of clean up and induction of a new CEO in 2007 or so. So it seems the company has sprung back to life due to focus by new team.

What I like now is that after consistent increase in turnover, now we are seeing consistent improvement in margins. The cash flows of the company also look good - they seem to be managing a tight control over working capital. As the turnover is high - even small improvements in margins will result into significant improvement in profitability.

Lets try to focus and understand the reasons behind the current change and sustainability of the same.


Disc: I’m invested


Interesting pick in a sector which seems to be on a run. Most textile stocks seem to be making new highs.

Usually these kinds of plays are at best opportunistic where demand supply scenario tends to turn favorable for a few quarters and companies make hay and so do the early investors.

Coming to the undervaluation here it does appear to be undervalued optically.

Some points that do come out on first glance are

For fy 15, RM costs have gone down drastically as compared to fy 15. This has led to spike up in profits. Now this can happen due to company increasing value addition or else genuine benefits of lower raw material costs (the latter not being such an attractive investment scenario bcos things can turn ugly if raw material costs were to rise suddenly due to prices of raw materials or currency swings and so on).

Company has been using MAT Credits and practically has not got to pay too much by way of taxes. How long this low tax scenario is going to last needs to be considered.

If one were to look at the last quarter results for the company then turnover has taken a dip from 230 to 190 crores and still profits have gone up due to varied factors. All this operating leverage has a limit to it and cant keep coming in. At some stage there has to be consistent topline growth and that has been the sore point for me.

Techically the stock has cleared multi year highs and hence seems to be in strong momentum.



Since the pricing is always cost plus it is difficult to make margin in these types of business by benefitting from lower RM price. RM price is open and transparent and has to be transparently passed through.

Welspun RM cost is 60% in Q4 '15 against 74% and 75% of Filatex and Indo Rama respectively.

Unless they are making something different in product mix / value chain, getting 14% - 15% differential is very difficult…


Just seen your thread … Interesting to see you are tracking it for such a long time. So, promoters have increased their stake from 37% level in 2010 to 70% mainly through preferential allotment of OCCPS at Rs. 10.26 in Mar '13. Then they bought another 5% from market in last 6 months.

Also, can you throw some light on the Tax / MAT issue as highlighted by Hitesh? How it would possibly look like going forward?


Hi Aveek,

Yes, its not easy to make differentiated margins in a commodity industry until and unless someone is doing different.

Ideally we should look up and compare the margins and other numbers of the players in this industry. From a quick work that I had done earlier, other players had seen fall in margin due to volatility in crude prices. While the margins had improved for Welspun. So lets try doing this comparison.

Another thing to note is that last year the company had carried out a expansion of about 120 Cr and started a new area - BCF - http://www.welspunsyntex.com/bcfproject.html. We should try to understand more about this.

@Hitesh - The co is not paying taxes due to un-absorbed losses. As per some calculation done earlier, the co should be having some more of un-absorbed losses.


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Reliance Industries have given the following details in their AR '15 … It gives the details of price and margin movement of POY and its key Raw Materials during past one year…


Regarding the increase in promoter shareholding you had raised - there is both positive and negative in this. Its a positive to see that promoters have increased their stake substantially from just 37% in 2012 mid to 65% and now to 70%. The negative part is that the first increase was done by converting the convertible preference shares into equity at a very low price (close to the Face Value of 10) and hence massive dilution in equity happened.

Another interesting thing to notice is that till a year back IFCI was having close to 20% of the equity and they had been selling in the open market. It seems to have been absorbed by the market now.



Hi everyone,
Here is a comparison of other Industry Players:


Welspun Manufactures POY, Nylon and BCF Yarn.
BCF Yarn is used in Quality Carpets.

Capacity : ~50000 Tonne.

Century Enka

Century Enka is a big player in POY and Nylon Yarn. Approximately 50% of the revenue comes from Nylon tyre cord, 30% from POY and 20% from Nylon Yarn.
Capacity: ~125,000 TPA.

Indo Rama

Indo Rama is one of the biggest player in this segment, seems to be totally integrated in the value chain and manufacturing several types of Polyester yarns.

The financial performance has been very poor.
Capacity: ~90,000 TPA (Cumulative Capacity: 6 Lakh Tonne.

Sarla Performance Fibres

The numbers of Sarla are industry leading. They have highest and most stable margins. They seem to be doing POY + Nylon yarns but more focus on value added yarns. Recently they have been the first company to introduce Nylon 66. They do have a good clientele.
Indian Plant: 11,900 TPA
USA Plant: 9,900 TPA (To be Expanded to 18000 by 2017)

JBF Industries

I have not taken JBF as they are a totally integrated player, selling both chips and yarn.
They have a capacity of about 2.5 lac tonne of POY yarn but numbers are available for whole the company only. There presentation is good and informative to understand about POY yarn industry, margins etc. Link to presentation: http://www.jbfindia.com/new_pdf/JBF%20Investor%20Presentation%20-%20October%202014.pdf


For FY15, debt repayments were to the tune of INR 250 Mio
Interest payments were INR 239 Mio
(PAT + Depreciation) was INR 630 Mio

Hence, the DSCR worked out to be INR 1.28x.

Given that this is an upstream textile company which can see a lot of volatility in margins, don’t you think the debt levels are too high, and the repayment position too tight for comfort? Even for a stable company, I’d say the debt levels are high, never mind a textile company.

Debt position as of 31.03.2015:

Total debt: INR 1978 Mio
Gearing: 1.35x
Debt to EBITDA: 2.36x
Interest coverage ratio: 2.66x

While the Debt to EBITDA and Interest coverage ratios look fairly OK, the DSCR is a worry for me. Atleast for 1-2 years, repayments are going to stretch the financials in case of a slowdown.

Disc : Not invested

I will be meeting an industry veteran and head of an apex textile body on Monday next…

If any of you have any question on Manmade / Natural Fibre industry or company then please send…

An interesting coverage about the Welspun Group:

As per the article, company plans to substantially increase the yarn capacity for capacitive consumption. Focus on BCF might have also contributed to better margins and product mix.


Sorry, I am late but if you have time I request you to ask him about this…

While reading [this article][1] following paragraph caught my eyes:
Regardless of where you buy your shirt, or who constructs it for you, virtually all quality shirting fabrics originate at a handful of mills. Generally speaking, the best shirting fabrics will come from brands such as ALUMO, Thomas Mason, Cotonificio Albini, Otolina, David John Anderson, Grandi and Rubinelli, T.E.S.T.A, Ermenegildo Zegna, Dormeuil, Holland & Sherry, Vitale Barberis Canonico, and Loro Piana.

If you have nice clothes, your closet is filled with textiles produced by these mills, even though you’ve probably never heard of them. The only widely recognized fabric mill that successfully made the transition to fashion house, designing, manufacturing, and selling directly-to-end-customers and through third party distributors such as high-end department stores, is Emenegildo Zegna. The rest are content to make their textiles and then sell them to tailors, shirtmakers, fashion designers, and clothing lines, who then use it as raw material to create products for their customers. If a particular designer wants a custom textile, they can draw it, then approach one of the mills to make a limited batch that is sold exclusively to them.

For example, many high-end custom shirtmakers use Thomas Mason fabrics. You could walk into the showroom of one of these shirtmakers, flip through their fabric books, and design a custom shirt in, say, Tadly Gingham. Yet, if you walked into a J. Crew Store this season, you would see an off-the-rack Tadly Gingham dress shirt for $135. The J. Crew designers created the shirt, ordered the fabric from Thomas Mason, and then had it massed produced in limited sizes with no personalization to bring the cost down to more affordable levels.

As companies that sell high end product have:
competitive advantage, pricing power, staying power in depression (Rich people i.e. the client, get poor slower than poor people), the Pavlovian association ( Brand Name as a proxy for information regarding quality, There-are-only-so-many-pieces-in-a-year, if it is so costly it must be good)

Prof. B in Relaxo Lecture mentioned trend in buying high end things due to increase in income level.
QUOTE Let’s return to the potential growth in average realization. Based on past trend as displayed in the table above, and also based on the fact that there are role models like Havaianas (discussed by me in The Relaxo Lecture) which now sells its cheapest flip flops for $18 a pair, I project that Relaxo will be able to change product mix and on top of that inflation will enable it to achieve increase in average realization
of 10% a year over the next decade. This implies that average realization per pair will rise from Rs 101 in 2013 to Rs 262 (about $4 a pair) in 2023. UNQUOTE

can you ask his opinion on these matters … how Indian tex industry is positioned on that front … any companies that fills above mentioned characteristics… and if i may request … can you throw a Phil Fisher i.e. ask him “what is that you are doing that nobody else is doing” and “if you were in competition with a company on this segment and you have to put a bullet in head of one competitor… which one would that be ?”
[1]: http://bit.ly/1Fi6aMQ

This thread died abruptly. Any update @aveekmitra?

Regarding magins, could this be the reason for low RM costs?

The technology is patented too.

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Found conf call details for Q2 which throws some light on their business.



First off thanks to @aveekmitra and @ayushmit for idea generation.

AYM Syntex stall link at the Domotex 2017 portal

(In total, there are 29 exhibitors attending)

It is the only BCF Yarn manufacturer from India presenting at the convention.
AYM Syntex is using Oerlikon Neumag’s latest equipment.
Below snapshot is from the 2 brochures were posted in the above link.

Both Oerlikon and Superba are the best in their technical segment.

Oerlikon Neumag

Posting all relevant links about Oerlikon attesting to the fact that it is the best in the business when it comes to BCF Yarn machinery.

Based on Domotex 2016
Furthermore, the multipolymer systems can be used without modifications to process all polymers, from polyester and polypropylene all the way through to polytrimethylene terephthalic (PTT). The product program is complemented by the single-end Sytec One, which is convincing particularly in the specialties segment with its superlative yarn quality and high degree of flexibility.

Interview with Georg Stausberg, CEO, Oerlikon Manmade Fibers


BCF: Distinct performance plus with S+

With a 70 per cent market share, Oerlikon Neumag is the leading global supplier of systems to manufacture highly developed BCF carpet yarn. The company achieved market leadership through continuous development work to improve the machines, components and processes. The result: individual solutions, from modular systems all the way to turnkey systems.

The equipment generation S+ is a good example of the technological capacity that serves as the foundation. This BCF machine brings together all the benefits of previous technologies: proven components like the godets and texturing characteristics of the S5, along with the straight yarn path and the optimized spinning mill from the Sytec One. The optimization measures also allow the S+ to dramatically increase production speed and output, reaching 99 per cent efficiency.

Manmade Fibers News
(11/13/15) Lower Energy Costs for BCF Yarn Production
RoTac3 the rotating tangle unit from Oerlikon Neumag, global market and technology leader for turnkey plants for the production of BCF carpet yarn, … Its successful launch is a further signal that energy saving and yarn quality are playing a growing role in the production of BCF carpet yarn.

50 per cent less compressed air consumption
Customers confirm improved processing quality

Again from the Domotex 2017 portal, i found that AQUAFIL is among the global leaders in BCF.

  • Leading manufacturer in Europe, with a 40% market share
  • The BCF division accounts for 78% of the Group’s turnover

The production of filaments for textile floorings has been Aquafil’s core business since the company was founded. Today, the Group is the leading manufacturer in Europe and the second largest global player in the BCF sector.
Aquafil is a leading supplier for carpet manufacturers operating in the following markets: contract (hotels, offices and public buildings), automotive (car mats and upholstery) and residential.

From the 2014 Annual Report:

“This business unit is engaged in a high level of continuous product innovation, renewing each year a significant number of its products, thanks to the research and development at its style centre together with developers of the client companies and the internal architecture studies of the fibre end users.”

Research and development activity in 2014 was focused principally on:
• technological improvement and optimisation of the regeneration process of post-industrial waste and ECONYL® post-consumption materials;
• development of new PA6 polymers in order to improve the colouring and dirt resistant and easy cleaning features of BCF yarns for textile flooring;
• development of innovative BCF polymers and fibres, with intrinsic fire resistant properties;

AYM Syntex FY15 margins of 10% compares well with Aquafil’s margins.

While Aquafil has 60,000 MTPA BCF capacity, AYM has 10,500 MTPA (875 MT/month).

AYM’s capacity: 500MT (in FY15) + 75% (Capex done and commenced in Q3FY16 as per concall transcript Peak utilization within Q4)

Investment Rationale:
Addressable market size based on the link shared by @BeingGraham is USD 6 bn. Considering this was the case 2 years ago, and the excellent execution by the Welspun group in their “Home textiles” division based on their Vision2020 plan, there is a good probability of above average growth in the Carpets segment.


Globally, carpets is as good, or in some markets much bigger than home textiles. In the US, for example, the market size for towels is $3-4 billion compared to carpets which is nearly $6 billion. Identifying an opportunity in this segment, Welspun has forayed into manufacturing carpets and has invested Rs. 250 crores in setting up a dedicated manufacturing line for rugs and carpets. It is fully integrated, thanks to the BCF line at Welspun Syntex, which gives it a competitive edge.

Welspun has capacity to manufacture 20,000 tonnes between rugs and carpets, producing 25 million units annually. The company is already utilising 50 per cent capacity. “We are already working closely with potential global customers and the response has been very encouraging. We are confident that this will be an important part of our future business”, added Mr. Rajesh.

Improving margins and profitability, piggybacking on Welhome branding which should increase carpet sales to existing retailers.

Aquafil’s R&D strategy corroborates with mgmt’s assertion that higher margins relative to peers can be attained through product differentiation and continuous innovation.

Disc: Invested. Bought an initiating position and plan to add incrementally as conviction increases. Please do your due diligence.



Some quick observations from my side -

1). Company has recorded one freehold land in its books for which it does not have ownership papers. The land is not yet transferred in the company’s name. The transaction was done in 2003. Company is still in process of sorting out the issue. Land was purchased for 7.7 lacs and some development was done for 14 lacs amounting to total value of 22 lacs in 2003. Statutory auditors have qualified their audit report for the said issue.- This is not that big issue, but good to share.

2). As provided in the mgmt discussion and analysis -

Quote -

Installed capacity of Polyester filament yarn has marginally increased
from 2058 million kg. during the year 2009-10 to 2118 million kg. in 2014-
15 (upto December 2014). Production however has been reduced from
1434.88 million kg. during the year 2009-10 to 1213.06 kg. during the
year 2013-14 and 873 million kg during 2014-15 (upto December 2014)

Installed capacity of Nylon filament yarn is at the same level at 32 million
kg since 2009-10; production was decreased from 30.35 million kg
during the year 2009-10 to 23.98 million kg during the year 2013-14.

Unquote -

This shows how consistently production of PFY and NFY have been decreasing over years. This shows that capacity utilization over years has been decreasing in this segment. Is this not a big issue for the entire industry? Can shifting to specialty yarns help company to avoid this issue?

3). I feel mgmt is on correct track. Focus on bottom line is ultimately important in a commodity segment. Top line is not in their hands and we cant even expect consistent (15%) growth in top line. Shifting to high margin businesses is a good thought process. Energetic and young mgmt driving the business will help change the dynamics of the entire organization. Now, the business is less prone to inventory and margin losses due to reduction in prices because of better pricing powers due to their specialty products. Even the future thought process of mgmt to slow down a bit for FY16-17, consolidate the position and try to bring more efficiency at operational levels is commendable.

4). I really do not understand the difference between POY, PFY and NFY, etc. If anyone can help with that would be of real help.

5). As mentioned above by Saket -

This totals to capacity of around 1025-1030 million kgs. As per the Annual report the total installed capacity is around 2318 million kgs. We are missing almost half other companies in the market. Analyzing each of these competitors will be much needed, because this is a scenario where only two or three efficient players are generating profits and the rest of the industry is either bleeding or operating at very low capacity utilizations. We need to check how efficiently does Welspun operate compared to its peers.

6). Inter corporate loans have been taken at 10% interest rate. All other outside loans are at 2-3% rates above the inter corporate rate. Company has also taken some FCCB loans at Libor + fix % (3-4%). - I guess there were some FCCB issues in past in (Welspun India).

7). Company had invested in one unlisted company’s (disclosed in non current investments) preference share capital at 6%. Last year the investment was withdrawn. - these small actions have been taken by the company to improve its balance sheet and P&L.

8). 7.5% of (approx) revenue comes from Welspun India. The figure has been calculated from the related party transactions data.

Disc - Not yet invested. Still digging.


Hi Vishnu,

First of all hats off to your dedication and digging skills :pray: Also, the pains you take to concise the links and highlight the relevant information only!!

Its good to know that the company has one of the best machines etc and trying to focus on premium/innovative products and the market is really big and hence growth is not an issue. But it may be too soon to say anything. I think the journey has just started for the company and based on the concall etc, they seem to be doing the right things…how things will unfold can be said only after sometime. But we should keep a tab on such developments…these are good pointers :slight_smile:

Thanks & Regards,


Company released Q4FY16 results

Annual EPS of 12.17 v/s 10.9 previous year.
One small concern is increase in receivables from 32.15 cr to 52.26 cr while there has been negligible decrease in revenues.
Overall, decent results in my opinion.

AYM Syntex Ltd has informed BSE that the Board of Directors of the Company at its meeting held on May 06, 2016, has agreed in principle to do capex upto Rs. 75 Crores for de-bottlenecking and building infra-structure such as warehouse for next five years road map.

Agree with your comments @ayushmit. Too early to go overboard. But what got me interested is the long term planning of the management where they emphasized the fact that the current margin improvements were a result of decisions made in 2009. It was very good to see they stuck to their mission and have executed a good turnaround in terms of profitability.
Given the increase in capacity of Rugs and Carpets division in Welspun India by 5000 MT, hopefully the sales growth should follow.
Happy to be early rather than late for a change. :smile:



Hi Vishnu,

I’m happy to see the results. What i find pretty interesting is the consistent improvement in operating margins…the same has improved from 6-7% from 2-3 years back to 13% in FY16…in the latest quarter they have done about 16%. I feel improving margins is a really tough thing and if the current numbers are sustainable then the management deserves an applaud.

If one hears the concalls - the management seems to be clear that they are more focused on strengthening the business model and moving up the value chain rather than chase growth. People might be disappointed to see flat sales…but i think its not bad if someone is trying to phase out commodity products and do something more value added and sustainable.

Another thing that i have been noticing is - there is a consistent fall in raw material costs as a percentage of turnover…which indicates expanding gross margins and moving up the value chain. Can we try capturing this and comparing with other listed peers?
On increase in debtors - debtor days for last 5 years are -
So it seems ok. Infact debtor days at just about 20 days is a very good thing. Also, if we notice the payable days - the same has increased this year…if the same is sustainable then its a good thing. The balance sheet seems pretty efficient as of now.



To talk about the negatives - most of the peers have posted superb numbers in this quarter…so one needs to see if the expansion in margin for AYM was due to this industry tailwind or due to their efforts? Other negative is that other companies have had topline growth but here the numbers have been flat.