Cravatex... an atheletic stock

Cravatex is a small cap listed company on BSE which is into sports products manufacturing. FILA a well known brand is under their kitty and they are only licensee to sell fila products in India through cravatex. They also own proline brand which is into treadmills majorly and is also a well recognized brand. The company has posted steady growth in revenues in last 5 years which has boosted their bottomline too. Their business plan is to grow through franchisee business which reduces a lot of risk from their shoulders and can also help in growing fast. Having a well recognized brand and pan India presence i feel the stock can be re rated if it posts good growth numbers ahead. Also the business is recession proof and is purely non cyclical and hence the stock can have better valuations in future. Comparing it to page industries or lovable lingerie, i think the stock is undervalued and has huge upside potential if backed by good earnings. If the company realize full potential of their brand and decide to back it up, i feel rising consumer market can do wonders for this company and growth can be very high.

On the contrary view

1.This company is promoted by Batra Group who do not have a very good record in transparency and fair management (although the promoters have 75% stake).

2). Another point to ponder is their low operating profit margins at 12% which is again less than peers in a branded textile business. Their annual report doesn’t give much insight about their business strategy.

3). Also their Operating cash flows have been random in last 5 years and the business needs stability to get serious investors scanner.

4). Their moat is their brand value/recall pan India which should be capitalised upon by increasing more and more outlets in major cities in India.

Please take the discussion from here on and lets do some more research on this company regarding its negative points. Seeking for more insights.


Vikas Kukreja

Disclosures: I am not invested in this company and yet researching to get more insights. Please do your own research before investing.

1 Like

Looking at the negatives, first:
1. Sales growth is unimpressive for last 5 years. EPs growth when not backed up by corresponding sales growth, should invite much more scrutiny
2. If you take Other Income out of the picture, much of the sheen goes out of the seemingly excellent earnings story. (At ValuePickr, we look at Operating Margins = PBIDT-Other Income).
Variable FY06 FY07 FY08 FY09 FY10
Operating Profit Margin 0.09 2.23 4.94 -2.37 5.20
Net Profit Margin 0.91 2.79 2.47 4.18 6.31
3. Other income (5.56 Cr in FY10) includes a susbtantial 4.46 Cr coming from License fees (same 4.46 Cr in 09). We should find out what is "License Fees"
4. Huge rise in Debtor days -from 54 days in FY09 to almost 100 days in FY10. This has been a rising trend over last 5 years. Similarly Inventory days have risen a bit. The company isn't getting better on the Working Capital Management front!
5. The ownership pattern (also brands) is confusing and hence not a positive for me. Cravatex vs. Fila India, Proline Fitness vs Proline India. Brother Rajeev Batra reportedly a part-owner in Fila UK along with some Korean investors.

Some positives:

1). 9m results are impressive. There’s a 61% growth in Sales. last Qr they clocked 24 cr in Sales. If this trend is repeated, there is some solid traction on the ground. We should understand where this growth is coming from?

2). In FY10, Fitness Equipment sales was 30.5 Cr (32 Cr) and Sports goods was catching up fast with 26 Cr (10.4 Cr).

3). If this trend has continued in FY11, it would mean Sports goods sales have grown handsomely. We should understand why…more stores, bigger dealer network, etc.

4). part ownership in FILA by Rajeev Batra - a positive?

The stock jumped ~20% today. CMP 716 up from 597. I tried to check the news activity, as below

null Corporate Notices
Source:BSE- Cravatex Ltd has informed BSE that a meeting of the Board of Directors of the Company will be held on May 24, 2011, inter-alia, to consider the following business:

1. Audited Financial Results for the year ended March 31, 2011

2. Recommendation of Dividend, if any.

3. Issue of Bonus Shares.Date:2011-05-16
Source:BSE- Cravatex Ltd has informed BSE that the Company has acquired 100% of 1000 equity shares of ÂŁ 1 each of M/s. BB (UK) Ltd., U.K. for a total consideration of ÂŁ 1093.

By virtue of the said investment, M/s. BB (UK) Ltd., U.K. has become a Wholly Owned Subsidiary (WOS) of the Company.Date:2011-03-10
Source:BSE- Cravatex Ltd has informed BSE that the Company has successfully concluded negotiation to extend the Sub License Agreement for the use of "FILA" trademark till December 31, 2016 for India, Bangladesh, Pakistan and Sri Lanka.Date:2011-02-03

Valuation-wise it is quoting already at 18x trailing earnings. If there is a good story in the making, it seems already priced in.

Lets try to follow more on the company, wait for results and the 2011 AR. Lets continue the digging though.

I found this useful compilation of newsflows at Amit Arora’s blog


Since I am following this stock I noticed an announcement BSE on the 10th of March which prompted me to look into motivation behind it.

More details on the announcement is at

It is too early to comment on the prospects. There have been some changes in top management of FILA UK and Directors of Cravatex Ltd, Proline India Ltd i.e. Rajiv Batra and Rajesh Batra have stepped down as directors from Jan 2011 as can be seen from link below. Guessing this must have been part of negotiations to be mafia of whole of Indian subcontinent including neighbouring countries under their territory.

Both brothers own a few other companies registered in UK dealing in sports.

Incase you did not know FILA faced financial hurdles due to over endorsement few years back and now the business is beingresurrectglobally since 2008. SBI group of Korea owns it along with management who went for rights issue and loans to capitalise the company.

Most of the innovation and extension in apparels like Golf apparels, Mountain wear, Innerwear / Undergarments and Kids range besides the sports range is coming in Korea, US and should follow in other countries with a time lag.

Some more newsflow

from Amit Arora ( blogger) discussions in equitydesk

Cravatex’s role will not be downsized unlike our double faced P&G and their ilk.

Batra Group of which Cravatex Ltd is a part owns FILA through a management buyout forever.

Cravatex Ltd own 30 crores property in Mumbai.

Cravatex Ltd owns Proline Fitness

Cravatex Ltd does not own Proline Apparels

MBO was done in 2007 and now business is being revived

Useful Links

They have entered innerwear and kids wear recently in Korea which is the new HQ

15 year regular dividend record. Other Batra brother is CEO of FILA Europe.

Given all above, at current prices, All positives seemed to be priced in into the story.

I am not so sure that the negatives have been fully considered. We need to wait and watch performance for a few quarters.

Is all FILA showroom inIndia,Bangladesh are owned by cravatex.

I was looking at this company. There are a lot of issues with the company, specially the holding structure. But, I like the underlying business of fitness equipment and FILA shoes.

I have been playing tennis since I was a kid and FILA shoes are/were very famous. In fact, for tennis shoes, Nike, Adidas, FILA and PUMA were considered elite. Bjorn Borg used to advertise for FILA (but that was way before my time!). Considering the fact that FILA is just entering the market and is likely to offer at a lower price point compared to the incumbents Adidas, Nike and Reebok, there might be a good opportunity here.

I think this company is worth understanding a bit better. It’s available at a PE of 15 and has shown very good growth in FY11 although its still bleeding cash even at the operating level.

Very very confused on this one. My analysis says I should not buy but instinct says I should. :slight_smile:

1 Like

Hi Donald / Arindam,

I have figured out that the License Fees shown in balance sheet is actually rental revenue that company is generating from the property it owns in Cuffeparade in Mumbai, in Maker Chambers. And assuming that the property is generating 4.46 crores rental, its surely worth a lot more than 30 crores. 30 crores is the historic value of the property, which should easily be worth over 70 to 80 crores in today’s terms. And also considering that rental yields from even the best premises in India are at best around 5% to 6% per annum, the rental of 4.46 crores per year justifies this valuation too.

So guess this property of 70 crores to 80 crores provides a big margin of safety to the investment in Cravatex.

The sports goods side (FILA) of the business has clocked 100% growth with turnover of Rs.51 crores for this year as against Rs.25 crores of last year, as is evident from the latest annual report. This shows that the operating side of the business is also doing well. FILA being a relatively well known and globally recognized brand could easily drive company’s growth in the future. It definitely makes the company a good long term investment. The stock could easily get rerated just with investors recognizing the popularity of FILA as a brand in the sports segment.

I think looking at the run up in price of share of cravatex, at a PE of around 15 times trailing, most of upside seems captured here.

Company has not gone anywhere in terms of growth between fy 07 to fy 10. Only fy 11 has shown sharp jump. I think one needs to watch a few quarters before taking a call or else let the price cool off before taking entry at cmp. For those invested at cheaper rates it might make sense to remain invested but fresh entry looks dodgy at this price.

Excellent set of numbers… any fresh take on the stock?

Just to put up the numbers,

q1 fy 12 sales at 40 crores vs q1 fy 11 at 21.54 cr

q1 fy 12 NP at 2.31 cr vs q1 fy 11 at 1.53 cr

q1 fy 12 eps at 9 per share.

Sales growth seems to be excellent.

I have inquired quite a few gym enthusiasts and all of them vouch for the quality of Proline fitness equipment. And I got great reviews even for FILA.

Some positives I see are

1). Two divisions of the company – fitness equipment and FILA both headed for great growth.

2). Clean balance sheet-- low debt, good ROE

3). High promoter holding at around 75%. no pledging.

4). Looking at the opportunity size, the market cap of the company at around 90-95 crores seems quite good.

Negatives is very little is known about the company and it needs a detailed study in order to take a big stake. Low liquidity is another problem.

I am right now in the US and I see FILA brand picking up a lot here. It had gone down significantly in the last few years but now it seems they are doing really well. The price is lower compared to Nike, Adidas and quality is pretty good. I see a lot of people in the tennis clubs here wearing FILA sportswear and shoes. I am hopeful that the brand is also revive (or have a new start for that matter) in India.

After my previous post, I had actually followed my instincts and bought some of the stock.

1 Like

Interesting story about revival of the Fila brand -

does anyone has any idea what is the total sale of Adidas/Reebok/Nike in india? Also, what kind of PAT or OPM does these companies have? Also, specifically to cravatex how can its subsidiary in EUROPE bump up its revenues and bottom-line. I am not very clear on their subsidiary’s operations…

copying in comments from Your Top Picks thread


Since Cravatex has done so well in an uncertain last year, there is something in that story - that needs revisiting - may be clear my bias, by trying to undrestand more of the business.

I looked at this useful Price History table of Cravatex

As Abhishek says, there is huge volatility in the stock. Every month there is a big gap between the highs and lows - sometimes as much as 30%. There are many stocks with low floats, but not this volatility - that can’t be the reason (my experience has shown low float with steady performance, has worked in favour of the stock almost always). At the same time, the movement has generally been upwards!!

Like more comments from Prabeesh, Abhishek and others who follow this company.


This is what over-analysis can do, it creates illusions. If there are people “obsessed” with such metrics, its important that the parameters are correct for that analysis. I am sure people have not bothered to check the weighted-avg-price and just seen the low and high of the day/month. Most often than not these lows are done on 1 or 2 shares (could be for highs too), but the thing to notice is that upmoves are on huge volume whereas down move is on hardly any volume. Furthermore, this company has picture perfect chart. As per the charts, this company can grow atleast 150% more (from present levels) in the price in this FY.

Needless to say i am biased as i am invested here. After all this price appreciation its still a 200cr market cap company. It has a long way to go in my opinion and i would be really happy if someone could do a sincere analysis of the company.

copying thread _ Link:

Dear J2EE

Thanks for your views. Yes, many of us would like a proper analysis of this story. Hope this time it catches momentum - so we can decide either way - how good a business this really is.

Some interesting comments from you on Volatility- Volumes. Yes, its not too important to dwell much on, but preferable to draw correct inferences on patterns.

My observations:

Will be good if you can point us to a quick/simple way to see weighted-average-prices somewhere? W/o the benefit of that, it appears to me

1). While it is true that lows may be often recorded on low volumes, a high price difference of low-high every month for Cravatex- cannot be justified by this argument. If that were true we should have seen similar patterns of price difference for many other stocks too, isn’t it.

2). Last 6 months data shows Avg volumes - about 600-700. Two huge upmoves in last 6 months Sep 2011 and Feb 2012 with 4000+ volumes. In a few months big lows recorded at 2000-3000+ volumes. Most times, at 1000+volumes.

So there is genuine volatility. Maybe it is because of the low float as Abhishek says, but the float is usually not in strong hands, but momentum hands! unlike say a PI, with the lowest float of less than 10% if I remember correctly, but you never see this much volatility.