Spenta International

I have recently come accross a stock named Spenta International which is a textile stock operating on a relatively niche area like Socks. Below are the analysis I have made.

Sales Growth :-

As we can see the company is
making a sales growth CAGR of 16% over last 10 years hence this is a
commendable job and mostly inline with management expectation of making 20% CAGR
for coming 2-3 years but the considering individual years the growth they are
mostly fluctuating which is a cause of concern from strategic point of view of
the management.

Profit Margin :-

The profit margin both OPM and NPM
is not very satisfactory and mainly on the decreasing side hence it will
clearly show they do not have a bargaining power over it’s consumer. Though
they have recently felt the urgency to create their own brand and increasing
export hence this might be a good step in increasing the Profit Margin but only
time will tell.

Value Creation :-

Over the years it is not well
known for creating any value for the share holder but this year it really does
it also from above you can see they have started to giving dividend so the
focus has changed and could have been a very good value investment opportunity.

Tax Payment :-

Tax payment is at per with corporate
tax [30-34%]rate hence not a problem with that but there is a ongoing dispute
with the IT of 48Laks.

Interest Coverage :-

Interest coverage is 5-6% always
hence a very good cover they have on their debt.

Debt :-

Debt is mostly very low and they
have have significantly reduce it in last three years also DE ration is under
control of 0.14-0.16 level.

Current Ratio :-

Current ratio is good hence we can
conclude there is ample amount of liquidity in the business.

Cash Flow :-

Cash flow is really good which is a
commendable job by the management and show there conservative mentality also
collection of cash remain stable and consistent.

Self Sustainable Growth Rate :-

This is the parameter by which we
can judge weather a company is able to survive in future from it’s internal
operation without a much requirement of cash inflow into the business.
Generally an average of 30-40% SSGR is good and stable.

The company does not have a good
track record of SSGR and mostly on the -ve side hence the future capital
requirement for the company is on the card if they will plan for expansion. As
we have earlier discussed that margin has suffered for the company so this is a
prime reason for -ve SSGR coupled with high depreciation rate of it’s asset
which means they are in a requirement of continuous replacement of their
asset and also they have started paying dividend from this year which is
a good sign for the shareholder but will cost the business. So if the company
wants expand capacity or global footprint they will be requiring cash inflow
outside of their internal business operation though the CFO and free cash flow
is good and the company have ample cash in hand but this will again affect the
Dividend payout plan of the company. So the way I see it if they will be able
to increase Profit Margin this ratio will automatically improve and might not
be a cause of concern.

Valuation :-

Before taking an investment decision
we have to check couple of point :-

  1. PE is at 28 hence on the higher
    side and we have no margin of safety.

  2. PEG stands at 0.9 i.e. under one
    which shows there is a ample amount of growth left as the market cap is only

  3. PB ratio is at 2.8 and PS ratio
    is at 1.3 which are really good investment rationale.

  4. EV to EBITDA ratio is at 10.8
    hence a good bargain.

  5. DCB is -ve and mainly due to same
    reason for SSGR though here we are interested in CFO instead of PAT but as the
    company is good at collecting cash so both are having the same explanation. We
    have to have a Hawk eye on NPM and Sales CAGR.

Any help in this stock will be very helpful for me as I am relatively new in this domain. So if anybody has any information please share your view in this stock.

many thanks,



Please put up a disclosure on whether you hold shares in the company or not as is the normal practice at VP.


Sorry Hitesh,

I didn’t know about this policy.

Dis closer :- I do not hold any position yet in this company bust very interested to take position very soon. If any one has any information in this company kindly share. I will also update on the business in this very chain as I was waiting for the reply from the management.

Not able to find Spenta Buyers’ list anywhere. Important to know which market/brands they are catering to…before taking a call

In which parameter this is better than “Virat Industries”, please let us know.

Hi Brajesh,
I too have not been able to find out the buyer list but when I call them up they has giving me the below idea:-

  1. Spenta is supplying socks as white label to most of the retailers in the country and boasts of customers like Reliance retail, Future group, AB etc.
  2. It claimed itself to be the leader in Export of white level socks via large trading houses who are selling to big brands internationally.
  3. Recently they are trying to develop their own brand as Spenta Socks which they have got a very good response.

Hi Chaitanyak,

The main parameter I judge is cash floe and profit margin and in both parameter Virat Ind stand way lower than Spenta. Also I haven’t got any good response from the management of Virat.

My concern is not with Virat but with the other major player in the industry like Mustang, Renfro etc. I am doing an analysis on them as a part of my business and competitor analysis. Will updated more as soon as I finished.

If you guys can gather any information on the same [in the buyer range as well as with the competitor]it will be very helpful for me.

N.B. :- I have not buy Spenta Int yet as my analysis is not complete but the financial of a company is the first line of checking for me and undoubtedly Spenta Int has very lucrative financial as I have described above.

Here is the comparison between the 2 players.

In comparison between the two clearly Virat Industries is having upper hand.
All the parameters such as Profit Margins or ROE ratios, Debt front, Dividend history Virat industries reports better figures. But In my opinion both are fully priced in at current market price.

Recently both gave nearly 100% returns because of following reason.
Spenta got attention by aceinvestortrader blogger where as Virat got fame by smallcapvaluefind blogger.

Virat : Virat Industries Ltd financial results and price chart - Screener
Spenta : Spenta International Ltd financial results and price chart - Screener

Disclosure: I don’t hold any investment in these scrips, i am a safety investor i will never buy stocks of 25+ PE multiples generally.


i think what could be added to your assessment is that virat has not grown too much in last 3-4 yrs whereas spenta has…also spenta has a much larger capacity than virat. Last but extremely important is the cash generated ability of spenta which is far superior than that of virat… i had evaluated both stocks, met the management, talked to factory employees and its customers and eventually decided in favor of spenta… infact if you do the last bit virat, does not stand a chance.therefore, I invested in spenta a few quarters back but have booked out fully due to this bse circular of price caps…else my personal fav was spenta…

disc: as of now not invested in either.

Hi Krishnendu,

Good Piece of analysis. Having spoken to the management, Spenta is mostly dependent on a handful of big brands like Nike and Puma. The own brand name is only used in case of idle capacity. The sales growth has been there, but till the company comes out of in full strength on its own brand name, do not know how would the sales grow and till what level.

Disclosure- Invested in the company.

good result by spenta

Very good note.
Stock is hovering at almost same price when you opened thread in Dec 2016.
Whats the status of their growth and expanding supply to local retailers. looking at sudden love for consumption theory market is discovering such stocks.
Result is tomorrow and expected to be in line with other B2B and B2C companies in this space.
Reduction in tax slab for small companies will also boost its profitability going forward.

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