Vardhman Textiles saw low margin in Q4 due to higher raw cotton prices

Vardhman Textiles, in its Q4 results has shown decline in net profit by 41.55% to Rs. 90.20 crore in the quarter ended March 2015 as against Rs. 154.32 crore during the previous quarter ended March 2014. Sales increased 9.79% to Rs. 1407.79 crore in the quarter ended March 2015 as against Rs. 1282.21 crore during the previous quarter ended March 2014.

For the full year,net profit has declined 44.91% to Rs. 359.11 crore in the year ended March 2015 as against Rs. 651.88 crore during the previous year ended March 2014. While sales increased 11.04% to Rs. 5742.03 crore in the year ended March 2015 as against Rs. 5171.31 crore during the previous year ended March 2014.

Neeraj Jain, Joint Managing Director, Vardhman Textiles, said that total debt as on March 31 was close to about Rs. 2000 crore. The majority of the debt is covered under textile upgradation plan which is subsidised debt.

According to the company as there were not much addition of the capacity in FY15, hence there is not be much improvement in the topline margins

Talking about the reason for high income but low margins, Neeraj Jain said that there are two, three factors. One, the new capacities have come last year where the numbers have increased and the overall volume has increased. The margins have come down again for one or two specific reasons.

One, last year they could cover the quarter, FY13-14 at very reasonable prices and as a result the margins are better. Whereas this year, there was a reversal so the quarter during, in the peak season was at much higher prices which later on came down and as a result the prices got adjusted to that. So, anyone who had the stocks of cotton, this was a disadvantage too.

This year, there has been a change in the depreciation method because of the change in the Act. So, the depreciation required to be provided is much higher than the last year’s figure, so almost Rs 150-175 crore is the impact of that. So, these are the two major reasons for drop in the margins.

However, Jain is confident to improve number in FY16, as it hopes that the finance cost will be lesser than Rs. 29 crore as there were not much expansions and earnings and whatever earnings they have will go towards payment of the loans.