Next two years to witness Rs200 cr capex
BBN Bureau
THRISSUR/September 10-2022: Kalyan Silks Trichur Pvt Ltd’s (Kalyan Silks’) net profit more than doubled in the financial year ending March 31, 2022 (FY22) as it has soared from Rs23.1 crore in FY21 to Rs48.7 crore (estimated) in FY22 – representing 111 per cent growth.
During the said period, the operating income improved from Rs734.7 crore to Rs1002.6 crore, an increase of 36.5 per cent. The leading rating agency, ICRA, has upgraded Kalyan Silks’ Rs60 crore cash credit and Rs30 crore term loan by one notch from BBB+ to A- with stable outlook.
“The ratings upgrade reflects the better-than-expected performance of Kalyan Silks in the recent quarters, and the expected steady operational and financial performances over the medium term, backed by its established presence and business diversification measures,” ICRA noted.
Leaving a tough two-year period behind, thanks to the COVID pandemic, Kalyan Silks’ revenue growth is estimated at a strong 30 per cent in the current financial year (FY2023), buttressed by strong sales in the first quarter of FY23 against a weak performance in the corresponding quarter of the preceding fiscal.
ICRA said Kalyan Silks’ operating margins also remained at a steady 12 per cent in the just-concluded financial year, supported by better economies of scale.
“However, with the rising raw material costs and increasing employee and marketing expenses towards new stores, the operating margins are likely to moderate by around 1.5 per cent to 2 per cent in the near term,” the agency noted.
Rs200 cr capex planned
The company is planning to incur a sizeable capital expenditure estimated at around Rs200 crore towards showroom expansion during the next two years.
The Kerala market contributes to more than 90 per cent of Kalyan’s revenues, with 20 out of its 24 apparel showrooms located in the state.
Further, there is significant revenue concentration from the central regions of Kerala, where it contributed to around 50 per cent of its total revenue as of FY2022.
Kalyan Silks has a healthy market position in the apparel retail market in Kerala and certain markets of Tamil Nadu and Karnataka, driven by the strong brand recall of ‘Kalyan Silks’.
Competition
ICRA says that intense competition from organized and unorganized players limits pricing flexibility. “Moreover, Kalyan Silks experiences intense competition from other major organised retailers and unorganised local players, exposing its profitability to limited pricing flexibility and fluctuations in input costs,” it added.
