Kamadgiri Synthetics Ltd. (Rs.52-): Promoted by Mr. Pradeep Kumar Goenka, this Mumbai based Textile Company has its Plant in Umergaon with most modern 120 looms like; Somet, Sulzer, Dornier etc. with production capacity of nearly 0.6 mn meters. Company owns the brand 'True Value'. Now, company is undergoing major restructuring, acquisition, expansion plans etc.

Under first scheme of restructuring, Stripes Apparels (A Pantaloon Group Company which is having capacity of manufacturing approx. 1 lakh garment pieces per month) will be merged with Kamadgiri. Kamadgiri has unlisted group company called 'Innovative Fabrics' having turnover of approx. 27 crs. Innovative Fabrics has already been merged with Stripe Apparels. Now, in near future, Stripe Apparels will be merged with KSL and for the same, KSL will allot Equity Shares to Pantaloon Inds. Thus, Pantaloon Inds. will be holding Equity Stake in KSL. Perhaps, Pantaloon Group is exiting manufacturing operations. Group has another 2 garment factories. In next few months, these 2 garment factories will be bought out by KSL as lump sale. After that, KSL will have production capacity of more than 3 lakh garment pieces per month. These garment factories are supplying garments mainly to Pantaloon Retail and also doing some business for Raymond as well. Hence, KSL is getting ready platform in garment business under which it will have own garment making facilities and as well as assured market.

Another big trigger is Retail foray. For this purpose, company is opening retail showrooms under the name 'BANGKOK FASHION'. It is a new concept in India wherein, customers will have the choice to buy the fabrics or get shirts, trousers, suits, tailor-made within 24 hours. This concept is very popular in Thailand, Hong Kong etc. For this also, Pantaloon has tied-up with KSL (store-in-store) concept. Under this scheme, KSL will open retail stores inside Big Bazaar Stores. FIRST RETAIL STORE ALREADY OPENED AT MUMBAI CENTRAL WHERE RESPONSE HAS BEEN VERY GOOD Reputation of Big Bazaar will immediately rub-off on KSL's Bangkok Fashion as well (due to huge footfalls, KSL is confident of attracting large number of customers from day one, without spending any money on publicity). This apart, company will also open some retail stores independently in different shopping malls to attract other customers also. It is learnt that 3 retail show rooms should be operational as early as Dec '07. Company plans to open upto 100 retail show rooms all over India in next 2 years. It is estimated that KSL may achieve topline of 125-150 crs. in 08-09. Thus, company will have its own textile and garment units and retail show rooms.

Valuations: There may be small equity dilution in 2008 as company will need funds to buy out remaining 2 garment units of Pantaloon and for investment in Retail stores. Scrip will be re-rated completely in near future due to following factors:

1) Company will have own garment manufacturing units with capacity of more than 3 lakh pieces per month (nearly 3.6 mn pieces p.a.).

2) These garment units have ready business as already selling to Pantaloon, Raymond etc.

3) Gestation Period in Retail business will be much shorter as its stores inside Big Bazaar will get the customers immediately.

4) Pantaloon Inds. will also be share holder of the company.

Considering extremely high valuations for retail sector wherein even loss making retail chains are quoting at Rs. 80-90, KSL appears extremely cheap. Scrip is lying low due to extremely low promoter profile, so far, small size of the company and investor ignorance. Share price had gone upto Rs 78/ just 2 months ago but fell subsequently due to delay in allotment of shares to Pantaloon. However, now allotment of shares should be finalised in next few weeks.

Share Price can go up by 50% in next few weeks. If, investors have patience to hold for 18-24 months, scrip appears set to provide multibagger gains. Buying strongly recommended.

HEMANT K. GUPTA
Centre for Development of Financial Treasure
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