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Why is sugar king Anil Goel buying into a microcap textile company

MUMBAI: Famed investor Anil Goel, known for his daredevil investments on Indian sugar companies, is making a bold bet in another long forgotten industry – textiles.

Anil Goel, and his spouse Seema Goel, bought shares of one of the largest players in India’s spinning industry during the June quarter. The Goels bought 59,000 additional shares of

Limited during the quarter, the company’s shareholding data showed.

While Anil Goel was an existing shareholder of the company, his spouse made an entry in the stock during the April-June period with the purchase of 162,000 shares. The presence of both reflects the couple’s conviction of the couple in the prospects of the more-than-60-year-old company.

Despite its six-decade-long presence in the Indian spinning industry, Precot is a stock out of the wilderness of India’s capital market. In the past three months, the company’s shares have more than doubled in value, taking its market capitalisation closer to Rs 300 crore.

The company has no ownership of institutional investors, but high networth investors such as Goel are backing it to make it big. Goel isn’t the only famed investor on the shareholders’ list of Precot; it also includes Tejas Trivedi, who shot to fame with his early bet on companies like Nocil.

A Turnaround Story?

Analysts have recently been pointing at the improving prospects of India’s textile industry on the back of the government’s policy support, expectations of a booming export market led by western countries and improving market dynamics back home.

Precot, being one of the largest players in India’s spinning industry, has a large presence in the global export market and could, therefore, be one of the major beneficiaries of the recent upswing in demand, analysts said.

Rating agency

, in a recent note, said it has a stable outlook on Precot’s debt due to the company’s improved operational and financial performance during previous financial year and robust performance of the technical textile division with a higher share of value-added products.

Precot may be on the cusp of a turnaround, as it has used the pandemic year to improve its balance sheet much like larger Indian corporate houses. Precot’s total debt-to-gross cash accruals improved to 4.98 at the end of the previous financial year from 19.24 in 2019-20.

Further, the company reported a turnaround in earnings performance in one of the most difficult years in modern economic history, reporting earnings per share of Rs 27.46 in 2020-21 against minus Rs 13.78 in 2019-20.

What’s ahead?

CARE Rating said Precot has the ability to scale up operations with greater product diversification, and maintain profit before interest, lease, depreciation and amortization (Ebidta) margins of over 15 per cent on a sustained basis.

With global textile demand inching higher, demand for cotton yarn is likely to remain stable or improve going ahead. Further, global cotton prices are expected to remain stable in the coming months, which will reduce risks to Precot’s margins.

The stock currently has a score of 10 on ETPrime’s stock score card powered by Refinitiv. Only 159 of the 4,000 stocks covered by Refinitiv currently have a score of 10, reflecting strong fundamental momentum powering Precot’s stock.

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