Porinju Veliyath recommendation and latest buys are important to track because such stocks become multibaggers in the portfolio.
Porinju Veliyath latest portfolio purchase stock
Porinju Veliyath has made an important addition to his portfolio. The latest stock that he has bought is Century Textiles.
Buy Century Textiles
The important trigger point for Century Textiles is that it is considering demerging the textile business to Aditya Birla Fashion & Retail.
The object of this demerger is to bring the entire textile and fashion business of the Aditya Birla Group in one corporate entity.
The other trigger point for Century Textiles is that the new management led by Kumar Mangalam Birla has taken charge.
The advent of Kumar Mangalam Birla will lead to a restructuring of the businesses of Century Textiles.
Century earns nearly 8.6 per cent of its total revenues (about Rs 1,817 crore) from the fabrics and denim business.
Aditya Birla Fashion & Retail (ABFRL) is also undergoing major restructuring. The fashion business of Aditya Birla Nuvo – comprising Madura Garments – was merged with ABRFL.
This merger has made Aditya Birla Fashion & Retail the largest fashion retail player, with consolidated revenues of Rs 12,000 crore.
Porinju Veliyath Latest Portfolio
Analysts said Century Textiles’ financial metrics have declined, mainly due to its high debt, which shot up from Rs 2,621 crore in FY11 to Rs 5,320 crore in FY16. The interest costs have corroded its profit after tax, which fell from Rs 237 crore in FY11 to a loss of Rs 54.5 crore in FY16 (see chart). Besides, due to falling demand and pressure on selling prices of cement, the financial performance of cement units has also suffered. “
Century is facing financial pressure and the only solution is restructuring or outright sale of some businesses.
There are two revenue streams in the textile business. These are cotton fabric and denim. Both units can be integrated with ABFRL’s existing businesses.
Century has a vertically integrated plant at Bharuch for manufacturing cotton fabrics. The cotton division manufactures a wide range of premium textiles and supplies to many international players, including Royale Linen, Ralph Lauren, DKNY, Belk and US Polo.
The merger of Century’s cement division with Aditya Birla Group’s UltraTech has been announced last year.
So, Porinju Veliyath’s purchase and recommendation of Century Textiles is because he expects the Company to announce a restructuring which will improve its financial performance and create multibagger gains for investors.