NOT A BUY RECOMMENDATION
Why I bought Alok Industries?
The following information is taken from AR 2019 of Alok and AR2020 of Reliance Industries:
1)RIL (RIL and JM Financial ARC) bought Alok Industries in March, 2019 based on Alok strength as an integrated textile company.
2) Alok debt was 30000 crores and lenders took 85% haircut and settled for 5050 crores.
3) RIL paid 250 crore for 37.7% equity (83.33 crore shares at ₹3) and another 250 crore for 9% OCPC at ₹1 face value. And gave garantee for the remaining 4550 crore.
4)Alok will not be delisted within next 5 years.
5) When RIL took over Alok, the following business verticles were existed- Spinning- Embroidery- Terry towel- Weaving - Polyester yarn- Textile processing - Garments - Hemming - Home textile.
RIL added PPE kits and N95 mask only in 2020.
6) Alok factories are at a)Saily- Silvasa (spinning, polyester yarn, garments,and Home textile).b) Mahape- Navi Mumbai (Embroidery). c) Vasona- Silvasa (Embroidery), d) Balitha-Valsad (Terry towel, textile proccesing and weaving), e)Dadra-Haveli (Weaving), f) Bhiwandi (Weaving), g) Rakholi(polyester yarn, hemming and garments), h)Morai-Vapi (Garments), I) Morai- Pardi (Garments and Home textile) and j)Pawane-Navi Mumbai (textile processing).
7)Alok has marketing office at a) Dubai b)Sri Lanka c)British Virgin Islands d)USA e)Bangladesh f)Czech Republic.
8)Alok subsidiaries: a) Alok infrastructure Ltd. b) Alok International Inc, New York, c) Alok International, Dubai, d) Alok Singapore PTE Ltd e) Alok worldwide Ltd, British Virgin Island and Alok has step down subsidiaries f)Alok Industrial International, British Virgin Islands, g)Graham Alok International ktd British Virgin Islands, h) Milega a s. ,Czech Republic and Alok has two joint ventures a) New City of Bombay Manufacturer Mills ltd.b) Aurangabad Textile and Apparel Parks,Ltd.
9) Alok Revenue share in 2019- 55% (polyester yarn), 14.76% (sheting), 12.32% (woven textile), 9.72% (cotton yarn), 3.36% (knitting), 3.14% (Terry towel) and 1.52% garments). Kindly note here that Alok is not a competitor in apparel and knitting as it's 55%revenue comes from polyester yarn and PTA and MEG are main raw materials which Alok used to buy. Now RIL is sourcing these PTA (RIL capacity is 4.9 MMTA and is ranked 4th global rank) and MEG (RIL capacity is 1.5 MMTA and is ranked 8th global rank) in house from its own production.
10)Alok has following certifications a)ISO 9001:2015 (QMS), b)ISO 14001:2015 (EMS),c)OHSAS 18001:2007 (Integrated manufacturing), d)SA 8000:2014 (Social Accountability), e) GOTS: Global Organic Textile Stand, f) OCS: Organic Content Standard g) Fair Trade - FIOCERT- Fair Trade Standard for Fibre Crops for Small Producers Organisations, h) OEKO- Tex Standard - Product Class I and II. And secured several times awards from TEXPROCIL and SRTEPC for many years.
11) World class clientele of Alok includes: Adidas, NABL, Next Retail Ltd, TESCO, Target, C&A, Marks and Spencers, George, CAP, ANN, TAYLOR, KOHLs, Walmart, TC Penny etc ,
12) Looking to the urgent requirement and increasing demand RIL converted one full factory for PPE kit and NOT Mask. The profit margin is 40% of production cost if sold in India and will this profit margin will be 4x if exported.
13) The world demand for PPE kits and N95 mask is increasing at CAGR of 7.8% and this segment is growing to reach 60 billion US dollars by 2025. WHO estimated 89 million medical masks per month for COVID 19 alone.
14) Now COVID 19 spread to 213 countries and there is ever increasing demand for quality PPE kits and N95 mask (several countries are rejecting Chines PPE kits due to poor quality).
15) Present world business of textile and apparel is 1.9 trillion US dollars and this is expected to reach 2.6 trillion US dollars by 2025 and is growing at CAGR of 6%.
16) India ranks 3rd in textile export with 6% market share and 6th rank in apparel export with 4% market share.
Conclusion: 1) Without PPE kits and N95 mask, Alok could garner revenue of 24153 crores and net profit of 258 crores (it paid 3513 croreinterest on loan)
2) In next two years time line, Alok revenue may surpass its 2015 revenue and with very little debt all interest out go may turn into net profits.
3) Mukesh Ambani is capable of hiring world class experts and make Alok Industries, into a golden egg laying machine.
4)I shall not listen to any negative mongers statements and keep buying Alok Industries if it comes down and is dead cheap for me.
5) Above is my own research findings, Alok has risen 20x from its low. Fresh buyers, please do your own study (like me) and take your buy or sell decision in Alok.