Cheslind Textiles

Cheslind Textiles-A Least Expensive Alternate to RSWM Ltd BSE 521056; CMP Rs 22.10

-For the past three months the RSWM Limited scrip (the erstwhile Rajasthan Spinning and Weaving Mills) which belongs to the Laxmi Niwas Jhunjhunwala owned Bhilwara group, has been on a tearaway run at the BSE, nearly doubling in value to about Rs 200 per share   -The news backing such a strong up move has been the Rs 7000 crore investment that the Bhilwara Group intends to make in the Power sector. Also, two of the group hydel projects in Himachal's Kulu-Manali district with a combined capacity of nearly 300 MW are coming closer to completion.   -While all this has been happening on the Power scene, LN Jhunjhunwala' s two sons Ravi and Riju Jhunjhunwala have been rapidly consolidating their Cotton Yarn operations, quietly grabbing up the Bangalore based Cheslind Textiles earlier this year with an offer price of Rs 25 per share.   -The Rs 124 crore Cheslind Textiles, located 40 kms from Bangalore City in the misty slopes of Bagalur, TN is a 100 per cent Cotton Yarn EOU with a state of the art manufacturing facility.   -Cheslind made marginal losses of Rs 1.4 crore in FY07, but at Rs 25 per share and a Equity base of Rs 23 crore it fetched a market capitalisation of a mere Rs 58 crore.   -RSWM Ltd through a buy-out of the earlier promoters and a subsequent open offer to the public now holds about 66.46 per cent Equity of the company, thereby making it a subsidiary of RSWM Limited. Tamil Nadu Industries Development Corporation continues to own 8.93 per cent of Cheslind, leaving a mere 24 per cent Equity with the public.   -It is only a matter of time before Cheslind Textiles gets merged with RSWM through a share swap, which may benefit the promoters in raising their Equity stake in RSWM Ltd.   -At the CMP of Rs 22, Cheslind Textiles now fetches a market cap of roughly Rs 46 crore. The Land held by Cheslind at Bagalur, having been acquired in the year 1992, that is 15 years ago alone should now be worth atleast Rs 50 crore.   -Thus a modern textile plant with machines supplied by Rieter, Switzerland, Suessen, Schlaforst and Volkman Compact of Germany, Murata of Japan and Gemini of Italy comes virtually free of cost.   -The Unit is Equipped to produce a variety of yarns ranging from 24 counts to 110 counts, using up to 5 yarns from Pima, US, Egyptian Giza, West African, Chinese and Indian Cotton.   -The Exports go to such demanding nations like Switzerland, Italy, Germany, Mauritius, Turkey, Korea, Hong Kong and Japan.   -Purely as a value play, Cheslind Textiles leaves a marginal downside while allowing investors to play on the success of RSWM Limited without the additional risks.   -The question is not "if" a merger between the two entities (Cheslind and RSWM Ltd) will take place, but "when". And the Bhilwara group would realise sooner than later that it is better to carry the manufacturing operations under one roof than doffing up multiple hats.   (Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. )

courtesy: vishnu shanbhag