🧠 At a Glance

Vardhman Textiles is one of India’s largest integrated yarn and fabric manufacturers with global reach. But while the looms are running, the stock seems stuck in slow motion. With 5-year sales growth crawling at 8% CAGR and profit growth trending sideways, the question is — are we looking at a value buy or just value trapped in cotton bales?

🧵 1. Business Model – Master Spinner of Many Threads

• Vardhman operates across the entire textile value chain:
  • Yarn (cotton, blended, synthetic)
  • Fabrics (woven, dyed, processed)
  • Acrylic fiber (through JV with Japan’s Tohoku)
  • Garments (recent foray)
• Export footprint in 75 countries.
• Huge scale:
  • Over 1.2 million spindles
  • ~1,500+ tonnes/day yarn capacity
  • One of India’s top 3 woven fabric manufacturers.

🧠 A legacy player with integration, efficiency, and presence. But can you weave those into growth?

📈 2. Financials – Strong Fabric, Weak Fashion

📊 5-Year Snapshot (₹ in Cr)

• Sales CAGR (FY21–25): 8%
• Profit CAGR: 9%
• Peak FY22 was commodity heaven — high yarn prices + global demand.
• Since then? Flat is the new up.

🧨 From ₹1,551 Cr net profit in FY22 → ₹887 Cr in FY25. Textile stocks were the life of the FY22 party. Now they’re cleaning up after it.

🧾 3. What’s Strong in the Thread Count

✅ Integrated Operations = Margin Buffer
Cotton gins to spindles to looms — Vardhman controls it all. This lowers dependency on vendors and saves working capital.

✅ Global Presence
Exports to 75 countries — not just China-dependence like Trident or Welspun.

✅ Debt Reduction
Total borrowings down from ₹2,132 Cr (FY21) → ₹1,239 Cr (FY25). D/E now < 0.15.

✅ Cash Flow Positive
Despite the profit dip, FY25 had ₹1,644 Cr operating cash flow — more than net profit. That’s not common in textiles.

🧵 4. Snags in the Weave

❌ Flatline Growth
5-Year Sales CAGR: 8%. For context, Trident’s is higher. KPR Mill? 20%+. Vardhman is still on the slow loom.

❌ Working Capital Hog
Working capital cycle now 199 days. That’s like tying up money for two-thirds of a year.

❌ Volatile Margins
OPM dropped from 24% (FY22) to 10–13% in FY24–25. Commodity-linked businesses = margin lottery.

❌ Low Dividend Payout
Despite ₹887 Cr PAT in FY25, dividend payout is just 16%. Compare that to FY22’s 62%.

🧵 5. Peer Comparison – The Fabric Showdown

🧠 Verdict: Vardhman is cheaper (P/E < 15) with decent quality — but doesn’t excite like KPR or Trident.

🧠 6. Management & Shareholding – The House of Oswal

• Promoter Holding: 64.22% (stable and slightly increasing)
• CEO: S.P. Oswal, part of the promoter family that has run the group for decades.
• FIIs slowly exiting: From 7.5% (Jun ’22) → 5.75% (Mar ’25)
• DIIs remain steady at ~16.7%

👔 Family-run, conservative management style. Good for debt control, less so for aggressive expansion.

💸 7. Valuation – Is the Loom Undervalued?

• FY25 EPS: ₹30.54
• CMP: ₹455
• P/E: 14.9x
• Book Value: ₹342 → P/BV = 1.3x

🧮 EduInvesting Fair Value Estimate

🎯 FV Range: ₹366 – ₹576

At ₹455, it’s reasonably valued — but not dirt cheap unless you believe in a cotton revival or policy boost (like PLI schemes).

🧶 Final Take: Is This a Hidden Multibagger or Boring Value Trap?

Vardhman is the safe, sober elder of the textile pack — strong balance sheet, no debt drama, decent cash flow.

But it’s also not growing, not innovating, and not rewarding shareholders (low payout).

So…

If you want a textile compounder with momentum — try KPR Mill.
If you want a deep value dividend payer — maybe wait for Vardhman below ₹400.

For now, it’s spinning more cotton than excitement.

🏷️ Tags: Vardhman Textiles, Cotton stocks India, Yarn manufacturers, Indian textile stocks, Value investing, Oswal Group, EduInvesting Recap

✍️ Written by Prashant | 📅 20 June 2025