At a Glance
Raj Rayon Industries manufactures polyester chips, POY (Partially Oriented Yarn), and DTY (Drawn Textured Yarn). It was bankrupt and shut till FY21. Now it’s bouncing back — from ₹0 sales to ₹849 Cr in FY25. ROE has turned positive, promoter holding is 94%, and shareholders are piling in. But does the story have threads… or holes?
1. 🧶 WTF Do They Even Do?
Let’s get textile-techy:
- Product line: Polyester Chips, POY & DTY
- End usage: These are raw materials used in textiles, garments, home furnishings
- Business model: B2B – sells to textile processors and manufacturers
- Part of SVG Group (unclear strength, mostly promoter-level control)
Operations were halted for years. From FY20 to FY22, they had negligible revenue. But post-2022, it’s been a full-blown revival:
- FY22: ₹0 revenue
- FY23: ₹137 Cr
- FY24: ₹745 Cr
- FY25: ₹849 Cr
That’s a Cinderella recovery… or the setup to a Netflix scam doc.
2. 💰 Financials – From Dust to Polyester
| Year | Sales | Net Profit | ROE | ROCE |
|---|---|---|---|---|
| FY22 | ₹0 | ₹641 Cr (extraordinary gain) | — | — |
| FY23 | ₹137 Cr | –₹12 Cr | – | –7% |
| FY24 | ₹745 Cr | ₹4 Cr | 7% | 7% |
| FY25 | ₹849 Cr | ₹14 Cr | 12% | 6.8% |
Let’s not pretend — the FY22 “profit” was likely a writeback or one-time gain post-restructuring.
The real performance started in FY23–FY25, where:
- Revenue is growing strong ✅
- Margins are thin 🧵
- Net profit is only ₹14 Cr despite ₹849 Cr sales ❌
- Interest and depreciation eating profits 🍽️
3. 💣 Valuation – Is It Cheap, Meh, or Crack?
| Metric | Value |
|---|---|
| CMP | ₹29.2 |
| EPS (FY25) | ₹0.25 |
| P/E | 117x 😵💫 |
| Book Value | ₹2.20 |
| P/B | 13.3x (CRAZY) |
| Market Cap | ₹1,618 Cr |
| ROE | 12% (decent) |
🧮 Fair Value Range (Based on Fundamentals)
- EPS FY25 = ₹0.25
- Let’s assume 15–25x P/E (reasonable for turnaround textile stock)
- FV = ₹3.75 to ₹6.25
You’re paying ₹29.2 today. That’s 5x–8x over fair.
4. 📈 What’s Cooking – Growth or Just Garnish?
- FY25 Sales Up 14% YoY
- Profit up 3x, but still only ₹14 Cr
- Operating margins stuck at ~3%
- Audit opinion = modified – not clean ✅
- Borrowings up to ₹194 Cr (up from ₹126 Cr in FY23)
- Capex Plan announced (unclear funding)
Basically, they’re trying to grow… but with high debt, low margins, and sketchy accounting.
5. 🧾 Balance Sheet – Better, Not Great
| Year | Debt | Reserves | Net Worth | Assets |
|---|---|---|---|---|
| FY21 | ₹709 Cr | –₹640 Cr | NEGATIVE | ₹155 Cr |
| FY25 | ₹237 Cr | ₹67 Cr | ₹123 Cr | ₹500 Cr |
Clean-up has happened, but leverage still remains high.
Debt-to-equity ≈ 2x
Assets growing, yes. But funded via debt more than internal accruals.
6. 💸 Cash Flow – Sab Number Game Hai
| Year | CFO | Capex | FCF |
|---|---|---|---|
| FY24 | ₹79 Cr | ₹111 Cr | –₹32 Cr |
| FY25 | ₹37 Cr | ₹83 Cr | –₹46 Cr |
Company is burning free cash due to high capex. Expansion may be necessary, but earnings can’t support it yet.
7. 🧷 Ratios – Threadbare Margins
| Metric | FY25 |
|---|---|
| OPM | 3% |
| NPM | 1.65% |
| ROE | 12% |
| ROCE | 6.8% |
| Interest Cover | ~1.4x (thin ice) |
Low-margin commodity business. Even small cost inflation = profit wiped.
8. 📉 P&L Breakdown – The New Normal?
- Sales: ₹849 Cr
- Operating Profit: ₹30 Cr
- Net Profit: ₹14 Cr
- Interest: ₹14 Cr
- Depreciation: ₹12 Cr
If you notice, interest + depreciation = ₹26 Cr, which is ~87% of operating profit. Not sustainable unless margins improve.
9. 🧵 Peer Comparison – Lagging in Profits, Leading in Valuation
| Company | CMP | P/E | OPM | ROE | P/B |
|---|---|---|---|---|---|
| KPR Mill | ₹1,150 | 49x | 19.5% | 17% | 7.9x |
| Trident | ₹30.8 | 42x | 13% | 8.3% | 3.4x |
| Vardhman | ₹498 | 16x | 12.9% | 9.3% | 1.5x |
| Raj Rayon | ₹29.2 | 117x | 3% | 12% | 13.3x 🚨 |
Raj Rayon is the most expensive textile stock on every metric except EPS.
10. 📉 Shareholding – Public? Not Really.
- Promoter Holding: 94.14%
- Public Float: Just ~5.86%
- Retail Shareholders: Up from 20K to 28K+ in 2 years
This is an illiquid stock with tight float and retail FOMO.
Any 5% buyer can move the stock 2x–3x easily.
🧠 EduInvesting Verdict™
“Raj Rayon is what happens when a company comes back from the dead… but charges you 5x for the resurrection ceremony.”
- Yes, they’re selling again. ✅
- Yes, they’ve cleaned their books. ✅
- Yes, they’re profitable. ✅
- But no, they are nowhere close to justifying ₹29/share.
It’s an operator magnet, not an investor stock.
🎯 Fair Value Range: ₹3.75 – ₹6.25
At ₹29, you’re not investing in polyester.
You’re weaving a position in retail speculation.
Tags: Raj Rayon, SVG Group, Textile Revival, Polyester Stocks, Penny to Multibagger, Operator Stocks, NSE Turnaround, Small Cap Rally
✍️ Written by Prashant | 📅 July 3, 2025
