Spenta International – A Cash Rich Niche Textile Company !!!

Spenta10 spenta9 spenta8 Spenta 7

Background: Textiles is a very booming sector with many interesting hosiery and Apparels plays, though most of the companies are plagued with high debt and pathetic cash flow. Therefore, we should always be on the lookout for companies that are niche plays with good, strong, ethical and ideally conservative managements with strong financial profile. Spenta International is one such budding company.

The Company: Textiles companies are known to be cash guzzling companies with huge piled-on debt and cash flow problem. Therefore, in this space if you get a cash rich company backed by a strong and ethical but conservative management and in a niche space, it would ideally be a non-brainer investment. Further, if it also is into a branded space, it would add to the sheen of the company. Spenta International (Spenta Socks), is one such cash rich company which is into manufacturing of “Socks” and is known for its high quality socks and has therefore, not lost any customer in last so many years. Company has a manufacturing facility in Palghar on a Five acre (company owned) land parcel. Spenta is supplying socks as white label to most of the retailers in the country and boasts of customers like Reliance retail, Future group, AB etc. Since everything is sourced and supplied locally there is virtually no risk of currency fluctuations, though company is exploring options to export its products which can improve its OPM significantly. Furthermore, unlike other textile companies the company does not experience any Chinese threat which is a significant plus. The company has also started improving its Operating Margins in the recent past. Most importantly company has also launched its own Brand of “Spenta Socks” a few quarters back which is getting good reception in the markets and it has been selling its branded socks on all the major e-tailer platforms. The company is planning to emphasize very strongly on promoting its own brand in coming years and has experienced “very good” reception of their product thus far. At the moment the stock is available only regionally (w.r.t physical stores) but they plan to launch it nationwide in coming future. Realizing the potential of the products and traction that Spenta has started seeing across the industry, there has been a conscious and significant change in the attitude of management towards shareholder wealth creation. Therefore, as a first step last year, they had a share buyback by which they reduced their outstanding shares. Also, this year they announced their maiden dividend and the promoters have clarified that in future they will consistently pay dividends. Furthermore, its important to note that the company has a very small equity base with high promoter holding. In the last couple of years the promoter holding has increased from around 52.9% to around 64% (with no pledge) out of which 4% was bought in the last month from open markets at a price even as high as early 90s. Clearly promoters are seeing much better days on back of growing business and incredible acceptance of its newly launched brand of spenta Socks..

spenta 5 spenta 4 spenta 2 Spenta 1

Valuations: The current market cap of company is just around 32 cr and is available at around 9 times FY16 PE whereas other branded apparel companies are trading at sky high valuations. The company has a cash of around 6.25cr which is around 20% of its market cap alone. The company has superb cash flows and has now started paying liberal dividends and as noted earlier the management has stated that they will “never” discontinue dividends. Spenta has reduced its debt by half to around just 0.75cr in last two years. The company intends to become debt free by this year. The company’s own 5 acre land out of which the present factory occupies around 2.5cr and therefore, the company has enough land for expansion as and when required. The company delivered a Q1FY16 EPS of 3.38 vs 4.53 delivered in the entire FY15. The Operating profits also more than doubled YoY with revenues growing to 10.17cr from 8.24cr YoY. Spenta is expecting 15-20% topline grown for the next 2-3 years with improvement on OPM, on back of surging demand from the retailers for supplying white label socks and most promisingly increasing share of its own branded Spenta Socks.

Technicals: The stock is backed by superb technical setup and is close to its all time highs. By the way the stock made this all time highs when the markets were crashing and going from one low to another. After a bit of consolidation the stock has started to make another move and is now slated to go much higher in short to long term.

The Textile companies are coming out of their shell after a multi-decade hiatus. Here we have a cash rich, dividend paying and niche textile company which is on cusp of explosive growth and has tremendous cash flows with low equity base. The company is backed by a young and energetic management that is evolving with time. The launch of their own brand and the acceptance that it has shown is a clear indication of the bright days that the stock can see. The stock is low equity and thus volumes are low so its important that if one decides to go for it, they keep it for the long haul and most importantly those who decide to be part of it, should try their products too…

God Bless !!!


Disclaimer: It is safe to assume that I may have some vested interests in the stock. Also, the above stock view is my personal view in individual capacity. For rest, please look at the About page.

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209 Responses to Spenta International – A Cash Rich Niche Textile Company !!!

  1. sang says:

    Ultra micro cap company of just market cap around 30 crores very interesting will study it tomorrow. Looks like one of the boring business. But as the legend says wealth is created in the boring business.
    Thank you for the idea ace bro

  2. Great pick, Ace!🙂 ‘At the moment the stocks are available..’ I think I spotted a typo there.

  3. hafizul09 says:

    Hello Ace ji—Thanks for the idea—looks like its a good company , however what is their future plan? if the company plans for growth in near future then it might give multi fold returns with the OPM is also improving with exports——-will ask one question though——from packaging sector I am checking two companies 1. Kanpur Plastipacks 2. Emmbi Industries——which one looks better in your honest opinion—Thanks.

    • they are looking for atlest 15-20% CAGR with improving OPM for next 2-3 yrs atleast as they are seeing great demand for the white label and also for their own branded products.will add this to stock story as well.

      • hafizul09 says:

        20% CAGR with improved margin will contribute hugely to the bottom line and it should give multi fold return —–Now only concerns remains is will we get the share? last 5 day avg. volume is around 500-900, so anyone looking to add 500 shares might have to add for several days—–however on last Friday volume gone up to 2,000 which is good sign—lets see if it can generate some good volume then it will be great———Thanks again for finding this small company which has bright potential to become medium/big!!!!!!!

  4. SP says:

    Thank u sir for the gem.. now i hope the market gives us the opportunity to buy it on monday🙂

  5. Pratul Lobo says:

    Please give your opinion on Duke offshore. Mgmt has recently given dividends and received Annual Maintenance Contract from Defence Ministry

  6. Rahul says:

    Nice find sir but have you noticed they using American polo as they logo on men sports socks? Are they stealing the brand logo which could get them sued.

    How big is the fake socks market industry?

    Secondly the management has been promising dividends since 2009, whats make you confident this time?

    • what i have noticed is the sad mindset of indian investors to brand every small cap management as chor without researching or anything. American polo is one of their customers – have you read the stock story where i mentioned “white label” stocks. This is what it means, it supplies socks to many branded apparel companies so its perfectly legal for them to display that photograph on their website. and NO the management has not been promising dividends since 2009, let’s not put imaginary things on public form. What makes me confident of dividends in future is that i would like to trust what management had to tell me. Go and look at their factory and talk to their employees to know more about management rather than accusing a budding entrepreneur with your imagination.

  7. Jp says:

    Wishing you all to get benefit from this stock as usual…!! Tnx for this recommendation Mr. Ace..!!

  8. Tamilvanan says:

    Thanks for your new pick ace….

  9. Nikhil says:

    I found this blog very recently and now following all your updates regularly. Thanks for suggesting this new story. Surely looks promising. Thanks once once again for the great work by helping ppl to create wealth.


  10. naveenagp81 says:

    Thanx for new pick……
    American polo is one of their customers means socks manufacture by spenta and distributed by american polo?

  11. SAY says:

    Ace ji – a minor observation, under annexure to auditor’s report, disputed statutory obligation of 48+ lacs is o/s. Any further insight on this ?

  12. Sampat says:

    Thanks ACE for the new pick.
    Though the last 5 years’ growth isn’t too exciting, but investment decisions are best made keeping in mind future growth and not hindsight.


  13. Raj says:

    Thanks Ace long time since u have up with something .god bless raj

  14. Suneetha says:

    Thank you very much for this New Gem !

  15. AP says:

    Just looked at sept SHP of Deccan gold, promoter stake shows zero.. Not sure if that’s a reporting error

  16. Indus Boy says:

    Thanks for the new find Ace bro.

    A quick look at their FY 2015 results shows a slight decline in sales when compared to 2014. Were you able to understand the reasons for this?


    • last year their focus was their own brand sale and so the white label volume took a hit, although this was done deliberately company quickly realized that they cannot sacrifice volume… they are rectifying it now and hence they are now seeing around 20% growth this year….furthermore, with expectation of their own brand gaining further expectations their OPM should improve.

  17. healingtouch says:


    I have talk with company secretarty Mr. shetty last month in which I asked that company is saying at their site they are largest exporters of socks from India, but in balance sheet they are not showing any dollar earings, in reply he said that they are earnings in rupees as they are selling to large trading houses who are selling to big brands internationally, so their products are going large brands international through trading houses, now they may explore exporting directly

  18. Puru says:

    Another gem!!!

  19. shreeux says:

    Hi Ace,

    Your view on Repro India?

  20. Ramesh says:

    Sir, cud u plz say ur view regarding Deccan gold

  21. Abey says:

    Sir I am holding sharp, what is the present status, is it good to hold, advice me

  22. ace – how do u think of transportation corporation of india – u think demerger cld create value with gst, fuel price, ecoomerce and improvement in economy could be triggers

  23. Vineeth Nair says:

    Dear sir, I’m sitting on about 30% losses in Jain irrigation, motherson sumi, OBC… Could you advice me a wise stock option wherein I would be able to make for all my losses by putting in fresh capital. Also advice me if I need to sell these loss making stocks and invest the same in any other stocks? Your guidance will be highly appreciated.

  24. Akshay says:

    Will start researching about the company…thanq🙂

  25. A Goyal says:

    Another stock in the textile space, Riba Textiles, seems interesting as the company is planning to increase it’s production and that should increase their revenues and profit. Promoter shareholding is also increasing. Debt is low. What do you say about this stock?

  26. any view on prima plast?

  27. Akshay says:

    Vidhi made a new high of 72 today…Cheers!!

  28. cp says:

    Sir how is fairdeal filament

  29. zubin says:

    It is time to average in Deccan gold or should be wait for some more time. currently its corrected 50% (after considering rights @ 17 ). I am convinced about the business but also understand that the journey can be loong.

    Thank you for sharing such ideas …… you are proving great service to retailers who seldom make such good money. as in this side (invested in Cupid , Vidhi , V2 etc:)

    Thanks again.

  30. Suneetha says:

    Monthly Chart of Low hanging Fruit AIMCO Looking just as Waterbase did few months back !
    The only seemingly concern is , Does economic problems in Brazil affect the performance of the company? I feel like accumulating the stock ! Your suggestion plz ! Thanks !

  31. Ra Da says:

    Ace bro, do you see any impact of Trans Pacific partnership agreement on Ambika cotton and Spenta international as well? According to an online report it has been mentioned that companies with textile and apparel exports could face potential risk from Vietnam..Your thoughts.

    • no, dont think it as a problem…. a few years back, taiwan, Indonesia and malaysia was threatening india’s software industry and now they are nowhere to be seen. Also, i have read a lot of interesting articles suggesting how indian companies would actually benefit.

  32. MTA says:

    Hi ace,
    googled your blog (not sure if i googled it right), could not find ur views on godavari drugs.

    thank you

  33. CA Ravi Khanal says:

    Ace Sir .. need view on DHP .. holding since your recommendation with patience.
    Any updates in your view sir ?

  34. Hemanth says:

    Dear Ace,

    I couldn’t able to buy today as it was at UC when opened. Till what price we can buy?
    Can we buy Rajoo and Riba Textiles currently? Is the fundamentals are still intact.
    Any other stocks from your previous recommendation.

    Thanks a lot for your hard work and guidance…

  35. mesh says:

    Once again superb pick .technicals looks good as co goes 52 w high ……..freeez not likely to open upto 150 (assumption made due low liquidity) ….till that time 2 nd qtly results …ohh god .
    only superb timing……….timing of posting stock is again superb….

  36. naveenagp81 says:


    i think spenta will fly like orient bewerag . both are low share capital !

  37. naveenagp81 says:

    Your view on Orient beverage is same as previous……

  38. acefollower says:

    Why circuit limit is at 3.83% in spenta today when general circuit limits are 2%, 5%, 10% or 20%.

  39. Panyam on a roll, Ace🙂

  40. srinathnitb says:

    Hello Ace. Your views on SKS microfinance results? Can I make a new entry now into the stock?

  41. A Goyal says:

    Any views on Rane Brake Linings. Valuation seem to be good. Demand for products should increase in future as number of total vehicles in the country is increasing and one needs to replace brake parts after periodic use.

  42. Mayur says:

    Sir, i don’t think circuit is going to open before 150 considerig so much low volumes…lets wait and watch anything can happen🙂

  43. Jayprakash says:

    Do you track Enkei Wheels? mkt leader in aluminum alloy 2&4 wheels and had a cash EPS of Rs. 20.68

  44. Shankar says:

    Ace ji

    Requesting your views on Umang Dairies. Thanks

  45. Vinod says:

    sir, ur views on Lawreshwar polymers ?

  46. umesh says:

    hi ace your view on xchanging solutions for long term

  47. umesh says:

    hi ace are you tracking capital trust and nirvikara papers

  48. Vinay says:

    Hi Ace,

    Any view on HCL infosystems. I read somewhere, that they are hiving off the loss making division and will try to turnaround to profitability. Last week RK damani’s investment arm bought 11lac shares in it.

    Thanks and Regards,

  49. Ace, your take on ANG Industries?

  50. SP says:

    Congratulations sir.. all ur picks firing.. interestingly.. they take turns but eventually when u look back each stock has its day.. panyam, associated stone, gujarat themis.. god bless u and all of us..🙂

  51. mesh says:

    Try ur luck upto 30 oct price will remain same…
    chance for those who do complain every time that we are not getting shares …..
    still 7 days left……..
    god gift ( by ACE sir)
    after that upmove till Rs.140/-….(as per new rule)& so on on on ….
    superb superb
    try try try

    • you are the only one who figured out this…yes the price would remain the same. one reader had asked in the morning why the circuit was just above 3%…different than normal circuit filters. as you rightly pointed out now it would remain the same because from Oct the bse only listed shares have come in a bse filter system which decides weekly monthly limits also apart from daily limits. hope we all as investors are more in sync with rules and regulations governing our investing lives….

  52. ketan says:

    Thanks for the Spenta recommendation. i already bought some shares in the last week on Thursday. but could not add more now.
    Sir, What is your outlook on MRSS? (Majestic research)

  53. Aluwalia says:

    How is Umang diaries business sir?

  54. Manthan says:

    Your views on Samtex Fashions, Amarjothi Spinning Mills, Sterling tools, Sambandam Spinning Mills and Sarla Performance Fibers and Sri Lakshmi Saraswathi Textiles (Arni) and Shiva Texyarn?

  55. charlieberta says:

    Dear Ace, your views on Alpa Labs!!

  56. A Goyal says:

    Any views on Shekhawati Poly Yarn. Stock seems to be undervalued.

  57. Vinod says:

    ur views on Danlaw Tecnologies Sir

  58. Parag says:

    I am invested in Sahyadri and I know you also like it and had recommended it.
    Looks like Harimudra Securities Pvt Ltd and Mahesh Kumar Singhi have sold their stake as per Sept SHP. Hope all is well. Do you have any further insights?

  59. Panyam – immensely strong🙂

  60. Parag says:

    Great result by Mangalam – Again a great pick of yours.

  61. Vishwanath says:

    Ace, your view on Mangalam Drug result?

  62. VT says:

    Sir, what is ur take on DIC India.. Disc: I googled the blog.. but saw no opinion of urs on it..

  63. manish says:

    Sir i have invested in merck at 759 .pls share ur views on merck.

  64. SAY says:

    Ace ji – Mangalam rocks.
    Finance cost heads south, QoQ and YTD basis
    PBT more than doubled on qoq, humongous jump on YTD (half yearly) basis
    EPS leaped substantially on YTD basis
    LT borrowings are down by 15/16cr
    Trade receivables has gone down almost by 21cr
    With this kind of eps if market values it in the range of 20 to 30 times then the stock can command price in the range of 221.6 to 332.4
    Of course, next trigger’s outcome will be closely watched to price it 30 times.

  65. pavans13 says:

    Dear Ace, Hope you are doing great! Spectacular results by our company Mangalam Drugs.
    Long way to go though. Thank you again for the stock story….Cheers:)

  66. Sampat says:

    ACE, can we expect Wanbury to repeat 1st quarter’s spectacular performance?

  67. manish says:

    Sir , why dont u recommend stocks during market hours.

  68. SAY says:

    Aceji – new accounting standard, Ind-AS, any view you hold on this ?

  69. prem says:

    Aap ko aur aapke parivar ko vijyadashmi ki shubhkamnaye.🙂 hamare viswaas ko bal dene ke liye tahe dil se dhanyawad🙂

  70. RAVI says:

    Happy Dussehra sir ji………Let the devil die and Dharma win……let us follow dharma with devotion. God bless all and wishing all of you Happy Vijayadashmi.

  71. Sachin says:

    Happy Dussehra to you and all – sacbee

  72. Ace, your views on Virat Industries?

  73. hafizul09 says:

    Hello Ace ji—–Subha Vijayadashmi!!!!!!!! God Bless U and ur family———-sorry to disturb u regarding one of ur old picks—–its V2 Retail—I was convinced on the company and Mr. Agarwal’s interesting journey and his commitment to the business——BUT did not enter for the case going on in the court as that is uncertain and not sure which way the verdict will go that’s why——–and also the 118cr. claims by Income tax department(its very tough to fight with IT dept in my opinion)—–could you please comment on these two issues because seeing the tremendous business improvements of the company, growth potential of organized retail sector(24%) and company in near future , reduction of long term debt by 21 cr.(from 37 to 16)—these are very lucrative improvements in the company’s business , operations and future potential to invest in this company——-so if those two issues are not threatening then I will enter this company with peace of mind——-Thanks in advance!!!!!!!!

    • as you should be knowing i dont do portfolio management. also these issues are not new and is known and more importantly discussed numerous times last year in the blog. Please refer that and decide for yourself.

      • hafizul09 says:

        Yeah, agree—-by the way looks like my wish will get fulfilled and the target is visible—–the wish is to see one post by you with heading “Mangalam 20 times in XXX Years”–where XXX is 2-3 years——with consistently improving results, good growth on both top and bottom line , with new approvals coming by Dec 2015, with debt reduction and god effort from management team led by our MD Mr. Sri Dhooot ji, the stock price should reach 800(which is 20 times of your recommended price of 40) within 2 years……….Thanks again for finding this great company—-God Bless U!!!!!!!

  74. afzal says:

    sir what is your view on kellton tech they are coming with qip for fund rasing and equity dilution

  75. mesh says:

    sir ur valuable comment required on JAUSS POLYMERS LTD (BSE) 4.63 CR equity last year EPS Rs 3.98 & now on 1qtr Eps Rs.2.29 ,promoters have increased from 33.56 % to 52.07 % ..this growth will continue or this is a cyclical business…..cmp mkt price is around 21 ……
    i don’t have a deep knowledge then u….so please
    thanks ….

  76. Tushar says:

    Ace Bro.. whats your take on Nucleus Software. Debt free.. sitting on 335 crores cash.. recent tie up with microsoft.

  77. Dev Kedia says:

    Is this the right time to enter in spenta at the 52 week highs. plz suggest.

  78. Ram says:

    When is the next recommendation is coming out.

  79. i have already shared my thoughts on this … if you googlethe comments on this blog you will see why i prefer spenta over virat

  80. Krish says:


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