Debt to equity is 2.24, would it be a concern ?

Conference Call      
          Mandhana Industries
Garment manufacturing facility is expected to be completed by October 2011


Mandhana Industries came out with the financial results for the quarter ended June 11 and conducted concall to discuss financial performance and prospects of the company. Mr Mitesh, VP Finance and corporate affairs addressed the call

Highlights of the call are:
The company has reported robust 43% increase in the Net sales at Rs 205.04 crore and 22% jump in the Net Profit at Rs 15.5 crore for the quarter ended June 11. OPM slipped 450 bps to 19% in quarter under review.
Revenues from textile division has increased 49% to Rs 169.99 crore and constituted 79% of the total revenues. Segment margins declined 330 bps on the back of spike in the raw material costs. Profit from this segment has increased by 18% to Rs 21.84 crore and constituted 68% of the total segment profit.
Revenues from garment division has increased 24% to Rs 44.32 crore while segment margin eroded 470 bps to 23.7% in quarter under review. Profits from Garments division has marginally inched up 3% to Rs 10.49 crore and constituted 32% of the total revenues.
The yarn prices have slipped from peak of Rs 270 per Kg in Q4FY11 to Rs 160 per Kg in Q1FY12. Fabric prices have slipped from Rs 170 per mtr to Rs 125 per mtr in quarter under review.
The company was able to curtail further erosion in margins by maintaining yarn inventory of just 15-20 days in quarter under review and has also maintained back to back booking of inventory and finished goods.
The new garment manufacturing facility with capacity of 4.7 million pieces per annum is expected to be completed by October 11. The Company also proposes to set up garment manufacturing unit at the Baramati Hi-tech Textile Park at M.I.D.C., Baramati with a capacity to manufacture 36 Lacs pieces per annum. As per the SITP scheme (Scheme for Integrated Textile Parks), the Company will be eligible for a subsidy of up to 40 % on the investment in the Land & Building for the project. Capex for FY12 would be Rs 125 crore.
The company has currently 5 stores of Being Human (4 at Mumbai ad 1 at Ahmadabad). It plans to roll out 25 stores by FY13.
Investment in Servalakshmi Papers was to realize listing gains. However, the company witnessed the losses and MTM losses were booked in the quarter. It has 4% stake in the above company.
Long term debt stood at Rs 387 crore and Working Capital of Rs 200 crore at end of June 11. Average cost of debt stood at 8.5% (an increase of 250-300 bps y-o-y).