Vishal Fabrics Ramped Up Capacity Utilisation From 55% to 75%
AHMEDABAD: Vishal Fabrics Limited, one of the leading manufacturers of denim fabric, reported improvement in capacity utilisation of denim manufacturing plant located at Dholi, Gujarat, from 55% in Q2FY19 to 75% in Q2FY20. Higher capacity utilisation led the company to improve its operating efficiencies; resulting into better financial performance.
Vishal Fabrics has comfortably outperformed industry growth by posting a top-line growth of 30% (YoY) in H1FY20. The production of denim fabric grew by 36% as on Q2FY20 on a Y-o-Y basis. The higher production is attributable to the commencement of four new lines of denim fabric manufacturing plant in 2018. Higher production led to a robust increase of 23% in revenue to Rs 293 Cr in Q2FY20, while EBITDA witnessed a stellar growth of 172% to Rs 8.6 Cr in Q2FY20 on a Y-o-Y basis.
The output growth was driven by increased purchase orders from key customers spread across different regions. For Vishal Fabrics, in India, Delhi was the key market and whereas for exports, it was Bangladesh. Higher production helped the company to achieve economies of scale in the form of lower manufacturing and overhead costs. The lower overhead cost translates into higher EBITDA margins. The EBITDA margin grew from 4.3% to 7.8% in Q2FY20 on a YoY basis. Higher capacity utilisation also makes business more competitive on the back of lower per-unit cost Higher capacity utilisation is due to a rise in sales to Indian brands, fabric exports and domestic fabric sales. Out of 2,000 bps growth in capacity utilisation as on H1FY20, 1,500 bps is attributable to domestic fabric sales and 500 bps to exports and sales to Indian brands combined.
Vishal Fabrics boasts of a state-of-the-art manufacturing facility with a total installed capacity of 80 MMPA. The denim unit is equipped with 11 warping units, 8 DR machines for dyeing, 3 singeing machines, 2 mercerising units, 1 stenter, 4 wet finishing machines, 14 inspection machines, foam finish machine s and other latest technology. It allows us to meet strict timelines to deliver the product without compromising on the quality, which is a must-have for brands who are our customers. Vishal Fabrics Limited is a premier supplier of high-quality stretch denim fabric, which has a universal appeal, i.e. it is widely used and is popular among people of all ages.
Mr Brijmohan Chiripal, Managing Director of the Company, commented, "Significant improvement in capacity utilization has led to better efficiency and higher profit margins. Going ahead, we expect capacity utilisation to improve and also enhance our operating leverage. Superior manufacturing technology allows us to develop innovative products in line with global fashion trends. Furthermore, it enables us to produce a wide range of products. This is a source of competitive advantage and allows us to not only meet customer requirements but also delight them." Vishal Fabrics has expanded its business into newer geographies covering the MENA region and South Asian countries. The Company caters to leading domestic and global brands. Domestic brands include Aditya Birla Fashion, Pantaloons and Future Group whereas global brands include Austin, Pepco, OVS, Inditex- ZARA Pull & Bear and more. The company also supplies to E-commerce portals like Myntra. While the company continues to build marquee clientele through product innovation and value additions; it continues to build sales momentum through strategic promotional activities.
