Pioneer Embroideries Ltd. - A complete turn-around story.

Pioneer Embroideries is in the business of manufacturing embroidered fabrics, laces and dope dyed yarn and its brand “Hakoba” is still the leader in embroidered clothing category. In the ‘Laces’ segment company is the second largest producer in the world. 

Due to leveraged and untimely expansion ( mainly in retail segment) and unexpected downturn in overseas markets due to recession, company went into big trouble. From a net profit of Rs.15 Cr reported in 2007 , its bottom line crashed to a loss of Rs.33 Cr in 2013. Sensing the big trouble, management initiated efforts to revive the company .Edelweiss ARC Limited ( EARC) , an asset reconstruction company took over the debt of Pioneer with EXIM Bank. I believe, Compared with banks, Private asset management companies are more flexible and time and formalities needed to deal with them is less compared with PSU banks. Now EARC agreed to accept re-payment of interest outstanding on this loan in the  form of equity. As part of this agreement company have allotted  Eight Lakhs Fifty Thousand shares to EARC at a price of Rs.35 each.

I don’t think any private ARC will convert  even a part of their assignment to equity if they feel the underlying business is not viable.

Right now Pioneer P.E is 4.7 as compared to industry P.E 33.8, this shows the stock is available at fare value & Textile sector is in boom for now.

Company’s retail venture – Hakoba Lifestyle-  is running through its subsidiary and it also selling products like ready to stitch salwar kameez and dupatta sets, sarees etc through e-commerce sites like Flipkart. Amid its not so good financial situation and working capital crunch , for the last five years pioneer reported substantial and steady improvement in its top line ( See below Table)  .

This clearly indicates, demand of product is  not the major issue but mainly the debt related issues eating its bottom line. Now promoters are trying their level best to find a solution for debt related issues  and considering the recent developments, I believe the possibility for a success in this effort is quite high. If the success of of their efforts continue in this same tempo, Pioneer may emerge as a dark horse in the years to come .

Recently on 19th Sept 2015, company has done one time dues settlement with SBI.

The performance of the company in last two quarters have been positive, due to which the stock has moved from Rs.30 to Rs. 81 on fundamental basis only. I believe the Q3 & Q4 results will be fantastic due to festive seasons & company is on a verge of revival.

Stock listed in both exchanges and currently trading around Rs. 81.                                      
This is for Mid - Long term holding for handsome returns.

Suggested this stock around Rs. 38 to my close group.

Link to Company Website HERE.