>Eastern silk Industries (INAJ MENA)

COMPANY OVERVIEW

EASTERN SILK INDUSTRIES, LTD. engages in the manufacture, sale, and export of silk yarn and fabrics primarily in India. It offers fabrics and madeups, home furnishings, fashion fabrics, handloom fabrics, double width fabrics, scarves, laces and belts, and embroidered fabrics. EASTERN SILK INDUSTRIES exports its products to the United States and Europe, as well as to Australia, the Middle East, and the Far East. The company was founded in 1946 and is based in Kolkata, India. The company was thereafter converted into a Private Limited Company in the name of Eastern Silk Manufacturing Company Private Limited on 12th June 1956. The company was again converted to a Public Limited company in the name of Eastern Silk Manufacturing Company Limited and fresh certificate of incorporation consequent to change of name was issued by the Asst. Registrar of Companies West Bengal on 26th July 1975. The name of the company was further changed to "Eastern Silk Industries Limited" and a fresh certificate of incorporation consequent on change of name issued by the Asst Registrar of Companies West Bengal was obtained on 12th August 1975.

The company manufactures silk fabrics with an annual processing capacity of 4.05 million mtr pa. Most of its production is exported to Japan, the US and the UK. A government-recognized export house, it also exports made-ups, leather goods and shrimps. The company has two subsidiaries – Eastern Enterprises and Mayur International Corporation. Eastern subsidiaries markets a part of the ESIL products in the US and Canada.

ESIL is involved in an integrated production facility of silk products starting from reeling of yarn from cocoons to finished silk. ESIL procures the cocoons from the southern part of India and Madhya Pradesh. The yarn is reeled on a contract basis by the various units in different villages in the cottage industry sector. The reeled yarn is sent either directly in to company's process house at Noida for dyeing or given to Eastern Enterprises Ltd. (EEL) a wholly owned subsidiary of ESIL. Around 50% to 60% of the yarn requirement is imported mainly from China or Brazil . After the weaving of the fabric, ESIL processes and finishes the fabric at its process house at Noida. The made-ups like scarves etc. are mainly manufactured in Naraina in New Delhi.

· Expansion Plans to drive volumes :The company is starting a new plant worth INR 800mn in Bangalore which should be operational from July 2009. This will surge the total production capacity of silk yarn and fabrics.

· Shift in Product Mix :The company is now focusing on machine made silk fabrics rather than handloom made silk fabrics. Machine made silk fabrics fetches higher margins and have better demand in developed countries.

· More Focus on Domestic markets to improve margins :ESIL plans to venture into domestic markets due to an increase in demand for silk in the furnishing sector in India. The margins in the domestic markets are higher as the finished products are sold to the retailers directly.

· We have initiated a coverage with a price target of INR 49.95 giving an appreciation potential of 581% in the next 2 years.

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