Uniform Focus Helps 120-Year-Old Mafatlal Industries Sew Up Revival

(MENAFN- Live Mint)

Mumbai: Mafatlal Industries Ltd, a 120-year-old textile company, shuttered its loss-making and less-profitable businesses while sharpening focus on its core strength of supplying uniforms, including through government tenders, to stitch a turnaround after years of indifferent financial performance.

Over the past five years, the company shut its loss-making denim division, exited contract manufacturing for overseas retail brands, reduced its workforce through voluntary retirement scheme and focused on debt repayment. It also switched to an asset-light business model, where the bulk of the textile it sold was procured through vendors, instead of in-house production. Outsourced production accounted for 95% of the company's top line in the first quarter of FY26, as per an investor presentation.

The company also diversified into new business categories like making sanitary pads, offering digital infrastructure to schools and supplying consumer durable kits for the economically-marginalized section of the society to engineer its revival.

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These measures helped it to improve its income and stem losses. The company reported a revenue of ₹1,240 crore from operations in the first quarter of FY26, nearly tripling from a year ago. Profit during the quarter surged to ₹46 crore, compared to ₹30 crore a year ago.

In FY25, the company reported revenues of ₹2,807 crore, sharply up from ₹602 crore in FY21. Profit for the year was ₹98 crore, compared to a loss of ₹94 crore four years prior. The share price rose nearly five-fold over this period to close at ₹138.8 on the BSE on Thursday.

“We have grown between 30-50% over each of the last five years," Priyavrata Mafatlal, part of the fifth-generation of the promoter Mafatlal family, said in an interview.

The company had found itself in a financial crisis around the turn of the last decade. That's when the fifth-generation scion took over as chief executive and managing director of the company.

“On the morning of 17th December 2018, I was named the CEO of Mafatlal Industries Limited, a company drowning in losses at the time- ₹180 crore, to be precise," the 38-year-old wrote on professional networking platform LinkedIn last year.

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“The board was looking for 'young blood' to turn things around... and they chose me. My first thought was, 'There's a legacy of four generations before me... Am I going to drive it all into the ground?'," he wrote.

Just as he got to stabilizing the ship, the covid-19 pandemic struck. However, the resultant factory closures and other challenges also gave the company an opportunity to rethink its strategy, helping chart the turnaround plan. Once the turnaround plan started yielding results, Mafatlal relinquished the CEO position in March 2022 to continue as managing director.

While the turnaround strategy has clicked, the company has a long way to go. It squarely lags its peers in the textile industry. Its peers of similar vintage such as Arvind Limited and Raymond Lifestyle Ltd have multiple times higher revenues.

Mafatlal Industries' focus on uniforms and affordable products also means lower margins, with an Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin of less than 4% compared to upwards of 10% for its two larger peers.

These weaknesses show in the company's valuation. It has a market capitalization of just ₹1,000, crore despite a sharp rise in share prices over the past five years. This compares to ₹7,500 crore for Arvind Limited and ₹6,900 crore for Raymond Lifestyle Ltd.

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Even as Mafatlal Industries recovers, listed chemicals maker Nocil Ltd, also part of the Arvind Mafatlal group, finds itself languishing in a downcycle. The rubber chemicals producer has been outcompeted by lower-priced imports from China and South Korea, said Priyavrata Mafatlal, who is a director on the company's board.

The company is exploring expansion into other organic chemicals and other chemicals for the larger automotive sector to diversify its business. However, it is in no hurry to make a decision as the sector tends to be cyclical and it was part of business to weather downcycles, Mafatlal said.“This is the time in the trenches for us. We will weather the storm."

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