Gokaldas Exports surges 10% on acquisition of Dubai-based Atraco Group

Gokaldas Exports shares surged 10 percent in the morning trade on August 30 after the company announced the acquisition of Dubai-headquartered Atraco Group.

As of 9:56am, the stock was trading at Rs 794.85 on the National Stock Exchange, up 8.09 percent. In 2023, the shares outperformed the headline index with a gain of over 112.73 percent as compared to the broader market’s growth of 6.23 percent.

This marks the second straight session of gain for Gokaldas Exports shares. During the previous trading day, the stock soared by as much as 20 percent, reaching a 52-week high of Rs 736.30 per share on the BSE.

Gokaldas Exports stated in a release that the Dubai-based apparel manufacturer operates through a network of four manufacturing units in Kenya and one in Ethiopia, producing approximately 40 million garments annually. Atraco Group achieved a revenue of approximately $107 million, with a post-tax profit of $7.2 million in the calendar year 2022.

The equity value of this transaction amounts to $55 million (approximately Rs 455 crore), which will be financed through a combination of debt and internal accruals, according to the statement. The transaction encompasses the acquisition of both shares and assets and is contingent upon customary regulatory approvals. Completion is anticipated in the third quarter of FY24 (October-December 2023).

The deal has been struck at a reasonable valuation of eight times the price-to-earnings (P/E) ratio, and its financing will be a blend of debt and internal accruals. This acquisition will provide the company with the access to cost-effective duty-free manufacturing locations, said ICICI Securities.

“The acquisition of Atraco represents a significant step in this strategic direction as it holds relevance, possesses a complementary customer base, exhibits operational strength, and primarily, excels in its own domain,” the company said.

Gokaldas Exports is a manufacturer and exporter of ready-made garments in India, engaged in the design, manufacture, and sale of an extensive range of ready-made garments for men, women, and children, suitable for all seasons.

The company’s management, during the Q1FY24 earnings conference call, highlighted the robust long-term prospects for the industry on the back of the ongoing shift of global sourcing away from China, supplier consolidation favouring efficient and well-capitalised players, and supply-side instabilities in various countries.

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