May 2013

In February 2010, while building our initial portfolio of India Equity we identified Page Industries which is the authorized license holder for manufacturing and distributing products of Jockey in India. When we invested in that business it was trading at Rs.800 where value of the business was 1000 Crores. It was doing sales of more than 300 crores and around 35 crores profit after tax while having very limited leverage. Our investment was made at around 30 price-earnings multiple which from a classic valuation matrix point of view was an expensive business to own.

Our rational was that in the prevailing inflationary environment it is impossible to build the value of a 125 year old strong brand at a cost of 1000 crores. Our scuttlebutt research also revealed that it is the most sought after brand in men's innerwear in almost all age groups. With that in mind we went ahead and built it in our portfolio. As we speak the previous year sales have grown to more than 800 Crores and profit has exceeded 110 crores. They have introduced further categories in women's wear, leisure-wear and also Jockey for kids. A tie-up with Speedo was also announced which can give further impetus to growth.

Page Industries has demonstrated growth in an extremely challenging environment which is commendable. Raw material prices have moved more than 100% in this period while currency depreciation of more than 40% has created quite a challenge for the company.

Additionally they have licenses for territories outside India like Nepal, Bangladesh, Srilanka and UAE but they have been slow in building business in these regions due to capacity constraints. We believe that Page will deliver 20% plus volume growth in the foreseeable future. This stock has by far been our biggest winner and has delivered more than 400% to our early stage investors. Our analysis says that it can continue to be a big performer this year as well.