Arvind Mills to up FII pie to 49%

Resolution to be placed at the company's annual general meeting on August 7

The Ahmedabad-based Arvind Mills Ltd is planning to hike the foreign institutional investors' (FII) holding in the company to 49 per cent.

At present FIIs hold 23.94 per cent stake in the company, while the company had set a 24 per cent holding limit for these institutions.

"The board of directors of the company has passed a resolution to hike the FII investment limit in Arvind Mills to 49 per cent. The resolution will now be proposed at the company's annual general meeting to be held on August 7 this year," said Jayesh Shah, director and chief financial officer, Arvind Mills.

The integrated textile manufacturer has not yet revealed the reasons behind the move.

Promoters hold 38.07 per cent stake in the company's, while institutional investors and FIIs together hold 33.58 per cent.

Of the 33.58 per cent, 23.94 per cent is with FIIs, 2.90 per cent with mutual funds and Unit Trust of India and 6.74 per cent with banks, financial institutions and insurance companies.

Private corporate bodies hold 4.88 per cent in the company, non-resident Indians, foreign banks and others 1.68 per cent and the remaining 21.78 per cent with the public.

"After getting the board's approval, the resolution will be send for the Reserve Bank of India's approval," said a company official.

The company has registered a nine per cent drop in its operating profit for the first quarter of the financial year due to high raw material, power and fuel costs.

The operating profit as on June 2004 was Rs 89 crore against Rs 98 crore for the same period last year.

The operating margin of the company dropped from 26 per cent to 22 per cent.

The interest cost of Rs 34 crore includes losses on account of revaluation of foreign exchange liablities to the extent of Rs five crore as against an interest cost of Rs 35 crore, which was after adjusting foreign exchange gain on liabilities of Rs 6 crore.

Following a lower operating profit and higher interest cost, the company registered a profit before tax of Rs 19 crore for the quarter ended June this year as against Rs 28 crore for the same period last year, a drop of 32 per cent.

The net margin also dropped from eight per cent of sales and operating income for the quarter ended June 30, 2003, to five per cent of sales and operating income for the quarter ended June 30, this year. The profit after tax declined from Rs 28 crore to Rs 19 crore.

The margin of the company will continue to be under pressure for the second quarter of the current financial year as well, said a company official.

However, the company expects to benefit from good demand, increased supply of denim by eight per cent and cost reduction from the second half of the current financial year.