Mahavir Spinning to consolidate textile lines

Mahavir Spinning Mills Ltd, part of the Rs 2,000-crore Vardhman group, is planning to consolidate its textile operations in one company, a senior company official said Friday.

It informed the stock exchanges today that its board of directors would meet Thursday to consider various restructuring options.

"We are looking at restructuring the company by de-merging the textile division and merging it with our group company Vardhman Spinning or vice-versa," the official said.

"Keeping in view the dismantling of textile quotas from Jan. 1 and looking at the synergies within our group (Vardhman), our aim is to concentrate all textile activities of the group in one company," he said. The synergies are likely to be in terms of common procurement of cotton, marketing, and financial support.

The textile business of the group will be worth around 18 billion rupees, once the merger takes place," the official added. The company has appointed ICICI Securities as the investment bank for the restructuring, he said.

In 2003-04 (April-March), Mahavir Spinning clocked a turnover of close to Rs 1,100 crore, while Vardhman Spinning and General Mills recorded a turnover of a little over Rs 600 crore.

Among the companies of the Ludhiana-based Vardhman group, Mahavir Spinning Mills is the largest and most diversified company. It also the only company in the group, to have exposure to an industry other than textiles.

Almost 80 per cent of Mahavir Spinning's turnover come from manufacturing cotton, acrylic and blended yarn, and sewing threads, while the balance comes from its steel division, which manufactures steel ingots, billets, and rolled products.

Over the past few years, the company has been showing continuous increase in topline but the bottomline has been under pressure due the fluctuations in cotton prices.

Vardhman Spinning, the flagship company of the group, is engaged in yarn spinning, fabric weaving and processing.

Yarn spinning is its largest business accounting for about 70 per cent of its revenues, while the fabrics business accounts for the rest.