Spentex on buyout binge, eyes 3 firms

Spentex Industries, after acquiring three companies in the current financial year, is looking at three more acquisitions.

"We are looking at adding Rs 1,000 crore to our revenues next year. So, we are considering two-three acquisitions. Spentex is in talks with two companies, but it may acquire only one of these," Managing Director Mukund Choudhury told Business Standard.

He added that one of the target companies was based in India, while the other was located in Eastern Europe.

Choudhury, however, refused to elaborate on the value of these acquisition targets saying that while the overseas company located in eastern Europe was larger in size, the domestic option was smaller. He said that talks with these companies had not yet entered the final stages.

Spentex is also in talks for buying over the assets of a state-owned sick unit in Egypt. Earlier this year, it acquired Indo Rama Textiles and the Kolhapur-based Amit Spinning Industries domestically and followed it up by buying Tashkent To'yetpa Tekstil LLC in Uzbekistan for $81 million.

Queried on the debt:equity ratio of the company, Choudhury said after the acquisition of the Uzbeki asset, it stood at 3:1 but was steadily moving down as payments to debtors were being paid off. Choudhury also ruled out the possibility of a follow-on public offer to finance the company's acquisitions.

"We do not want to dilute our stake in the company any further so there will be no move to go to the capital markets," Choudhury said. The promoter stake in Spentex is currently at 45.78 per cent while financial institutions, mainly Citigroup, hold about 42.28 per cent stake.

With the contribution of the acquisitions kicking in, Spentex projects that its turnover for 2007-08 would be in excess of Rs 1,600 crore with an EBITA in the region of Rs 240 crore.

About long term plans, Choudhury said the company first wanted to achieve a milestone of 1 million spindles by 2009-10. At present, it has a capacity of 570,000 spindles.

On the current expansion, Choudhury said the company's second project at Baramati, which was deliberately delayed by three months, had begun production and would be up to full operational capacity of 29 tons a day in six weeks.