Suryalata mulls expansion

Suryalata Spinning Mills, a city-based synthetic blended yarn manufacturer, is planning to expand its production capacity by another 10,000 spindles from the existing 56,000 spindles.

The company also plans to procure some value-addition equipment to manufacture blended yarn that is targeted at the export markets.

At present, the company has two spinning units, one each at Hyderabad and Nagpur with 35,000 spindles and 21,000 spindles capacity respectively.

"We are estimating an investment requirement of Rs 25 crore for the proposed expansion and value-addition equipment installation. We are evaluating different options of raising finances, which could be a combination of debt and equity," Mahender Kumar Agarwal, the joint managing director of Suryalata, told Business Standard .

At present, the company has a debt equity of 0.8, with debt at around Rs 25 crore and equity at Rs 3.38 crore. In addition to this, it has issued preference share capital of Rs 2.25 crore.

"We have recently modernised our two facilities with a Rs 8-crore outlay. The results of modernisation would start accruing from the present quarter," Agarwal explained. The company has mobilised Rs six crore of the modernisation cost via term loans, Rs one crore each from internal accruals and issue of preference share capital.

Suryalata manufactures polyester and viscose blended yarns and dope-dyed yarns with counts ranging from 20s to 60s. We are concentrating on manufacturing of value added products like dyed yarn, mileage yarn and sewing threads. With the abolition of quota regime by 2005, the exports market offers us a great potential to grow, Agarwal said. The company earns about 15 per of its revenues from exports to European Union, South East Asia and Latin America. It expects exports to contribute 25 per cent to the overall revenues from next year onwards.

The company is trying to reduce its present average interest charges to 7-7.5 per cent range from the existing 13 per cent level, by utilising the subsidies under the Textile Upgradation fund and Textile Reconstruction scheme. For the nine months ended December, the company posted a net profit of Rs 2.03 crore on a turnover of Rs 86.92 crore as against Rs 1.37 crore profit and Rs 82.69 crore net revenues posted during the same period last fiscal.