Exim Bank picks stake in Bombay Rayon Fashions

Export-Import Bank (Exim Bank) has for the first time acquired an equity stake in a domestic company. It has bought a 3 per cent equity stake for Rs 5 crore in fabrics and garments maker, Bombay Rayon Fashions.

Exim Bank bought 10 lakh shares of Bombay Rayon for Rs 50 per share, a premium of Rs 40, ahead of the textile company's proposed initial public offering (IPO).

In addition, Exim Bank has also sanctioned Bombay Rayon a term loan of Rs 40 crore to part finance a Rs 161 crore greenfield integrated textiles unit at an apparel park at Doddaballarpur near Bangalore, said S Sridhar,executive director,Exim Bank.

Bombay Rayon will finalise details of its IPO to complete funding for the greenfield textiles unit in next two weeks. This will include the target amount to be raised, said Prashant Agrawal, managing director.

The company has also tied up for loans from banks under government's Textile Upgradation Fund Scheme making it eligible for interest subsidy of 5 per cent and a direct subsidy of 10 per cent of the investment for processing machinery.

Exim Bank's stake in Bombay Rayon will drop to 2 to 2.5 per cent after the IPO.

The Rs 140 crore Bombay Rayon is a leading manufacturer and exporter of fashion fabrics and garments. It has state-of-the-art manufacturing facilities at Navi Mumbai, Silvassa and Bangalore backed by product development facilities, design studio and sampling infrastructure.

Fabric and garment exports constituted 30 per cent of Bombay Rayon's Rs 140 crore turnover in 2004-05. The company's increasing exports component in sales target for 2005-06 is 45 per cent and 60 per cent for 2006-07.

"We have achieved the target in the first quarter of 2004-05,"said Agrawal.

Bombay Rayon has been allocated 20.26 acres of land in Industrial Township developed by Karnataka government at Doddaballarpur Apparel Park, which has been modelled on international lines with modern infrastructure and dedicated power and water supply and common effluent treatment plant.

Bombay Rayon, set up in 1986, has a strong presence in fashion fabrics and garment segment and caters to various international brands from Europe and the US, including C & A, DKNY, Liz Claiborne, Wrangler, Federated Stores, Tom Tailor, Guess and Kiabi.

With multifold expansion of garment capacity on the anvil, negotiations are on with premium labels in international market, Agrawal said.

The company's new project will increase its weaving capacity to 60,000 metres per day from 20,000 and garment capacity to 30,000 pieces per day from 8,000 pieces and also establish its own processing capacity of one lakh metres per day. The project is slated to be on stream by March 2006.