A two-month production loss at DMT operations cost Bombay Dyeing dearly in the first half of 1997-98 as net profit slumped 26 per cent to Rs 16.40 crore or Rs 8.06 per share.
The Nusli Wadia textiles and DMT major was however saved by a sharp fall in interest costs by 36 per cent, without which, profitability would have further fallen. Interest cost reduction was achieved by lower interest rates plus reduction in the volume of overrall loans. Total loans fell to Rs 626.46 crore on March 31, 1997 from Rs 844.38 crore in March 31,1996. Of this, secured loans fell to Rs 376.66 crore from Rs 687.54 crore. In first six months of 1997-98, Bombay Dyeing raised cheap loans through commercial paper issues. Total loans were also reduced by Rs 10-15 crore.
Net sales fell to Rs 419.48 crore from Rs 457.09 crore, but textiles, Bombay Dyeings original business performed well thanks to higher realisations. Warwick Management Group of Warwick University of UK is advising a major restructuring of the companys operations.
The benefits of the restructuring, say company executives, are starting to pay off. For example, operating margin this year has risen to 6.6 per cent versus 4.5 per cent last year. This is largely due to higher realisations from the textile division, where low-value, high volume products have been discarded in favour of high-value fashion items.
Other income also fell to Rs 49.75 crore from Rs 83.36 crore. Depreciation has remained more or less stable at Rs 22.62 crore versus Rs 22.83 crore.
Equity has risen slightly due to conversions to Rs 40.72 crore from Rs 38.94 crore. By the end of the year, equity would rise further to touch Rs 42 crore, executives said. EPS fell to Rs 8.06 from Rs 11.48 last year.
Bombay Dyeings businesses suffered this year due to a two-month shutdown of the DMT plant at Patalganga, Maharashtra.
Though operations were resumed in October this year, poor DMT prices also affected margins. Net DMT prices, inclusive of discounts are Rs 24,000 per tonne this.
