Bombay Dyeing Bailed Out
Bombay Dyeing has gone the Century Textiles way of paying dividend from the prior years profits. The dividend pay out is Rs 13.88 crore, excluding a dividend tax of Rs 1.39 crore. This works out to be higher than the actual profit of Rs 13.78 crore earned by the company.
Net profit, as shown by the company is Rs 35.70 crore, marking a decline of 69.51 per cent over the previous year. However, after deducting Rs 21.92 crore, which the company has written back on account of provision for premium on secured premium notes (SPNs) of earlier years, the net profit works out to Rs 13.78 crore. From this year, the company has charged the premium payment to the share premium account. Analysts suspect the change in accounting is largely to shore up the profit figure, which has been depleted due to poor operating performance. In the earlier years it was charged to the interest and financial charges account. In 1995-96 the amount paid as premium was Rs 8.14 crore while in 1994-95 it was Rs 9.04 crore and Rs 4.74 crore in 1993-94. Over the three years, Rs 21.92 crore has been charged.
Surprisingly, the company has not provided any tax under MAT, even after showing a book profit. The company claims to hold tax-free government bonds worth Rs 140 crore. It has claimed an exemption from the payment of tax. The company attributes the poor performance to the fall in prices of DMT. Despite increased sales in terms of volume, from 1.34 lakh tonne to 1.43 lakh tonne, the value has declined from Rs 858.54 crore in 1995-96 to Rs 441.21 crore last year. DMT prices have declined from a high of Rs 64,000 per tonne in 1995 to the current level of around Rs 30,000 per tonne. The textile division should have performed well due to the lower cotton prices prevailing during the year. However, there are no signs of any improvement.
In the current year DMT prices seem to be firming up. But on the inputs side, cotton prices too have firmed up over the last one month. In fact, cotton prices are expected to be firm throughout the year. Increased raw material costs may well offset the gains of better DMT prices.