Rajasthan Spinning acquires B'lore firm

Rajasthan Spinning and Weaving Mills (RSWM) Ltd, part of the LNJ Bhilwara Group, is acquiring close to 49 per cent stake in Bangalore-based Cheslind Textiles for an approximate enterprise value of Rs 134 crore.

RSWM, a Rs 775 crore integrated player in the textiles sector, will acquire 48.17 per cent at Rs 25 per share from the promoters of Cheslind Textiles for Rs 27.8 crore after settling a debt of Rs 48 crore in the target firm.

Cheslind Textiles is an export-oriented unit manufacturing cotton yarn with a topline of Rs 126 crore with a net of around Rs 3 crore. The acquisition will add 64,500 spindles to RSWM kitty, taking the total spindlage to about 3,60,000 spindles.

In line with the listing and SEBI guidelines, RSWM will shortly make an open offer to the shareholders of Cheslind Textiles to acquire up to another 20 per cent equity stake at Rs 25 per share. If the open offer is successful, an additional Rs 11.5 crore will be used to purchase 20 per cent of the public holding in Cheslind Textiles.

Cheslind Textiles has been in the yarn business for more than 13 years. For the third quarter 2006-07, the firm reported revenues of Rs 94.33 crore and EBIDTA of Rs 14.91 crore.

As on December 31, 2006, the total long-term debt on the books is about Rs 48 crore (out of which Rs 40 crore is under Technology Upgradation Fund scheme).

The RSWM board earlier this financial year had approved a capex plan of Rs 900 crore. As part of the capex initiatives, RSWM on Monday formalised the acquisition of Cheslind Textiles. RSWM's cash profits for third quarter 2006-07 were at Rs 67 crore.

Commenting on the acquisition, RSWM Joint Managing Director Riju Jhunjhunwala said: "This acquisition is proposed to be funded through internal accruals. It will augment our size, product mix and geographical presence. This acquisition will help us increase our capacities at an accelerated pace."

RSWM declared an interim dividend of 30 per cent (Rs 3 per share) for FY2007 after approval from the board. The dividend will result in a total pay-out of Rs 7.92 crore including the dividend distribution tax.