Bombay Dyeing Yet To See The Worst: Report

Nothing seems to have gone right for the company of late. It decided to alter its material-sourcing policy by cutting down on paraxylene purchases from the spot market and source more through contracts. This proved to be very expensive as some time thereafter, spot prices went below contract prices, and a differential of about $100 (18 per cent) prevailed for over a quarter.

Duty cuts in di-methyl terepthalate (DMT) from 35 per cent to 27 per cent in the 1996-97 Budget have added to the company's woes, while excise remains unchanged. On the other hand, duty on import of paraxylene has gone up marginally owing to the imposition of an additional duty of two per cent on imports.

 

The report estimates that the company's turnover to slump 25 per cent in the financial year 1997 and profit before tax to slide 59 per cent. This, together with an assumed 12.9 per cent minimum alternate tax (MAT), will see the bottomline decline to Rs 43 crore from Rs 117.1 crore in financial year 1996, representing a fall of 63 per cent.

With PTA and DMT prices almost at parity, and considering that PTA yields a better input-output ratio, the DMT business will continue to bleed, the report says.

The report also estimates the share of other income (including sale of assets and investments), which as been historically high in the past three years, to come down sharply in financial year 1998, though it would form a substantial part of profit before tax.

Bombay Dyeing and Manufacturing Company, established in 1879 by Nowrosjee Wadia, was incorporated as a public company in 1889. Nusli Wadia is now the chairman of the company.

Bombay Dyeing is one of the leading textile companies in the country, especially in the made-up segment. It is also India's leading producer of DMT with an installed capacity of 1,60,000mt per annum, which accounts for 61.8 per cent of its financial year 1996 turnover. Its spinning units are in Jamnagar, while Roha houses its processing unit. The company's DMT plant is based in Patalganga.