The Hindu Business Line : LMW to expand through buys

The growing demand for textile machinery, long delivery schedule and the urge to retain its clientele, besides wooing prospective ones, have all triggered its capital expansion plan. The company has earmarked Rs 150 crore for this capacity building exercise for the current year and the next.

The Coimbatore-based textile machinery manufacturing major had on Saturday informed the Bombay Stock Exchange about its resolve to take over Jeetstex Engineering Ltd (JEL), a sick, closely held public company operating in the same space. The acquisition cost has been estimated at Rs 35 crore.

The company has not ruled out more acquisitions in the days to come.

"If a similar proposal comes our way, we will grab it. Only by acquisition we can grow fast. But we want to confine to spinning and the very next post-spinning stage (such as winders and doublers) in the machinery manufacturing process," a senior official of the company told Business Line.

"It would be a one-time settlement and the same would be met from our internal accruals. Once the formalities are cleared, we intend to give effect to this merger proposal from April 1, 2005," the source said. The company is hoping to get the process cleared within the next three to four months by opting for fast track clearance.

JEL has three divisions - the machinery division at Ganapathy and the foundry and CNC machines division at Arasur. The machinery division product range includes ring spinning and doubling frames, Simplex Fly frames and two-for-one twisters. The installed capacity is 1,200 machines per annum. The foundry division has an installed capacity of 6,000 tonnes of castings.

The acquisition is expected to add another 20 per cent to LMW's production of castings for its captive requirements and JEL's spares and accessories division would be able to supplement to manufacture of spindles for the ring frames of LMW.

"By optimising the capacities in all the three divisions of JEL, we will be able to increase the current production level considerably and shorten the delivery period in the near future," the source said, but remained non-committal on the time frame. The waiting period is now between 18 to 24 months. LMW is intent on reducing it to 10 to 12 months.

To a query on the order-book position, he said it stood at Rs 2,500 crore and was on the rise, in spite of the penetration of machinery from China and import of second-hand machinery. LMW has kick-started this capacity-building exercise by installing mother machinery. "This has helped us improve our productivity by 35 per cent compared to the earlier fiscal and on the sales front, we have registered a 46 per cent increase compared to 2003-04. Apart from modernising our mother plant, we are also planning to enhance our capacity by another 50 per cent," he said.

These measures, the company hoped, would over a period of time assist LMW to improve the volume by 20 to 25 per cent. LMW commands a market share of 70 per cent at present.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page