Coimbatore-based Precot Meridian Ltd plans to exit from the fabrics business. The company believes it would be in its long term interest to do so as input costs and prolonged power shortage in the State have added to the losses from the division that is loss-making since inception.

The fabrics division contributes around 12 per cent to the company's turnover of about Rs 600 crore.

In a communication to the stock exchanges, Precot Meridian said that it established, as part of a diversification strategy, weaving and fabrics processing division at Pollachi and yam dyeing facility at the SIPCOT industrial estate at Perundurai in Erode district in 2000 and 2003 respectively (the fabrics division) to produce yarn-dyed shirting fabric. But from the beginning the division did not show profit.

The board of directors has decided to sell the fabrics division subject to the approval of the secured loan creditors and the shareholders.

To set up technical textiles plant

With a view to capitalising on the demand for technical textiles, PML is establishing a technical textiles plant with state-of-the-art technology in the Textile SEZ in Hassan, Karnataka, as it considers the technical textiles segment an emerging area of opportunity.

The unit will produce non-woven products for medical and hygiene care applications. The project cost is estimated at Rs 165 crore out of which Rs 125 crore is to come as a term loan from ICICI Bank, according to the company’s latest annual report.

Precot Meridian’s product range consists of cotton yarn, sewing threads, fabrics and garments. Precot Meridian has units in Tamil Nadu, Kerala, Andhra Pradesh and Karnataka with total spinning capacity of 2,25,000 spindles.

During the last financial year, the company's total revenue was Rs 594.04 crore but it suffered a huge loss of Rs 52.83 crore due to adverse market conditions.

However, in the second quarter of this year, the company has reported a total income of Rs 169.84 crore and net profit of Rs 7.76 crore.

The shares of Precot Meridian were trading at Rs 90, down by Rs 4.60, on the NSE in early trade.

(This article was published on December 4, 2012)
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