Companies

LMW hopes to gain from defence spending

R Yegya Narayanan Coimbatore | Updated on November 29, 2017

lmw

Coimbatore-based Lakshmi Machine Works Ltd (LMW), the largest textile machinery manufacturer in India with a turnover of more than Rs 2,150 crore last year, has witnessed a rather subdued growth in the July-September 2014 quarter, with the turnover up by about 5 per cent compared to Q2 of last fiscal.

The company, which has expanded to China, does not expect to make any fresh investment in capacity addition this fiscal, reflecting the challenging environment the textile sector is facing now.

What should come as a relief probably is the boom witnessed by the automobile industry and the huge push the Centre has given to the domestic manufacturing sector by clearing defence projects valued at Rs 80,000 crore last week.

LMW, which has a machine tool & foundry division, expects to benefit from the defence push.

In an interview to BusinessLine, R Rajendran, Director-Finance, LMW, explains the tough situation the textile machinery sector is facing and the steps LMW is taking to cushion its impact.

Excerpts:

What were the reasons for the rather muted performance by LMW in Q2 of this year?

On account of exceptional item of VRS payment amounting to Rs 6.58 crore, there was a drop in net profit. Further, input cost increase has also resulted in reduction of net profit in spite of turnover growth of 5 per cent.

The textile machinery division has maintained the same turnover as mills find it difficult to get funds for their greenfield projects.

In respect of machine tools division, on account of buoyancy witnessed by automobile sector, the auto and auto ancillary industries are adding further investments to enhance capacity (which helped).

The Centre has cleared about Rs 80,000- crore worth defence projects (purchases). Do you expect to gain from that?

As the Government seeks to give a push to the manufacturing sector, the prospect of growth is possible in the near future. Our machine tool division is already catering to the defence sector. There is scope for further share of revenue from defence sector.

Can you explain how the technology transfer agreement LMW had signed recently with Veejay Lakshmi Engineering Works Ltd (VeeJay) will help you?

Veejay has developed an automatic cone winding machine which LMW would like to manufacture by technology transfer agreement. The project details are being worked out and we may come out with production within a year.

Are you planning any capital expenditure this year?

The current capacity of all our divisions is sufficient to meet the demand and hence there is no proposal to increase capacity.

How is the China venture doing? Are you planning more overseas investment?

The wholly owned subsidiary LMW Textile Machinery (Suzhou) Co. Ltd is in the process of introducing another product namely Draw Frame in addition to Ring Frame. Our capital investment is limited to $12.5 million. No further investment from the parent company is envisaged. At present, we have no plans to add manufacturing facility elsewhere.

You had entered into a real estate venture with Sobha Developers here. Are you planning for more such forays?

In order to utilise the vacant urban land, we have entered into a joint venture with Sobha Developers Ltd.

Published on October 29, 2014

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