Lakshmi Cotsyn plans Rs 993-cr capex for next fiscal

Shri Lakshmi Cotsyn has drawn a capital expenditure plan of Rs 993 crore for its venture into high-margin technical textile and enhancing its denim capacity by next fiscal end.

The Kanpur-based company has already tied up Rs 693-crore long-term loans through a consortium of banks led by Central Bank while promoters have invested Rs 125 crore by subscribing to share warrants.

Mr M.P. Agarwal, Managing Director, Lakshmi Cotsyn, said due to unfavourable conditions for raising further equity fund of Rs 175 crore, the Central Bank has offered to extend a mezzanine debt of similar amount, which will be converted into equity shares if we are not able to repay it in three months.

(Mezzanine finance refers to a subordinated debt or preferred equity instrument that represents a claim on a company's assets and ranks just above the common shares. It can be structured either as debt or preferred stock.)

The company will double its denim capacity to 40 million metres and fusible interlining fabric to 25 million metres from 12.5 million metres through brownfield expansion in Uttar Pradesh.

As part of its Greenfield technical textile venture, Lakshmi Cotsyn has entered into a joint venture with a Malaysian company to set up Multi-Spectrum Camouflage Fabric unit of 10 million tonnes a year. This fabric is used largely by the army in battlefields to cover themselves and weapons from the enemy's satellite surveillance.

Camouflage fabrics

“The Government had recently floated a tender for supply of spectrum camouflage fabrics worth Rs 200 crore. Only international bidders were allowed to participate in the tender process as Indian companies did not have the expertise in production of these fabrics,” said Mr Agarwal.

The company will set up a unit for producing 20 million metres of Blackout Fabric, 50 square million metres a year of flex fabric and 5 million metres of nuclear bio-chemical fibre.

Climate fabric

Blackout fabric used as window screens does not allow the outside climatic conditions impact the room temperature. They are in good demand in the international markets due to the extreme climatic conditions.

“Given the climate change in India, we expect demand for Blackout fabric to pick up. We will have an instant market for our flex fabric as it is largely imported. As far as, nuclear bio chemical fabric, we expect initial orders to come from the army,” said Mr Agarwal.

The company is also looking out to acquire two to three lakh spindles by end of 2012 in order to secure cost of yarn – one of the major inputs. The company has acquired 15 acres at Fatehpur in Uttar Pradesh and is in negotiation for another 50-100 acres.

“After the sharp spike in cotton prices, many standalone spinning mills in Karnataka and Maharashtra have gone out of business. We were interested in few of them, but want to make sure that they are litigation free,” said Mr Agarwal.