Companies

Nandan Denim looks at increased profits post subsidy incentives

Rutam Vora Ahmedabad | Updated on September 05, 2018 Published on September 04, 2018

Gujarat Government clears tax sops under State Textile Policy, 2012

A tax incentive application by denim maker, Nandan Denim Limited was accepted by the Gujarat government under State's Textile Policy, 2012, paving the way for potential savings for the company in excess of Rs 50 crore annually.

Nandan Denim informed that its application for sanction of incentives such as subsidy on interest, power and VAT/GST under the Gujarat State Textile Policy, 2012 was approved by the State government.

Under the policy, the company is entitled for interest subsidy ranging between 5-7 per cent and power subsidy of Re 1 per unit consumed. Additionally, the company is also entitled for refund of VAT and GST at 2.5% for the sales made in Gujarat.

According to Ashok Bothra, CFO, Nandan Denim, the incentives will result into savings of Rs 12-13 crore from interest subsidy, Rs 4 crore from power subsidy for a period 5 years, and 2.5 per cent GST refund with annual ceiling of Rs 45 crore for a period of 8 years starting December 31, 2016.

"We were entitled for various incentives under the Textile Policy, 2012, so we had applied for these incentives. These benefits will boost profit and cashflow of the company," Bothra told BusinessLine.

Notably, for the fiscal ending March 2018, Nandan Denim had registered standalone net profit at Rs 47 crore on revenues from operations at Rs 1189 crore. The potential savings from the policy benefits will add-up to the company's existing bottomline.

Bothra mentioned that the savings coming from the additional profits will be used for business operations.

As a strategy for profit maximisation, the company will look to make maximum sales in Gujarat, said Bothra adding, "We plan to get the maximum benefit of the policy and also focus to attain higher capacity utilisation."

The company, like most players in the industry, faced liquidity crunch resulting into lower utilisation at about 65-70%.

With subsidy benefits, the liquidity issue may get resolved and company looks to achieve higher capacity utilisation in excess of 80 per cent.

"The business outlook appears positive with several macro economic factors indicating towards revival in the denim market. We are waiting for this revival and expect to increase our revenues with the rising aspirations and spending power of the youth," said Bothra.

Nandan Denim shares ended negative on the Stock Exchanges to close at Rs 78.5 with loss of over 3 per cent on NSE.

Published on September 04, 2018
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