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ReturnIndia:Eastern Silk Industries reports 59% higher profit in Q4 2005-06
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PublishDate：
2006-04-13 16:07:00
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Eastern Silk Industries Ltd (ESI), a leading exporter of silk fabrics and textile made-ups, has reported 69 per cent growth in net sales of Rs 79.70 crore in the fourth quarter of the year ended March 31, 2006 against Rs 47.26 crore in the corresponding quarter of 2004-05. Net profit during the period increased by 59.5 percent to Rs 5.36 crore from Rs 3.36 crore in the corresponding quarter of 2004-05.
Net profit for the full year in 2005-06 increased by 54.5 per cent to Rs 38.04 crore compared to Rs 24.62 crore for the year ended March 31, 2005. Net sales in 2005-06 stood at Rs 387.24 crore against Rs 337.93 crore for the year ended March 31, 2005, registering growth of 14.5 per cent. The earning per share on fully diluted equity capital (post-amalgamation) works out to Rs 3.98 in the fourth quarter. However, for the full year the earning per share stands at Rs 27.37 as against Rs.17.71 per share in the corresponding year 2004-05.
The company has just completed the first round of private placement of equity to Leverage India Fund (fund manager- IL & FS Investment Managers) aggregating Rs 50.50 crore. The shares were placed at a price of around Rs 250 per share. The promoters of Eastern Silk are also subscribing to fresh equity at the same price for an aggregate amount of Rs 7 crore. The equity capital after the private placement and promoter contribution would stand at Rs 15.79 crore.
The company's proposed expansion includes two key initiatives. The capacity for fabrics at the Anekal unit near Bangalore will increase by 4.5 lakh metres per annum at a cost of Rs 52.2 crore which will include double width jacquard and velvet fabrics. At the same time, ESI is planning to set up an in-house facility for made-ups. The planned capacity is for 1500 set/day, where each set has three/four pieces. The cost of this project is Rs 16.6 crore. The total cost of Rs 70 crore is being funded by way of private placement of Rs 50.50 crore, promoter equity of Rs 7 crore and internal accruals of Rs 12 crore.
The rationale of the expansion is to increase sales realization ($15-20 per metre) from mill made production and reduce dependence on outsourced low margin handloom/ powerloom production. Interestingly, profitability from millmade fabrics is superior not just on account of better realizations but also shorter operating cycle for mill made fabrics (110 days) than for handloom/powerloom (260 days).
