Birla Cotsyn Limited – IPO

by Manshu on February 7, 2008

in IPO/NFO

Business of Birla Cotsyn Limited

 
Birla Cotsyn belongs to the Yash Birla group which is one of the leading industrial groups in the country. There has been a joint venture agreement between the Yash Birla Group and the PB Bhardwaj Group and consequently the total promter’s part of the equity will be shared between these two groups in a ratio of 50:50.

 
The company is engaged in cotton ginning, pressing and oil expelling. The company is presently focusing on expansion activities at a total estimated cost of Rs.28919 lakhs. Birla Cotsyn has plans of expanding the spindle capacity for manufacture of synthetic yarn, setting up a 36000 cotton spindle yarn manufacturing facility, manufacture of open end rotor based cotton yarn, manufacture of finished cloth by setting up a dyeing and manufacturing unit.

 
Birla Cotsyn also has plans to set up retail outlets and setting up facilities for garment and apparel manufacturing. The huge size of the project has led to its being granted the status of a Mega Project by the Government of Maharashtra as a result of which Birla Cotsyn enjoys several benefits like electricity duty exemption for a period of seven years, 100% exemption of stamp duty, industrial promotion subsidy equivalent to 100% of eligible investments and 75% reimbursement of expenditure incurred on account of employer’s contribution towards ESI and EPF for a period of 5 years subject to certain limits.

 
Financials of Birla Cotsyn Limited

 
Birla Cotsyn has shown a significant jump in its sales and profit figures in the past year, where the revenues were Rs.40.43 million for the year ended March 31st 2006, it jumped to Rs.561.48 million for the year ended March 31st 2007. Similarly the profits increased from Rs. Rs.2.71 million to Rs.25.69 million in the corresponding period. The EPS for the last three years has been Rs.1.89 in 2007, Rs.0.20 in 2006 and Rs.0.04 the year before.

 
Summary

 
The issue comes from a well respected industrial house of the country however as the financials state the company has just about increased its revenues many folds in the past one year and has plans to go on a major expansion drive make it difficult to rely on past performance to make a future judgment.

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