The Hindu Business Line : Rajasthan Spinning up on acquisition plans

THE counter of Rajasthan Spinning and Weaving Mills Ltd today registered substantial volume and price increase on buying. According to brokers and dealers, spirited buying was caused by the possibility of announcement of an acquisition by the company.

According to the management, the board of directors of the company would meet on November 10 to consider such an acquisition, which would provide synergy in existing operation.

The stock was up 13.3 per cent on the BSE with a volume of 3.46 lakh shares, which is a 467 per cent jump over previous day's volume of 61,000 shares. The counter normally attracts daily volume in the range of 20,000 to 60,000 shares on the BSE.

On the NSE, volumes were higher at 4.9 lakh, a jump of 345 per cent over the previous day's traded quantity of 1.1 lakh shares.

The Rs 660-crore Rajasthan Spinning & Weaving Mills Ltd is a flagship company of the LNJ Bhilwara group.

According to Mr Pradip Hotchandani of Anagram Stockbroking, it is the market leader in blended yarns with a market share of around 12 per cent and largest producer of polyester viscose in the country among blended yarn varieties producing over 5,000 tonnes per month.

It has already launched a Rs 150-crore modernisation-cum-expansion plan this year to take advantage of dismantling of quota regime from January 1, 2005.

It will add another 25,000 spindles at its Banswara plant and 10,000 spindles for mélange yarn at Mandpam plant.

The company is likely to benefit substantially in the post-quota period and targets to export 40 per cent of the total sales in 2004-05, Mr Rajesh Agarwal of CD Equisearch said. The company has also taken up plans to enter the high value-added readymade garments business. The company's bottomline is expected to improve this fiscal due to savings in interest costs since 80 per cent of the expansion plans would be funded through Technology Upgradation Fund loans (net interest cost 2.5 per cent) and rest through internal accrual.

At today's closing price of Rs 77, the stock traded at a P/E of 9 times trailing fourth quarter EPS of Rs 8.5.