Anna Peter

Mumbai , Feb. 3

BOMBAY Dyeing and Manufacturing Company Ltd has decided to set up a polyester staple fibre unit at its Patalganga facility at an investment of Rs 350 crore.

According to sources, the company plans to fund the expansion through internal accruals and borrowings. With this investment, the company is looking to integrate forward and concentrate on the captive use of DMT - the raw material it produces and is used in polyester production.

According to sources, DMT production is a cyclical business. Though Bombay Dyeing's profitability has improved in the last couple of years, the segment will continue to challenge profits.

According to an analyst, the selling price of DMT is Rs 3 lower than that of its competing raw material PTA. And if forward integration does take place, it will boost the company's margins.

Also, the move gains significance considering that polyester consumption is high worldwide compared to India, where cotton consumption is about 70 per cent and polyester and blends make up the remainder.

Reliance Industries and Indo Rama dominate the polyester market, accounting for 90 per cent of production. The production of polyester staple fibre is 6 lakh tonnes annually, while that of polyester filament yarn is 11 lakh tonnes annually. Non-fibre polyester production is 1-2 lakh tonnes.

Polyester consumption has grown by over 20 per cent in the last few years.

While cotton yarn attracts a duty of 8 per cent in the country, the duty for polyester is 24 per cent, making it an expensive proposition. However, this is expected to be reduced in the forthcoming Budget.

According to an analyst, this is a positive move for Bombay Dyeing because it plans to erect capacities,. as polyester is becoming a fibre of choice for a number of manufacturers.

As for funding, the company has about Rs 360 crore in unquoted debentures.

When contacted, company officials declined to comment.

© Copyright 2000 - 2009 The Hindu Business Line