The Hindu Business Line : Eastern Silk to issue Rs 200-cr FCCBs to fund expansion plans

EASTERN Silk has planned Rs 80-crore capital expenditure for raising its silk fabric producing capacity at its existing unit in Bangalore and setting up a new unit for carpet and made-ups such as curtains and pillow covers.

The stock today closed at Rs 205.60 on the NSE, down 1.25 per cent with a traded quantity of 63,341 shares.

Mr G. Venkatesh, CEO of the company told Business Line that to finance this capital expenditure and to prepay a significant portion of its secured loans the company has planned to issue foreign currency convertible bonds worth around Rs 200 crore.

He said though the proposed issue is yet to be finalised, a broad resolution to this effect is being placed at the AGM on December 30.

Mr Venkatesh said the prepayment of debts is proposed to reduce cost of borrowings. In the first half of this fiscal, the company has spent Rs 6.32 crore on interest expenditure against Rs 5.47 crore in the corresponding period in the previous fiscal.

The fabric capacity expansion at the old facility would be of the order of 4.5 lakh metre per annum over the current capacity of 15 lakh metres. The new facility would produce 1,500 sets of velvet carpets, curtains and pillow covers per annum.

The land for the new unit has been acquired and orders for machinery have been placed.

Meanwhile, amalgamation of Eastern Jingying Ltd, a Chinese outfit and Sstella Silks Ltd, a domestic group unit, with Eastern Silk is expected to be through shortly. The Calcutta High Court has already cleared the scheme. Clearance from the Karnataka High Court nod might come any moment, sources indicated.

The amalgamation would increase the balance sheet size of the company, secure raw material sourcing and provide operational synergy. The company indicated that once the amalgamation process was complete, final dividend for 2004-05 would be considered. An interim dividend of 15 per cent was, however, declared for the last fiscal.

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