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Shanthi Venkataraman

The new face of Bombay Dyeing.

FRESH exposure can be considered in the stock of Bombay Dyeing. The stock trades at about 16 times its trailing earnings per share. There is, however, room for further appreciation.

While the DMT (dimethyl terephthalate) business enjoys bright prospects, the company's measures to improve the domestic market for its textiles division also augurs well for growth. There is also scope for growth on the export front from 2005.

The stock has attracted attention in recent months, following the turnaround in the textile business.

Having got rid of non-productive assets, the company has also pruned its product portfolio and is now sticking to products that cater to the higher end of the market.

In the past two quarters, the textile division's turnover has dropped, which could partly be explained by the restructuring of their product portfolio. The growth in the DMT division has, however, compensated for the loss from that of textiles.

Profits of the division grew 155 per cent in the July-September quarter. The division is set to enjoy good prospects in the following year as well, as demand from the polyester industry remains robust.

Lower contribution from `other income' and pressure on margins may depress earnings in the near term.

Although lower cotton prices would have a favourable impact on margins, the higher cost of paraxylene — the main raw material of DMT — is likely to keep margins on a leash.

Bombay Dyeing's textile business, focussed on home furnishings, bed and bath linen, is now undergoing a facelift.

The housing boom in the domestic market has spurred the interest of a number of home textiles exporters such as Welspun, Himatsingka Seide and Creative Mobus Fabrics which are making rapid inroads into the market.

Bombay Dyeing is now attempting to give its brand a makeover and is targeting a younger age group.

Its retail expansion, in particular, is expected to give it greater visibility and should help it maintain its market share. The company is to invest Rs 100 crore in opening up its own retail chain of about 70 outlets over the next three years, besides making its presence felt in departmental stores.

Prospects are also bright on the export front. Exports now account for about 20 per cent of sales.

India is the market leader in the home textiles business, pegged as one of the faster growing segments. Bombay Dyeing, as an established player, would be well-placed to garner a greater share of the export pie.

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