ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Diversification and Vertical Integration

Diversification and Vertical Integration

Diversification and Vertical Integration Hansavivek NIRLON SYNTHETIC FIBRES AND CHEMICALS is diversifying its interests into new fields. It is joining hands with Gujarat Industrial Investment Corporation (GIIC) as co- promoter of a project to be set up by Gujarat Tyres to manufacture automotive tyres and tubes in an industrially backward area at Palej in Bharuch district of Gujarat. Initially, the new company will have a capacity of 4 lakh tyres and tubes each per annum. Nirlon will have the advantage of utilising its additional capacities of nylon tyrecord fabric and surplus capacity of its new dipping unit being established at Tarapur in Maharashtra. This project should help the company substantially to increase its turnover and profitability. Company has also received a letter of intent for manufacture of carbon fibres with an annual capacity of 100 tonnes. A high technology product, at present manufactured only in US, UK and Japan, it is made from petrochemical feedstocks and is finding increasing usage abroad in applications in fields of space, aeronautics, engineering components, sports goods and in medical field for implantation of artificial limbs. Company will enter into -collaboration with one of leading producers in world. This fibre can extensively replace conventional metals resulting in reduction of cost and energy consumption and at the same time achieving better performance in various fields of applications. Meanwhile, the company is awaiting government approval for expansion of its polyester filament yarn capacity to 6,000 tonnes per annum. The company also proposes to expand into new and improved product-lines, such as steel cord conveyor belt at Roha. It is awaiting approval of government for entering into technical and financial collaboration agreement with a reputed firm of West Germany. Attention is being concentrated on improving technology, efficiency and utilisation of existing plant by installing highly sophisticated machinery and equipment. Borrowing limit of board of directors is proposed to be stepped up from Rs 75 crore to Rs 100 crore, so as to enable it to increase borrowings as and when necessity arises. The company has earned a lower gross pro fit of Rs 7.57 crore during year ended March 1984 as against Rs 8.87 crore in previous year, despite higher turnover of Rs 95.31 crore against Rs 86.61 crore. These figures show a marked deterioration of margins. As depreciation has claimed more and there is also a small tax liability against nil previously, net profit has dropped from Rs 3.45 crore to Rs 1.14 crore. A little over half of unchanged dividend of 215 per cent is short earned, whereas it was covered 1.46 times last year. Profit margins have been squeezed by steep rise in cost of raw materials and other inputs. Cost of caprolactum, main raw material for nylon yarn, was increased by STC alone at Rs 6 per kg and, as a result, company had to pay Rs 250 lakh more. Excise duty structure was reclassified, which resulted in increased burden of Rs 360 lakh to company. Emoluments per employee" and interest on borrowings have further gone up. Company has not been able to realise increase in selling prices commensurate with increases in costs. Commenting on prospects, Jaykrishna Harivailabh- das, Chairman, says company's performance during first quarter of current year and trends in present economic situation justify an optimistic outlook. He is confident that, except for some unforeseen reasons, company can

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