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3 Lalbhai Group companies plan merger

The boards of Arvind Polycot Limited, Arvind Cotspin Limited, and Arvind Intex Limited are meeting separately on January 24 in Ahmedabad, Gujarat, to consider a proposal to merge into one company.

The three companies belong to the Lalbhai Group, of which Arvind Mills Limited, a global denim major, is the flagship company.

The three companies are dependent on one another as well as Arvind Mills for raw materials and to sell their production.

Arvind Polycot, which is shortly expected to begin producing gabardine, will purchase cotton yarn from Intex and grey cloth from Arvind Mills. The cotton yarn produced by Arvind Intex is primarily sold to Arvind Mills and Polycot. The cotton yarn produced by Cotspin is sold to Arvind Mills and its subsidiary in Mauritius.

The three companies are proposed to be merged with Arvind Products Limited, a small company wholly owned by Arvind Mills. Arvind Products currently does not carry on any business. The combined entity, to be also named Arvind Products, will be able to effectively capture the synergies that exist between cotton yarn, denim and gabardine, particularly because Arvind Mills is setting up a gabardine production capacity.

The merger will integrate the business operations of the three firms and significantly reduce inter-company transactions. It is also expected to result in a transparent structure eliminating cross holdings.

The group has initiated this restructuring exercise in line with its endeavours to be a world player in cotton textiles. Upon completion of the current restructuring, the group will have a more focussed, leaner structure.

Arvind Polycot, with an equity capital of Rs241 million, reported sales of Rs621 million and a net profit of Rs42.3 million for fiscal 1997-98. In the same period, Arvind Cotspin reported sales of Rs1062.9 million and a net profit of Rs80.1 million. The company has an equity capital of Rs420 million. And Arvind Intex, which has an equity capital of Rs513.5 million, posted a net profit of Rs88 million on sales of Rs1404.7 million.

The combined sales of the three companies for 1997-98 were Rs3090 million, and the new outfit is expected to post sales of over Rs5000 million in 1999-2000, making it a very significant player in cotton textiles in the country.

UNI

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