The Index
Emcee
Shamken groupIn a year when almost all companies have posted negative or poor results, some of the textile manufacturers have shown good growth rates. This has also been reflected in the performance of the textile dyes manufacturers like Clariant. Shamken group of companies are the latest in the textile sector that have recorded positive growth rates. The Shamken group is operating in the country through three companies; Shamken Multifab, Shamken Cotsyn and Shamken Spinners. While Shamken Cotsyn is mainly in manufacture of garments and printed fabrics, Shamken Multifab is into production of plush fabrics, industrial fabric and velvet fabrics. Shamken Spinners is an 100 per cent EOU that manufactures combed cotton yarn. Among the three companies Shamken Spinners has shown the best performance with a turnover growth of 46.19 per cent from Rs 24.17 crore in the first half of 1995-96 to Rs 35.33 crore in 1996-97. Net profit on the other hand has increased by 55.39 per cent. Higher growth rate has
been possible as the company is selling cotton yarn of higher counts — 30s and 40s, which are mainly used for jeans. The company has been helped with depressed cotton prices in the first half of the current fiscal. However cotton prices have started to increase not only in the domestic market but also in the international market, though in a smaller proportion. It will have to be seen whether the company will be able to pass on the price hike. Performance of Shamken Cotsyn has improved substantially since it acquired assets of Stencil Apparel Brands Ltd. Prior to the acquisition the company earned its income mainly from printed fabrics (75.21 per cent in 1995-96), however, this share declined substantially to 39.70 per cent, which was captured by the garment sector (44.78 per cent). Shamken Cotsyn has increased its growth rate by 32.36 per cent from Rs 20.20 crore to Rs 26.74 crore. Net profit has moved increased from Rs 1.25 crore to Rs 1.76 crore, up by 42.21 per cent The garment division exports shirts
and ladies garment to countries like USA, Canada, Sweden, UK and Australia. It has entered into an agreement with MMTC to sell its products through their outlets in USA. Shamken Multifab, the third company in the group has shown the poorest growth rate of 8.4 per cent from Rs 26.44 per cent to Rs 28.65 crore. Net profit on the other hand has increased by 23.75 per cent from Rs 1.89 crore to Rs 2.34 crore. Slow growth rate is apparent as the company is an OEM supplier to Hindustan Motors, Maruti and Telco. The slow growth rate of the automobile sector is reflected in the performance of the company. Shamken Multifab, is planning a rights issue to finance its venture with a Korean firm, II-Jeong Industries to manufacture upholstery for Hyundai. Though the performance of all the three companies looks good, the flip side is that these companies are heavily leveraged. Debt to equity ratio of all the companies are on the higher side, with the worst being that of Shamken Cotsyn -- 2.8:1. Finance could be a main
problem for future growth of the companies as all of them are either going in for an expansion programme or diversifying in related areas. Samtel colour tubes Akai's strategy to price colour televisions (CTVs) below the psychological Rs 10,000 mark per set has revived the fortunes of the colour picture tube (CPT) market. The CPT market saw radical change when the government brought down the import duties to 25 per cent in 1997 from 65 per cent in 1994. With imports being cheaper than the domestic prices the Indian producers had to cut down heavily on their prices to compete. This is evident from the P&L account of Samtel which shows stagnant turnover at around Rs 260 crore between 1995 and 1997, but shows exponentially decreasing net profits to Rs 8.62 crore in 1997 from Rs 31 crore in 1995 with annualised EPS dropping to 3.52 in 1997 from 12.86 in 1995. Samtel Colour Ltd plans to further expand its CPT business by an additional 1.8 million units from 1999. With lowered margins, increased volumeswill ensure it stays in business. This Samtel is doing by expanding capacities. The company already has two lines producing for both 21 inch and 14 inch colour televisions. The second line at Ghaziabad just started production for 14 inch televisions 1.8 million units, of which it plans to export 60 per cent. Currently, there are only two major CPT manufacturers in the country, namely Samtel and JCT electronics. The third one, BPL Ltd, took over Uptron last year and proposes to invest close to Rs 75 crore in the manufacture of CPTs. This facility will mainly cater to its in house manufacture of BPL CTVs. The Uptron plant is a very old plant and will need a lot of capital input before it could produce CPT to sell in the domestic market. In 1996-97 the industry produced 2.5 million CTVs and about 1 million CPTs were imported. But in the current year production in this industry is expected at 3 million mark which can easily feed the domestic industry. The biggest spurt to the industry has come from Akai.
This has not only encouraged other players like Videocon and Daewoo to cut their prices on no- frill televisions and has enticed the local consumer to replace old sets. Thus the replacement cycle has come down from 12 to 6 years. JCT Electronics after pricing its product competitively against the imported product have induced players like Thomson and Daewoo to procure the CPTs locally. With increased volumes and local procurement the industry might see better days. But currency depreciation in South East Asia the company's ability to compete with these countries remains doubtful.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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