KPR Mill bucks the recessionary trend

KPR Mill bucks the recessionary trend

Tirupur, Tamil Nadu: KPR Mill Ltd, a major textile firm, said it expects revenues to increase by nearly 50% in the current fiscal, even as garment exporters here are complaining of loss of business and declining profits because of rupee appreciation.

The firm, which recently sold its shares to public in an initial public offering, gets 25% of its annual sales—Rs512 crore last year—from export of garments. The rest comes from selling yarn and fabrics within India, though mostly to exporters.

“All our export contracts are short term in nature. This helped us to avoid adverse effects of rupee appreciation," said P. Nataraj, managing director and founder of KPR. The company finishes an export order in about three months, whereas long-term contracts run from six to 12 months.

Textile exporters based in Tirupur, led by Tirupur Exporters Association, have claimed that rapid appreciation of Indian rupee, which gained 11% against US dollar since January this year, has made them uncompetitive against exporters from Bangladesh, Pakistan and China. Already 8,000 jobs have been lost in Tirupur area because of rupee appreciation, the association claimed.

KPR reported one-third increase in its net profit in the second quarter ended September, mainly due to rising apparel sales and increased domestic demand for yarn and fabric. “People without integrated facilities will be affected by rupee appreciation," said Nataraj.

KPR has facilities from processing of raw cotton to garment making, making it one of the largest integrated players in Tirupur. The Rs472 crore ongoing expansion programme will be completed by December 2008 and will double its capacity across all segments, from yarn production to garment manufacturing.

The company has doubled its revenue and capacity every two years in the last six years and is hopeful of repeating the same in the next two years. “We will operate at full capacity in the next year (2008-09) itself," said Nataraj.

After expansion, KPR will have around 210,000 spindles making it the second largest player and it will also triple its garment making to 38 million pieces per annum from the current level of 12 million pieces per annum. The company’s processing facility, where dye or colour is added to the fabric, would also be ready by December 2008 and will contribute Rs40 crore to the revenue.

The company, in the last 12 months, has attracted private equity investments of Rs105 crore from Blue River Capital and Brandot Investments, and issued 16% of its share capital to public at an issue price of Rs225 per share. As a result, the company’s debt equity ratio is at 0.72:1, giving it more room for debt funding for further expansion.

KPR’s shares in Bombay Stock Exchange closed Monday at Rs122.30 per share, well below the IPO price.