What are the strengths that your company banks on to maintain its record of better performance year on year on growth trajectory?
We strongly believe in keeping our foot firm on internal efficiencies rather than relying on the positive waves alone. The Company follows the balanced approach in that the external factors are discounted based upon the best possible intelligence but internal factors are strongly leveraged. We have long maintained that funds management in textile is a strong pillar for sustainable engine. Right time of funding for right procurement of inputs is the basic success factor that we have practiced over the period of time to maintain almost seven decades of uninterrupted operational profitability of company. We believe in maintaining quality standards in line with the market expectations so as to have automatic pull in the market rather than creating ways of pushing the material. The biggest of all such strengths is that we recognize our weaknesses internally and work on avoidance of the same.
As of now, the Company has identified certain expansion opportunities to move up and horizontally in the value chain. Serious work is going on evaluation part apart from conducting market study.
The Company has also entered into institutional sales to derive a natural hedge against seasonal vagaries and make a robust growth cycle. We intent to expand in this area by having dedicated capacities customized to specific segmental requirement to ensure a regular Return of Investments.
How would you comment on current cotton issues?
The prices are high at Rs 45000-46000 / candy but we will not be surprised if there is hike of another 25% in short to mid-term before having some correction and settlement. The situation is precarious where one needs to balance the diverse interest of the industry and farming community. Politically, the balance is tilted against the industry and therefore, we need to learn to live with the realities. The good point is that the prices of products are moving in tandem with cotton prices. The bad part is that under normal monsoon, one can expect the crop size to reach a new high in subsequent year due to higher cultivation area that would ultimately lead to drop in prices. Better part could always be to keep the buffer stock within the industry to take care at the time of poor or not-so-good monsoon. The balancing between the domestic and external economies need be arrived at keeping in view the fact we have compulsion to ensure growth of both these segments. The average price of cotton for the entire crop season could range between Rs 40000-42000 / candy. The off-take of cotton products would have a beating in market with a significant part of customers shifting to synthetic products as is visible by change in the prices of synthetic materials and fat order books of manufacturers.
Your recent quarter & half year end results (30th Sep 2010) shows that raw material expenses constitute over 68% of your total operating costs. What are your plans to reduce the impact of raw material costs on bottom line?
We believe, external costs would rule apropos the market conditions. We need to derive maximum benefits through internal controls that would include increase in yarn recovery, improvement in quality to fetch higher prices and ensuring correct quality of cotton at the correct prices to take care of any possible correction in input pricing. We agree, the game is tough and gaining uncertainty day by day with lot of grapevine in industrial sector. We intent to focus more on the top line rather than on middle line (Raw materials costs). A higher top line normally would provide adequate opportunities for a fat bottom line in mid to long-term. Increase in value addition could bring down middle line as percentile to top line and we are seriously working on it.
Statement of Asset and Liabilities (30th Sep 2010) also depicts about the Reserves & Surplus. How do you envisage its strategic investment? Would this be inorganic or organic mode of expansion? Is LN Bangur Group likely to venture into diverse sector too?
The LN Bangur group is already present in paper & pulp business apart from tea gardens. We are in the process of building the group based upon the core competence acquired in the chosen streams of businesses. The group flagship, MSUM Ltd has been a source of generating businesses for the group and benefitted by way of appreciation in its value of investments. With a virtually debt free financial position as on 30th September 2010, the flagship unit is poised for an expansion plan that could entail huge capital outlay, the biggest so far in the lifetime of the Company. We are not ruling out our increasing interest in other group companies as long as the shareholders’ value accretion is assured on sustainable basis. We are looking at the options of acquisitions in textile segment if the target is aligned to our value addition statement.
Your Group is leader in Paper sector. Can this business ever be a link to drive your Group to nonwovens sector too?
Well, when we entered into paper sector, we could have never thought about convergence of the two businesses. As of now, we are not working on this direction but over the period of time, the huge capacities of most economical manufacturer of Pulp (i.e. The Andhra Pradesh Paper Mills Ltd) can be added to our competence in textile to provide innovative solution to some functional deliverance and derive some of the dreams that the promoters could not have realized at the time when the two companies were conceived.
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