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RSWM acquires 48.17% stake in Cheslind Textiles

Mar '07
RSWM Limited (RSWM) announced that it had concluded a transaction to acquire 48.17% equity stake in Cheslind Textiles Limited, a 100% EOU manufacturing cotton yarn with its headquarters based in Bangalore. RSWM will acquire 48.17% equity shares at Rs. 25 per share from the promoters of Cheslind Textiles resulting in a total consideration of Rs. 278 million.

In line with the listing and SEBI guidelines RSWM will shortly be making an open offer to the shareholders of Cheslind Textiles to acquire upto another 20% equity stake at Rs. 25 per share. Should the open offer be totally successful the Company will have acquired 68.17% equity stake in Cheslind Textiles at a total consideration of Rs. 393 million.

RSWM had earlier indicated that it would like to rapidly scale its yarn operations keeping in view the anticipated buoyancy in the textile sector going forward. This initiative will augment the Company's objective of fast expanding its capacities across various yarn segments. Post acquisition the Company's total spindlage will increase to about 360,000 spindles. RSWM believes that it will be in a position to better leverage the operations of Cheslind Textiles, given RSWM's size and experience in this sector.

The acquisition brings in a highly complementary basket of products that includes super fine count cotton yarns and also provides RSWM with an established foothold in the international market.

The Company believes that it will be able to generate good returns on its investment in Cheslind Textiles keeping in view that the acquisition cost per spindle is Rs. 15,500 compared with Rs. 25,000 per spindle that will be required if such a plant is established on a green-field basis.

Also the Company plans to better manage productivity and efficiency levels of Cheslind Textiles, and deliver integration related benefits from the acquired operations. The Company proposes to fund this acquisition through internal accruals.

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