The Arun Bajoria - Bombay Dyeing Tussle

            

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Themes: Mergers / Acquisitions and Takeovers
Period : 2000 - 2001
Organization : Hooghly Mills Company Ltd / Bombay Dyeing / SEBI / FICCI
Pub Date : 2001
Countries : India
Industry : Financial Services

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Case Code : BECG029
Case Length : 11 Pages
Price: Rs. 200;

The Arun Bajoria - Bombay Dyeing Tussle | Case Study

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Background Note

Established in 1879, BD was one of the oldest and largest mills in the Indian textiles industry. The company was promoted by the Wadia family and had been managed by successive generations.

BD's major business comprised textiles (predominantly cotton) and chemicals (DMT - Dimethyl Terephalate, used for fabric manufacturing). The company primarily manufactured and sold cloth, which accounted for 97.4% of the Rs 5.35 billion turnover in 1999-00. In cotton textiles, BD was one of the oldest players in the country dealing in shirting, suiting, sarees, dresses, bed sheets, pillow covers, furnishings, blankets and other readymade garments. The company was also present in the industrial segment where it supplied canvas and other specialty grade cloth made according to users' specifications to canvas shoe manufacturers. BD was one of the leading producers of DMT in India. The company owned five textile units - three at Mumbai (Maharashtra), and one each at Roha (Maharashtra) and Jamnagar, (Gujarat) besides a DMT plant at Patalganga (Maharashtra). The Jamnagar unit had 25,000 spindles and the two Mumbai units had a combined capacity of 137,000 spindles and 1,900 looms.

Table I
Bombay Dyeing – Profit & Loss Account

Period ended

 Mar-98

 Mar-99

 Mar-00

 1-Mar

Gross Sales

 9,066.40

 8,610.00

 9,464.90

 9,292.00

Excise Duty

 -1,183.60

 -971.5

 -983.2

 -1,009.60

Net sales

 7,882.80

 7,638.50

 8,481.70

 8,282.40

Other income

 1,283.40

 910.9

 1,022.20

 1,132.10

Total income

 9,166.20

 8,549.40

 9,503.90

 9,414.50

Raw materials

 4,663.00

 3,826.40

 4,200.70

 4,498.40

Stock adjustment (Inc)/Dec

 -34.4

 23.9

 -51.4

 -502.7

Cost of material

 4,628.60

 3,850.30

 4,149.30

 3,995.70

Employee cost

 849.3

 982.1

 927.9

 918.7

Power & fuel

 1,080.80

 1,007.10

 1,174.40

 1,200.50

Advertising/ promotion/ public

 130.4

 140.8

 139.4

 223.3

Other expenses

 1,068.80

 1,140.10

 1,498.60

 1,699.50

Cost of sales

 7,757.90

 7,120.40

 7,889.60

 8,037.70

PBIDT

 1,408.30

 1,429.00

 1,614.30

 1,376.80

Interest & finance charges

 676.6

 728.6

 683.8

 717.2

PBDT

 731.7

 700.4

 930.5

 659.6

Depreciation

 481.5

 490

 484.6

 478.3

PBT

 250.2

 210.4

 445.9

 181.3

Provision for taxation

 20

 8.1

 14.3

 -

Adjusted PAT

 230.2

 202.3

 431.6

 181.3

Dividend payout

 157.3

 136.5

 136.5

 90.4

Source: www.indiainfoline.com

Over the years, BD had built strong brand equity and a well spread out network of retail outlets. However, due to a lack of focus and poor marketing skills, the company saw its competitive position weaken in the Indian textile business. Its backward integration into DMT considerably eroded shareholder wealth. The recessionary conditions in the textiles and apparels market in the late 1990s led to declining margins for the company. (Refer Table I). As a result, in the late 1990s, BD focussed on cost cutting through tighter inventory controls and downsizing.

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