Alok Industries to buy 60% in Czech textile firm
Textiles maker Alok Industries Ltd. said on Tuesday it would buy a majority stake in Czech firm Mileta International to strengthen its apparel and home textiles business.
The company said it would pay 13.96 million euros ($17.81 million) for a 60 per cent stake and retain the option to acquire another 19.6 per cent in Mileta.
"They have tremendous design capabilities and products but are hit by high cost," Managing Director Dilip Jiwrajka said.
" We are cost effective. We will use their technology and produce for the international markets and brands."
Alok expects the deal to close in 3 months and the integration of operations in 12 months of the acquisition.
Mileta, with a revenue of 18 million euros, makes shirting fabrics, handkerchiefs and a range of home furnishing, the company said in a statement.
The Indian company will get ownership of brands such as Wall Street, Osaka and licensee rights of Daks handkerchiefs through the deal and plans to use Mileta’s brands to widen its retail presence.
The company plans to increase its stores to nine from the current two by the end of the year.
"After increasing capacity they need to grow margins by producing at least 10-12 million metres of high value-added fabrics annually," said Sonal Shrivastav, senior analyst with Religare. "The acquisition gives them the technology."
Alok has ramped up its capacity by 73 per cent to 82.5 million in the last three years.
Fabric makers on average realise about $1.75 per metre, but when they have brands and make specialised products realisation goes up to $3-4 a metre, Shrivastav said.
Alok entered a deal in July to supply 5 million metres of value-added flannel shirting fabric a year to Portugal-based shirt maker Teviz Textil Vizela SA.
Indian textile firms have gained from a production shift to low-cost centres since the abolition of quantitative limits on textiles on January 1, 2005. Firms are looking to buy European and US brands to service recently expanded capacities.
Home textile firm GHCL Ltd. took a 90 per cent stake in US firm Dan River for an undisclosed sum in December 2005, and bought UK-based Roseby’s for $50 million in June this year. Welspun India Ltd. bought a majority stake in UK-based home textile chain Christy in July this year.
Alok shares were up 0.7 per cent at 65.15 rupees in a firm Mumbai market.
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