Highlights of the concall

HSL consolidated revenues increased 265% to Rs 892.32 crore in FY’08 compared to Rs 244.58 crore in FY’07. However consolidated bottomline reported a net loss of Rs 23.99 crore in FY’08 compared to net profit of Rs 61.43 crore in FY’07.

The consolidated results FY’08 include Rs. 40.28 crore losses from the new Bed linen manufacturing facility which was commissioned on October 12th 2007. Further, the company incurred Rs. 9.50 crore of expenses during the first half of the fiscal that relate to the Bed linen facility prior to the commencement of commercial production. The total investment made in the new facility stands at Rs. 437 crore.

During FY’08 HSL through its wholly owned subsidiary, Himatsingka America Inc. (HimA) concluded the acquisitions of Divatex Home Fashions Inc., USA, and DWI Holdings Inc., USA. HimA acquired an 80% and 100% stake respectively in the two firms. Consequently, the above consolidated results also include one time M&A related expenses of Rs.2.20 crore.

Exceptional items include Rs. 27.77 crore towards a mark to market provision for a foreign exchange derivative contract, Rs 1.32 crore pertaining to one off expenses incurred relating to the closure of the Portugal Subsidiary of Giuseppe Bellora SpA and a gain of Rs 3.43 crore on account of profit on dilution of stake by Giuseppe Bellora SpA, in one of its subsidiary company.

During the quarter, the shareholding of Giuseppe Bellora S.p.A. (GB), in one of its subsidiary companies, BP Venture Srl (BPV) has reduced from 57.3% to 15.1%. This is in line with the strategic intent of GB to consolidate its retail operations. The reduction in the shareholding is a result of lower participation in fresh infusion of capital of BPV. Consequentially, BPV and its subsidiary are no longer subsidiaries of the group and hence not consolidated in the above results.

HSL standalone revenues for the quarter ended March 2008 stood at Rs 285.14 crore and consolidated net loss stood at Rs 41.09 crore. The consolidated results during the quarter were primarily impacted by a net loss of Rs 22.43 crore from the new Bed Linen manufacturing facility at the Hassan SEZ in Karnataka. The facility was commissioned on 12th Oct 2007. Exceptional items for the quarter ended March 2008 include Rs 27.77 crore towards a mark to market provision for a foreign exchange derivative contract.

As the new Bed Linen facility has just been commissioned and is being ramped up, capacity utilization was low during the quarter ended March 2008 and stood at 53%.

Himatsingka Wovens, a wholly owned subsidiary of the HSL which owns the Atmosphere brand, launched its Singapore store during October 2007. The store was launched through its 100% subsidiary Himatsingka Singapore.

In view of the rising energy prices, the company is executing a coal based cogeneration captive power plant of a capacity of 12.5 MW at an investment of Rs 78 crore. The plant is expected to be commissioned in Q2 2009. Post commissioning, the company expects to benefit on account of lower steam and power costs.

Going forward the management plans to ramp up and stabilize the Greenfield facility at Hassan, to enhance synergies with acquired entities and continues to explore growth opportunities in emerging markets on the retail and distribution front. The company had committed investments of around Rs. 1000 crore in M&A, green field initiatives and organic expansions over the last 18 months.

Consolidated debt as on 31^st March 2008 stands at Rs 600 crore. Going forward no substantial addition is expected except in power plant project which may require an additional debt of Rs 45 crore.

The company expects Hassan facility to breakeven in FY’09.