Vardhman Textiles posted a net profit of Rs 90.20 crores compared to Rs 154.32 crores for the March quarter. The fall in profits came on the back of higher depreciation. The lower margins are on the back of higher raw cotton prices. Total debt as on March 31 is close to about Rs 2,000 crores. Primarily majority of debt is covered under TUF which is a subsidised debt.

There is not much of an inventory build-up. Generally Vardhman works on a 30-day inventory or finished goods. Last year, the company could cover the quarter 2013-’14 at reasonable prices and as a result margins were better. This year, there was a reversal. The quarter during the peak season was at much higher prices which later on came down and as a result, prices got adjusted to that. So, for anyone who had stocks of cotton, this was a disadvantage.

This year there was a change in the depreciation method because of the change in the act. The depreciation required to be provided was much higher than last year’s figure, so almost Rs 150 to Rs 175 crores is the impact of that. These are the two major reasons for drop in margins. On topline, not much capacity has been added since last year. However margins are expected to be better compared to last year.

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