Queryist : Sarathi Agarwal , Panvel

Modern Denim Ltd. (MDL) is engaged in the manufacture of denims, terry suitings, terry towels, etc. MDL has 68 weaving looms which includes 20 imported Sulzer looms. It manufactures and processes 36 lakh metres of cloth. MDL's financial performances over the years had been mediocre , though during 1995-96, its performance recorded a sharp upswing with its sales rising to Rs 116.92 crore, an increase of 93 per cent. The net profit recorded thereon was Rs 22.62 crore, up by 88 per cent and the resultant EPS derived therefrom worked out to Rs 6. During the first half of 1996-97, its sales and net profits amounted to Rs 71.21 crore and Rs 11.09 crore respectively, which translated into an annualised EPS of Rs. 5.2.

RATIONALE : The company executed a premium worsted terrywool suitings expansion project with technical assistance from Sulzer Brothers. However, MDL experienced a time and cost overrun which was a result of change in machinery , locational shifts and the declining rupee . Moreover, the internal accruals and indirect credits from suppliers was not sufficient to meet the differential cost. The company was thus affected, and it is still to fully recover therefrom.

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