Dewan Mushtaq Group, one of the largest and most diversified industrial and trading groups of Pakistan, is going to launch another project in the spinning sector - Dewan Farooq Spinning Mills Ltd, (DFSML) and is planning to sell 150 million rupees of shares through the Karachi Stock Exchange. It is expected to be one of the most modern yarn-manufacturing units with the state-of-the-art technology. The majority of the yarn produced would be exported to Europe, as there is a huge demand of high quality yarn due to high operating and labour cost.
The competitive advantage of producing at a lower cost and the large demand potential provides opportunity to Pakistani manufactures to export fine quality yarn to Europe and other foreign countries at premium prices that would generate handsome income to the company. The installed capacity of the 28,800 spindles is 6.5 million lbs per annum. The total cost of the project is expected to be Rs 1,250 million.
The company's offer price is Rs 10 per share, the subscription date is 27th & 28th April, 2005 whereas the issue amount is Rs 600 million, sponsor contribution is Rs 310 million, pre-IPO amount is Rs 140 million and IPO amount Rs 150 million.
The three textile mills, Dewan Textile Mills, Dewan Khalid Textile Mills and Dewan Mustaq Textile Mills under the Dewan Mushtaq Group management are producing coarse to medium count yarn, whereas the Dewan Salman Fibre is involved in the production of polyester fibre, all the textile mills are also involved in the export business as well.
COTTON CROP: Due to the bumper cotton crop this year, the availability of cotton at reasonable prices augurs well for the textile industry as the cotton being the major portion of cost of production therefore, on the back low cotton prices as well as higher exports owing to WTO regime, the textile industry will definitely reveal better financial performance.
Sadia Sultan, research analyst from Noman Abid Co, said that in May, 2004 the DMG took over the management and controlling shares of Dewan Hattar Cement Limited (formerly Saadi Cement Limited) and Dewan Cement Limited (formerly Pakland Cement Limited), the DMG decision to take both the cement companies was primarily due to the intense growth in the cement industry in Pakistan based on the heavy allocation of Rs 202 billion on PSDP along with government infrastructure projects like dams. The construction industry is in its full swing and creating heavy demand of cement. Although the recent surge in the UAE cement prices and the exceptional growth in neighbouring countries have created a small window of opportunity for Pakistani cement in Afghanistan and the UAE, there will be a significant impact on the sector as a whole.
Now the Dewan Mustaq Group is entering into a new market of fine and super fine count compact yarn used in the production of high quality products. Dewan Farooq Spinning Mills identified a new target market that is a European market to export yarn, as there is a heavy demand of fine yarn, therefore, the company will tap the market on a very competitive rates because of lower cost of production and portray tremendous financial performance in the future.
DFSML have the competitive advantage over its competitors because of the group that has already penetration in the foreign export market.
Since the WTO regime, the only companies would survive that are cost competitive and having the latest technologies.
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