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Bombay Dyeing considers hiving off DMT division - Views on News from Equitymaster
Bombay Dyeing has initiated a feasibility study for hiving off its loss making di-methyl terephthalate (DMT) division. The division has been incurring losses for some years now and has been primarily responsible for the company's subdued performance over the years.
The company is evaluating the options of either getting out of the business or roping in an ally for the new company that will formed to take over the DMT business. Bombay Dyeing plans to focus on its textiles business.
The hive off will benefit the company in two ways. First, it will no longer have to support a loss making division. This will improve overall profitability. Second, the sale will result in fresh cash inflow into the company. This could be used to beef up its marketing network. Moreover, the company can then step up its advertisement budget to reinforce its brand image. This will help it in achieving leadership status in the textiles sector.
The only drawback of the sale would be that the company would have to source its raw materials from the market. This could put pressure on margins in times of higher DMT prices.
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