The Century Enka Limited - the over Rs 933 crore (Rs 9.33 billion) B K Birla group company - in which Acordis Overseas Investment BV of the Netharlands held over 35 per cent stake, on Saturday announced an ambitious Rs 170 crore (Rs 1.70 billion) capacity expansion programme for its Pune and Bharuch factories.

"Of the total, Rs 105 crore (Rs 1.05 billion) would be spent on setting up a conversion plant for surplus polyester chips to polyester yarn at Bharuch and the balance on replacing old machineries at Pune and other plants," Century Enka's senior president G M Singhvi said in Kolkata, while addressing the 37th annual general meeting of the company.

Later, talking to reporters, he said, "We have already committed close to Rs 65-68 crore (Rs 0.65-0.68 billion) since last year for improving machineries at all the plants."

"Most of the funds for expansion would be arranged from internal accruals and if required institutional support might also be taken," Singhvi added.

He said the company had acquired the Pune plant in 1969 and a number of machines needed upgradation while the Bharuch plant started operation about five years back.

Explaining the reason behind going for the expansion at Bharuch, Singhvi said in polyester chips, the domestic supply was outstripping the demand significantly and the margins were under pressure and their share in the domestic textile yarns market was only about six per cent.

The company was optimistic about the future in view of the ongoing modernisation, debottlenecking of the existing capacitites of the manufacturing plants and the proposed expansion plan, he said.

Singhvi said about 70 per cent of the cost of their manufacturing was raw material prices and fluctuations in the international prices of crude oil had a severe impact on their performance last fiscal.

"While PTA prices went up from a low of $28 at the beginning of the year to $45 in March, MAG prices almost doubled to $44 in March from a low of $22, before coming down once again between April and June. We expect that July prices may go up again as the international prices are hardening," he said.

The abnormal increase in raw material prices was the main reason for the decline in the operating profit in 2002-03 to Rs 121.04 crore (Rs 1.21 billion) from Rs 139.19 crore (Rs 1.39 billion) in the previous fiscal, as they could not pass on it to customers despite the turnover going up to Rs 933.78 crore (Rs 9.34 billion) from Rs 891.53 crore (Rs 8.91 billion), Singhvi said.

Asked to comment on the recent Sebi directive that Acordis would have to make an open offer to acquire 20 per cent shares of Century Enka consequent to its taking over the stakes of Akzo Nobel in 1999, alternate director of Acordis K R V Subrahmanian said they had not gone through the order.

"We will do everything as required and which will benefit shareholders. I don't think shareholders will benefit in any way, if we have to make open offer at around Rs 72 against the prevailing market price of around Rs 90. However, a decision would be taken on receipt of the Sebi order," he said.