KARACHI, June 10: Market talk suggests that the Dewan group is taking a hard look at the possibility of merging all three textile companies into the flagship fibre unit.

“There have been ‘rumours’ in the market that the group is actively considering merger of Dewan Textile Mills; Dewan Mushtaq Textile and Dewan Khalid Textile into Dewan Salman Fibre Limited (DSFL),” say analysts at brokerage, Taurus Securities.

If the group gives in to the urge to merge, it would be following in the footsteps of DSFL’s principal competitor, Ibrahim Fibres Limited, which had recently amalgamated with Ibrahim group’s textile mills and the captive power plant.

The recently released results of Dewan group’s textile companies for the half year ended March 31, showed Dewan Textile making an operating profit of Rs130 million; Dewan Mushtaq Rs27 million and Dewan Khalid Rs24 million.

Earlier in mid-May, DSFL—the largest PSF producer in the country— had reported operating profit of Rs1.6 billion for the nine months to end-March 2002.

Of that sum, as much as Rs1.2 billion was wiped out by ‘financial & other charges’. That, of course, was due to huge debts on the balance sheet.

As such, the group may be prompted to consolidate businesses to fuel synergies and also to reduce the debt to equity ratio of DSFL, giving that company a more financial flexibility.

Analysts point out that DSFL’s current ratio at end- December last year stood at 1.03 and debt-to- equity ratio was 48:52.

Then early last month, DSFL had announced that it would raise cash through the issue of preferred stock. The company having increased its authorised capital from Rs3.6 to Rs6.3 billion to accommodate the proposed preference shares. “The merger of DSFL with the group’s textile units—if it actually takes place—would certainly reduce the company’s debt to equity ratio and it is likely to go well with the investors,” said one equity trader.