United Towel Exporters is confident that exports to Europe will go up exponentially post the expansion of business following acquisition of a 70 per cent stake in the Netherlands-based Vespo Groep BV. The acquisition of majority stake in the home textile company would propel United Towel’s exports to $13.50 million in 2018, up 221 per cent from the current $4.2 million, the Finance Division told the Cabinet’s Economic Coordination Committee (ECC) in a meeting held late last month.
The projection while requesting the ECC to permit United Towel to remit $9.39 million to acquire 70 per cent equity in Vespo Groep BV. The State Bank of Pakistan (SBP) had forwarded the company’s request for remitting the money. Sponsors of United Towel have over 30 years of experience in value added textile manufacturing and exports of diverse products for the hospitality, healthcare, home fashion and work wear industries. Vespo Groep is a textile market leader in designing, producing and supplying products throughout Europe. The group’s expansion to Nordic countries is expected to enhance United Towel’s export prospects. The payback period of the proposed investment was expected to be about 13.5 years with the internal rate of return estimated at 26.72 per cent.
The proposed equity investment would be financed from export proceeds retained in special foreign currency accounts of the company. SBPs regulations permit textile exporters to keep 10 per cent of their export proceeds in foreign exchange. The Finance Division recalled that the ECC had decided in 2002 that the Central Bank should approve overseas investment proposals of up to $5 million, while investments valued at over $5 million should get the green signal from the ECC.
The SBP had evaluated the proposal and was seeking permission for remitting $9.39 million on the condition that the company would fund all future foreign remittances from the same account.