The last time the sales fell was during 1992-93, when turnover was down by 5.1 per cent. Correspondingly, net profit during 1997-98 too was down by 61.35 per cent to Rs 294.66 crore. At the same time, with a 54.1 per cent drop in operating profit, margins on the operational level have fallen from 10.43 per cent to 6.72 per cent.

And if one were to compare the first half's performance with the second half, net profit was Rs 80.73 crore, almost one third of the first half's figure of Rs 213.93 crore.

But the company has been honest enough to accept its dismal showing. In its annual report for 1997-98, the company claims, "Telco failed to listen to the warnings signals from the market-place about the softening of demand as far back as the end of 1996and continued to operate at high levels of production in the belief that the slowdown was a temporary phenomenon and that the demand would revive".

The rest is history. The company had piled up huge inventories. It was only in the second half that the company took remedial action and reduced production drastically.

As on March, 1998, although inventories declined to Rs 965.95 crore, the fall was much lower than the drop in total sales. Inventories were down by 15.50 per cent as against a sales drop of 28.07 per cent. This clearly reflects that the strategy to keep its production level high has hurt the most, apart from the slowdown in demand.

The company's total debtors have kept apace with sales. However, debtors over six months have recorded a sharp jump of 79 per cent jump to Rs 232.12 crore which is a cause for concern.

Another area where a change has taken place is in investments. During the year, investments have gone up from Rs 724.98 crore to Rs 837.10 crore. And most of the increase has goneinto the group/joint venture companies. These companies are: Tata Finance (Rs 27 crore), Telco Elxsi (Rs 12.56 crore), Tata IBM (Rs 23.09 crore), Tata Communications (Rs 22.40 crore) and Tata Autocomp (Rs 25 - crore). The shareholders might question the company's decision to raise investments especially at a time when the performance is not encouraging. During 1997-98, interest burden was up by 26 per cent to Rs 272.01 crore.

For the stock market, the real cause for the falling stock price is not the discouraging performance during 1997-98, but the fact is that there are no signs of improvement in the performance in the current year either.

The first three months of 1998-99 have been far from impressive. For instance, sales during April was down 71.6 per cent to 1,463 vehicles in the M & HCVs segment. In the LCVs segment, it was down by 17 per cent to 2,023 vehicles.

With a 30.41 per cent jump in borrowings to Rs 3,308.74 crore, interest cost is expected to remain higher in the current year. The unionbudget also failed to bring any positive news for the company. The budget meant higher cost of automobile components. Similarly, higher excise duty also came as a dampener for the company. All these forced the company to increase its selling prices for `Sumo' and `Safari' 6.15 per cent and 4.26 per cent respectively.

As far as the small car project is concerned, a breakeven would only be at 60,000 units which would take at least two years. While signs of recovery are not visible, the only factor which appears to be in favour of the company is a good monsoon. It can give a push to sluggish demand but even this would take some time to materialise.

While the recent rally in the Sensex might also restrict selling on this counter, the stock has a strong support level at Rs 97. A fall near that level is expected to attract huge investment-buying. By then, the demand may also recover.