The company can be considered as a pure `software' company as 80-85 per cent of its revenue comes from such software development. The growth rates in topline and bottomline really match with the best in the business. The former shot up by 105.44 per cent to Rs 11.71 crore, while the bottomline jumped exponentially to Rs 1.89 crore from a mere Rs 0.33 crore. But, sadly for the investors, the operating profit margin (OPM) is low at 17.9 per cent. The apparent reason for this is that the increase in staff cost and software development expenses. The same has skyrocketed by 180 per cent to Rs 5.43 crore. This comes to 46.37 per cent of the sales as against 34.04 per cent in the corresponding period of the previous year.

The phenomenal rise could be attributed to the San Jose and SEEPZ centres becoming operational in the later part of the quarter. While the manpower must have been already recruited, the revenues from these centres will take a while to come in. However, the company thinks that due to increase in overseas software activities, the employee cost has risen! Whatever may be the reason, the operational profits grew by a healthy 153 per cent to Rs 2.10 crore. The interest cost was nil as observed in most of the software companies.

Melstar's current business model includes e-business and web applications, object technologies, client server legacy system, system integration and networking and product development and maintenance. It has core competence in IBM-based Net commerce solutions, Internet applications and banking business domain knowledge. It is also the largest business partner for Tata IBM.

The company has started focussing on promoting one of its latest software solutions, documentation management services (DMS), in the UK and US markets. To gain the necessary expertise, it has a joint venture with Linkhand business solutions, a specialist in such software solutions. India will serve as a major base for developing DMS, which will enable management of database and documents in the electronic format. The target for the product will be the banking, finance and insurance sectors. It has already bagged some major contracts from the Citibank. A recent development in the West could help increase the company's market. Some of the utilities departments such as police in the UK have already taken a major initiative to digitise their entire database. Currently, the company has got a 20 per cent patent right for a DMS solution alongwith a UK and an Ireland-based company.

In addition to that, it has 60 per cent marketing rights for the product in India and a 20 per cent marketing rights in the USA.Fertiliser Industry
The plight of the fertiliser industry, particularly the manufacturers of di-ammonium phosphate (DAP), is unenvious. Not only is there no clarity on the government's pricing policies, the prolonged delays in disbursement of ad-hoc subsidies has led to losses for manufacturers. A case in point is Hind Lever Chemicals Ltd, which plunged into the red for the first time, in the second-quarter of the current calendar year, mainly due to inordinate delays in payment of subsidy. The grim scenario has also affected the companies' share prices. The Hind Lever Chemicals scrip has shed about Rs 68 (nearly 38 per cent) since July 27, when the company announced its second-quarter results. The share price nosedived from Rs 252 on July 27 to a low of Rs 183 on August 12.

As against the industry's request for a minimum base rate of Rs 5,000 per tonne for indigenous DAP for 1999-2000, the government announced in May 1999, a base rate of Rs 4,600 per tonne. This was not the final blow though. In May this year, the government declared the final subsidies, which were up to Rs 450 per tonne lower than the base rate. Far from being adequate, these rates leave no headroom for the industry, manufacturers opine.

The fertiliser industry, which has been crying hoarse against the concealed methodology adopted by the government in arriving at the price of DAP, is utterly displeased by the pricing system which fails to cover even the cost of production. It does not even take into consideration external fluctuations such as the rupee-dollar rate and input costs. If the disgust exhibited by industry players - on the ambiguous pricing policies and the sheer state of neglect towards the fertiliser industry - is anything to go by, the industry could only witness a spate of exits or closures.

Moreover, the possibility of international exporters taking advantage of the situation to jack up prices in the backdrop of a DAP shortage for the ensuing rabi season, is another threat that looms large.

In the last one month, the FOB price of DAP has gone up from $140 per tonne to about $175 per tonne. Last year, the C&F price of DAP was at its lowest level of $165 per tonne. With the opening stock for rabi at 1.3 million tonne and the production at 4 million tonne, the stock is falling short of the total consumption of about 6-7 million tonne for rabi. Usually one-third of the DAP consumed is imported. With the total time taken for contracting imports being at least two months (after taking into consideration the infrastructure bottlenecks) a shortage seems inevitable if the government does not wake up now.

KSESH (with contributions from Manish Joshi and Namrata Singh)