Although this move has affected sales, it should help in keeping finished goods inventory under check and improve the working capital position.

Bearing grade alloy steel, which accounts for 40 per cent of total raw material cost, is mostly imported. Its high prices and rupee depreciation made matters worse. Consequently, total expenditure has fallen down marginally by 1.9 per cent to Rs 78.5 crore. Operating profit slipped to Rs 11.4 crore (Rs 18.8 crore). OPM shrunk by more than 600 basis points to 12.7 per cent. Interest jumped to Rs 7 crore from Rs 3.2 crore. This may be owing to expenditure incurred on modernisation of Pune plant. Depreciation too went up by 26.5 per cent to Rs 10.5 crore. Bottomline before extraordinary items turned red, with loss of Rs 3 crore as against profit of Rs 10 crore in the corresponding quarter of the previous year.

The company is targeting export market to counter the recession in the domestic market. Along with improvement in productivity and better asset utilisation, it has also undertaken cost-cutting initiatives. Recently, a VRS scheme was introduced for its employees at the Pune plant. SKFI has the largest market share of around 37 per cent in ball bearings and 23 per cent in Taper Roller bearings. It is a major player in the OEM (Original Equipment Manufacturers) segment. This segment has been more affected than the second-hand goods market. Then, of late, imports have become very cheap, particularly from South East Asian nations, resulting in an increased competition from global players. This too has affected the margin of local players. However, to the company's credit, this was the only quarter to record loss in the entire accounting year despite all odds.

Rallis India
Sale of its pharmaceutical division by Rallis India recently, is in line with the company's overall restructuring strategy of focusing on its core-competence viz., agro-chemicals. This sale would fetch Rs 49 crore to the company.

The pharmaceutical division of Rallis contributed around Rs 45 crore to the total turnover of Rs 1432 crore for the year ended March, 2000. While this division has been growing at a decent pace of 20 per cent, the volume generated was a measly 3 per cent of the total turnover.

The amount generated through this sale could be utilised for retiring huge debts to the tune of Rs 336 crore that the company had in its books on March 31, 2000. Although the steps taken by the management are in the right direction, the future of Rallis still depends largely on the rain gods as well as government policies regarding retention price of urea.

This over-dependence on the vagaries of nature has led to a steep fall in the revenue as well as net profit for the quarter ended December, 2000.

Adverse conditions in the agricultural sector have resulted in reduced volumes and lower price realisation.

The revenue from operations for the quarter declined by a huge 23 per cent to Rs 275 crore from Rs 357 crore in the corresponding quarter. The situation has worsened now, with major parts of Gujrat being rocked by earthquake.

Threats of cheap import from China has plagued the industry. These imports have not only threatened the export markets, but have created a dent in the domestic market as well. The net profit as a result of these factors has turned red at Rs 8.7 crore as against a profit of Rs 0.28 crore in the corresponding period.

The forthcoming budget is unlikely to have any major benefits for the agro-chemicals industry and the performance of Rallis in the coming quarters rests solely on the wishes of the rain gods.

Manish Joshi & Prashant Kothari