Image-building exercise

Sachchidanand Shukla & Laxmikant Khanvilkar

The Jammu & Kashmir Bank (J&K Bank) shows the incipient impact of slowdown eventhough it has done well during the quarter to September 2001, judged by the results when compared on a sequential quarter basis. For J&K Bank, one of the fastest growing private sector banks in the country, the speedbreaker has come in the form of a not-so-conducive current macro-economic environment. Credit offtake is down and low sentiment afflicts the corporate sector that further affects the banking sector.

J&K Bank’s inherent strength and its slew of big corporate clients ensured a steady growth in interest income that rose 33 per cent to Rs 332 crore. Spreads witnessed a squeeze as interest expenditure spurted sharply by 36 per cent. As a result net interest earned ratio fell 280 basis points (bps).

Other income grew by 14 per cent, lower than the growth in the immediately preceding quarter. The ratio of other income to total income fell to 9 per cent (10 per cent). A rise of 36 per cent in total expenditure to Rs 282 crore affected OPM that fell by 200 bps to 23 per cent. Other provisions and contingencies were down to Rs 9.7 crore from Rs 14 crore. Net profit rose 33 per cent to Rs 52.9 crore in spite of a rise of nearly 18 per cent in tax provision. However, on a sequential quarter basis, this is down by 6 per cent.

J&K Bank’s venture into life insurance by forming a joint venture with MetLife of the US is a major thrust area besides the general insurance business. The launch of its depository services and co-branded credit card in a tie-up with American Express can help its state-centrick image that may prompt investors to have a closer look at the J&K Bank’s scrip.

TVS Suzuki
TWO-WHEELER manufacturer TVS-Suzuki (TSL) has hit a roadblock during the second quarter to September 2001. The company reported an 8.8 per cent drop in its sale to Rs 428.3 crore. Even worse, its bottomline skid by 48.6 per cent to Rs 104 crore. It seems TSL’s bad run has just begun, synchronising with its decision to snap ties with Suzuki of Japan. Has the decision come at a wrong time?

However, the decision has not had an adverse fallout on the company’s current functioning, as the present licensing arrangements will continue for a period of 30 months. This should enable TSL to produce the licensed products under the Suzuki brand name and TSL will continue to service all licensed products sold by it even after expiry of the license.

Hence the performance may, in fact, improve given the prevailing scenario of the economy vis-a-vis automobile sector. The two-wheelers segment, particularly the motorcycle segment, continues to do well. The segment recorded a massive 30 per cent growth in sales on y-o-y basis. It grew much faster in the month of September with a 36 per cent rise in sales to 34,544 units up from 25,537 units in August 2001.

Unfortunately the offtake of other two-wheelers such as scooters, and scooterettes declined during September. There are some signs that scooters may pick up in sales. TSL has focused on powered two-wheelers. Yet, it has taken a hit in this segment as sales have been on the decline continuously. The company sold 386,285 units during April-September 2001, down from 421,349 units during October-March 2001. It continues to maintain the leadership position in both the moped and scooterette categories with a market share of 68 per cent and 38 per cent respectively. While mopeds declined by 22 per cent, the sale of TVS Scooty rose by 20 per cent during the first half of 2001-02. However, in the quarter to September 2001, moped sales have grown by 30 per cent.

There is optimism that recovery is round the corner if part of the rural incomes materialises in the coming months consequent to a good agriculture season, backed up by a much-hoped for public spending on infrastructure. Yet, the company counts a lot on growth of motorcycle sales that may receive a further boost with the introduction of state-of-the-art world-class four-stroke 110 cc motorcycle TVS Victor.

The company has also embarked upon cost reduction aggressively. This is reflected in 7 per cent drop in operating expenses to Rs 399.6 crore and 20 per cent drop in interest expenses to Rs 2.88 crore during the quarter to September 2001. TSL has implemented a company-wide ERP system linking all dealerships and suppliers with it.