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A toast to the champions of 1997
Harshad Mehta
Nineteen ninety seven is a year which we will all remember 20 years from now when we laze on the deck of our yachts in the Arabian Sea and admire our nerves at having survived the worst 365 days in the history of the Indian stock market.To prevent this column from degenerating into a sob-story, I would like to do the opposite: raise a toast to some of the champions of the year. And they are: ITC Limited: Quite easily raises the biggest cheer of the year. For quite a few reasons. One, it lost ITC Classic which would have been a huge moral, financial and psychological setback for any parent. Two, the heat turned on a number of its executives accused from plain mismanagement (on the better side) to deceit (the worse side). Three, its results for 1996-97 were okay, not really big deal. Four, its stock plunged. But a crisis is when some of the biggest heroes are made. ITC proved that this is just so. For the first half of 1997-98, the net sales increased only a wee bit: from Rs 1382.91 crore to Rs
1473.14 crore but that is where the gloom ended. Thereafter, ITC staged a coup of sorts: its other income dropped from Rs 53.80 crore to Rs 38.22 crore which means that the company presented a cleaner balance sheet. Total expenditure also dropped from Rs 1007 crore to Rs 939 crore, interest outgo fell from Rs 57 crore to Rs 41 crore and gross profit just knocked the daylights out of all those who had shorted the stock emotionally. ITC Limited's bottomline increased from Rs 180 crore in the first half of 1996-97 to Rs 301 crore in the first half of 1997-98. A little like Muhammad Ali losing the first seven rounds on points, and then sending Foreman to the canvas in the eighth. Asian Hotels: If you see the performance of the first half of 1997-98, the post-interest profit has dropped from Rs 43 crore to Rs 40.46 crore. But forget that little blip: see the bigger picture. For the 12-month ended March 1997, Asian Hotels posted a net profit of Rs 78.59 crore - on an equity of Rs 22.80 crore. But get
into the nitty-gritty to get a better fix on the company: interest outgo for a company with a turnover of Rs 166 crore was a mere Rs 3 lakh in 1996-97, the company paid nearly Rs 14 crore as tax so profits must have been genuine, and better still, on an average net worth of Rs 127 crore for 1996-97, the company raked in a profit before tax of nearly Rs 93 crore, a near 75 per cent return! Interestingly, this did not do much for the market capitalisation of the company which actually dropped during the year because the stock market pounded the management for its inability to expand. Catch 22. Bharat Heavy Electricals: This is an amazing PSU suffering the image of the government control and a low profit. In 1996-97, BHEL registered a net profit of Rs 463 crore on an equity of Rs 245 crore. If you turn the page after only this casual glance at the bottomline, you might miss the romance of this company. For BHEL paid Rs 401 crore tax; in fact, the company's profit before interest, depreciation and tax
was Rs 1129 crore - amazing! Once again, I am tempted to use the return on net worth yardstick: in the absence of a balance sheet but being able to deduce reasonably from the figures given in the results table, I infer that the average net worth for 1996-97 must have been around Rs 1700 crore. Given BHEL's pre-tax profit of Rs 864 crore, this works out to a return on average net worth of around 50 per cent. Better still, in the first half of 1997-98, interest outgo dropped from Rs 45 crore to Rs 27 crore and so has other income. So if you tell me that there is no recession in the country, seeing BHEL's figures you could fool me. Infosys:This company is soon becoming a metaphor for how companies ought to be responsive to shareholder interests. Infosys has made it a practice to announce its audited numbers within the first seven days of each quarter; it actually publishes a document every 90 days to tell shareholders the direction -- and speed -- in which the company is headed. Others, embarrassed, are
trying to emulate by publishing unaudited quarterly results and fishing around for xeroxes of Infosys' Employees Stock Options scheme. But more than the profits -- Rs 23 crore in the first half of 1997-98 -- it is the company's philosophy and honesty which makes it a model for companies even 50 times its size in India. For example in the report for the second quarter 1997-98, Infosys stated that "the next two quarters are likely to see relatively flatter growth rates compared to Q2 of 1997-98 since the next phases of these projects will move out of India, where the per capita productivity is significantly lower. Further, due to a sluggish demand for automation in the domestic banking market, the sales of BANCS 2000 in India have dipped." BPL Limited: You can't but believe in the best. BPL has done the country proud in 1997 by increasing market share in an industry where we feared the foreign brand names would kill Indian competitors. Well, they succeeded to a large extent but for BPL. BPL
registered a pre-profit of Rs 60 crore in 1996-97 at a time when the Sony chief has admitted his company would try and break even by the turn of the century and when Whirlpool has already registered a loss in excess of Rs 100 crore. BPL is the only Indian brand to grow in the first half of 1997-98, its alkali battery has been tested and found to be the longest lasting in the world. Its brand was acknowledged by A&M magazine as the most popular among Indian consumer goods while the group brand was valued at Rs 628 crore during the course of the year. In the current fiscal when the economy has shown no signs of reviving, BPL has posted a profit after tax of Rs 34 crore - on an equity of Rs 27 crore, pointing to the possibility of finishing with a post-tax bottomline of around Rs 80 crore for the full year.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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