Questionable premium brand positioning, diversifications into the jewellery business with long gestation periods, huge capital investments with a reducing capability to utilise these funds productively and the consequent high cost of funds have all eroded Titan's profitability in the past. Thus although the results for the year ended March, 1997 are mediocre if anything, Titan appears to have finally arrested the southward spiral in net profits.

A read between the line reveals that last years bottomline was to a large extent buoyed by some one-off revenues of Rs 10.13 crore, which basically resulted from the sale of 45,00,000 shares in Timex watches to an associate investment company. Thus after leaving out this cushion, earnings last year stood at Rs 14.09 crore, which when compared to Titan's bottomline of Rs 14.63 crore for March, 1998 gives some semblance of respectability. What is even more interesting is the fact that the company has achieved this performance despite a higherwage bill, which was a result of last years new wage settlement accord. This aside a lower interest burden down 6.11 per cent and a lower effective tax rate of 9.86 per cent (12.9 per cent last year) also did help.

Interestingly Titan's performance on the operational front is also impressive, despite the margins still being pressurised. Sales have improved 8.21 per cent from Rs 408.52 crore to Rs 442.06 crore. Thanks largely to a 15 per cent volume growth in domestic watch sales, aided to some extent by Titan's entry into the low priced segments with the Sonata and Fastrack brands. Jewellery sales of Rs 60 crore, have also displayed a positive growth trend after the company shifted from 18 carat to 22 carat gold jewellery.

However any benefits of low gold prices, were offset against a negative impact on exports. Firstly due to the SE Asian crisis which robbed the company of a major marketplace. A reassesment of the company's strategy in Europe (which had come in for heavy criticism) also temporarilyaffected exports. However a disproportionate increase in expenses created due to the heavy expenditure on marketing and sales promotions and maintaining and opening new exclusive retail outlets, has created a drain on margins. A fact which is clearly accentuated by the drop in the operating profit margins from 21.49 per cent to 19.2 per cent.

But for the future, Titan already has its plate full, what with the repositioning exercise for its Tanishq jewellery range and its foray into the European watch market yet to yield dividends. All these problems appear to be mirrored in the sentiment for the scrip which at the Rs 42 levels is trading precariously close to its new 52-week low of Rs 38.

Torrent Pharma

The Torrent Pharma scrip has been hammered in the recent bear phase which gripped the stock markets, what with the stock price dropping from a peak of Rs 105 to Rs 75. Nevertheless prior to this, the second half of last year had seen the company's stock outperform the market. Interestingly enoughthis stock performance was backed by strong fundamentals, as is reflected in Torrent's second half financials when sales rose by 13 per cent and profits increased by 19 per cent on an annualised basis.

The impressive growth reported in turnover for the second half, was partly due to the increased market shares of new brands launched by the company. Products like -- Torospar (Sparfloxacin-Quinolones), Nikron (Nicorandi- anti schentic), Resipidon (Resperidone- anti schizophrenic), launched by the company in late 1996-97 have become brand leaders in their respective segments. All of which has boosted the ORG ranking of the company, by a couple of points.

Furthermore export sales, which had stagnated last year have improved by a solid 200 per cent. Interestingly export sales had stagnated last year due to payments from Russia getting delayed. Thus with the company now sorting out this problem and also getting US FDA approval for its new formulations factory, exports have risen.

However profitability hasbeen eroded to some extent due to a higher effective tax rate of 5 per cent (2 per cent last year). Interestingly, though Torrent had availed of the benefit of Sec 115 JA of the income tax act, by which MAT paid was eligible for tax credit and treated as advance tax. Thus inflating the company's profits by Rs 3.59 crore. However this year Torrent has not availed of a similar facility and hence the increased tax rate.

Although the company sources its raw materials from a group company, the drop in penicillin G prices could not translate into higher profits. Moreover the lower penicillin G prices would not mean higher dividend income from this group company. In addition the expansion and more expenditure on R&D resulted in higher interest and depreciation outgo. But despite the earnings of Rs 39 crore is the highest in last five years.

Considering that volume growth should continue this year, it would indeed be interesting to note whether this fact helps change the market perception. Especially given thefact that perception has been negative in the past, due to fund transfers between group companies.

(With contributions from Percy Dubash and Manish Saxena)