This growth is expected to slow down in the second half but for the whole year the net income is expected to be around Rs 26-27 crore, which on anequity base of Rs 8 crore yields an earnings per share of Rs 33. There was the expectation of a 1:1 bonus issue built into the stock price prior to the announcement of the annual results a few weeks ago. Disappointment over the non-announcement saw the stock fall despite the good results. Now the feeling is that with another very good year, the bonus issue will not be withheld hence the bullish build up in the stock. The stock has been in a uptrend for the last 13 months rising from Rs 183 to Rs 508 in April this year before reacting to Rs 300. The trend has once again changed for the better.

AFT Industries

While companies such as Tata Tea which market branded tea felt the new excise blow reflecting on its stock some companies such as AFT Industries (better known as Assam Frontier Tea) have seen their stock strengthen. After a clarification that the new excise of 8 per cent being levied on tea did not apply to loose or non branded tea; the benefits to such companies became obvious.

If that wasone reason to cheer the dream run that tea companies have had last year also reflected in the bottomline of these companies and AFT which is a major producer in the eastern region was no exception. Revenues increased from Rs 73 crore last year to Rs 103.5 crore in for 1997-98, an increase by 42 per cent which was lower than the growth rates in the tea industry. The bulk of this increase translated directly into profit before tax as it consisted mainly of increases in selling price. The increase in profit before tax was by 320 per cent to Rs 35.08 crore, pushing return on equity to 48 per cent. But while the whole of the last year as such was better the bulk of the gains have come in the second half with 51 per cent growth in revenues against a 31 per cent jump in the first half. Net income increased in the second half over the first half by 12 per cent. Even though the company does not have much of an export market.

The current year will not be as cheerful for these companies (though AFT will expect to sellmore in volumes) since the price of tea has dipped from the month of April in the current financial year and has not looked up throughout the first quarter. The primary reason for the change in fortunes for the tea industry is that other tea producing countries lead by Kenya have reported a very good crop since the beginning of the year and have provided stiff competition to exporters from India who in turn will divert supplies from those markets forcing down prices in the domestic market. The tea industry has already indicated that the exports for the year will be marginally lower than what it was last year. After reacting negatively in line with other tea stocks in the beginning of the year AFT is one the few tea companies that have gained post budget. The AFT Industries stock increased by 95 per cent between May 1997 and January 1998 but it was still below the gains seen by the rest of the industry. The Goodricke Group gained by 308 per cent while Tata Tea gained by 246 per cent.