In value terms, the company has recorded a 30.72 per cent growth to Rs 871.84 crore. Against the industry growth of 13.3 per cent, Punjab Tractors' volumes during 1997-98 grew by 22.37 per cent to 40,425 units.

As far as profits are concerned, although higher excise duties (up by 53 per cent to Rs 93.64 crore) had their impact, a strict control over cost has given a major boost to the operating profit. Operating-profit margins have risen from 12.49 per cent to 14.77 per cent. Net profit at Rs 96.63 crore was up by 71.6 per cent.

As far as the currentyear's performance is concerned, despite a slowdown in overall industry sales, the company managed to maintain its sales growth. Against a drop of 0.3 per cent in industry sales, during the first quarter of 1998-99, the company has recorded a 28.9 per cent growth to 12,008 units.

During the same period, M&M's sales growth has recorded a fall of 7.6 per cent, while sales of Escorts and HMT dipped by 13.3 per cent and 24.5 per cent respectively. Eicher is the only company besides Punjab Tractors to record a posted-sales growth during the first quarter of 1998-99. Aggressive marketing coupled with a strong presence in the northern market has helped the company to maintain its sales growth.

In fact, a depressing performance by the other tractor manufacturers have helped the company gain market share. Punjab Tractors' market share has risen from 15.1 per cent to 19.5 per cent during the first quarter of the current year. If one were to go by these sales figures, there is no reason why the company should notreport an encouraging performance during the current year.

For the future, while the sector is expected to witness a slowdown on account of rising capacities, the company's strong presence in the northern market and product upgradations would it to maintain its sales growth. Last year, Punjab Tractors raised its capacity from 36,000 units to 42,000 units, besides initiating steps to replace its old plant and machinery by more productive equipments.

From the stockmarket's point of view, the company will continue to attract higher discounting. Factors like stronger-than-industry growth, lower sale/inventory ratio (10 times), low average credit period (less than two days) and insignificant debt portion (just 4 per cent of its net worth) will continue to play their roles. At present, the stock gets a price multiple of 17 -- much higher than the other industry players. While Mahindra & Mahindra gets a discounting of 9, Eicher and Escorts are traded at a P/E multiple of 4 and 5 respectively.

Another factorwhich can give a boost to the company's discounting is a proposal to raise the ceiling for FII investments from 24 per cent to 30 per cent. At present, FII holding in Punjab Tractors stands at 18.38 per cent. With an increased limit, the stock is likely to attract more foreign investors. If the FII would like to have an exposure in the tractor industry, investments in Punjab Tractors cannot be ignored. Over a medium-to-long period, though the company has not shown any indications, a merger with Swaraj Engine is also expected. This step, if implemented, can give a further boost to the company's margins as well as the stock discounting. Swaraj Engine is a group company and supplies the engines fitted into tractors manufactured by Punjab Tractors.