Although Wockhardt posted a 32 per cent jump in sales for the first quarter ended September 30, 1998, at Rs 152.4 crore, analysts do not expect its operating margins to rise. The reason being Merind's merger with the company, which brought vitamin B12 to the product portfolio of the combined entity. As vitamin B12 is under the Drug Price Control Order and prices of bulk drugs have been falling, operating margins of the combined entity could get squeezed. But the good news is that the new products introduced by the firm are likely to yield high margins. The firm commissioned a Rs 42-crore plant in Ambla to produce 5,000 tpa of medical nutrition products in the first quarter. Reports suggest that this plant operated at 85 per cent capacity during the period. Wockhardt's future strategy to manufacture 60 tpa of various grades of third-generation cephalosprins would also help improve its margins.

In addition, three out of five new specialised products were launched at the start of the yearfor use by patients suffering from diabetes, renal failure and debilitating conditions like cancer, burns, trauma and tuberculosis. With two more products in the pipeline, the company expects to genrate Rs 70 crore from this segment. The company would also gain indirectly from good volume growth from its Hepatitis B vaccine product sales by its joint venture with Rein Biotech. These contributions are likely to increase further. This, along with the commendable growth of 53 per cent for the agri-science division (up from 40 per cent), should augur well for Wockhardt, which has comprehensively beaten the Sensex in the last three months. The stock price shot up to Rs 313 from a low Rs 188 in June 1998, before falling to Rs 284 on October 9.

Bharat Electronics

After having reached new highs at around Rs 73 in the beginning of June, following the announcement of its annual results, Bharat Electonics began its southward journey to touch Rs 22 in the beginning of September. Analysts attribute this to thepoor first-quarter results reported by the PSU. Against a net profit of Rs 53.40 crore for the year ended March 1998, the company reported a loss of Rs 14.97 crore in the quarter ended June 1998. According to the company's management, the loss had resulted from sluggish demand for its products during the first quarter.

Sales, which stood at Rs 1,261.30 crore for the year 1997-98, had tapered to Rs 72.09 crore in the quarter ended June 1998. However, the manangement had said at the time of announcing the quarterly results that it expected sales and profits to rise in the subsequent quarters. It had further expressed confidence that the company would end the year in the black. But the market did not appear to be enthused and had continued to push the stock downwards till the beginning of September. Since then, however, the stock appears to be finding favour with the investors once again.

The reasons for this could be one or both of the following. Now that the second-quarter results are due, expectations ofa better performance may be behind the recent surge in volumes at the Bharat Electonics counter. The second and more plausible explanation for the stock's increased popularity could be the tie-up with National Semiconductors for the indigenous manufacture of Cyrix motherboards and processors. Considering that Intel has taken a strategic decision to get out of the production of low-end processors, a huge market is waiting to be exploited by the likes of the Bharat Electonics-National Semiconductors combine. The market understands the kind of gains that can accrue to an orgainisation with a potential to reach out to over a 100 million consumers.

Infotech fund

Newsreports indicate that the country's first Infotech fund floated by the Kothari Pioneer Mutual Fund has fallen short of its internal target of Rs 10 crore. UTI also plans to raise fresh subscriptions for an IT sector-specific offshore fund. It has a highly successful $50 million Mauritius-based India IT fund. With the scheme being open-endednow, the Kothari IT fund has set a target of raising anywhere between Rs 50 crore and Rs 75 crore in the coming year. For the retail investor, the question being asked is, is this is an opportune time to invest in an infotech fund? Investments in this sector are usually placed on a high-risk, high-return platform.

But fund managers are reacting to the enormous opportunity presented by the boom in the software sector. Software blue chips like Infosys Technologies, NIIT, Satyam Computers and Wipro have been consistently outperforming the Sensex. The scrips have recorded huge trading volumes and while other sectors of the economy are reeling, the software sector has been growing by 40-50 per cent. Nasscom expects Indian software exports to touch Rs 36,000 crore by 2002, and the government has recently announced sops to the industry, which should ideally generate an improved performance. But market risks loom large. With a high promoter holding and low paid-up capital, the stock prices could easily be rigged,particularly for the smaller and medium-sized companies like as BFL Software. Most software stocks are quoting at a very high PE and sem to be overpriced. Whenever there are upheavals in the market, infotech stocks y tend to fall. Financial institutions

It is worth noting is that the country's premier term-lenders ICICI, IDBI and IFCI are all trading at a P/E of less than 2, the lowest discounting in the A-group.

Emcee (With contributions from M Saxena, Sarad Saraf & AG Krishnan)