Atul's stock has failed to respond to any positive development, whether itis better cash flows, improved domestic sales in agrochemicals, significantly better operating margins or even a substantial profit on the sale of assets. The reason is its inability to post a profit from its operations for the last three years, its increased reliance on extraordinary income for a profit and the fact that it is dependant on extraordinary profits for its dividend payments. Despite being asset rich and despite the Rs 63 crore of extraordinary income it has enjoyed in the last two years, Atul continues to be highly indebted. The only difference is that the mix of debt has changed with high cost ICDs being repaid and replaced by longer term debentures. The debt equity ratio was 1.55:1 in 1997-98, marginally better than the 1.61:1 in 1996-97. In addition to this there is a lot of hidden value in the investments held by Atul and its subsidaries, which is worth much more than its accquisition cost. But now that the company is liquidating its investments it is still unable to realise a better pricefor its stock. The cash flows are being utilised for plugging its annual losses rather than repaying debt, even though the intention has undoubtedly been capital restructuring. Interest cost is the major contributor to losses absorbing Rs 47.39 crore or 88 per cent of its operating profit.

Atul still holds another 4 lakh shares of Novartis but the huge market value of that and other holdings have done little to boost sentiment for the stock. The fact that the dividend was halved to 10 per cent did not help and as an indicator of what is to come no transfers were made out of its appropriation account and the company chose to carryforward Rs 23 crore in its profit and loss appropriation account, probably to cushion against expected losses in the current year. The stock has been languishing with a market capitalisation of Rs 64 crore while even on a net asset basis the stock is worth Rs 202 crore. Out of this the balance of shares (book value of Rs 2.43 crore) held in Novartis and Ciba Speciality Chemicalshave a market value of Rs 45 crore; which undoubtedly will be liquidated soon. But unfortunately not only has the stock not reflected the inflow of cash (it should have appreciated by at least Rs 15 per share) into the company from the recent sale of Novartis shares the stock has fallen by 15 per cent or Rs 3 since July, 1998.

Despair over software

Expectations over the performance of software stocks were obviously over extended. This was clear in the case of Satyam Computers. Against an expected PAT figure of Rs 21 crore for the second quarter the company reported Rs 18 crore, which though significantly higher than both the corresponding period last year as well as the preceding quarter disappointed the market. The stock fell by 5.8 per cent to Rs 560.

The market sentiment towards software stocks has turned for the worse but results do not seem to have much to do with it. Infosys Technologies reported superb growth figures but its stock followed Satyam Computers; losing less than 1 per cent ofits value. The stock went into a decline a few weeks after it announced its first quarter results. Operators have taken a negative view towards software stocks since foreign funds have been sellers in these stocks and this is the overwhelming sentiment at present.