Gross sales turnover for the third quarter was marginally higher at Rs 1845.33 crore against Rs 1832.73 crore in the corresponding period last year. Net sales income during the period was lower at Rs 861 crore against Rs 890 crore. Cumulative net sales for the nine months ended December 31, 1998 was higher by 12 per cent at Rs 2,707 crore, while net profit increased by 16 per cent to Rs 486 crore.

The operating profit, after charging depreciation but before interest and tax has gone up by 20 per cent to Rs 247 crore from Rs 206 crore in the comparable quarter of 1997-98. The improved performance has been attributed to "continuousenrichment of the company's product mix and the focussed management of expenditure". The growth in operating profit in the second quarter was better at 28 per cent.

Expenditure has come down, quarter to quarter, to Rs 588 crore from Rs 665 crore. Interest burden, however, is higher at Rs 39 crore compared to Rs 27 crore in the comparable quarter last year. Interest costs for the nine months to December 1998 are 80 per cent higher at Rs 122 crore, largely the result of the exit from financial services which cost the company over Rs 800 crore.

On the excise dispute, the management has been advised by senior counsel that the Cegat order dated September 4, 1998 is "unsustainable in law" and the company has "no legal liability to pay any differential duty". An eminent jurist has also supported the view taken by the company.

Subsequent to the order of Cegat dated September 4, 1998, both the company and the excise department filed their appeals against the order which came up for admission before the SupremeCourt on January 15, 1999.

The latest position is that the appeal filed by the company against the Cegat order holding the company liable for differential duty has been admitted and so has been the appeal filed by the excise department.

Moreover, the Supreme Court has directed that adjudication proceedings for fresh quantification in accordance with the Cegat order may continue, but no orders pursuant to such proceedings shall be passed without the leave of the Supreme Court.

In addition, the department's appeals in respect of the contract manufacturers have been admitted only on the limited question of their liability, if any, up to six months preceding the show cause notice; and the department's appeals, challenging the quashing of penalties imposed on the former directors of ITC have been dismissed.

It will be recalled that in the appeal filed by the company before Cegat against the order of the commissioner, central excise, Delhi dated December 29, 1995 demanding differential excise duty from thecompany and several contract manufacturers and imposing penalties on the company, six of its former directors and several contract manufacturers, Cegat had quashed penalties and ordered fresh quantification by the excise authorities on the basis of the findings made in the Cegat order and after giving the company an opportunity of personal hearing.

Scrip takes a beating

The ITC scrip took a beating today as operators found the results much below their expectations and the scrip slipped from yesterday's peak of Rs 830 to around Rs 804 after close of official session on comparatively lower volumes of about 30 lakh shares on the NSE against 36 lakh shares traded yesterday.

The market expectation of net profit was Rs 180 crore plus which eventually proved to be over optimistic. Analyst Mayank Khemka of C Mackertich said the results show that the company's volume sales in cigarettes are down. "The price increase of 20-25 per cent effected in the last one year has not yielded proportionate returns. Theimmediate price outlook is bearish as we anticipate a bout of fresh FII selling at prevailing levels."

Another stock broker pointed out that the price rise was sustained largely by a group of bullish operators. The price levels on the kerb today indicated that the scrip was likely to be subjected to bear hammering in the near term.

INSIGHT

Belies market hopes

By recording a bottomline of Rs 135.70 crore for the third quarter, ITC has failed to live up to market expectations, which were that the company's net profit would be around Rs 150 crore. This was reflected in the fall in the stock's price on the BSE. The reason for the lacklustre performance was the negative growth in net sales, which fell to Rs 837.64 crore in the third quarter of the current fiscal from Rs 873.61 crore in the corresponding period of the previous year. This has been because of a slower 6.87 per cent growth in gross turnover as well as higher excise duty. The bottomline has however improved by 16 per centwhich was because of better operating margin which improved from 24 per cent to 29.85 per cent.