Alhough the annual result looks very impressive, the stock seems to have reacted to the fourth-quarter results. In the last quarter of 1998, net profit actually fell to Rs 82 lakh from Rs 1.06 crore in the fourth-quarter of 1997. This is in spite of a 67 per cent jump in the Q4 turnover to Rs 13.31 crore compared with Rs 7.95 crore in the corresponding period last year.

A closer look at the balance-sheet shows that the higher profits in 1997 was due to a high other income component. In the fourth-quarter of 1997, the company earned an other income of Rs 99 lakh (77 per cent of profit-before-tax), while in the same period of 1998 thefigure fell to Rs 39 lakh (37.5 per cent of PBT). In fact, the other income for 1997 was higher than the PBT.

This apart, the company's operational performance is appreciable. Operating margins in the fourth-quarter of 1998 has shot up to 6.24 per cent from 3.78 in 1997. Operating margins for the full year 1998 has been better at 10.55 per cent from 3.26 per cent in 1997. Bottomline growth has been affected by higher effective tax rate at 37.44 per cent (Rs 1.49 crore) in 1998 against 18.80 per cent (Rs 0.22 crore) in the previous year.

Krone Commumnications, a 51 per cent subsidiary of Krone AG of Germany, has come a long way since the 1996 telecom scandal which affected all telecom companies. Operating margin prior to 1996 was 24 per cent (mainly because the company use to cater entirely to the needs of DoT).

The other factor that affected the company was the presence of an impostor which sold telecom components under the name `Krone Products'. After a legal battle, the multinational managed aninjuction against the imposter, which seems to have helped post a rise in tunover.

Another reason for the improvement in turnover is the shift in Krone's customer base. Krone has pragmatically reduced its dependance on DoT. The company entered the country with a complete range of connection and distribution systems.

It's product range start from the main distribution frame and it caters to an elite clientele consisting of C-Dot, Siemens, Ericsson, Alcatel, Lucent and NEC.

The company is a major supplier of connectors. All pillars and roadside telecom cabinets have Krone connectors. In mosat other countries connectors are housed in an insulated box, while in India the boxes are mostly left open and exposed to heat and dust. Even under these conditions, Krone's products are giving excellent results.

With over 3000 patents and 1100 products, the company's technology is unquestionable. The company has the whole range of passive components which normally account for 5 to 7 per cent of the network cost, butaccounts for most of the systems down time. It is here that quality matters. Krone has a presence in both public network connectors and premise network cables and connectors. In order to improve its performance further, the company is considering indigenisation and outsourcing some of its components on just-in-time basis. The company has started supplying equipment to smaller C-Dot exchanges and also to private operators (digital distribution frame has already been supplied to Bharti Telecom).

The company is planning to increase its sales of structured cabling and introducing wireless local loop solutions. Krone is also looking at exports to its group companies worldwide. Further, the company is planning to launch shielded cables solution for the first time in the country, which is the standard in European countries. Given its growth plans and higher potential for telecom companies, Krone is expected to enjoy a better discounting.