Another segment which has performed ably for Exide is the submarine batteries division with increased despatches to Algeria. In fact, this division now accounts for almost 40 per cent of Exide's total turnover. This aside, Exide has also managed to sustain the downturn in the automotive battery segment with the company's products now powering most of the new entrants. This includes the likes of Hyundai Santro, Tata Indica, Mitsubishi Lancer, Honda City and Daewoo Matiz. Furthermore, Exide also appears to have capitalised in the two-wheeler segment with motorcycle battery sales improving a solid 42 per cent. All of which have contributed to the 46.79 per cent growth in revenues, which were at Rs 655.32 crore for the 12 months ended March 1999.

This aside, stringent cost control and prudent working capital management have also helped post buoyant operating margins. In fact, operating margins for the full 12-month period improved from 15.05 per cent to 18.77 per cent. Importantly, though these margins are much lower than those of another player in the battery segment namely - Amara Raja Batteries, which are in the region of 30-35 per cent. All this has helped Exide Industries post a strong bottomline growth of 66.78 per cent for the year ended March 1999, with net profits at Rs 39.86 crore.

But despite this buoyant bottomline, all is clearly not well at Exide. The company is finding it increasingly difficult to contend with a burgeoning interest burden. A fact clearly reflected by the 75.61 per cent jump in the interest burden from Rs 27.80 crore to Rs 48.82 crore for the year ended March 1999. In fact, at the end of 1997-98, the total loan funds of the company amounted to Rs 357.27 crore compared to Rs 178.02 crore in 1996-97. Additionally, an exceptional charge of Rs 1.35 crore (consisting of an amortisation of ERP and Y2K realted expenses Rs 0.39 crore and an exchange loss on foreign currency loans Rs 0.96 crore) has further eroded the earnings growth.

Furthermore Exide's prospects in the interim, will be affected by the slowdown in the automobiles sector. However, the steady demand from the replacement market should help Exide's bottomline, as the OEM segment does not give good margins. In fact, some tax reliefs on the excise front in the replacement market have brought the price of the batteries in the unorganised sector almost on par with the organised sector. Thus, the earnings in the replacement market would get reflected in the bottomline.

Lastly, the company would also benefit from the additional inflows accruing from the manufacturing facilities of Standard Batteries which will augment Exide's cash flows. This apart, Exide Industries' foray into the industrial battery segment will lend a greater degree of stability to its earnings stream.

Supreme Industrie
The nine-month results of Supreme Industries reveal the flexibility enjoyed by the plastic processing sector which can easily shift its manufacturing processes from a segment showing poor growth to another product enjoying higher growth rates. But most importantly, this shift can be achieved with minimal capital expenditure.

Supreme's turnover grew by 10 per cent for the nine months ended March 1999 from Rs 317 crore to Rs 342 crore, aided by a 10 per cent volume growth. However, the operating margins have remained stable at 15 per cent, which together with similar volumes and value growth rates, may lead one to infer that not much has changed in the processing sector.

But this is far from the reality. Today the maximum growth is seen in the PVC-pipe fittings and moulded furniture, where the growth rate was 30 per cent in the last fiscal (1998-99). At the same time, growth rates in the multi-layer packaging and industrial components fluctuated in the range of 4-6 per cent. The industrial components business, however, suffered due to poor offtakes from the automobile sector.

This is where the company has adapted and shifted focus towards moulded furniture. Supreme converted its multi-layer sheet business into a thermo-formed food service centre, which had the capability to cater to the growing packaging demand from the agro-processing industries. All of which helped offset the poor offtakes from the automobile sector. Trading income from polymers also improved from Rs 18 crore to Rs 40 crore. Thanks largely to the trade discounts which Supreme generates while buying polymers from Reliance and IPCL, which are then utilised to earn returns from the trading business.

The higher depreciation of Rs 17.43 crore (Rs 15.01 crore) is due to the commencement of Supreme's facilities at Pondicherry and new extrusion line at Andheri. The higher interest rates are due to increased working capital requirements for the newly installed capacity. All of which has been offset against the topline growth achieved by the company through volumes. A result of which has been the bottomline growth of 14.55 per cent. The markets have also been giving the company higher discounting, reflected in the northward spiral of the scrip from Rs 192 to Rs 213 in the last one month, despite the bearish overtones of the market.

With contributions from Percy Dubash and Manish Saxena