The success of the company's extensive and sophisticated product line has been consistently seen in its export performance, which has shot up from Rs 30 crore to Rs 49 crore in the last three years. For 1999-2000, the company expects to export Rs 60-crore worth of printing machines.

The beneficial impact on operating margins has come about as a direct result of the increase in the proportion of exports to total turnover, which now stands at 53per cent.

Further, gross margins have improved as a result of the conscious effort made by the company towards both reducing gearing as well as reining in the cost of its borrowed funds. Interest paid out as a result has been lower by Rs 1 crore during the year, or 13 per cent. The debt-equity ratio has been reduced to 1:1 from 1.3:1 in the previous year.

Other benefits should also accrue in the current year. For example, the Exim Policy for 1999-2000 should plug a major loophole that worked against the company's domestic interests. Earlier, traders were allowed to import second-hand printing machinery under OGL. The problem faced by Manugraph was that the market for smaller capacity equipment (between 20,000-25,000 copies) eluded the company.

Under the new policy, second-hand printing machinery has been brought under the restricted list. Since only the actual end users can now access this equipment, the speed at which the machines are available is critical as traders are no longer able to store theproduct. This could have a positive impact on Manugraph's volumes, as it will now have access to a market worth Rs 30 crore annually.

For the first quarter of the current year, the expectation is that revenues from the domestic market will be depressed (as it usually is for capital equipment manufacturers since activity generally picks up from the second quarter onwards), but the export growth is expected to be around 15 per cent. There could also be an additional impact on domestic volumes on account of the exim policy.

Kirloskar Oil Engines
Despite a last-quarter surge in earnings, performance at Kirloskar Oil Engines has been of little consequence (KOEL) in the last financial year. Though the company has been restructuring its assets for the last couple of years, it is yet to show any significant positive impact. For fiscal 1997-98, the company reported a loss of Rs 21 crore but covered it up with profit on sale of investments, eventually reporting a PBT of Rs 171 crore.

High interest cost,which is the single largest contributor to depressed profits, was dealt with during the year, though not completely despite the massive inflow on account of sale of investments (Kirloskar Cummins shares). During 1997-98, interest cost consumed 99 per cent of the operating profit, in the last financial year that proportion has improved to 64 per cent, though it is still high. Compared to a gross loss in the previous year, KOEL actually managed a marginal Rs 4-crore adjusted profit before tax (adjusted for non-operating income) as a result of improved last quarter earnings.

Despite some signs of improvement, one of the reasons the stock continues to remain depressed is the pending amalgamation with a sick company. If the amalgamated company's revenue loss is considered, then the paltry adjusted PBT that KOEL managed for FY 1998-99 would be wiped out, in addition to reducing reserves to the extent of the accumulated losses of Rs 81 crore.