On the operational front, the company has recorded a 36.6 per cent rise in its bottomline from Rs 11.09 crore to Rs 15.15 crore for year ending March 1999. This growth rate is similar to the nine-month growth of 36 per cent recorded by the company during the fiscal 1998-99. Turnover of the company has increased by 15 per cent from Rs 204.69 crore to Rs 235.21 crore. Higher bottomline growth has been possible on account of better operating margins as well as higher contribution of other income.

Operating margins of the company has improved from 8.07per cent to 8.51 per cent. Lower raw material prices has helped in improving the company's margins during the year. One of the major factors that has also helped is the phenomenal growth rate in the masterbatches segment, turnover of which has doubled during the fiscal 1998-99 as compared to the previous year. Textile chemicals division as well as the paper and leather division too has performed well during the year. Contribution of exports however, has been at the same level of around 32 per cent as is the previous year.

Other income for Clariant has increased from Rs 4.01 crore to Rs 6.99 crore (inclusive of interest recieved), contribution of which to profit before tax has gone up to 30 per cent from 24 per cent.

Despite the general slowdown in the economy, Clariant has been able to maintain its product prices. Part of the reason is because of customised products that the company manufactures, which requires constant interaction with the customers.

Though masterbatches have been the driver of growthduring the year, contributions from the other divisions is likely to increase in future, specially from the paper division (which has a vast range of optical brighteners) as the industry seems to be on a revival path. With the economy showing signs of recovery, Clariant with its diversified portfolio is in the right position to take advantage of it.

VSNL equity buyback

The news that the VSNL management is re-thinking the buy-back of shares is not the best of news for the VSNL stock. At the time of the GDR issue (offer for sale) there was the possibility that since the government was offloading only a small portion of its equity holding, a subsequent buyback would have done wonders for the VSNL valuations, and offered a better price for a subsequent divestment.

Media reports point out that the company will not go in for a buyback as its foreign shareholders are unhappy with it. First of all, a buyback in case of VSNL can only improve valuations as return on equity will improve. Second, VSNL hashuge quantitites of cash lying untilised (the figure as at the March 98 was Rs 2,500 crore). In addition the company generates free cash to the extent of Rs 1,000 crore annually.

In comparison, given the size of a buyback that the company can undertake will not entail an investment exceeding Rs 500 crore, but will immensely benefit the existing shareholders. The logic that this is not the ideal way for the governement to divest is not true, since the company will follow the tender offer route and all shareholders can participate.

Investors in the 1998-99 GDR issue obtained shares at a cost of Rs 777 per share against which the stock had appreciated to Rs 1,025 thereafter, before settling at Rs 830, a buyback can only accentuate these returns.