The company through its three subsidiaries has received almost Rs 30.8 crore through an out-of-court settlement with the Andhra Pradesh government towards surrender of lands at Hyderabad and Visakapatnam. It also hopes to recover a further Rs 9.4 crore from one of its subsidiaries following a final settlement of the proposed additional claim.

The subsidiaries had signed a memorandum of understanding (MoU) with the Andhra Pradesh government for setting up a project, which was subsequently subjected to various disputes, following which, the state government issued a show cause notice threatening to cancel the allotment of lands. The subsidiaries then filed a writ petition in the Hyderabad high court to quash the notice.

On the high court's advice to theparties to explore possibilities of going in for an out-of-court settlement, negotiations were initiated with the Andhra Pradesh government, whereupon lands were surrendered against refund of land costs paid to the government without in anyway abandoning the claim of the company for damages or loss of profits arising out of wrongful cancellation of the project.

The Assam Company has put a restrain on any diversifications through its subsidiaries. In fact, it brought down the number of subsidiaries from nine to five in 1997, and to four in 1998. Three of its other subsidiaries pertaining to infrastructure activities in Hyderabad, including Duncan Macneill Infrastructure, Duncan Macneill Housing Complex, and Duncan Macneill Industrial Parks Ltd, have been non-starters.

The company reduced its loans and advances towards subsidiaries to Rs 71 lakh in 1998, from Rs 12.28 crore in 1997.

A senior company official of the Duncan Macneill flagship said that the company, which has suffered by diversifying intounrelated areas, will now consolidate its activities in tea production and manufacture of tea-based products.

The Assam Company, whose profits have nosedived by more than 95 per cent in the last five years, reported a profit of Rs 11.49 crore for the year to December 1998, from Rs 9.64 crore in 1997. It had posted a meagre profit of Rs 1.78 crore in 1996.

Increased yields and higher realisation from its estates have resulted in improving the company's bottomline. The turnover showed a marked improvement to 142 crore in 1998, from Rs 119 crore in 1997.

Move will pay off

While the net profit increased during 1998, there has not been much of a change so far as operating margins are concerned. The company also needed more cash, as inventory and receivables levels increased. This requirement was funded in part by the refund of land costs for an infrastructure project being undertaken by a subsidiary (this resulted in the investment in the subsidiary flowing back to the parent company). But the netresult was negative cash generation from operations during the year. Moreover, expenses as a proportion of sales have actually increased during the year. Nevertheless, Assam Company's decision to stick to its knitting should slowly pay off, and since the quality of the company's tea is good, lower prices should not affect it significantly.