Though MRPL has been a late entrant to the bull run that refinery stocks have been in, its share price growth has surpassed those witnessed by public sector oil companies. The stock has moved from a low of Rs 8.70 to Rs 20.75 within a span of one month, a jump of almost 140 per cent. Public sector refineries had moved up both because they were available at obnoxiously low prices and due to a re-rating of commodity stocks. But MRPL is moving on the news that the Birla group a co-promoter in the company is looking out to sell its stake in the company. Movement is also seen in the stocks of the four AV Birla group companies that are going to benefit from the sell-off -- Indian Rayon, Grasim, Hindalco and Indo-Gulf Corporation.

As for MRPL, AV Birla group was more like a sleeping partner, with no former experience in the sector. Apart from the funds there was very little that the Birla group bought in the company. However, MRPL currently is not in the best of health as far its financials areconcerned, though on the operational front the company is doing very well. Against the required debenture redemption reserve (DRR) of Rs 485.2 crore as on March 1998, the company has created DRR of only Rs 110.33 crore due to non-availability of profit.

MRPL will defenitely benefit if Exxon buys out the Birla groups stake. The multinational will come in with its technical expertise as well as financial power which will be necessary in the post deregulation scenario. Reports had earlier said that MRPL is also exploring the option of setting up its own marketing network when the oil sector is completely opened up in 2002. With an expanded capacity of nine million tonnes, MRPL would require huge capital with a long payback period. This could be one of the factor that led to the AV Birla group's decision of withdrawing from the venture (assuming that news reports are true).

Further Exxon which had withdrawn from the greenfield project with HPCL in Bhatinda will now get a chance of re-enter the country througha ready-made refinery. Whether the government gives a clearance for such a sale will have to be seen, specially since it has recently asked some of the multinationals to invest only in greenfield projects rather than picking up stake in the Numaligarh refinery. If the sell-off is rejected not only will the MRPL stock take a beating but also the Birla group companies as MRPL will need more funds to survive, which will have to be pumped in by these companies.

Wim Plast

Following Nilkamal Plastics and Supreme Industries, Wim Plast has announced a similar jump in both its topline and bottomline. While the topline has grown by 35.87 per cent, bottomline growth has been higher at 53 per cent. The topline growth came basically from moulding items such as chairs, trolly and stools. In 1998-99, the segment showed a growth of 30 per cent and the company benefited from the growth in the market. In the current year, the company expects to get additional volume sales benefit from the expansion of the capacitiesbeing set up in the new industrial unit in Daman.

In spite of the drop in the raw material costs by 15-10 per cent last year, the operating margins fell marginally. This was primarily due to a fall in prices of finished goods, as well. But higher volumes saw the company post higher operating profits of Rs 19 crore in 1998-99 compared to Rs 13 crore in 1997-98. These profits were enough to offset higher depreciation and interest charges for the company. The depreciation was higher because last year the company had imported four injection moulding machines and four moulds for making chairs, furnitiure etc.

Despite the purchase of assets, the company's return on assets have always been very high. This is primarily due to the low cost of the plastic moulding machines. A look at return on assets would show that the returns in year 1996-97 was 12.69 per cent. In 1998-99, the returns on assets rose to 27.22 per cent. Moreover, the ROCE for the company has risen from 40.49 per cent in 1996-97 to 64.49 per cent atthe end of year 1998-99.

Since the plants of the company are located in Daman, the company gets 80-IA benefits of zero income tax. Hence it is but natural for the coming to come out with higher earnings in the coming year. It is only logical that the stock market mirrors the performance of the company. On a year-to-year basis, the stock price has risen from Rs 45 at the end of March 1998 to Rs 75 showing a rise of 66 per cent.

SPIC

SPIC's Jordanian joint venture, Indo Jordan Chemicals appears to be on firm grounds. The company posted a net profit of $ 13.09 million in 1998, its first year of operations. The 10 per cent dividend announced by it has added Rs 15 crore to SPIC's revenues. However, the Chennai-based conglomerate has posted disappointing results for the second year in the running. Though the company's operating revenues have grown by 15.55 per cent to Rs 2,381.46 crore, the growth in expenditure has been higher at 17.05 per cent. Total expenditure as a percentage of operating revenueswas 92.10 per cent as compared to 90.92 per cent in 1997-98. As a result, operating profit has been more or less stagnant at Rs 188.25 crore and operating margins have declined from 9.08 per cent to 7.90 per cent.

SPIC's other income has risen by 3.64 per cent to Rs 74.83 crore. The sale of a ship earned Rs 34 crore for the company. The Rs 2.63 crore higher other income has, however, been more than offset by a Rs 40.57 crore increase in interest outgo. The 34.02 per cent rise in interest expenses to Rs 159.81 crore has led to a 26.32 per cent fall in the company's cash profit to Rs 103.27 crore. Cash margins have declined from 6.57 per cent to 4.20 per cent. Though depreciation has been 9.29 per cent lower at Rs 51.43 crore, pre-tax profit has fallen 37.89 per cent to Rs 51.84 crore and pre-tax margins have declined from 3.91 per cent to 2.11 per cent. The company has provided Rs 1 crore for tax as against the previous year's Rs 4.50 crore. Net profit has declined 35.61 per cent to Rs 50.84 crore and netmargins have fallen from 3.70 per cent to 2.07 per cent.

SPIC's poor performance can mainly be attributed to three factors -- high interest outgo, low penicillin-G prices and slack demand for caustic soda & chlorine. The high interest outgo can further be attributed to inordinate delays in subsidy dues for the fertiliser division and Chinese dumping had led to low penicillin-G prices. Considering that the government has recently announced favourable ad-hoc concessions for decontrolled fertilisers and that the demand for heavy chemicals is likely to increase in the current year, SPIC's performance should improve. The stock markets also appear to be optimistic about the company's future and the scrip, which quotes at around Rs 27 per share, is on a bull-run.

With contributions from Shishir Asthana, Manish Saxena & Sarad Saraf