While the turnover dipped by a mere four per cent to Rs 349 crore in 1998-99, the bottomline dipped 81 per cent to Rs 2 crore.

The dip in net profits is similar to the 86 per cent dip in bottomline announced by Arvind Mills a week earlier. In the case of Arvind Mills, the bottomline had dipped to mere Rs 14.5 crore in 1998-99 compared to Rs 101 crore in fiscal 1997-98.

Despite the prices of cotton in India being high, international cotton prices have been at quite a low level. The basic reason for low world prices of cotton has been the poor offtake from the user industry.

Nevertheless, in an effort to capture added value, the company has been shifting its focus to worsted fabrics. In 1997-98, the company implemented the project to start a spinning unit forworsted fabrics through installation of capacity for 10,000 spindle production per year.

In addition, the company set up a 12 tpd dyeing unit for dyeing of fibre, yarn and knitted fabrics. Accordingly, both the interest and depreciation for the company rose. The interest rose from Rs 26 crore in 1997-98 to Rs 29 crore in 1998-99.

For the future, the cotton industry does not expect any surge in demand as the user industry is still finding it difficult to get export orders. Lower cotton prices can also spill over into the polyester yarn market and the polyster fibres market. This may seem to be good news for the company. But unless its sales volumes increase, there would not be any change in the bottomline for the company.

As for the stock market, depressing results during the last year were well discounted. The stock had fallen sharply from a peak of Rs 226 during August 1998 to the current level of Rs 86. While the rise in the stock during the first half of 1998 was supported by reasonable volumes, theongoing downtrend has seen insignificant volume. Unless the entire sector (which suffers from low discounting), gets a re-rate from the market, the price is unlikely to get into an uptrend even if the company shows an improved performance.