The company, sources say, will hike the prices of HCVs by Rs 5,000--Rs 15,000, while LCVs will be dearer by around Rs 5,000.

The demand for HCVs has shot through the roof following the Kargil conflict and the company, it is learnt, is stretching its supply machinery to meet the orders. The stocks at the dealer-level have come down sharply to around 2-3 weeks from over 4 weeks, while the lead time for supplies has increased considerably due to the sudden surge in demand, sources said.

The HCV segment, which was going through arough patch, has recovered marginally since the second half of last fiscal. Sales during the period increased to an average of 5,894 vehicles per month as compared to 3,008 vehicles per month in the first half. Last month, the company recorded a much higher sales of around 4,000 heavy and medium commercial vehicles, while LCV sales stood at around 3,000 units.

The proposed price-hike by Telco, say sources, is also in anticipation of an upward price revision of steel. HRC coil producers, it is understood, are contemplating a round of price-hike, which will raise the cost of commercial vehicles.

The Kargil conflict has come as a major relief for Telco which is now flooded with orders for HCVs from the defence department. Other leading commercial vehicle manufacturers like Ashok Leyland and Mahindra & Mahindra are also witnessing a spurt in sales because of the additional requirements for the army.

"The demand for HCVs has picked up because of the army requirements, and has come as a blessing in disguisefor the HCV manufacturers. Besides, the improved prospects of the economy is also contributing to the surge in demand. We would, however, not like to reveal numbers at this stage," said a Telco source.

The Telco counter has been witnessing a lot of buying interest on the bourses lately with the index weight going up from 2.09 per cent of the Sensex on June 14 to have an index weight of 2.36 per cent on June 29. On Tuesday, the scrip closed at Rs 203 on BSE, up from Rs 178.50 on June 14 and closed on the NSE at Rs 212.70, up from Rs 178.55 on June 14. The counter witnessed combined volumes of 47.8 lakh shares on both BSE and NSE, as against 26.07 lakh as on June 14.

Nikesh Shah, head of research at Triumph International Finance India said, "Telco commissioned its Indica car project last year and the current year the balance sheet will show increased depreciation and interest cost so whatever gain that the company makes due to increased offtake of its HCVs would be nullified by the losses due to Indica. Wehave projected a Q1 loss of Rs 42 crore for this fiscal compared to a loss of Rs 35 crore during Q1 last year."

According to Amisha Vora, vice-president Network Investment and Finance: "It has been seen that Telco turns out to be major beneficiary as and when the economy is on the upswing. For example between 1992 and 1995, the sales of Telco vehicles increased from 82,000 to 2 lakh units per annum. If there is an encore this time around, Telco could report a net profit of more than Rs 250 crore in the fiscal 1999-2000".

During 1998-99, Telco's performance has been hit badly with sales falling sharply and profits dropping to touch new lows. The company reported a 67 per cent drop in net profit from Rs 294.66 crore to Rs 97.46 crore last year. Total income also fell from Rs 7,327 crore to Rs 6,600 crore during the period.

Insight

A logical move

With demand showing an uptrend for HCVs, an increase in prices is a logical step for Telco especially when the prices of steel have given anindication of a upward revision. In fact, for this reason, higher prices should have a less than expected impact on profit margins. As for the market, the Telco stock has remained firm, except for a marginal decline on Wednesday. Earlier, it had moved up from Rs 178 to Rs 217 over a two-week period. However, besides investment buying, the no-delivery factor has also helped the stock to remain high.

Deepak Singh Tanwar