The ITW Signode balance sheet carried underprovisions on account of back taxes as well as non-performing debtors accounts, besides obsolete stocks, which needed to be written off. The clean-up that began with a minor charges to the P&L statement have ballooned in the just concluded financial year.

Extra-ordinary provisions amounted to Rs 28.6 crore for 1998-99, against Rs 13.5 crore in the previous year, pushing up losses for the year to a total of Rs 26.44 crore. However, considered net of these incremental provisions there is a definite growth in earnings. Significantly there has been a huge reduction in interest costs from Rs 10 crore in 97-98 to Rs 4.4 crore in98-99.

The fortune of the company is closely linked with the growth in industrial production, being a leading manufacturer of industrial packaging items. To that extent despite the worsening industrial situation last year ITW managed to maintain topline growth at the previous years level. The prognosis for the current year is much better. The market initially reacted positively to the results put out by the company. The stock was higher by a couple of percentage points. The general view is that the huge losses emanating as a result of the company's restructuring efforts are a one-time blow and will not be repeated in the current year.

Bank of Madura

The results from the public sector bank, Bank of Madura, show a distinct change in approach to its earnings from the other banks (particularly the public sector banks). The bank has actually managed to keep the level of net NPAs at the previous year level of 5.7 per cent despite a marginal increase in assets.

Conversely the bank has also seen a fallin its gross interest income. This fall in the interest income was a direct result of the bank curtailing its lending activities. Being hampered by two things, the possibility of higher NPAs as well a few credit worthy clients, the bank chose to reduce rampant asset creation. But simultaneously it is also focussed on reducing the growth in its liabilities as well, thus plugging interest outflow to some extent. Deposits grew by just 10.5 per cent.

The bank instead chose to focus on non-interest operating income, i.e income from treasury activities, profit on sale of investments etc. Here revenues grew from Rs 89 crore to Rs 98.5 crore, contributing significantly to operating profits. As a result of this approach the net NPA growth was hemmed in and the bank could reduce its provisioning to a large extent, by 23 per cent. Last year as well the bank differentiated itself from other PSU banks by also restating its accounts under the International Accounting Standards. Provisions against NPAs were higher by 30per cent as a result.

Aaron Chaze