Although the rise in the Indo Gulf Corporation's stock has been attributed to the firming up of the global copper prices to around $ 1600 per tonne, better performance by the fertiliser division is further going to boost the bottomline. Although the stock has risen to around Rs 53, it still discounts the latest earning per share of Rs 7.96 by a price earning multiple of less than 7.

Copper prices overseashave seen a spurt following the closure of a 1.8 lakh tonne plant, which has resulted in the excess supply coming down drastically, thereby pushing up the prices.

The company's Rs 1850-crore one million tonne copper smelter plant went on stream in the first quarter of last year. Although the copper smelter plant did not operate at optimum capacity in 1998-99, it has already notched up a market share of around 40 per cent in nine months of commissioning the copper smelter. An optimum capacity utilisation coupled with higher realisations would certainly help realise higher revenues and better margins. However, the cause of concern could be the high interest out go on huge debt taken for part-financing the copper smelter.

Indo Gulf Corporation's actual performance has not been able to meet its revenue projections in the first year as a result of the depressed copper prices since the commissioning the copper smelter. However, some positive developments like the firming up of global metal prices includingcopper augur well for the company. Indo Gulf had earlier projected a turnover of Rs 1,200 crore for the second year at 85 per cent capacity utilisation.

Indo Gulf has become the largest player in the Indian market with an annual capacity of one lakh tonnes followed by Sterlite (60,000 tpa) and Hindustan Copper (40,000 tpa).

Following the implementation of the plant, the company's turnover in 1998-99 improved from Rs 639 crore to Rs 1,560 crore in 1998-99. High interest and depreciation resulted in lower growth in bottomline. As a result, operating profit in the last year improved from Rs 197 crore to Rs 253 crore and net profit from Rs 141.16 crore to Rs 164 crore.

Considering the excellent growth prospects in the fertiliser division and the dominant position the company has achieved after the commissioning of the copper plant, Indo Gulf qualifies as a good stock for a medium-to-long term investment.