It reached its all-time high of Rs 88.50 on Friday, July 9. In fact, when HCL reached its latest pinnacle, the volume traded too was higher than usual at 8,700 shares for the day. As a pattern, however, the growth in volume has not kept pace with HCL's gain in price. The latter has perhaps more to do with a newfound interest in the counter arising as a sequel to its recent open buy-offer to public shareholders. Interestingly, the promoters' offer for buying a meagre number of 50,300 shares, representing just 1 per cent of its paid-up equity, was necessitated by a December 1998 diktat from Sebi.

In its order, the regulatory body had ruled that the preferentialallotment made by the company to its promoters and other investors in December 1997 had not quite complied with the takeover regulations. Consequently, it directed the recipients of the preferential offer to make a public offer as per regulation 11.(2) of the code. The minuscule offer, made at a premium of Rs 35 per share, remained open between May 12 and June 10.

Prior to the offer, the Hiremath family and the Kalyani group held 35.3 per cent and 34.7 per cent respectively of the equity, while Sumitomo Corporation (SC), Japan held another 15 per cent. The general public holding was, thus, only 15 per cent of HCL's equity of Rs 5.03 crore. Be that as it may, the first signs of activity on the HCL counter occurred at the dawn of 1999, when the company, engaged in the manufacture and marketing of intermediate chemicals for dyes, pharmaceuticals and pesticides, finally commissioned its Thiaben dazole (TBZ) plant at Taloja, outside Mumbai.

Significantly, HCL's product chemistry enabled it to set up the 1,000tpa-TBZ plant with technology provided (free of cost) by the US giant, Merck & Co Inc (Merck), who also agreed to buy back the entire production for 10 years.

The project, which cost HCL Rs 125 cr, reportedly conferred HCL with the distinction of being the only manufacturer of TBZ in the world, following the discontinuation of production by Merck due to the vintage nature of its existing plant and increased public awareness and resistance to pollution hazard in the West.

Perhaps, celebrating the event that was waiting to happen for over 18 months, the price line moved up smartly from about Rs 20 towards the end of 1998 to Rs 40 by end-February, though the trading volume did remain muted or very thin. However, after a brief period of hype, HCL's price line once again drifted along the sideward zone in March this year accompanied by low volumes. This trend continued in the lead-up to the open buy-offer and also during the initial days of the offer.

Come May end. The announcement of HCL's audited resultsfor fiscal 1999 stoked fresh interest in the counter. Though HCL reported a loss for the fiscal, it was only on account of the heavy depreciation occasioned by the commissioning of its TBZ plant in January 1999. Despite the high incidence of finance costs for the same reason, the company still ended the year with a `Cash EPS' of about Rs 10 per share. More importantly, the last quarter of fiscal 1999 represented a watershed in HCL's operations, when the company reversed the loss-making trend to report a bottom line of Rs 1.22 crore.

Propelled by expectations that HCL's turnover and profitability for the current fiscal would replicate the last quarter of fiscal 1999 and with the open buy-offer slated to close on June 10, activity suddenly picked up on the HCL counter in the first week of June. The daily volumes were higher than usual and the scrip's price line crossed the `offer price'. This set the pace for the renewed surge in the scrip later in the month, when it continually breached higher peaks to postits all-time high. Though the volumes may not suggest any large scale `insider trading' in HCL, the possibility of `informed buying' is certainly not ruled out.

Operationally, however, HCL has much going for it. Given the committed buy-back for its TBZ, a crop protection chemical, from Merck, the company's turnover would be dominated by the product beginning the current fiscal. Indeed, if the latest quarterly trend is any indication, a turnover of Rs 80 crore is well within the reach for the current year. With the company already enjoying an interest-free advance of around Rs 47 crore from Merck against future supplies, finance costs should also be under control.

As a result, the company could end up posting a much-improved bottom line for the current fiscal. Thus, HCL seems to have come of age. And, with the scrip now having posted its all-time high, HCL's 5,000 public sharehol ders can look forward to the future with renewed hope, as long as HCL is free of any environment disaster!

(E-mail feedbackto: investar@bol.net.in)

(Arranged by INVESTAR - The Aarthik News & Research Syndicate)