The restructuring exercise initiated by Alstom India Ltd has perked up the stock from Rs 33 to Rs 50. However, a minor technical correction at the counter has led the scrip fall to Rs 43-level. The rise in the price is accompanied by high volumes at the counter. According to marketmen, the Rs 437 crore Calcutta-based power equipment manufacturer Alstom Ltd, a subsidiary of Alstom France SA, is working on a long term strategy to turn the company around by reducing cost of production. The company reported a net loss of Rs 9.51 crore in the last fiscal. In the current fiscal, the company plans to reduce its manpower by 1500 from 4500 to 3000 workers. In the last fiscal also, the company incurred an expenditure of Rs 56.43 crore on voluntary separation schemes (VSS), whereby it managed to reduce workforce by 2700. According to marketmen, the company is currently working towards improving productivity by 30 per cent and at the same time, reduce costs by 30 per cent over aperiod of three years. This would mean a substantial jump in the profit margins at the operating level. The company operates in the industry where the competition is intense. The stiff competition makes it difficult for the player to charge premium on their products. Some of the players are even resorting to heavy discounts on their products. Thus Alstom's strategy to increase production by improving productivity should have an effect on its valuations on the bourses.

Earlier, the company had planned to hive off its Paharpur and Taratalla units to concentrate in core-area operations where its overseas parent has technological leadership, but failed to do so for want of suitable bidder. However, it had managed to sale off its low voltage business division to Distribution and Control India at a cost of Rs 75.5 crore.

Hero Honda rides high

An impressive performance by Hero Honda in the first quarter of current fiscal saw the scrip shoot up to its two year high of Rs 1277 on BSE. While on NSE, thescrip touched a high of Rs 1290. The scrip closed lower at Rs 1249 and 1249.5 at BSE and NSE respectively due to the general poor market sentiment. Hero Honda Motors reported a jump of 68 per cent in net profit from Rs 23 crore to Rs 38 crore during the first quarter of the current fiscal.

The turnover of the company has gone up by 51 per cent to Rs 489 crore in April-May of the current fiscal against Rs 324 crore in the corresponding period of 1998-99. Even the sales volumes increased by 42 per cent from 1.13 lakh units to 1.61 lakh motorcycles in the Q1 of the current fiscal. In the last fiscal, motorcycles overtook scooters to emerge as the largest product segment with a 41 per cent share of the two-wheeler market. Motorcycle segment registered a growth of 23 per cent in the previous fiscal.

Riding on the preference shift, the company has also managed to improve its market share from 38 per cent it enjoyed in the first quarter of the last fiscal to 42 per cent in the first quarter of the currentfiscal. With the company now targeting a turnover of Rs 2,000 crore in the current fiscal, analysts expect the scrip to zoom to around Rs 1500 in another six months time.

Room for rally

With Indian Hotels declaring that it will further buy 6.28 per cent in Chennai-based Oriental Hotels, the later's stock is likely to further shoot up. The stock has been on the rise after Indian Hotels bought 7.31 per cent in Oriental Hotels. Since June 14, the scrip has risen from Rs 117 to Rs 149.75. Indian Hotels will now buy 6.28 per cent stake from its wholly-owned subsidiary, Taj Investment and Finance Company Ltd between July 23 and August 10 at the prevailing on the BSE and NSE subject to a minimum of Rs 154.25 per share. On Tuesday, the share closed at Rs 149.95 on NSE. Oriental Hotels has reported a net profit of Rs 30.76 crore on a sales of Rs 94.89 crore for the fiscal 1999.

--Sunita Nagpal