However, there is another school that is quite cautious, while welcoming the badly-needed recent bull run in CGL. This school would like to wait and have a closer look at the full fiscal 2000 results of CGL to have a definite view on its prospects.

May be this school of doubting Thomases has a valid point. The immediate indication to theirsupport comes from the results of the first quarter of fiscal 2000, announced to coincide with the AGM yesterday. The results indicate an overall slack performance. Were the trend of the quarter to persist, then CGL is undoubtedly heading for a ride south, as was the case, post-GDR issue. On the eve of its GDR issue in July 1996, CGL, belonging to Thapar group, was on the buy list of almost every analyst worth his name. Those were the heady days when the scrip was quoting upwards of Rs 250 a piece. But, as events rolled out later, CGL's honeymoon with the bourses did not last very long. Tough operating conditions coupled with the company's business model, perceived to be unwieldy, resulted in the CGL scrip being relentlessly hammered down to its all-time low in September 1998. Then came hopes in May 1999. The May rally held out hopes because it was on the back of a three-fold rise in volume to 103.02 lakh shares.

In June, though the cumulative volume was slightly lower at 90.60 lakh shares, the momentumwas sustained on the price front. The scrip ended the month at Rs 45.15 a piece. During July, riding piggyback on a rampaging Sensex, the CGL scrip has breached new frontiers, posting in the process, its 52-week high of Rs 74 last week. Thereafter, the price back-peddled this week to Rs 63 a share. Even then, the scrip's gains from a volume of over 130 lakh shares, since the beginning of the month, stood at an impressive 40 per cent. If the sustained spurt in price and volume marked the recent CGL rally, it was not surprising. Because, the counter saw the return of the bulk investors, as with every passing day, the `average shares traded per trade' kept on improving. Also, the market sentiments were based on a relatively improved result for fiscal 1999.

In fiscal 1999, CGL reported a net profit of Rs 23.12 crore on a turnover of Rs 1693.91 crore, which represented an improvement of 12 per cent and 6 per cent respectively over its previous year's effort. Particular mention should be made about the consumerproducts division, which had been a loser in the past.

In 1999, the division was shown coming out of the red and somehow "posting" a PBT of Rs 3.51 crore. Of course, if an overall perspective is taken, CGL's fiscal 1999 financial report presented a mixed bag of contributions. Though power and industrial systems divisions clocked a higher turnover at Rs 644.88 crore and Rs 605.87 crore respectively during the fiscal, both these segments also sounded out an alarm with a drop in profitability by 14 per cent and 21 per cent respectively. The worst warning, though, came from the digital division, engaged in producing wireless local loop equipment, MAX-XL large capacity exchanges with ISDN facilities, optical line terminal equipment for optical media etc. It continued to be the major drag on the company's bottomline, losing a huge Rs 23.57 crore on a relatively minuscule turnover of Rs 78.49 cr during the fiscal. In fact, during the last three fiscals alone, the digital division has cumulatively lost a whoppingRs 70 crore, compared to the net profit of Rs 74.5 crore earned by the company!

It is not as if the digital division alone should be apportioned all the blame for the ills afflicting CGL. In the last decade, though CGL's gross income more than trebled to Rs 1694 crore, the net profit, save a brief glow in the mid-nineties, did not quite keep pace. Net profit margin slid from 2.53 per cent to 1.36 per cent. Sluggish domestic demand coupled with excess production capacities in industrial systems hugely contributed to the pressure on margins. To the litany of additional macro economic woes arising out of the dismantling of the Nehruvian protectionism to the core sector, one important micro contributor needs to be added. And that is the inadequacy of return from CGL's burgeoning investments portfolio. Investments, which stood at just Rs 4.18 crore at the end of fiscal 1990, grew exponentially to Rs 111.26 crore at the end of fiscal 1999. As a percentage of net assets employed, the company's investments moved upfrom just 2.1 per cent to 8.8 per cent during this period. However, apart from resulting in the creation of a maze of subsidiaries and joint ventures, these investments have failed to generate a matching contribution to CGL's bottomline in any significant manner.

Even after an exercise of restructuring via mergers and the likes, at the end of fiscal 1999, CGL had 6 subsidiaries and 18 joint ventures. The company had a cumulative direct investment of Rs 12.29 crore in the subsidiaries, which collectively generated a loss of Rs 2.85 crore during the year. As for the joint ventures, CGL's cumulative investment of Rs 75 crore in them produced a collective loss of Rs 41.11 crore. Leading the loss making pack was the telecom joint venture, Skycell Communications, which accounted for a huge loss of Rs 41.51 crore! No wonder then that CGL's income from investments stood at a pathetic Rs 0.62 crore for fiscal 1999!

So the writing on the wall is clear. To simply brush aside the doubting Thomases as representativesof the bear cartel would be begging the question. The fact of the matter is that for a long, sustained and inherently strong bull run, CGL is awfully not ready. And the emerging liberalised and globalised economy is not helping it, as well as the other core sector companies. As such, flashes of promises in one fiscal should be more carefully studied. In this milieu, the management too should be more open and it alone can effectively dispel doubts about the future of CGL. For one, what is the truth behind CGL being spun into three separate companies? The one-time blue chip, CGL, cannot chart out its winning rally under such a cloudy weather, can it? Over to the discerning investors.