L&T's order booking for the first quarter of 1999-2000 at Rs 2257 crore is 52 per cent higher than the corresponding period last year (net of one time refinery orders for DHDS projects - Rs 623 crore) and including DHDS orders by 4 per cent. Furthermore, the order backlog at Rs 6563 as on July 1, 1999 is 7 per cent higher than the previous year.

Interestingly, one has to remember that the second quarter of 1998-99 excluding one time income from sale of shipping division was extremely poor. Despite the fact that, commercial production at the second cement plant of 2 mtpa in Gujarat started in April 1998, largely beacuse prices in the next quarter dipped to Rs 90 per bag, resulting in a gross loss for the unit as only units with sales tax incentives managed to break-even.

But the price scenario, in the current period is much more comforatble. Not only will the second quarter be better than last year, but it should also outperform the first quarter results for two reasons. Firstly, the Tadpatri cement unit has started commercial production in October 1998 and though cement despatches in the state were higher by 38 per cent, the poor price realsiations of Rs 90 per bag made a telling impact on companies with a major presence in South India. The examples being Madras Cements and Priyadarshini Cement, inspite Madras Cements being one of the lowest cost producers. Thus there is no reason to believe that the performance of L&T's Tadpatri unit was any different.

The major exception being higher interest and depreciation costs for Tadpatri, which because of being a new plant must have resulted in unit posting a loss despite operating above capacity. In a reversal of the scenario, prices in AP have firmed upto Rs 115-125 and though no exact volume figures are available, the second quarter should be substantially better than the first quarter. The second reason, is the rush for project completion during the second quarter to claim depreciation benefits for the full year.

In the second quarter of the previous year, the PBT at Rs 64.06 crore (excluding one time income) was 20 per cent lower than the PBT of the first quarter. Thus even if L&T manages to post the same PBT as in the first quarter, the PBT (excluding one time income) on a half to half basis will be higher by 24 per cent. All of which inidcates that L&T's PAT in the first half could well be at par with the first half of previous year - Rs 198.71 crore, which importantly included profit on sale of ships of Rs 76.2 crore.

Indian Hotels

Luxury hotels earn about two thirds of their revenue from foreign tourists (business as well as leisure), while the rest of the revenue stream is generated predominantly from the upper end of the domestic business travellers. However, the influx of foreign tourist is highly sensitive to the political and socio-economic environment and no where is this more apparent than in the mere 1.3 per cent increase in foreign tourist arrivals in April 1999, compared to the substantial double digit growth of 13 per cent in April 1998.

Importantly, a direct corrolary of the miniscule influx of foreign tourist are the dwindling occupancy levels in hotels and as a consequence lower average room rates (ARRs). All of which has become an all too familiar story in the recession hit hotel industry and the first quarter performance recently posted by Indian Hotels is no exception. A reflection of the times is the fact that operating revenues at Indian Hotels have actually dipped 8.71 per cent to Rs 120.07 crore. Analysts state, that the decline in the revenue stream at Indian Hotels would have been even steeper had the company's aggressive marketing, made more attractive by hefty discounts, not helped in enticing domestic tourists.

In line with declining revenues, has been the sagging operational margins at Indian Hotels, which have in fact dipped from 14.26 per cent to 11.2 per cent. Thanks largely to a disproportionate cut in expenses which have dipped only marginally by 2.96 per cent to Rs 92.84 crore, an obvious strain from managing the 55 properties in India and abroad. A new wage settlement and increased power tariffs have also played their part.

As if these problems were not enough, a higher interest burden of Rs 5.82 crore and increased depreciation charges of Rs 8.65 crore, have further drained earnings. In fact the quality of earnings can easily be judged from the fact that, other income as a percentage of PBT stands at 48.96 per cent, compared to 18.57 per cent for the corresponding quarter last year. Thus had it not been for the buoyant other income of Rs 12.24 crore (Rs 5.21 crore last year), the 7.73 per cent dip in net profits would have been steeper.

Additionally, the outlook for Indian Hotels in the interim looks grim. Especially since a lot of hotel companies are planning new room additions, which will only lead to an overcapacity problem. Also with the sluggish trend of lower occupancy levels and stagnant ARR's slated to continue, any revival for Indian Hotels or for that matter any hotel stocks seems a distant dream.

With contributions from Urmik Chhaya & Percy Dubash