Meanwhile, current operations are under threat. According to managing director Arvind Poddar, there is no future in its traditional cycle and three-wheeler tyre business. The management openly admits to oversupply, and as Poddar put it, with no technological and capital barriers, maintaining the gross profit margin at 6 per cent is out of the question. Value-addition is a must.

Which was the main reason for the thrust on technology. The sales mix of the new plant at Bhivadi will provide value-addition to the sales mix. New markets are also being explored. Exports, primarily to the USA, UK and Holland, have grown from Rs 21 crore (8.5 per cent of total sales) in 1996-97 to Rs 48 crore (16.3per cent) last year. The original plant at Ludhiana will continue to provide the volumes, but auto tyres and pneumatic tyres from Bhivadi will be the driversof profitability.

Right now, though, costs are more apparent. Employee costs have gone up from around 5 per cent of net sales to 6.5 per cent in the last two years.

Company sources attribute this mainly to the salaries that qualified personnel command in a high-technology environment. There is a small rise in power and a hefty rise in selling and distribution expenses (12 per cent to 17 per cent). This is massive when considered that it was only this year that the net margin went above 1 per cent.

Finance manager Kudekar admits to sales push efforts. "Efforts have gone in areas like dealer conferences, schemes to dealers and suchlike. We were interested in selling the product without a reduction in the market price. New products also mean higher selling costs and besides, exports have been through the agent route."

In a competitive climate, topline growth is difficult. Sales in 1998-99 stood at Rs 295 crore. Company officials estimate the current year's figure at a stagnant Rs 300 crore, with somemodicum of growth next year (Rs.320 crore). The push, says Poddar, will come beyond that. "By March 2002, Bhivadi will give a turnover of around Rs.160-175 crore", he says.

Till then, expense control and debt repayment will help the bottomline. Courtesy slashed rubber prices, all the cost hikes did not impact margins, which have in fact improved slightly over the last two years.

With prices promising to remain soft, even a slight thinning out of overheads will help maintain margins in the face of competition. One ace up the company's sleeve is that cash generation has always been healthy, courtesy high depreciation. Last year, the earnings per share were Rs 4.57 and the cash earnings were Rs 19.83. GRL plans to retire around Rs 25 crore of its debt over the next two years, which will further boost the margins.

In the first five months, Rs 6 crore has been repaid, affirms Kudekar. On the downside, there is the working capital scenario. Debtor days have gone up from 64 to 84 in the last two years. Theyare liable to stay that way, though export sales are somewhat of a respite. Cash credit borrowings have gone up and will stay up over the next two years.

Another grey area is the tax outgo, which will go up slightly this year and strongly next year. But if the marketing department delivers, all will be joy and jollity. In that case, in the medium term, the stock is likely to see an upside due to earnings growth and a re-rating on the basis of where its revenues come from.