As a consequence, sales for the half year ended September 1999 have improved 12.50 per cent to Rs 495.17 crore. That export growth this year was subdued due to the winding up of the merchant exports division, did not help much.

Furthermore, creating brand awareness for its new products and the problem of dwindling herb supplies due to increased demand, as well as reduced yields due to replacement of more lucrative cash crops, have all taken a toll on the margins. In fact, during the first half expenditure on advertising and publicity jumped to Rs 60.80 crore, accounting for as much as 12.3 per cent of sales. Thus a disproportionate increase of 13.89 per cent in expenditure, saw the operating margins slip from 9.81 per cent to 8.73 per cent.

Despite this operational performance, the company's bottom line has jumped 80.51 per cent to Rs 44.28 crore. However, a closer look reveals that the buoyancy in the bottom line has more to do with a non-recurring income of Rs 21.17 crore from sale of investments. The quality of earnings can be gauged from the fact that other income accounts for as much as 60.45 per cent of profit before taxes, compared to a mere 26.67 per cent last year.

But even despite this performance, the positives at Dabur appear to outweigh the negatives in the long run. Dabur India has lately being very pro-active with sell-offs, new product launches and increasing thrust in international markets. The obvious reference here is to the recent sell-off of its entire 49 per cent stake in its confectionery joint venture- General De Confiteris India Ltd (GCIL) - to its Spanish partner Agrolimen for Rs 35.24 crore.

Dabur has also entered into a non-competition agreement with Agrolimen Group for consideration of Rs 11.25 crore which the company will receive in year 2001. Earlier in March, the company had sold 20 per cent stake in Excelcia Foods Ltd to Nestle SA reducing its stake to 40 per cent and giving management control to Nestle. The company realised Rs 10.6 crore from that sale. This has been done in order to concentrate in areas of its core competence and move out of ventures in unrelated areas.

The company has also set up an overseas arm in Britain with an investment of $5 million. Dabur already has a company, Axol in the UK to manufacture and market oncological products in the European market. The company is also considering ventures in Russia and South Africa. With natural treatments coming into vogue in international markets, there lies a huge potential for the company.

On the domestic front, the company has entered in one of the fastest growing segments - Hepatitis B and E. Most importantly, the company is offering its products at a very low price as compared to its competitors. Further, the drugs are in tablets and syrup form, rather than injectibles that are marketed by its competitors. In other words, the ongoing restructuring is making Dabur a lean and mean company with the potential for achieving a high growth rate.

Essel Packaging
In the second quarter of 1999-2000, Essel has posted better results than the corresponding period of the previous year as well as in the first quarter of the current year. The OPM in second quarter has, however, declined to 37.55 per cent compared to 40.4 per cent in q2 98-99. This has happened despite the topline growth of 44 per cent (from Rs 40.56 crore to Rs 58.24 crore). The reason is that bulk of the volume growth has come from small diameter tubes which results in higher number of tubes for the same laminated area. The prices obviously are lower in this segment.

The market had anticipated the results and there is no possibility of the stock giving the same returns which it has already given in last couple of months. However, Essel, in all probability, will declare an interim dividend over and above the dividend declared in lieu of the buyback of shares which did not go through. Another interesting development is that Y2K stocking is fairly high. This will mean a good third quarter but the good performance will probably be evened out in the last quarter.

The seamless tubes market is no longer declining but is not growing either. The offtake will depend on the severity of winter and for that one will have to wait till November. At the current price, the stock will certainly not give the returns it has given.

Steel - floor price
Although the steel industry has been asking for an increase in the floor price on steel imports, the Director General of Foreign Trade (DGFT) has reduced it. It will, however, be revoked after two months. Floor prices have been slashed considerably with the highest being 21.62 per cent in alloy steel from $740 per tonne to $580 per tonne. Ironically, this has been done at a time when international steel prices are on the rise while domestic prices have at best been stagnant. Given these circumstances, the question arises, why would any international company like to sell its products in India, where realisations are lower.

In fact, the whole system of imposing a floor price seems to have backfired. Imports, at a time when even international prices were lower, continued to be high. Reports say that import growth of HRC was as high as 30 per cent in the second quarter making a mockery of the floor price mechanism. These imports have taken place at prices lower than the floor prices set by the DGFT, which has been possible due to the advance licence mechanism.

Imports under the advance license route comprised nearly 78 per cent of total HRC imports in the first five months. Cheaper imports had come into India even since December, when the existing floor prices were imposed.

Imports of sheets and coils had increased from 30,000 tonne in December last to 51,000 tonne in March -- almost 86 per cent of which were routed through the advance license scheme.

Though there are certain products like CRGO grade (manufactured by Raymonds) which have benefited from the imposition of floor price and tinplates there are very few other products that will be affected. Thus the reduction in the floor price as well revoking it is unlikely to impact the Indian steel producer.

With contributions from Percy Dubash, Urmik Chhaya and Shishir Asthana