The figures speak for themselves - sales have risen by over 50 per cent for the past three years, the recession notwithstanding. This year, too, sales are expected to cross Rs 120 crore compared with Rs 80 crore in FY 1998-99.Paramount Communications has two manufacturing divisions -- one at Daruhera, which manufactures jelly-filled cables (JFTC), and the other at Delhi, which produces power cables and other telecom cables. Over the past two years, the JFTC capacity has been expanded from 8.75 to 24.44 lakh conductors kilometres (LCKM).

Says Aggarwal, ``The installed capacity at this plant has reached an optimal level and we are now consolidating our production process in order to improve efficiency. We have identified the bottlenecks and hope to raise our capacity utilisation significantly from 33.41 per cent in fiscal 1999.''

Aggarwal hopes to see a significant addition to the company's bottomline from this division thanks to this streamlining.

On the other hand, the Delhi unit - which produces power and other telecom cables - is hamstrung by space constraints and the economic recession which has affected sales. ``From our Delhi unit we feed the cable requirements of small and medium-size projects. Thanks to the recession, most projects have either been shelved or put on hold. This has impacted sales. The JFTC plant had been cushioning our bottomline so far, but with end to the recession in sight, we hope to see sales from this unit picking up,'' notes Aggarwal. To solve the problem of space constraint, the unit will be relocated. The land has already been purchased and the building is expected to come up within a year or so.

To grow at an aggressive pace, Paramount Communications identified two focus areas - building a loyal vendor network through alliances as well as equity partnership and focusing on quality in order to make its presence felt in the over-crowded JFTC market. Says Aggarwal, ``Building and maintaining our vendor base is one of our primary tasks. By making the vendors our partners in progress, we our able to achieve a higher-than-industry growth rate.

The you-grow-as-we-grow approach has paid off for us and will continue to attach a great deal of importance in fostering such alliances.'' Although Aggarwal is tight-lipped over the equity stake held by the vendors, market sources say it is close to 10 per cent. Quality is another aspect, Aggarwal says, where Paramount Communications will never compromise. ``In the fiercely-competitive telecom cables market, we have not only survived, but managed to increase sales thanks to our obsession for quality,'' says Aggarwal, adding that this is imperative to ensure long-term growth.

However, on the flip side, this often leads to over-provisioning and this partly explains Paramount's high expenses. In the first-half of FY 1999, expenditure as a percentage of sales was as high as 92 per cent. Cost of raw materials as a percentage of sales was a whopping 77 per cent as against the industry average of 60 per cent. Says Aggarwal, ``Yes, our expenditure is on higher side, but this will come down significantly as the economies of scale come into play. Copper prices are stabilising, after being on an uptrend for quite some time, and this will be to our benefit. Besides, we have initiated some cost-control measures at our JFTC plant which should bear fruit soon.''

For the future, the company plans to set up a optic fibre cable (OFC) unit in the next 1-2 years. According to Aggarwal, the OFC unit will compliment the JFTC plant and will not compete with it. ``OFCs are viable for trunk routes, while for households and individuals, JFTC will continue to be the mainstay. Once our OFC plant is operational, we should see a significant rise in our turnover,'' says Aggarwal, adding that the cost of the OFC project is yet to be as ascertained. However, he admits that internal accurals alone will not be enough. The company's reserves are not too comfortable at Rs 10.99 crore. However, the low gearing as well as a small equity provides enough room for maneuvering. However Aggarwal says, ``We would prefer the debt route to the equity option.''

The company's long-term debt-equity ratio is low at 0.50. The relocation (estimated to cost Rs 2 crore) and the new foray may strain the company's finances in the short-term. On the bourses, Paramount trades at a PE of 6.4 against the industry average of 12. Considering the growth potential and the consistent record, an investment at the counter can be considered for a medium-term perspective. Technically. The stock is trading above its 30-day moving average, indicating short-term buliishness, and the MACD indicator has given a buy signal. An uptrend from the current level of Rs 27.15 is likely.