The performance of L&T's ECC division was a clear indicator of the state of affairs in the industry and Thermax results are in the same mould. The operating loss in the third quarter at Rs 7.88 crore is three times higher than Q3 1998-99 loss of Rs 2.54 crore.

It is not possible to estimate the exact operating loss as excise is included in the topline instead of the head, total expenditure. For the nine-month period, the operating loss is Rs 20.36 crore compared to operating profit of Rs 8.82 crore.It may be noted that other income for the period ended December 1999 at Rs 44.28 crore is higher than in 1998-99 but PBT is just 35 per cent.

An interesting thing is that on adding up other income of the three quarters, the figure works out to be Rs 31.07 crore but other income for the nine-month period ended December 1999, according to results is Rs 44.28 crore-a difference of Rs 13.21 crore. Hard to figure out the reason. In fact, in 1998-99, the problem was the same. The difference was just Rs 7.81 crore. The figures for the first half tallies but when third quarter figure is added, the total does not tally.The fourth quarter is always the best quarter and this year will be no different. But the company's performance will be nowhere near Q4 1998-99.

The market had discounted the performance which is already reflected in the stock prices.

Dr Reddy's Laboratories

Dr Reddy's Laboratories is among the few pharmaceutical companies to post a robust growth during the third quarter of the current fiscal. The company has posted a 35 per cent topline growth while its net profit, prior to extra-ordinary item grew by 65 per cent. Taking into consideration the extra-ordinary expense provided by the company in the previous year on account of exports to CIS countries, it bottomline has more than doubled from Rs 10.87 crore to Rs 22.07 crore.

Two main reasons can be cited for the phenomenal growth in the company. First is the extra-ordinary growth recorded in the company's formulation business, which grew by 63 per cent from Rs 49.04 crore to Rs 79.83 crore. Contribution of the finished dosage business has increased to 66 per cent from 55 per cent in the previous year. Finished dosage growth in the domestic market has been a strong 41 per cent from Rs 40.12 crore to Rs 56.58 crore.The company has, however, on percentage terms, done far better in exports. This is because of a better performance in the Russian market.

Exports of formulation improved from Rs 8.92 crore to Rs 23.26 crore, while on the other hand exports to Russia shot up from Rs 4.63 crore to Rs 16.32 crore.Though the formulation division has picked up, same has not been the case with bulk drug, which has posted a slight drop in sales.

This however, has been a part of the management's strategy of cutting down its dependence on bulk drugs and increasing it in finished dosages to around 80 per cent of sales. The company is also expected to get a boost in the formulation division with the acquisition of American Remedies, which is known for its wide distribution network.Given the strong R&D pipeline and a merger with group company Cheminor Drugs, Dr Reddy's is expected to post strong performance in future.

Refining margins

India surprised the Asian gas oil market by importing the more diesel even after the threat of a strike by oil companies died down. Reports say that Indian Oil Corporation in its latest tender has awarded 2,55,000 tonnes of diesel in seven cargo for first half delivery. Traders expect that its buying, which has already touched 6.4 million barrels is likely to continue.

What has caused India to suddenly import diesel, when it had reached the point of self sufficiency after commissioning of Reliance Petroleum's? One of the reasons, as said earlier, was that the government was importing keeping in mind the threat of a nationwide strike by employees of oil sector PSUs. Though this did not materialise, imports are continuing.

Analysts say that a decline in refining margins, with the current sharp rise in crude oil prices, has resulted in oil companies cutting down production of gas oil and resorting to imports.More importantly however, is the fact the two big refineries are expected to undergo annual plant shut down in the first month of next fiscal. This coupled with a low capacity utilisation of MRPL's refinery is cited to be the main reason for the country increasing its imports.

Emcee (with contributions from Urmik Chhaya & Shishir Asthana)