There is no doubt that this is a wise decision, since incurring marketing expenditure on non-core businesses would not be a profitable proposition.However, this would not have a major impact on the bottomline of the company since the contribution of these areas is minuscule as compared to its core areas viz, soda ash and urea.

Production and sale of soda ash and urea is the bread and butter of Tata Chemicals and contribute around 80 per cent to its topline. The company is the largest domestic producer of soda ash. Dumping of soda ash by Chinese companies and downward revision of urea retention price by Rs 463 by the Government has had its toll on the fortunes of the company. As a result of these developments, the company has incurred a net loss of Rs 3.8 crore for the quarter ended June, 2000 as compared to a profit of Rs 6.6 crore in the corresponding quarter of the previous quarter.

Competitive pressure in the cement division has also posed serious question about the growth prospects of that division. In spite of producing only 3.2 lakh tonnes, against a capacity of 4.4 lakh tonnes, the company plans to go ahead with its expansion plans and wants to have a one mtpa manufacturing capacity.

The cement industry is undergoing a process of consolidation and it will be tough for Tata Chemicals to survive the onslaught with competitors like Gujrat Ambuja and Lafarge who are going all out to increase their market share and establish their dominance over the Indian markets.

Analysts favour the hiving off of its cement division as was the case with Tata Steel and Raymond, which sold their cement divisions to Lafarge. The company needs to focus on its core areas - soda ash & urea to survive and grow in this cutthroat competitive market. It has to work on the cost front, as it is one of the highest cost producers of urea in India.

The process of restructuring has already been started, with the company coming out with a VRS covering 1,067 employees of its Mithapur plant and cost it Rs 54 crore. However, a lot more remains to be done in terms of reducing the operating cost.

The share price of the company has come down from a high of Rs 69 in December, 1999 to a low of Rs 39 on 25th August, 2000.

Tata Chemicals has a long way to go with the backing of the biggest Indian business house ie, the Tata's. The only ingredient required is commitment on the part of the management to actively manage the affairs of the company.

MTNL
The Internet revolution is about to enter the second phase. While the first phase was in narrowband, the second one will be ruled by broadband. Since the present problem is of limited bandwidth, everyone is thinking of ways of increasing the bandwidth. There are two types of bandwidth with different features. With narrowband connection, your accessing speed is very slow and you can not view video on the net. Broadband connection solves both these problems. At present, ETH Dishnet, a south-based company, provides majority of broadband connections. It uses set-top boxes to solve the problem of bandwidth.

MTNL has been providing net access through dial-up connection ie, narrowband connection. General thinking has been that the broadband access is possible only through optical fibre cable network. Hence, BSES is rated higher compared to MTNL. However, this is about to change very soon. The Digital Subscriber Line (DSL) technology is on its way to change the way dial-up connections function.

At present, at least one telephone line remains busy while using Internet connection. It means simultaneous use of telephone and net is not possible. Even if that is accepted as unavoidable, the connection is only a narrowband one. This happens because the system is not able to bifurcate the signals for incoming telephone calls and net signals. Normally, the signals below 4,000 hertz are for telephone and above that are for net.

Once, the DSL technology is put in place, the bifurcation of signals will be possible. The technology is nothing but installation of equipment to do the bifurcation.

How will this benefit MTNL? The cost of DSL technology is cheaper than optical fibre cable. In case of optical fibre cable, you have to dig and lay down the cable everywhere, which will be avoided by MTNL. Even if BSES has got readymade optical fibre cable in Mumbai, its reach is not beyond the city. MTNL's customer base is more as it has been operating in Mumbai and Delhi. If MTNL acts at the right time, without Government intervention, then it will be the stock to watch out for.

The share price of the company has come down from a high of Rs 390 on 14th February, 2000 to Rs 170 on 25th August and may take a jump from these levels as it seems to be undervalued at this price.

KSESH (with contribution from Prashant Kothari)