These activities have begun to make a positive impact on the latest results. It is visible from the rise of 13 per cent to Rs 212 crore in the quarter ended September 2000. E-commerce and software services account for 66 per cent of sales income up from 54 per cent. Higher contribution from services brought down the cost of sales by 8 per cent to Rs 110 crore. As expected, salaries bill has soared by 121 per cent to Rs 7.83 crore, typical of intellectual capital company.

Operational profit went up 50 per cent to Rs 86 crore and OPM improved to 40 per cent. The bottomline before extraordinary items fattened on a 142 per cent increase to Rs 73 crore, largely helped by the utilisation of funds from the sale of its stake in Global e-Commerce Services (GECSL). The proceeds from the sales have been used to clear debts. Thus a substantial saving on interest and the income earned from balanced funds of Rs 16 crore has made the bottomline healthier.

Recently, the company acquired a software company from the Thermax group and Fine Infotech Ltd through stock swap to strengthen its presence in the Internet business. The spin-offs after the completion of acquisitions by way of access to the ready pool of trained and qualified human resources in the areas of banking, insurance and healthcare will add value in the future.

While these two entities will continue as the subsidiaries of GTL, GECS will be merged through stock swap. High paid-up capital resulting from issuing shares to shareholders of the three companies will not be a matter of concern as the benefits would be manifold. In fact, these developments have the potential to catapult the growth rate of the company.

Global Tele- Systems scrip had moved to a high of Rs 3,500 on market expectations of goodies from the company but has since sobered down to rule currently at around Rs 1,100. It is quite likely that the current bearish sentiment has told on the scrip price.

Kodak India
Kodak India's laudable performance during the quarter ended September 2000 is almost certain to make the investors take a relook at this FMCG stock languishing at low levels. The topline growth of 17 per cent coheres with the one seen in the year ended December 1999. Operational profits have catapulted to Rs 13.25 crore fired by a rigorous cost-cutting exercise that was initiated last year and continued in the current one too. There is a caveat as the corresponding period of the last year includes cost of the Graphic Art business.

The spruced up performance is all the more commendable as it has been achieved despite the company's imports of jumbo roll films in the regime of a declining rupee that adds to the landed cost.

An increase of 25 per cent in net profit may seem rather average. This growth has been achieved inspite of hiving off of Graphic Arts products business.

Lower borrowings have done their bit to shore up the bottomline. Loans fell to Rs 25 crore in the year ended December 1999 from Rs 105 crore. The company has utilised the proceeds of the rights issue to retire debt. The brisk advances in technology have rendered vulnerable many hitherto excellent businesses.

However, competition in photography may not hot up much in the near future as only a handful of players including Fuji and Konica continue to dominate the Indian market. The market may grow on a strong demand backed up by the rising Indian middle class.

For decades, Kodak has attained the status of brand equity in photography and imaging of all kinds. Kodak India has been able to cash in on the technological advances passed on by Eastman Kodak, UK the parent company that has spun a huge global business through brand building.

Keeping entry barriers high, made possible through advanced technology, has carefully protected the monopoly status. It seems the company may not enjoy this position for long as pace of digital photography picks up.

Kodak is definitely aware of this imminent threat and has been investing large sums to protect its perch from poachers and hence is ensuring that it remains a leader in the `new economy of the photography business' as well. The company has gone in for several digital-imaging technologies.

The current market price of Rs 360 discounts annualised earnings of Rs 36 based on nine months' results by 10 times. So some of the fears about digital threats might have already been built into the price. The problem for investors is whether to base their decisions on the fact that Kodak India is expected to see excellent growth at least for the next five years or so, or whether to look forward to the digital era and weigh Kodak's performance in that era.

Manish Joshi