An uptrend in global demand for steel and a growth of 4.5 per cent in domestic steel consumption was spurred by an increase in the offtake from construction, white goods, commercial vehicles and passenger cars in 1999-2000.

The bullish steel prices in domestic and international markets in the year also set a stage for the company to consolidate gains further. Which is why, even a moderate increase of 9 per cent in the net sales income to Rs 1,870 crore (Rs 1,707 crore ) in the second quarter ended September 2000 vaulted net profit by 75 per cent to Rs 115 crore ( Rs 65 crore), after adjusting for extraordinary items (provision for the employees' separation compensation and for power cost relating to the previous years). Operating profit increased by 57 per cent to Rs 429 crore ( Rs 274 crore).

A major stimulus to the sterling performance came from Tata Steel's rigorous cost-cutting exercise. Total expenditure in the same period was fractionally up to Rs 1,441 crore from Rs 1,432 crore. Raw material consumption saw a moderate rise in line with the 1999-2000 trend. The company may have utilized a part of proceeds from its sale of cement division to repay loans as interest quantum contracted by 19 per cent to Rs 68 crore (Rs 84 crore).

Price realisation per tonne improved from Rs 0.20 to Rs.0.22 lakh. An impressive rise of 17 per cent in steel exports to Rs 227 crore from Rs 193 crore shows that the international offtake of steel has turned for the better as expected by analysts.

In 1999-2000 international prices of flat products did firm up by 80 per cent. If the trend continues, and many feel it will, because of demand supply hiatus in the current year, Tata Steel can look forward to ending the year with higher sales and better bottomline.

Tata Steel may have to focus increasingly on product development that has been generally a neglected area in the Indian steel industry. The Indian steel market is fragmented, users demand numerous products in different sizes and lack of standardization of products.

Product development skills have to be honed to improve margins. Sometime ago Tata Steel developed the CHQ grade of steel with Sundaram Fastners. Later, Sundaram Fastners used it to improve the fastners' quality that enabled it to be a long- term supplier of fasteners to General Motors.

Tata Steel counts on its exit from low-end products and its emphasis on world class flat products producer. Its cold rolling mill became operational from August 2000 to cater for the needs of the consumer durables and automobile industries.

In the current year domestic market is expected to go up by 6-7 per cent. Tata Steel's emphasis on core competence and cost efficiency should see it through even the incipient and feared slowdown in the industrial sector. But more challenges lie in the nature of the Indian steel industry itself.

In spite of the sterling performance in the last few quarters, this once darling old economy scrip has suffered from a warped and dichotomous `old -new economy' perception of investors. Its once blue chip status seems to be under threat.

Bajaj Auto
The results of Bajaj Auto for the quarter ended September 2000 are on the expected lines. Both profit and profitability have declined even though topline improved by a mere 8 per cent to Rs 986 crore. The number of vehicles of all categories sold during the quarter went up by 8,000.

However, costs have gone haywire and that is a cause for worry. Total expenditure has gone up by 20 per cent to Rs 931 crore, while raw material cost has risen by 27 per cent to Rs 568 crore. That is precisely why operating profits fell by 60 per cent to Rs 5 crore. That may probably cause flutter among investors who have gone in for the buyback option.

Evidently the company has not kept a tab on cost. The return on net worth has not been impressive, what with 60 per cent of the total net worth (as on March 2000) or Rs 1,900 crore locked up in portfolio investments.

Bajaj Auto has been lax in monitoring the shifting market for two-wheelers. Lately there has been a discernible shift towards motorbikes from scooters, the forte of the company. The company has woken up late to make amends and has garnered a 25 per cent market share.

In scooters it has 74 per cent market share. But that is not enough, the company faces extremely competitive pressures in the motorbike sector particularly from Hero Honda, TVS- Suzuki and Yamaha.

If Bajaj Auto has not been able to strike it rich lately it is because, like most old economy companies, has yet to cast off the old economy psyche.

It is no surprise that Rahul Bajaj, one of the most dynamic industrialists, has been an open advocate of the level-playing field for the Indian companies, a demand that symbolises protectionist psyche.

Bajaj Auto has not paid as much attention to R&D unlike the Japanese companies. Its distribution or marketing muscle is not strong enough to spar with the global majors. In this respect Hondas and Yamahas score over it.

Exports fell 13 per cent from Rs 158 crore to Rs 138 crore in 1999-2000. In 1988, CMD Rahul Bajaj, like any Indian businessman had a dream. "What will give me satisfaction," he told a journalist from London's Financial Times, "..is to become a truly international company selling around the world, to become known internationally for quality, technology, and low cost."

The dream seems to have turned a bit sour and the company is holding on to its market share and may find it difficult to slug it out in the international market.The latest performance underlines this rather piquantly. Bajaj Auto scrip has shrunk to Rs 290. Ironically, the buyback price of the company is far higher at Rs 400.

SR Kasbekar and Manish Joshi