Low-cost driven

Manish Joshi & Laxmikant Khanvilkar

Gujarat Ambuja Cements (GACL) has reported a 19 per cent growth in sales, almost matching that of L&T’s cement division. It is very obvious that both the businesses benefited from higher cement prices.

However, when it comes to comparing OPM (sales inclusive of excise duty), GACL is around 10 percentage points ahead of L&T’s cement business with an OPM of 31 per cent.

The reason for such a huge disparity in OPM lies in GACL’s aggressive operational cost cutting initiatives. For example, freight & forwarding charges of GACL, one of the main components of cost for cement companies, has gone down to 13.9 per cent of sales (14.3 per cent), even though sales volume has gone up 13.8 per cent to 14.6 lakh tonnes.

Although topline grew 19 per cent to Rs 299.3 crore, profit after tax shot up 112.4 per cent to Rs 53.2 crore. A sharp rise in other income to Rs 8.9 crore (Rs 3.7 crore) and a drop in interest cost to Rs 24.7 crore (Rs 32.2 crore) made the bottomline soar, even as operating profit was up only by 24.4 per cent to Rs 105.5 crore.

GACL is optimistic that the next two quarters would see good demand, as the past two months have, but the company did not forecast earnings. Demand has also been rising in recent months partly because of consumption for building roadways and due to reconstruction activity in earthquake hit Gujarat.

While cement demand was sluggish in April-July, it grew 15 per cent in August and September 2001 that must have driven sales volumes.
Soon after reporting better financial performance, GACL has announced a buyback up to 10 per cent of its paid-up equity capital at a price of not more than Rs 170 per share. GACL will spend up to Rs 50 crore on the buyback. However, the mode of buyback will be open market operations that do not ensure a guaranteed price for exit.

As compared to the open market operations, tender method ensures the completion of buyback in a stipulated time at a fixed price. Hence, tender method is more effective and popular too.

Nevertheless, buyback involves the return of unwanted capital to shareholders and it improves the return on equity and the EPS.

Balaji Telefilms
Balaji Telefilms (BTL), the television software provider, has come out with impressive performance during the second quarter to September 2001. On sales income of Rs 23.6 crore, it reported a net profit of Rs 6.62 crore. The figures for corresponding quarter are not available as the company was not listed then.

BTL’s sitcoms are hitting popularity charts. Its continuous efforts to improve contents and effective techniques coupled with an effort to boost middle class value - based episodes has driven it up TRP charts. This has often led to better pricing and in turn higher revenues.

BTL supplies 12 of the top 20 television shows. Lately, BTL hiked rates for some of its widely popular serials like ‘Kyunki Saas Bhi Kabhi Bahu Thi’ and ‘Kahani Ghar Ghar Ki.’ As per the latest TRP ratings BTL’s serials occupy the top eight slots. Among the top 25 slots and top 50 slots, BTL has 14 and 22 slots respectively.

From September, 2001, BTL’s serials on Doordarshan’s Metro Gold had been discontinued. While this revenue loss has been compensated by the new serials signed on Star Vijay TV, and Sony TV, it has seen reduction in the cost of production and telecast fees.

Recently, STAR bought the IPRs for the old episodes of two of BTL’s three serials. One of these serials ‘Kundali’ was telecast on the STAR TV recently.

Similarly, the serial ‘Kabhi Saheli Kabhi Sautan’ is also in the pipeline. BTL’s new serial - ‘Kohi Apna Sa’ - supplied to Zee overtook KBC and has entered top 50 shows of satellite channels. The company launched two new daily soaps ‘Kutumb’ on Sony and ‘Kasauti Zindagi Ki’ on Star Plus.

For the first half, BTL’s revenues have grown by 183 per cent to Rs 47.3 crore (Rs 16.71 crore). OPM also improved to 32 per cent (22.3 per cent).

As a result, net profit after taxes jumped by 286.3 per cent to Rs 11.56 crore (Rs 2.99 crore), thanks to an increase in rates of commissioned programmes with rising popularity.