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PNB Gilts: Low-interest regime, a boost

Sachchidanand Shukla & Laxmikant Khanvilkar

PNB Gilts (PNBG), the only listed primary dealer in the country, helped by favourable market conditions, has reported a good performance during the quarter to September 2001. Its performance seems all the more impressive because of a very low base of comparison as PNBG had reported a negative topline as well as bottomline owing to dimunition in securities portfolio during the corresponding quarter last year.

During the quarter, its topline nearly trebled to Rs 41.66 crore, while net profit jumped to Rs 16.6 crore. The company has been consciously trying to increase its trading activity reflected in high trading profit than depending on interest income by holding on to tradable securities.

In the fiscal 2000-01, the company’s interest income was Rs 200 crore while trading profits were Rs 21.80 crore. Whereas, during the half-year to September 2001, interest income came down to Rs 59 crore while trading income stood at Rs 44 crore. A lowering of yields to around their lowest levels aided this boost in trading income.

At the same time, PNBG has been able to reduce its interest costs that aided a jump in operating margins. Interest cost, that was as high as Rs 134.50 crore during fiscal 2000-01, has come down to Rs 30 crore during the current fiscal half-year.

The secondary G-Secs market is likely to exceed Rs 10 lakh crore this fiscal. Of this, current half-year volumes have touched Rs 5.3 lakh crore. PNBG has been able to increase its market share to 8 per cent (5 per cent) and intends to stretch its market share to 10 per cent in a growing market. PNBG’s plans of enhancing its product portfolio besides leveraging the branch network of its parent, PNB would boost its prospects.

So far, demand for G-Secs has remained higher in a low interest regime and depressed market scenario. Banks and financial institutions are flush with funds due to poor credit offtake. However, the pick up in credit offtake, post-monsoon, could lead to diversion of funds from G-Secs.

Given the fact that the low interest rate regime is likely to continue in the near future, the going may continue to be good for PNBG.

Tata Telecom
Tata Telecom’s (TTL) second quarter performance to September 2001 must be a welcome news for the beleaguered sector. The company has reported a 43 per cent sequential revenue growth in the second quarter of fiscal 2001-02, in line with analysts’ estimates.
Its customer centric strategy along with better management of receivables and inventories, strong support network aided the over all growth.

For the second quarter, its revenues increased by 38 per cent to Rs 59.70 crore, while PAT went up by 34 per cent to Rs 3.30 crore.
On a sequential basis, operating margin shot up to 12.2 per cent, q-o-q from 5.7 per cent. Streamlining of operations and reduced interest expenses led to a 181 per cent growth in net profit even after providing for 42 per cent of PBT as tax.

TTL is a market leader in the fast growing call centre solutions business and has a steadily growing PABX business. Its product portfolio consists of Cajuna Data Switeches (CDS) for data networking market which are widely used for Ethernet and ATM protocol. The company has teleconferencing product called view station and is planning to launch wide area network (WAN) product shortly.

TTL has a technological tie-up with AVAYA (the enterprise business of Lucent US). Some of the important customers of TTL are SBI for video conferencing solution and Lan switchings for Elecon, besides GE the largest customer. The company received the shareholders’ approval for demerger of Tatafone division into ITel Industries.

Telecom is in one of the sectors that has witnessed tremendous growth since liberalisation process was initiated in the nineties. However, the sector has been the worst effected since
January 2000 after losing some 88 per cent in its market capitalisation. The sector has been clouded with issues relating to policies like long distance/internet telephony etc.

Yet, with a steady growth in infrastructure, improved teledensity and the government focusing on privatisation of basic telephony, the telecome sector can look up to new opportunities of growth in the future.