Sheen Lost

Updated: May 31 2002, 05:30am hrs
SAILs sailing has not been smooth during the year to March 2002, but the steel giant deserves kudos for coming out with the segmental (plant-wise) results. They reveal that only Bhilai steel plant has made a significant profit of Rs 812.8 crore, while all other plants either incurred losses or made a negligible profit. Moreover, Bhilai steel plant accounts for only 17 per cent of the total capital employed, which gives a substantial ROCE of 29 per cent. Rourkela steel plant is the worst in terms of performance with the highest loss of Rs 645.8 crore among all plants, while it consumes 26 per cent, the maximum, of the total capital employed.

SAILs overall financials took a beating owing to a drop in steel prices, (mainly of flat products). The eight per cent decline in the sales realisation was a result of the economic slowdown, oversupply in domestic market and a fall in international steel prices. However, it seems that the company could largely make up for lower prices, through higher sales volume as the topline (net of excise) fell only 3.5 per cent to Rs 14,064.5 crore. Another indicator that points out to the volume growth is an increase in raw material consumption (as a percentage of sales) from 33 per cent to 39 per cent. The company remained in black at the operating level with a profit of Rs 348.8 crore (Rs 1,879.8 crore). OPM nosedived to 2.5 per cent from 12.9 per cent.

Interest outgo came down by 10.8 per cent to Rs 1,562 crore. SAIL retired debt worth Rs 2,000 crore during the FY 2001-02. A part of the debt carried interest rates as high as 17 per cent. Even during the first two months of the FY2002-03, the company has repaid loans of Rs 270 crore. The full benefits of the debt repayment will be seen in the current financial year. Other income shot up 130.8 per cent to Rs 662.2 crore. Other income represents profit on sale / assignment of captive power plants to joint venture companies and long-term lease of houses to employees /ex-employees. Net loss spiralled to Rs 1,706.9 crore (Rs 728.7 crore). The company attributes a loss of more than Rs 1,000 crore to a drop in sales realisation.

However, steel prices have moved up by 6-7 per cent since January 2002. Besides the gains from higher prices, the company is all set to benefit from the aggressive cost-cutting drive in production processes. It has budgeted Rs 520 crore as cost savings for the FY 2002-03. Any further reduction in the interest cost should further boost the bottomline. The company hopes to recover its profitability once again during the current fiscal, if there is a sustained recovery in the steel prices.

Balaji Telefilms

Balaji Telefilms (BTL), the entertainment content provider, continued to perform well during the fourth quarter and year to March 2002. The companys performance was helped by higher sales realisation and volumes in the Hindi television serials. For Q4 2002, on Q-o-Q basis, its revenue increased nine per cent at Rs 32.8 crore, while net profit rose by five per cent at Rs 8.9 crore.

For the year to March 2002, BTL reported more than five-fold jump in its bottomline at Rs 29 crore, while revenues went up 126 per cent at Rs 110.3 crore. As the share of cost of production & telecast fees in sales dropped to 51 per cent (77 per cent) at Rs 56 crore, operating profit spurted six-fold at Rs 42.8 crore. Consequently, OPM improved to 39 per cent (12 per cent). BTLs long-running Hindi serials are also instrumental in generating higher ad-revenue for the TV channels, as they command higher viewer rating. This helped company in deriving premium from the channels. More than 50 per cent of its prime-time Hindi programmes earned premium rates of Rs 5,20,000/episode. For the year, its volume grew 108 per cent to 16 hours/week, while realisation improved by 56 per cent at Rs 4,40,000/episode. Revenue from Hindi programmes accounted for 67 per cent at Rs 73.5 crore. On these programmes gross margins grew sharply to 53 per cent (35 per cent). Regional programmes also did well and generated a revenue of Rs 22.5 crore up 92 per cent in FY02. Their gross margins improved to 42 per cent (11 per cent) driven by the increase in average advertising rates of the channels. Their share in total revenue stood at 24 per cent.

Recently, BTL announced a hike in FII limit to 49 per cent from 24 per cent following the placement of 10.11 per cent stake of the promoter with FIIs. Currently, FIIs hold around 19 per cent.