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Fruits of Decontrol

Fruits of Decontrol Hansavivek TATA IRON AND STEEL COMPANY (TISCO) suffered a setback in its working results for 1983-84 due chiefly to heavy additional burden of interest and other cost escalations. With commissioning of new units under phase I of modernisation programme, saleable steel output edged up to a new high mark of 16.26 lakh tonnes against 16.21 lakh tonnes in previous year and sales at 15.13 lakh tonnes were also three per cent higher In terms of value, sales brought in Rs 781.09 crore against Rs 687.56 crore but gross profit declined from Rs 68.64 crore to Rs 63.95 crore, reflecting a sizeable erosion of margins. Provision for depreciation was increased from Rs 23.77 crore to Rs 43.14 crore. Of this increase, about Rs 10 crore was accounted for upward revision in rates of depreciation introduced under Income-tax rules. Net profit was thus more than halved to Rs 20.81 crore (Rs 44.87 crore) which covered .unchanged dividend of 17 per cent 1.70 times as against 3.59 times. From October I, 1983, government revised Steel Development Fund (SDF) levies to range from Rs 350 to Rs 500 per tonne, as against Rs 600 per tonne uniformly for all categories payable earlier by TISCO. From April 1, 1984, certain special steels have been exempted from payment of SDF levies, besides effecting a certain reduction in rate of levies on defectives. Government also decided to reduce interest on SDF loans and charge differential rates of interest on different types of projects. Revised rates were made applicable to all loans sanctioned on or after October 1, 1983 and also to old loans outstanding on that date. Company's application to Bombay High Court and Indian Tube Company's application to Calcutta High Court for approvals to proposed amalgamation of two companies are pending. Governments approval under MRTP Act is also awaited. Asa measure of diversification company has agreed, subject to approval by government, to purchase bearings manufacturing plant of Metal Box India at Kharagpur as a going concern with effect from October 1, 1983. Pending receipt of approvals, Metal Box is managing plant on behalf of company. Company has purchased 55,000 equity shares of Rs 10 each in Davy Ashmore at Rs 18 per share and has agreed to purchase further 1,25,500 shares from its parent company, Davy McKee of UK, at a price of Rs 17 per share. Proposal is awaiting clearance from RBI under FERA. Company subscribed to 299 'rights' shares of Rs 1,000 each at par offered by Tata Services. It is awaiting government's approval under Companies Act to its proposal to invest Rs 107 lakh in share capital of Kumardhubi Metal Castings and Engineering Company, a joint sector company, with Bihar State Industrial Development Corporation and compnay as partners. Company has also accepted offer of 36,360 'rights' shares of Rs 100 each of Tata Industries. In response to company's 'rights' issue on non-convertible debentures of face value of Rs 50 crore, company received applications for Rs 99 crore. In view of its need for more funds, board of directors decided to accept subscription upto Rs.75 crore, subject to consent of Controller of Capital Issues. A new company under name 'Kalimati Investment Company' has been promoted to enable TISCO to hold some of its investments in other companies as well as to make new investments in pursuance of business operations. TISCO has invested Rs 50 lakh in its capital and intends to subscribe a further Rs six crore. Kalimati has obtained government's approval to acquire at par shares of face value of Rs 2.92 crore in Special Steels. This block constitutes 57.27 per cent of equity capital of that company.

Many-Sided Diversification

to strengthen the economies of the debtor countries", they will not be tied to "conditions designed to secure early repayment". Lever believes that such transfers "could be monitored by the IMF with a somewhat modified mandate than it has had upto now".

Sound Base for Major Expansion

Sound Base for Major Expansion Hansavivek TATA CHEMICALS' application for setting up gas-based nitrogenous fertiliser complex at Babrala, in UP, has been cleared at all levels and is awaiting formal approval of Cabinet Committee of Economic Affairs, D S Seth, Chairman, expects that a letter of intent will be received soon. This project is to be implemented by a new company 'Tata Fertilisers', which is a wholly-owned subsidiary. Government has, for time being, deferred decision on company's application for a phosphatic fertiliser complex in Okhamandat for production and supply of balanced plant nutrients as a part of a strongly farmer-oriented package of inputs and services. Management is anguine that, at an appropriate time, government will accord approval to this proposal too. Meanwhile, the company has produced good results in year ended March 1984 with record production, sales and profits. Shareholders have also been rewarded with a record dividend of 25 per cent, besides a two-for-five bonus issue of equity shares. Also, employees' earnings increased by about 10 per cent. Gross profit more than doubled from previous 9-month figure of Rs 15.51 crore to Rs 31.97 crore following increase in sales from Rs 65.91 crore to Rs 106.25 crore, reflecting a notable widening of profit margins. With both depreciation and taxation claiming much more, gap narrowed and net profit came to Rs 9.21 crore (Rs 8.23). Dividend stepped up from 19 per cent to 25 per cent on enlarged capital was covered 3.14 times as against 4.16 times previously.

Diversification and Vertical Integration

Diversification and Vertical Integration Hansavivek NIRLON SYNTHETIC FIBRES AND CHEMICALS is diversifying its interests into new fields. It is joining hands with Gujarat Industrial Investment Corporation (GIIC) as co- promoter of a project to be set up by Gujarat Tyres to manufacture automotive tyres and tubes in an industrially backward area at Palej in Bharuch district of Gujarat. Initially, the new company will have a capacity of 4 lakh tyres and tubes each per annum. Nirlon will have the advantage of utilising its additional capacities of nylon tyrecord fabric and surplus capacity of its new dipping unit being established at Tarapur in Maharashtra. This project should help the company substantially to increase its turnover and profitability. Company has also received a letter of intent for manufacture of carbon fibres with an annual capacity of 100 tonnes. A high technology product, at present manufactured only in US, UK and Japan, it is made from petrochemical feedstocks and is finding increasing usage abroad in applications in fields of space, aeronautics, engineering components, sports goods and in medical field for implantation of artificial limbs. Company will enter into -collaboration with one of leading producers in world. This fibre can extensively replace conventional metals resulting in reduction of cost and energy consumption and at the same time achieving better performance in various fields of applications. Meanwhile, the company is awaiting government approval for expansion of its polyester filament yarn capacity to 6,000 tonnes per annum. The company also proposes to expand into new and improved product-lines, such as steel cord conveyor belt at Roha. It is awaiting approval of government for entering into technical and financial collaboration agreement with a reputed firm of West Germany. Attention is being concentrated on improving technology, efficiency and utilisation of existing plant by installing highly sophisticated machinery and equipment. Borrowing limit of board of directors is proposed to be stepped up from Rs 75 crore to Rs 100 crore, so as to enable it to increase borrowings as and when necessity arises. The company has earned a lower gross pro fit of Rs 7.57 crore during year ended March 1984 as against Rs 8.87 crore in previous year, despite higher turnover of Rs 95.31 crore against Rs 86.61 crore. These figures show a marked deterioration of margins. As depreciation has claimed more and there is also a small tax liability against nil previously, net profit has dropped from Rs 3.45 crore to Rs 1.14 crore. A little over half of unchanged dividend of 215 per cent is short earned, whereas it was covered 1.46 times last year. Profit margins have been squeezed by steep rise in cost of raw materials and other inputs. Cost of caprolactum, main raw material for nylon yarn, was increased by STC alone at Rs 6 per kg and, as a result, company had to pay Rs 250 lakh more. Excise duty structure was reclassified, which resulted in increased burden of Rs 360 lakh to company. Emoluments per employee" and interest on borrowings have further gone up. Company has not been able to realise increase in selling prices commensurate with increases in costs. Commenting on prospects, Jaykrishna Harivailabh- das, Chairman, says company's performance during first quarter of current year and trends in present economic situation justify an optimistic outlook. He is confident that, except for some unforeseen reasons, company can

R and D-Based Expansion

R and D-Based Expansion Hansavivek ATUL PRODUCTS has developed processes for manufacture of two herbicides, Isoproturon and Metoxuron, and has applied for a manufacturing licence for these. It has also applied for a licence for Isocyanates, an important group of chemicals to be made for first time in India, Meanwhile, the company has secured a licence to step up capacity of dicalcium phosphate from 1,500 tonnes to 4,000 tonnes per annum. First stage of expansion to 2,500 tonnes is expected to be commissioned this year. Company is awaiting registration for Tetradifon, a pest ide, for which it already holds a letter of intent. Government has not approved its application for an industrial licence for DAP. Company has represented to goverrtment for reconsideration in view of substantial increase in demand for this product. Company continues to pursue R and D activities. Hydrogenation pilot plant costing Rs 35 lakh, based on such efforts, was commissioned last year. Processes for several dyes intermediates and pesticides have been developed The Week's Companies in laboratory, some of which will be scaled up for manufacture. A plant for removal of mercury from caustic soda plant effluent costing about Rs 17 lakh, also based on a process developed in laboratory, is being put up.

Strong R and D Effort

Strong R and D Effort Hansavivek ASHOK LEYLAND has suffered a setback in its results for 1983 when freight availability to transport operators continued to be low and sale of vehicles was consequently slightly tower than that of previous year. In order to keep control on inventories, production levels were regulated to match sales volumes. Company produced 13,411 vehicles as against 16,363 numbers in previous year. Licensed capacity is 47,000 numbers and installed capacity 23,000. Company sold 14,372 vehicles against 15,028 numbers previously. In spite of continuous and substantial escalation in costs of inputs, prices of vehicles were maintained during the whole year; In addition excise duty bertefits announced by Central government were also entirely passed on to customers. Directors state that with reduction in excise duty and economy showing some signs of revival, demand for commercial vehicles is now expected to improve. Sales declined from Rs 276.09 crore to Rs 266.33 crore and gross profit from Rs 19.07 crore to Rs .17.87 crore, reflecting a slight erosion of margins. As depreciation claimed more and there was also a tax liability of Rs 32 lakh against nil, net profit fell to Rs 6.60 crore from previous year's Rs. 10.73 crore. Dividend is maintaind at 18 per cent and is covered 2.22 times by earnings against 3.61 times.

Threatened by Cost-Push

Threatened by Cost-Push Hansavivek TATA ENGINEERING AND LOCOMOTIVE COMPANY (TELCO) has suffered a setback in its working during the year ended March 1984. Although it produced more vehicles than in the previous year, it earned a lower gross profit of Rs 50.86 crore against Rs 52.08 crore. Sales were also marginally lower at Rs 755 crore against Rs 759 crore. These figures reflect a decline in margins. With a higher provision for depreciation due to change in income-tax rules (Rs 29.23 crore against Rs 21.87 crore) and a tax liability of Rs 2.35 crore after the absence of any tax liability for seven years, gap has widened appreciably. Net profit is over a third lower at Rs 19.28 crore (Rs 30.21 crore). Directors have maintained equity dividend of 20 per cent on an enlarged capital, but at cost of earnings cover which has declined from 3.67 times to 2,11 times.

Recovery despite Recession

Recovery despite Recession Hansavivek GUEST KEEN WILLIAMS (GKW) implemented on schedule its automotive pres: sinas project at Kanhe in Maharashtra, which was inaugurated on February 5. In the first phase, a range of versatile presses have been installed incorporating contemporaneous design features and capable of supplying an extensive range of metal pressings both to satisfy requirements of the current customer base as well as emerging demands from new enterprises. The new facilities will provide fresh opportunity for the company to widen its product range and use its skills, experience and accumulated technological expertise in service of the automotive industry.

Continued Diversification

Continued Diversification Hansavivek LARSEN AND TOUBRO continues to expand and diversify its activities. Its cement plant at Awarpur commenced trial production in October last and has achieved commercial production. Implementation of second phase of project is in progress and the project is scheduled to be commissioned by mid-1987. Company's cement has been very well received in market and is considered to be of a high quality. Steps are being taken to set up new manufacturing facilities at a cost of about Rs 31 crore at Hazira in Gujarat for production of equipment for nuclear power and heavy water projects. To finance these projects, company proposes to raise additional finance of Rs 70 crore

Cutting Losses

Cutting Losses Hansavivek METAL BOX INDIA has shown the most adverse results in its career of half a century. This was caused mainly by large losses of bearings unit and industrial unrest at all units particularly prolonged strike in establish ments in West Bengal from July 18,1983. An agreement was concluded with unions and operations were resumed at Kharagpur on September 26, 1983 and at Calcutta units on February 9 last. Company has shown a trading loss of Rs 6.27 crore for the year ended September 1983 as against a gross profit of Rs 84 lakh earned in 1981-82 following decline in turnover from Rs 123,73 crore to Rs 112,50 crore. After depreciation, there is a higher net loss of Rs 9.77 crore compared to Rs 2.18 crore of previous year.

Many-Sided Expansion

Many-Sided Expansion Hansavivek HINDUSTAN LEVER is going ahead with its new projects. Its 10.000-tonne synthetic detergent plant, at Chhindwara in MP. has already been commissioned. Detergent bar manufacturing facilities, at Jammu. are being expanded and engineering work there is in progress, Erection of soap and personal products manufacturing plant, in the Kandia F;ree Trade Zone, has been completed. A garment manufacturing unit has also been commissioned at Kandia, Work on a complex fertiliser project, at Haldia, is progressing satisfactorily and the plant is expected to be commissioned next year. A new fine chemicals unit, at Jammu. has been commissioned. Drug intermediate project is scheduled to be completed later this year. An export-oriented herbicides project is being set up at Kandia. in technical collaboration with Velsicol Chemical Corporation, USA. The plant is due to be commissioned this year. The company continues to devote a great deal of attention to R and D. While trials as to efficacy of Plant Growth.Nutrient (PGN) in increasing yields of paddy, vegetables, potatoes and other crops art1 continuing on 1,90,000 acres, production facilities are being set up at Jammu. Co-ordinated trials conducted by ICAR regional stations and agricultural universities support company's own research findings and ICAR has recommended issue of manu facturing licence by the appropriate ministries. Newer compounds were discovered which increase the photo-synthetic efficiency of plants. Investigation on production of propionic, butyric and lactic acids by fermentation from molasses, field trials on different biological fertilisers for groundnut, arhar. moong. urad and Bengal gram, and production of prawn frys at the Muthukadu farm near Madras, are all progressing satisfactorily. Several new fine chemicals, an efficient hydrogenation catalyst based on locally' developed special carrier, and development of a process for utilising by-product fluorine from STPP plant, are high points of research effort in chemicals. Most of teething ''difficulties in the operation of the sal upgrading plant at Taloja have been overcome:' A new de tergen (active based on renewable raw materials has been found to be acceptable. Novel efforts in biotechnology, such as plant tissue culture, recombinant DNA work to produce single cell oil. and use of monoclonal and hybridoma techniques to develop im- munodiagnostics. arc under way. Management hopes that some of these new, concepts, will bolster technology and blossom into new business, A total of 19 schemes, funded by the Hindustan Lever Research Foundation (9 on agriculture. 2 on animal husbandry and 8 on industrial chemicals), arc on stream. Another 10 schemes recommended by the Foundation (8 on agriculture and 2 on animal husbandry)

Tax Planning to the Rescue

Tax Planning to the Rescue Hansavivek ASSOCIATED BEARING COMPANY has experienced a modest setback in its working during 1983, as bearing industry was under pressure due to dumping of extremely low priced bearings, mainly from East European countries. According to management, demand recession, coupled with labour problems and stagnant selling prices, resulted in many indigenous manufacturing units reporting losses in their operations. Company recorded a modest increase of 5.5 per cent in total production. Bearing production increased from 9.3 million in previous year to 10.1 million. Likewise, production of textile machinery components showed some improvement. Total turnover was up from Rs 36.45 crore to Rs 40.60 crore. While bear ing sales were 4.5 per cent higher, sales of textile components increased by 67 per cent over 1982, mainly due to resumption of manufacturing operations and offtake of company's products by its biggest customer.


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