INDO GULF FERTILISERS-Cost Advantage

EPW Research Foundation BOMBAY DYEING Lower Profitability BOMBAY DYEING AND MANUFACTURING CO, the flagship company of the Wadia group, has suffered a severe jolt 10 its profitability for 1992-93 following a rise in input costs on the one hand and reduced off take of di-methyl terephthalate (DMT) on the other. Though net sales increased by 8 per cent, operating profit was down by 24 per cent and profit before tax fell by 35 per cent over the previous year. The sharp increase in cotton prices in 1991-92 led to higher raw material cost during the next half year period, while energy costs increased by 30 per cent and oil and fuel cost by 20 per cent during the whole of 1992-93. Further, in spite of a reduction in customs duty on DMT and PTA from 150 per cent to 110 per cent in the 1992 budget, the 85 per cent duty on the company's raw material, namely, paraxylene remained unchanged in that budget. A 9 per cent higher interest cost coupled with a 19 per cent higher depreciation charge resulted in pressure on margins and despite a sharp fall in tax provision, net profit declined by 18 per cent. In spite of this the company maintained dividend at 30 per cent.