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Bharat Petroleum, Indo Gulf Fertilsers, Godfrey Phillips India

BHARAT PETROLEUM Pricing Problem In 1976, the Burmah Shell Group of companies in India was taken over by the government of India to form Bharat Refineries, which was renamed Bharat Petroleum Corporation (BPCL) in August 1977. It was the first refinery in India to process newly found indigenous crude at Bombay High. BPCL

Companias

BHARAT PETROLEUM

Pricing Problem

I
n 1976, the Burmah Shell Group of companies in India was taken over by the government of India to form Bharat Refineries, which was renamed Bharat Petroleum Corporation (BPCL) in August 1977. It was the first refinery in India to process newly found indigenous crude at Bombay High. BPCL’s business comprises industrial products, lubricants and retail services. The company has two subsidiaries and eight joint ventures.

The year 2004-05 witnessed a sharp upward spiralling of international crude oil prices. During 2004-05, BPCL’s net sales have risen by 22 per cent to Rs 58,969 crore over 2003-04. However, net profit has dipped sharply by 43 per cent to Rs 965 crore. The combined refinery throughput at BPCL’s refineries at Mumbai, Kochi and Numaligarh has increased by just 1.5 per cent to 19.10 million metric tonnes (MMT). BPCL has been exporting naphtha and fuel oil from its Mumbai refinery. The company’s exports have increased by 7 per cent to 519.9 thousand metric tonnes (TMT) over 2003-04. Export revenue has jumped by 57.8 per cent to Rs 865.6 crore. During the year under review, BPCL’s crude oil imports have risen by 7 per cent to 11.12 MMT. LPG imports were stepped up to 285 TMT from just 20 TMT in the previous year.

During 2004-05, BPCL has introduced a new product – Hi Speed Diesel. The company has ventured into the defence sector by supplying aviation lubricants to the Indian Navy, Kochi and Coast Guard, Goa. The company has recently commissioned a natural gas distribution project in Gandhinagar district of Gujarat.

BPCL has signed a memorandum of understanding (MoU) with the union petroleum and natural gas ministry for 2005-06, which includes achieving a crude throughput of 10.3 million metric tonne per annum (MMTPA) at its Mumbai refinery.

The merger of BPCL and its subsidiary Kochi Refinery has been approved by the company’s board of directors and the procedure is expected to be completed by the end of the current financial year.

In April 2005, a joint venture company, Central India Gas Company, has been incorporated for city gas distribution in Kanpur and the surrounding areas by BPCL along with GAIL. In July 2005, the company has completed its Mahul refinery expansion project. BPCL has earmarked an investment of about Rs 450 crore to add about 600 retail outlets to expand its retail presence to 7,000 outlets during the current year. It has revised the cost of its Bina refinery project to Rs 9,100 crore from the original estimate of Rs 6,354 crore. Bharat Oman Refineries, the joint venture company floated by BPCL and Oman Oil Company, is setting up the project in Madhya Pradesh.

Despite good sales BPCL has suffered in profitability during both the quarters of 2005. The company’s financial performance has been adversely affected due to higher crude oil prices not being fully compensated by higher product prices. During April-June 2005, the company’s net sales have increased by 22.6 per cent to Rs 16,015 crore over April-June 2004. But, the company has suffered a loss of Rs 431 crore against a profit of Rs 147 crore over the same period of the previous year. For the quarter ended September 2005, the company has posted a 21 per cent rise in net sales to Rs 16,207 crore over the same period of the previous year. However, it has witnessed a loss of Rs 203 crore during July-September 2005 against a profit of Rs 321 crore in the same quarter of 2004.

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INDO GULF FERTILISERS

Challenging Times

I
ndo Gulf Fertilisers (IGF), an Aditya Birla group company, is among the largest private sector fertiliser companies in India. The company manufactures urea and enjoys a leading position in the nitrogenous fertiliser sector with its strong brand, “Birla Shaktiman” urea.

During 2004-05, IGF has posted a 17 per cent rise in its net sales to Rs 678 crore over 2003-04. However, the company has posted a 37 per cent decline in the net profit to Rs 56.9 crore owing to higher total expenses compared to those in 2003-04. The company’s foreign exchange earnings have been nil during the past two years. Aggregate sales of urea have increased by 11 per cent to 9.75 lakh tonne during the year under review.

In September 2005, the board of directors of Indian Rayon and Industries, IGF and Birla Global Finance have approved the restructuring proposal for the mergers of Indo Gulf and Birla Global with Indian Rayon. Under the two separate restructuring schemes, Indian Rayon will issue to IGF shareholders one equity share of Indian Rayon for every three equity shares of Indo Gulf held. Indian Rayon will also issue to Birla Global Finance shareholders one equity share of Indian Rayon for every three equity shares of Birla Global Finance.

During 2004-05, IGF has introduced a new neem coated urea “Krishidev”. In the first year of its launch, the company has registered a sale of 1.75 lakh tonne. To enhance the productivity of farmlands, the company is developing products – zincated urea and sulphonated urea. The company has launched new initiatives in the areas of rain harvesting to conserve water, tap unconventional solar energy by installing solar heaters in its townships and increase the utilisation of treated effluent for horticulture.

IGF has posted an impressive performance for both quarters of 2005-06. During April-June 2005, the company has registered a 8.6 per cent rise in net sales to Rs 102.9 crore. Likewise, the net profit has risen by 17.5 per cent to Rs 9.4 crore. The sale of urea at 1.66 lakh metric tonnes during April-June 2005 has been higher by 17 per cent over the corresponding period in the previous year. For the quarter ended September 2005, despite a decline of 10 per cent in net sales to Rs 214 crore, net profit of the company has increased by 39 per cent to Rs 22.5 crore over the corresponding period of the previous year. The sale of urea for July-September 2005 has been marginally higher by 2.7 per cent at

3.48 lakh metric tonnes.

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GODFREY PHILLIPS INDIA

Healthy Bottom Line

G
odfrey Phillips India (GPI), incorporated in 1936, is the second largest producer of cigarettes in India, with two

Economic and Political Weekly January 7, 2006

year. Likewise, net profit has galloped by

The Week’s Companies (Rs lakh) manufacturing factories located in Ghaziabad (near Delhi) and in Andheri
BPCL Indo-Gulf Godfrey Phillips (Mumbai) and a tobacco-buying unit in
Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04 Guntur (Andhra Pradesh). The most popular brands of the company are Red
Income/Appropriations and White, Four Square, Jaisalmer,
1 Net sales 5896999 4825431 67835 57852 68296 62465 Cavanders, Tipper and Prince. GPI has
2 Value of production 6055624 4797027 68418 57142 68177 63290 two major shareholders, one of India’s
3 Other income 44529 43413 1838 2576 1345 1901
4 Total income 6100154 4840440 70256 59718 69522 65191 leading industrial houses – the K K Modi
Raw materials/stores and group and one of the world’s largest to
spares/power and fuel consumed 1379342 932766 47982 33827 16199 15872 bacco companies, Philip Morris.
6 Other manufacturing expenses 4079793 3245685 2229 1701 10203 7814 During 2004-05, GPI has reported a
7 Remuneration to employees 79309 66176 3996 3521 5691 4197
8 Other expenses 353801 268921 3864 3601 26829 28769 healthy financial performance. The
9 Depreciation 59604 56116 3996 4039 1655 995 company’s net sales have stood at Rs 683
Gross profit 148305 270777 8189 13029 8944 7544 crore – a rise of 9 per cent over 2003-04.
11 Interest 13980 10497 141 165 572 556 Likewise, net profit has increased by
12 Operating profit 134325 260280 8048 12864 8372 6988 22 per cent to Rs 63.6 crore. Earnings
13 Non-operating surplus/deficit 1310 3272 199 28 1623 661
14 Profit before tax 135635 263551 8247 12892 9995 7649 per share has also surged to Rs 61 from
Tax provisions 39055 94095 2554 3865 3635 2431 Rs 50 in the previous year. During the
16 Profit after tax 96580 169457 5693 9027 6360 5218 year under review, cigarettes sales have
17 Dividends registered a 2.7 per cent rise to 12,195
(includes tax on dist profit) 37500 52500 1263 1263 2288 1976 million cigarettes over the previous year.
18 Retained profits 59080 116957 4430 7764 4072 3242
Liabilities/assets Overall sales, comprising cigarettes,
19 Paid-up capital 30000 30000 4509 4509 1040 1040 tobacco, cigar and tea, have increased
Reserves and surplus 608843 554972 55756 51506 31661 27910 by 10 per cent to Rs 1,296 crore over
21 Long-term loan 352801 226051 66359 63194 304 654 2003-04. During the period under review,
22 Short-term loan 35360 42921 1368 327 5920 1415
(i) of which, bank borrowings 235460 28677 1368 327 5920 1415 cut tobacco exports have increased
23 Gross fixed assets 1401739 1256575 89494 88462 20775 15045 significantly to Rs 3.3 crore, as against
24 Accumulated depreciation 566872 511227 65807 61858 7855 6313 Rs 36 lakh in the previous year, due to
Inventories 625856 428602 5110 4497 12783 12488 major initiatives taken by the international
26 Total assets/liabilities 2037774 1777195 75159 69738 53705 43053 division of the company to enhance ex-
Miscellaneous items
27 Excise duty 488701 519405 0 0 61274 55188 ports of cigarettes and cut tobacco. The
28 Gross value added 254047 363431 14591 18197 21981 17737 company has introduced its cigarette
29 Total foreign exchange earnings 194456 132044 0 0 7387 7236 brands in the Republic of Guinea and
Total foreign exchange outgo 742542 495267 340 245 5346 3978 Sierra Leone, and it has appointed
Key financial and performance ratios experienced agents to popularise its
31 Turnover ratio (sales to total assets) 3.3 3.2 0.9 0.8 2.7 2.8
32 Gross value added to gross brands. The export of un-manufactured
fixed assets (%) 19.1 30.9 16.4 20.6 122.7 127.2 tobacco has surged by 35 per cent to
33 Return on investment (gross profit Rs 51.8 crore as compared to Rs 38.4
to total assets) (%) 7.8 16.1 11.3 18.8 18.5 18.1 crore in 2003-04.
34 Gross profit to sales
(gross margin) (%) 2.5 5.6 12.1 22.5 13.1 12.1 During 2004-05, GPI has set up a new
Operating profit to sales (%) 2.3 5.4 11.9 22.2 12.3 11.2 research and development plant at its
36 Profit before tax to sales (%) 2.3 5.5 12.2 22.3 14.6 12.2 Andheri factory with the latest meas
37 Tax provisions to profit before tax (%) 28.8 35.7 31.0 30.0 36.4 31.8 uring and monitoring laboratory equip
38 Profit after tax to net worth ment. During the current year the
(return on equity) (%) 15.8 32.0 9.8 17.3 20.6 19.0
39 Dividend (%) 107.7 152.6 24.0 24.4 189.1 165.2 company has test launched its new
Earnings per share (Rs) 32.2 56.5 12.6 20.0 61.2 50.2 cigarette brand “Force 10” in Nagpur and
41 Book value per share (Rs) 212.9 195.0 133.6 124.2 314.5 278.4 Ludhiana.
42 P/E ratio (multiple) 10.3 8.3 7.2 2.3 13.2 9.0 For April-June 2005, GPI’s net sales
43 Debt-equity ratio have risen by just 0.7 per cent to Rs 165.7
(adjusted for revaluation) 0.61 0.46 1.12 1.13 0.19 0.07
44 Short-term bank borrowings crore. Net profit has increased by 12.7
to inventories (%) 37.6 6.7 26.8 7.3 46.3 11.3 per cent to Rs 15.7 crore. Cigarette sales
Sundry creditors to sundry have been higher by 12 per cent at
debtors (%) 556.1 461.6 26.6 28.2 4781.8 788.6 Rs 329 crore over April-June 2004. Sales
46 Total remuneration to employees of domestic tea have risen by 2 per
to value added (%) 31.2 18.2 27.4 19.3 25.9 23.7
47 Total remunerations to employees 1.3 1.4 5.8 6.2 8.3 6.6 cent to Rs 8 crore. For the quarter ended
to value of production (%) September 2005, GPI’s net sales have
48 Gross fixed assets formation risen by 3 per cent to Rs 169 crore over
(% growth) 11.6 15.0 1.2 0.5 38.1 17.1 the corresponding period of the previous
49 Growth in inventories (%) 46.0 -2.7 13.6 4.6 2.4 20.6

Note: P/E multiples are the latest with corresponding last year’s figures. 97 per cent to Rs 23.4 crore.

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Economic and Political Weekly January 7, 2006

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