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Shipping Corporation of India, Voltas, Raymond

SHIPPING CORPORATION OF INDIA Slow Sailing The Shipping Corporation of India (SCI) was established in 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. At present, the government holds 80 per cent of the equity capital in SCI; with planned divestment, this will come down to around 65 per cent. The SCI operates in all areas of shipping, catering to both national and international trade. The company operates a network of global liner services from India to Japan, UK, US, Canada, South Africa and other countries. The bulk carrier fleet caters to the movement of almost all types of dry bulk cargoes, mainly export of iron-ore to Japan and import of coking coal from Australia. SCI

Companias

SHIPPING CORPORATION OF INDIA

Slow Sailing

T
he Shipping Corporation of India (SCI) was established in 1961 by the amalgamation of Eastern Shipping Corporation and Western Shipping Corporation. At present, the government holds 80 per cent of the equity capital in SCI; with planned divestment, this will come down to around 65 per cent. The SCI operates in all areas of shipping, catering to both national and international trade. The company operates a network of global liner services from India to Japan, UK, US, Canada, South Africa and other countries. The bulk carrier fleet caters to the movement of almost all types of dry bulk cargoes, mainly export of iron-ore to Japan and import of coking coal from Australia. SCI’s product tankers are engaged in the import and coastal movement of petroleum products and its specialised vessels are engaged in transportation of LPG, import of phosphoric acid and the movement of ammonia.

During 2004-05, SCI has reported a robust financial performance. Its income from operations rose by 15.8 per cent over the same period of the previous year to Rs 3,396 crore. Net profit shot up by 126 per cent over the same in 2003-04 to Rs 1,419 crore. During the year under review, SCI’s earnings in foreign exchange reported an increase of 9.7 per cent over the figure in 2003-04 to Rs 3,406 crore.

SCI owns 22 bulk carriers with an average age of 16 years, comprising one Paramax, 15 Handymax and six Handysize vessels. Out of 11 LR-1 tankers, eight tankers operated with the oil industry, while three tankers were utilised on cross trade for shipments of fuel oil on a charter basis. One vessel has been scrapped during the year under review. For its fleet expansion, SCI took delivery of one Suezmax ‘Desh Shakti’ and one very large crude carrier (VLCC), the ‘Desh Ujaala’ tanker. SCI has received a 9 million tonne crude oil transportation contract from Indian Oil Corporation to transport its crude oil from the Persian Gulf to the Indian coast.

After the government’s approval, SCI has signed contracts with Daewoo Shipbuilding and Marine Engineering Company of South Korea for building and delivering two VLCCs with a capacity of 3,00,000 dead weight tonne at a total cost of Rs 1,136 crore. This would augment SCI’s crude oil tanker tonnage and help to meet the increased demand for crude oil transportation in the future. The ministry of shipping has cleared the SCI’s proposal to acquire 16 new vessels worth Rs 2,868 crore.

SCI witnessed a decline in profitability for the first three quarters of 2005-06, mainly due to a fall in ocean freight rates. For the quarter ended June, its net sales declined by 2 per cent over the same period of the previous year to Rs 812 crore. Likewise, net profit suffered by 14 per cent to Rs 274 crore. During July-September 2005, the company’s net sales decreased by 4 per cent over that in July-September 2004 to Rs 740.7 crore. Net profit went down by 28 per cent over the same period of the previous year to Rs 150 crore. For the quarter ended December 2005, the freight rates of vessels such as VLCCs, Suezmax, Aframax and clean tankers, etc, have posted a sharp fall. The company’s net sales dropped by 0.2 per cent to Rs 927 crore during the third quarter of 2005 and net profit fell by 4 per cent over the same period of the previous year to Rs 268 crore.

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VOLTAS

Strong Growth

V
oltas, a Tata group enterprise, is India’s premier air conditioning and engineering services company. The company’s operations are organised into four independent business clusters: the air conditioning and refrigeration business group, the international operations business group, the unitary products business group, and the engineering products business group.

Despite tough competition from multinational companies, Voltas sustained its pursuit of active growth in its businesses. During 2004-05, its net sales rose by 8.9 per cent over that in 2003-04 to touch Rs 1,386 crore. Net profit increased by 29 per cent over the same period of the previous year to Rs 50 crore. The company’s earnings in foreign exchange went up by 24 per cent to Rs 80 crore. In gross sales, the share of electro-mechanical projects and the services segment stood at 56 per cent, followed by unitary cooling products with 29 per cent; other businesses added 8 per cent, and engineering agency and services contributed 7 per cent.

The company continued its thrust in overseas markets, particularly in west Asia. It has successfully completed certain contracts, such as the Conference Palace Hotel project in Abu Dhabi and metro railway and science park building projects in Hong Kong. Voltas has won two major mechanical and electrical contracts – for the Burj Tower in Dubai and the Hyderabad international airport. The contracts valued at around Rs 1,339 crore are scheduled to be completed by December 2008.

The company is planning to invest Rs 120 crore over the next three years for setting up three manufacturing units in Uttaranchal to manufacture air conditioners, central cooling plants and commercial refrigeration equipment. The company’s new air conditioner manufacturing plant in Uttaranchal would have a capacity of five lakh units per year, while the central cooling plants would have a capacity of 20,000 units in the first year, which would be scaled up to 50,000 units in full operation. The commercial refrigeration units will have a capacity of one lakh units from the first year of operations itself. The new units will be operational by mid-2006.

Voltas has started the valuation process to sell-off its loss-making Hyderabad unit and has announced a voluntary retirement scheme for all the 3,500 employees, the compensation amount being Rs 65 crore. This unit has been making losses for the past 12 years, except during 2000-02, after it stopped manufacturing refrigerators for LG and Samsung. The company is in the process of shifting its Hyderabad operations, engaged in making retail coolers for food products, to Pantanagar in Uttaranchal.

Voltas has posted strong financial results for the first three quarters of 2005-06. For the six months, April-September 2005, the company’s net sales surged by 45 per cent over the same period to Rs 931 crore of the previous year. Net profit shot up by 77 per cent over the same period to Rs 35 crore. During October-December 2005, its net sales increased by 51 per cent over the corresponding period of the previous year to Rs 435 crore. Net profit rose by 49 per cent over the same period to touch Rs 11 crore.

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Economic and Political Weekly February 11, 2006

The Week’s Companies RAYMOND

(Rs lakh)

ShippingCorporation Voltas Raymond
Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04
Income/Appropriations
1 Net sales 339614 293290 138666 127319 111534 99432
2 Value of production 339614 293290 138666 127319 110525 99849
3 Other income 22608 7801 1931 1600 7694 12386
4 Total income 362222 301091 140597 128920 118219 112235
Raw materials/stores and
spares/power and fuel consumed 8172 6141 547 605 53355 48753
6 Other manufacturing expenses 44255 31410 103945 95463 5446 3116
7 Remuneration to employees 31683 28891 14435 12619 20288 18042
8 Other expenses 134916 135446 15383 15298 24098 19970
9 Depreciation 29716 27999 1048 1325 6377 6338
Gross profit 113480 71204 5240 3610 8655 16016
11 Interest 0 0 0 0 2883 2309
12 Operating profit 113480 71204 5240 3610 5772 13707
13 Non-operating surplus/deficit 1239 147 526 1077 3410 4952
14 Profit before tax 114719 71351 5766 4687 9182 18658
Tax provisions -27272 8652 725 784 1501 5475
16 Profit after tax 141991 62699 5041 3903 7682 13184
17 Dividends
(includes tax on dist profit) 19761 47991 1654 993 2455 3376
18 Retained profits 122230 14708 3387 2910 5226 9808
Liabilities/assets
19 Paid-up capital 28230 28230 3306 3306 6138 6138
Reserves and surplus 330981 211470 16046 15595 104255 98717
21 Long-term loan -- 20545 20516 18348 38658
22 Short-term loan 140265 137127 9447 6708 38930 8992
(i) of which, bank borrowings 140265 137127 7447 5208 38930 8992
23 Gross fixed assets 662862 645951 24858 24740 120361 99432
24 Accumulated depreciation 327030 309204 16615 11688 62798 57309
Inventories 5041 4186 24001 15866 28757 29491
26 Total assets/liabilities 617910 502023 99306 88285 198183 184500
Miscellaneous items
27 Excise duty 0 0 5477 5674 2494 8043
28 Gross value added 154644 122992 19861 16770 28826 29009
29 Total foreign exchange earnings 340615 310223 8051 6494 26534 21416
Total foreign exchange outgo 154070 202872 9888 5626 26787 18178
Key financial and performance ratios
31 Turnover ratio(sales to total assets) 0.6 0.6 1.5 1.6 0.6 0.6
32 Gross value added to gross
fixed assets (%) 23.6 19.9 80.1 69.0 26.2 30.3
33 Return on investment
(gross profit to total assets) (%) 20.3 14.9 5.6 4.2 4.5 8.9
34 Gross profit to sales
(gross margin) (%) 33.4 24.3 3.8 2.8 7.8 16.1
Operating profit to sales (%) 33.4 24.3 3.8 2.8 5.2 13.8
36 Profit before tax to sales (%) 33.8 24.3 4.2 3.7 8.2 18.8
37 Tax provisions to profit before tax (%) -23.8 12.1 12.6 16.7 16.3 29.3
38 Profit after tax to net worth
(return on equity) (%) 47.4 26.6 26.4 41.3 7.1 13.2
39 Dividend (%) 60.6 148.2 43.0 26.2 34.8 48.0
Earnings per share (Rs) 53.7 23.7 15.2 11.8 12.5 21.5
41 Book value per share (Rs) 135.7 90.6 58.5 57.1 179.9 170.8
42 P/E ratio (multiple) 3.9 7.3 15.3 11.6 18.9 9.0
43 Debt-equity ratio
(adjusted for revaluation) – – 1.55 1.44 0.52 0.45
44 Short-term bank borrowings
to inventories (%) 2782.5 3275.8 31.0 32.8 135.4 30.5
Sundry creditors to
sundry debtors (%) 374.5 263.1 114.0 107.3 48.7 42.6
46 Total remuneration to employees
to value added (%) 20.5 23.5 72.7 75.2 70.4 62.2
47 Total remunerations to employees
to value of production (%) 9.3 9.9 10.4 9.9 18.4 18.1
48 Gross fixed assets formation
(% growth) 2.6 9.0 0.5 3.6 21.0 8.0
49 Growth in inventories (%) 20.4 -16.6 51.3 28.9 -2.5 6.3

Restoring Profits

R
aymond, incorporated in 1925, is a leading conglomerate, with varied businesses in textiles, readymade garments, denim, engineering files and tools, aviation and designer wear. The company has a wide network of retail shops – over 320 shops – in domestic and overseas markets. It exports suitings to more than 50 countries, including US, Canada, Europe, Japan and the west Asia.

Raymond suffered a decline in profitability during 2004-05. Its net sales rose by 12 per cent to touch Rs 1,115 crore over 2003-04. However, net profit declined by 41.7 per cent to Rs 76.8 crore. During the year under review, the textile division’s total sales accounted for Rs 757.6 crore, a rise of 8.7 per cent over the same period of the previous year. The denim division recorded a 21 per cent jump in total sales to Rs 222 crore. The company’s earnings in foreign exchange increased by 9 per cent to Rs 265 crore.

Raymond’s R&D department has developed various new products under the textile division, like the Tasmania collection, Royal Crest, Linen World, Nanotex, Explorer, etc. Its textile division has adopted the latest technology in spinning, by introducing compact spun technology, thereby producing less hairy and more uniform yarn. For producing light-weight suiting fabrics, it has installed a single sizing machine for sizing single yarn. It has opened three new retail shops in UAE, Saudi Arabia and Bangladesh. The company also signed a joint venture with Lanficio Fedora of Italy for manufacturing, selling and distributing blankets, carded woollen fabrics and shawls.

Raymond’s files and tools division has entered into a memorandum of understanding with MOB Outillage SA, a well known hand-tool manufacturer of France for setting up a joint venture company to manufacture steel files and rasps at Chiplun, Maharashtra at a total project cost of Rs 20.7 crore. Recently, Raymond has acquired a 69 per cent share in Ring Plus Aqua, an automotive component maker, through its wholly-owned subsidiary, Scissors Engineering Products, at a total cost of Rs 21 crore.

Raymond has witnessed healthy results for the first nine months of the current financial year. Net sales have risen by 14 per cent over the corresponding period of the previous year to Rs 940 crore, while net profit has shot up by 122 per cent to

Notes: – not available; P/E multiples are the latest with corresponding last year’s figures. touch Rs 86 crore.

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Economic and Political Weekly February 11, 2006

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