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Bajaj Auto, Ispat Industries, GTL

BAJAJ AUTO Pulsating Growth Bajaj Auto (BAL), incorporated in 1960, is the world

Companias

BAJAJ AUTO

Pulsating Growth

B
ajaj Auto (BAL), incorporated in 1960, is the world’s fourth largest motorcycle manufacturer in terms of volume. It is India’s largest producer of two-wheelers (including geared and ungeared scooters and mopeds) and also manufactures threewheelers. The company’s market share of motorcycles has gone up to 30.2 per cent from 27.8 per cent in 2004-05. It is the only company to have a strong presence in each segment of the two-wheeler market. BAL has a technical tie-up with Kawasaki Heavy Industries of Japan to produce twowheelers in India since 1986. The company has three manufacturing plants, two situated near Pune at Akurdi and Chakan and a third plant at Waluj near Aurangabad. On the export front, BAL is the market leader in Sri Lanka and Bangladesh in the two-wheelers segment. During 2004-05, BAL witnessed a healthy financial performance. Its net sales jumped by 20.6 per cent over 2003-04 to Rs 5,736 crore and net profit rose by 5 per cent to Rs 766 crore. The company’s total two-wheeler sales, including export, grew by 24 per cent to 16 lakh units whereas three-wheeler sales declined by 3 per cent to 2.2 lakh units, during the year under review. BAL continues to be India’s largest exporter of two-and three-wheelers. In value terms, its earnings in foreign exchange increased by 29 per cent to Rs 729 crore.

BAL is planning to set up a two-wheeler assembly unit in Jakarta through a joint venture with a local distributor, where it will have a 95 per cent partnership. The company is also setting up a joint venture in Nigeria to produce high-powered commuter motorcycles. BAL is developing a 250cc motorcycle with its technology partner Kawasaki, which is expected to be launched by 2008. It has plans of venturing into the commercial four-wheeler segment by launching small trucks in the next three years. The company is also planning to expand its presence in Brazil, Iran and Africa to capture the growing demand for two-wheelers and motorised rickshaws. BAL will acquire a 27 per cent share in Maharashtra Scooters from Western Maharashtra Development Corporation at a cost of Rs 47.2 crore. Post acquisition, BAL will become the major (51 per cent) shareholder in the company.

BAL has introduced a range of two- and three-wheelers during the current year. In the motorcycle segment, it has launched Avenger 80cc, with the DTS-I (Digital Twin Spark Ignition) technology and also launched Discover 112, a 100cc bike. The company will soon launch its two new scooter models, namely, ‘Kristal’ aimed at college girls and ‘Blade’ for male customers. The company has launched its Liquefied Petroleum Gas (LPG) auto rickshaw in Gujarat. LPG rickshaws are especially beneficial for those cities and villages where CNG is not available and petrol is very costly.

The company is also developing ‘EcoRick’, a battery powered three-wheeler rickshaw – powered only by a 2-volt leadacid rechargeable battery. Once fully charged, the battery can power the vehicle up to 130 kilometres.

During April-September 2005, BAL reported a 31 per cent rise in net sales to Rs 3,501 crore over the same period a year ago, and net profit shot up by 45 per cent to Rs 499 crore. During the period under review, the company’s total vehicles sales grew by 30 per cent to 10.6 lakh units. For the quarter ended December 2005, BAL reported a 24.6 per cent rise in net sales to Rs 2,001 crore over the same period a year ago and net profit zoomed by 53 per cent to Rs 280 crore. The company’s motorcycles sales increased by 16 per cent to 5.11 lakh units and three-wheeler sales also rose by 16 per cent to 57,572 units. The company’s exports jumped by 53 per cent to 64,359 units.

In January 2006, BAL’s total two- and three-wheeler sales, including exports, increased by 28 per cent to 2 lakh units over the same period of the previous year. In February 2006, the company’s total twowheeler sales, including exports, have increased by 29 per cent to 1.7 lakh units over February 2005 and three-wheeler sales have risen by 40 per cent to 25,896 units.

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ISPAT INDUSTRIES

Integrated Steel Maker

I
spat Industries (IIL), established in 1985, is one of the leading integrated steel makers and the largest private sector producer of hot rolled coils in India. The company has two manufacturing complexes at Dolvi and Kalmeshwar both in Maharashtra, and produces a wide range of steel products such as hot rolled and cold rolled coils, galvanised sheets/coils, colour coated sheets and sponge iron.

During 2004-05, IIL reported robust financial performance. Its net sales surged by 62.8 per cent to Rs 6,078 crore and net profit swelled to Rs 696 crore from Rs 44 crore over the same period of the previous year. The production of hot rolled coils was higher by around 22 per cent at 1.96 MMT. The production of cold rolled steel sheets and galvanised coils/sheets sponge iron was higher in each of the respective segments as compared to the previous year. The company’s export earning surged by 110 per cent to Rs 1,668 crore during the year under review.

IIL has decided to invest Rs 1,100 crore to fund the expansion of its existing units and other ongoing projects. The company has undertaken various expansion plans and is raising the capacity of its hot rolled coils plant to 3 MMT from the current 2.4 MMT, which is expected to be completed during the current year. The company has commissioned a sinter plant with a capacity of

2.24 MMT per annum at Dolvi and it is also building an oxygen plant with a capacity of 1,260 tonnes per day, at the same location.

IIL has shown mixed results during the first two quarters of 2005. For the quarter ended June 2005, the company reported a 6 per cent decline in net sales at Rs 1,161 crore over the same period of the previous year. However, the company’s net profit stood at Rs 1.20 crore against a net loss of Rs 45.6 crore. For the quarter ended September 2005, IIL’s net sales declined by 20 per cent to Rs 1,198 crore over the same period a year ago. The company witnessed a net loss of Rs 232 crore during July-September 2005 against a net profit of Rs 77 crore over the corresponding period of the previous year. The company’s operations have been affected due to the extensive floods in Maharashtra, a significant fall in finished steel prices and restricted supply of natural gas due to a fire at Bombay High.

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GTL

Worldwide Network

G
TL, formerly known as Global Tele-System, is a global provider of network systems and information technology (IT) services. The company’s network

Economic and Political Weekly March 11, 2006

The Week’s Companies

(Rs lakh)

Bajaj Auto Ispat GTL Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04

Income/Appropriations

1 Net sales 573636 475517 607808 373201

2 Value of production 572526 476577 606681 378667

3 Other income 42840 38220 1843 7064

4 Total income 615366 514796 608524 385731

5 Raw materials/stores and spares/

power and fuel consumed 403332 320945 397741 269113

6 Other manufacturing expenses 25410 18318 2265 8968

7 Remuneration to employees 24906 24054 11243 7326

8 Other expenses 51511 50643 12354 40503

9 Depreciation 18537 17989 43599 21966 10 Gross profit 91669 82847 141322 37855 11 Interest 67 94 53406 33526 12 Operating profit 91602 82754 87916 4329 13 Non-operating surplus/deficit 17042 13289 1638 1692 14 Profit before tax 108644 96043 89554 6021 15 Tax provisions 31963 22891 19948 1589 16 Profit after tax 76681 73152 69606 4432 17 Dividends (includes tax

on dist profit) 25296 25296 0 0 18 Retained profits 51385 47856 69606 4432

Liabilities/assets 19 Paid-up capital 10118 10118 113690 98176 20 Reserves and surplus 403317 359244 110200 91596 21 Long-term loan 122699 100272 239505 327208 22 Short-term loan 0 0 343718 357895

(i) of which, bank borrowings 0 0 95558 75816 23 Gross fixed assets 276947 272876 864668 851989 24 Accumulated depreciation 162864 149668 184648 139826 25 Inventories 22417 20256 62902 47658 26 Total assets/liabilities 829521 714824 976147 914053

Miscellaneous items 27 Excise duty 80525 66332 38131 38041 28 Gross value added 92811 87243 197890 61338 29 Total foreign exchange earnings 72913 56448 166807 79314 30 Total foreign exchange outgo 19507 12283 78697 47375

Key financial and performance ratios 31 Turnover ratio(sales to total assets) 0.8 0.8 0.7 0.5 32 Gross value added to gross

fixed assets (%) 33.8 32.5 23.1 8.4 33 Return on investment (gross profit

to total assets) (%) 11.9 12.4 15.0 4.2 34 Gross profit to sales

(gross margin) (%) 16.0 17.4 23.3 10.1 35 Operating profit to sales (%) 16.0 17.4 14.5 1.2 36 Profit before tax to sales (%) 18.9 20.2 14.7 1.6 37 Tax provisions to profit before tax (%) 29.4 23.8 22.3 26.4 38 Profit after tax to net worth

(return on equity) (%) 19.6 21.1 33.7 2.3 39 Dividend (%) 214.9 218.0 0.0 0.0 40 Earnings per share (Rs) 75.8 72.3 10.1 0.6 41 Book value per share (Rs) 408.6 365.0 32.3 27.4 42 P/E ratio (multiple) 14.3 13.0 6.2 2.8 43 Debt-equity ratio (adjusted for

revaluation) 0.30 0.27 2.60 3.61 44 Short-term bank borrowings

to inventories (%) 0.0 0.0 151.9 159.1 45 Sundry creditors to sundry

debtors (%) 416.9 465.2 94.1 166.0 46 Total remuneration to employees

to value added (%) 26.8 27.6 5.7 11.9 47 Total remunerations to employees

to value of production (%) 4.4 5.0 1.9 1.9 48 Gross fixed assets formation (% growth) 1.5 3.2 1.5 40.3 49 Growth in inventories (%) 10.7 -2.6 32.0 52.1

Notes: P/E multiples are the latest with corresponding last year’s figures.

54452 47993

54452 47993 1382 899 55834 48892

00 00 11230 8351 24735 22978 9072 7364 10797 10198 258 2028 10539 8170 -45 992 10494 9162 736 976 9758 8187

1375 1069 8383 7118

7413 7128

137601 125790 26647 500 16301 13741 15177 11055 97779 87653 40349 31170 14734 8453

210244 164056

00 30136 25353 18174 15782

9427 9434

0.3 0.3

32.5 27.7

5.8 6.2

19.8 21.2

19.4 17.0

19.3 19.1

7.0 10.6

7.0 6.0

15.9 13.1

13.2 11.5

195.6 186.5

10.3 6.5

0.30 0.11

103.0 130.8

100.8 52.9

37.3 32.9

20.6 17.4

11.6 -8.2

74.3 -76.5

engineering segment designs, deploys and manages the network infrastructure of telecommunication service providers and large organisations in both the private and public sectors in India. GTL’s IT segment provides managed services, enterprise management solutions, security services and business process outsourcing services. The company has three Indian and nine international subsidiaries located in the US, UK, Singapore, Australia, Germany, New Zealand and some others. GTL’s customers include Alcatel, BSNL, Tata Consultancy Services, HSBC India, ICICI Bank, Mahindra & Mahindra, Nokia, Canadian Tire Financial Services, Ericsson, Deloitte, Ernst & Young, Nortel, WNS and among others.

During 2004-05, GTL witnessed stable financial performance. Its income from services improved by 13 per cent to Rs 544 crore and net profit grew by 19 per cent to Rs 97 crore. Inventories reported a growth of 74 per cent to Rs 147 crore largely due to the long gestation projects of its network engineering business, as well as the ongoing large network rollouts with BSNL, Nortel and Nokia. The company’s earnings in foreign exchange rose by 15 per cent to Rs 181 crore. GTL’s overseas subsidiaries recorded better performance as compared to the parent company. During the year under review, the company’s share of revenue from international operations grew by 5 per cent of its total global revenues from 43 per cent in 2003-04, on the back of sharp rise in the combined revenue from the north America, Europe, west Asia and Asia Pacific regions.

During 2004-05, GTL signed an agreement with Alcatel under which it will design and implement Alcatel’s enterprise solutions for voice, data and applications worldwide. GTL will soon undergo a process of restructuring its business, which includes the sale and transfer of its network infrastructure and related business to its wholly-owned subsidiary, GTL Infrastructure (GIL). As a result, the parent company will only deal with network engineering services and the BPO business. GTL’s board has approved a swap ratio of 1:1 for the demerger of all its telecom and network related infrastructure business to GIL.

For the nine months ended December 2005, GTL’s net sales from the international market have surged by 28.6 per cent to Rs 67.8 crore over the same period of the previous year. However, in India (domestically) its net sales slipped by 20 per cent to Rs 220 crore. During the period under review, the company’s net profit decreased by 65 per cent to Rs 26.8 crore.

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Economic and Political Weekly March 11, 2006

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