Gujarat Heavy Chemicals Ltd has witnessed a slowdown in sales growth for the year ended March 31, 1997. Operating at near-full capacity, the soda ash manufacturer saw its turnover rising by a marginal 10 per cent to Rs 360 crore compared to 20 per cent in fiscal 1995-96. While the price of soda-ash remained steady for most part of the year, volumes rose marginally. At present, the company has an annual capacity of 4.2 lakh tonnes, which is now being expanded by 45,000 tonnes at a total expenditure of Rs 83 crore.

During 1996-97, operating profit inched up 4.3 per cent to Rs 96.17 crore. However, operating profit margin (OPM) has fallen nearly two per cent to 26.68 due to a more than proportionate rise in expenditure. Expenditure for the year has risen by 12.8 per cent to Rs 264 crore.

While the company's interest liability has registered a marginal fall to Rs 26.71 crore, depreciation has remained stagnant at Rs 21 crore. Over the past two years, the company has paid back a significant part of the loan component. As a result, the company's long term debt/equity has fallen sharply from 1.24 during 1994-95 to a 0.78 in fiscal 1995-96. Thus, with a comfortable debt/equity, GHCL has raised a loan of Rs 60 crore from IDBI to fund its expansion project. The remaining amount will come from internal accruals.

GHCL has treated its MAT liability as tax credit and carried forward for setting off in subsequent years. Had the company provided for tax, net profit would have fallen by 12.28 per cent to Rs 42.84 crore. For the year under consideration, the company has earned a net profit of Rs 49.19 crore. However, NPM has declined from 14.94 to 13.65 per cent.

On a large equity of Rs 93.25 crore, the earning per share works out to Rs 5.28. The current market price of Rs 16.5 discounts the EPS by a multiple of 3.12. The reserves have shot up from Rs 80 crore to Rs 129 crore, a rise of 61 per cent.

Soda ash is used to manufacture glass and detergents. With the reduction in excise duty on detergents and capacity expansion by major glass manufacturers, the demand for soda ash will remain strong. Although the import duty on soda ash has been reduced to 30 per cent, domestic manufacturers are unlikely to face any competition as domestic prices are way below the landed cost of soda ash. The company's scrip after the announcement of results continues to move in a narrow band of Rs 16-17.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.