I was gifted 100 shares of Cabot India. How is the company performing?

Raghu K Ravindranagar, Hyderabad

Cabot India, a subsidiary of Cabot Corporation of USA, is engaged in the manufacture of carbon black, a fine black powder used as a reinforcing agent in tyres and industrial rubber products. A major portion of the carbon black production (around 70 per cent), both internationally and in India, is consumed by the tyre industry. The fortunes of this sector are more or less linked to the performance of the tyre industry.

The recent announcement to lower customs duty on carbon black feed stock (CBFS-main raw material for carbon black) may not really boost the bottomlines of carbon black manufacturers as most companies had to revise their prices downwards following the 10 per cent cut in customs duty on finished carbon black.

The parent company, Cabot Corporation, after increasing its stake from 50.5 per cent to 60 per cent, is set to further up its holding to 74 per cent. The US company plans to pump in over Rs 50 crore in its Indian operations. Cabot India is in the process of increasing its existing capacity from 35,700 tonnes per annum to 50,000 tonnes per annum.

The company's performance in the past has been fluctuating. After reporting profits in 1991-92 and 1992-93, it slipped into the red in the next two years. Cabot India staged a comeback in 1995-96 with a net profit of Rs 7.09 crore. The net profit further zoomed to Rs 10.54 crore in the first half ended September 1996. However, high input cost and low offtake may pull back the earnings growth in the second half. The company's stock responded positively to the recent announcement of lowering of customs duty on BBFS and has zoomed from Rs 155 to Rs 190 in the past few sessions.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.