New Delhi, June 8: LML Limited's problems are far from over, even though the company has reported a 100 per cent growth in net profit in the first half. A liability of over Rs 44 crore continues to be a drag on LML's bottomlines.A major part of the liability is on account of the loan extended by LML to a BIFR-company, Ession Synthetics Limited. The amount at the beginning of the year stood at Rs 31.39 crore. In the absence of the exact loss in this transaction, the company has not been able to write off the loss at one go. For the year ended September, 1996, the company's net profit was lower by Rs 9.58 crore because of the provision for part of this exceptional item. In the first half of 1996-97 too, LML has provided for Rs 4.35 crore, which resulted in a lower net profit of Rs 17.2 crore.

Another Rs 17.72 crore is outstanding in respect of materials, debts/advances and investments in Vespa Car Company Limited. LML may have to write off these contingent liabilities in the coming years. In the process, its net profit is likely to come down.

On the positive side, LML has been among the few corporates who have taken advantage of the MAT credit being allowed from the current financial year. The company with effective tax planning managed to avoid this liability and it carried forward an amount of Rs 2.22 crore for MAT to be adjusted out of tax liability for future years as per the provision of the recently introduced Section 115JA of IT Act.

The two-wheeler segment has shown no signs of a real slowdown and has been one of the few sectors to have survived in a lean phase.

LML reported a 15.58 per cent growth in scooter sales to 1,42,703 scooters and turnover/income from operations went up by 25.65 per cent to Rs 363.94 crore in the first half year ended March, 1997. On a constant equity of Rs 44.14 crore, the earning per share improved substantially from Rs 1.97 to Rs 4.15.

The company reported a sharp jump in its margins and operating profit margin (OPM) excluding other income improved to 9.99 per cent up from 6.33 per cent in the corresponding half of last year. Net profit margin improved from 2.82 per cent to 4.73 per cent.

LML has already signed new agreements with its collaborator, Piaggio of Italy for sourcing technical know-how for the new range of vehicles it is planning to introduce during its second phase of expansion.

LML has already completed its first phase of expansion and is proposing to invest another Rs 150 crore in the second phase wherein it is increasing its annual capacity for manufacture of two-wheelers from the present three lakh to around six lakh vehicles. In addition, LML is also planning to introduce several new models including a 60 CC scooter and high-powered motor cycles.Lacklustre results for the full year results ended September 1996 pushed the scrip down from a high of Rs 62 to a 52-week low of Rs 32. In the last six months, the company's scrip has seen a sharp surge three times from Rs 32 to Rs 50 in early January this year and then from Rs 37 to Rs 54 in February and recently from Rs 35 to Rs 51 before dropping to Rs 48. The scrip may see some resistance at current levels of Rs 48, which discounts the latest EPS (annualised) of Rs 8.3 by a price earning multiple of less than 2.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.