Dolat Securities has come out with a research report on Grindwell Norton, where it recommends a "Buy" at Rs 178.

Grindwell Norton, a 51 per cent-owned subsidiary of Saint Gobain group of France, manufactures and distributes abrasives. The day-to-day management of the company, which has historically been market-driven, is handled by a team of professionals led by Anand Mahajan. Grindwell leads in bonded abrasives (which is required for less intricate engineering work, while coated abrasives, in which the company lags, is used for more intricate engineering). The report says it is unlikely that Saint Gobain will incorporate a 100 per cent Indian subsidiary. The company's main competitor is Carborundum Universal.

Dolat points out that the stock has always traded at a premium to others in its sector primarily because of its international connections and consistent performance. The stock has outperformed the market in the last two years. With no further equity dilutions on the cards, earnings is expected to show a 35 per cent year-on-year growth in the next two years, says the report. It says that Grindwell will therefore outperform the market over the next 12 months although in the short term the stock will move in line with the market, predicts the Dolat report. The report points out that despite a slowdown in the industrial sector, Grindwell has performed creditably in 1996-97.

Its revenues have increased 18.7 per cent against main rival Carborundum's 12 per cent. Its operating margins have improved by one and a half percentage point.

The report points out that Grindwell be commission new capacities in the second half of 1997-98. Depreciation costs will show a rising trend in the next two financial years. With reduction in long-term debt, the interest cost a a percentage of sales is likely to witness a drop from 3.5 per cent to 3.1 per cent in 1997-98 and 1998-99, predicts the report. (The views expressed above are those of Dolat Securities and not that of The Financial Express).

F.I.R -- The dollar effect

Exports data shows a positive 11.1 per cent growth year-on-year in May 1997, and imports have grown a measly 0.7 per cent, both in rupee terms. The export rise, after a 5.9 per cent fall in April, must seem encouraging. But US dollar terms, exports have actually fallen by 8.4 per cent, and even imports have fallen by 1.6 per cent. The bad news persists.The reason for the slightly different scenarios? Probably, a depreciation in the value of the rupee from Rs 34.7 in May 1996 to Rs 35.5 in May 1997. The slipping rupee may have dragged down the dollar value of trade further.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.