New Delhi, Nov 7: The scrip of Engineers India has witnessed some volatile movement since listing on the Bombay Stock Exchange on October 20. The scrip closed the first day of its trading session on the BSE at Rs 680, which is also the current high. The reason for this bout of volatility is not far to seek, since the Indian government had divested only six per cent of its stake in the public sector unit. This, in turn, has resulted in a low floating stock.

Engineers India is engaged in consultation of turnkey projects. The divestment took place about two years back where bids had been invited from institutions. The reasons for a two-year delay in the listing of the scrip are not exactly known but sources attribute it to procedural hassles, that continue to dog divestments of public sector units.

On November 5, the scrip closed at a price of Rs 637, after witnessing a rally from its November 4 close of Rs 585 which is also the lowest price for the scrip till date. Earlier, the scrip had fallen to Rs 585 from Rs 640 on November 3. The accompanying average daily volume has been low, with around 100 shares being traded. The scrip was listed on the National and Delhi stock exchanges on August 20 and June 10, respectively.

Engineers India has also announced results for the first half of the current fiscal. The company has posted net sales of Rs 129 crore with an operating profit of Rs 28.32 crore. This gives an operating profit margin of 21.9 per cent.

For fiscal 1997, the company's operating profit margin (OPM) was 31.4 per cent. Thus, the OPM is way above the industrial average of 23.5 per cent. The highest OPM in the industry is, however, that of ABG Heavy Industries at 72 per cent.

With no interest cost, the company's gross profit is Rs 54 crore which includes a healthy other income of Rs 25.4 crore. With depreciation of Rs 3.26 crore and provision for tax of Rs 17.7 crore, the company's net profit for the first half stands at Rs 33 crore. This gives a net profit margin of 25.5 per cent. On a paid-up equity capital of Rs 18.72 crore, the earnings per share (on an annualised basis) works out to Rs 35.25. The annualised EPS discounts the current market price of Rs 637 by a multiple of 18, which is way above the industry average of 2.8.

While the reserves for the company for the full year stand at Rs 368 crore, the company's equity capital has increased by Rs 72 lakh over its March figure of Rs 18 crore. This is on account of allotment of 7.2 lakh shares to employees at a premium of Rs 128 per share. However, much to the chagrin of employees, the shares carry a lock-in of three years.

For the full year, the company expects net sales to surpass the previous year's figure of Rs 269 crore inspite of a recession in the engineering industry. Also, the company's income from operations is the highest among the companies that provide turnkey services.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.