Kirloskar Brothers records sales growth, but bonus issue mars earnings
Surekha Sule
Mumbai, Dec 29: In an otherwise gloomy corporate scenario, Kirloskar Brothers Ltd has done commendably well. With no end in sight for the industry's woes on the power front, the captive power generation has been going strong from which Kirloskar Brothers derive their benefits.To cater to captive power plants with a capacity of 3 to 60 MW, the company got into a technology transfer agreement with Ansaldo of Italy to manufacture steam turbines. Besides it bagged Rs 25 crore worth orders from mini-hydel power plants in Tamil Nadu and Orissa. In its main business of pumps, it has tied up with ASV Stubbe of Germany to offer pumps in competitive alternate materials like thermoplastic, in the Indian market. The company is investing Rs 20 crore over the next three years to set up a new facility near its existing plant at Kirloskar Wadi to manufacture centrifugal pumps, hydel-turbines and turbines. This investment may be funded through internal generation. Keeping up the last year's trend when sales grew
by 18 per cent to Rs 316.86 crore, Kirloskar Brothers posted a good growth in the business with sales rising by 21 per cent to Rs 160.04 crore during the first six months of 1997-98. With modest increases in interest and depreciation, the bottomline swelled by a whopping 62 per cent to Rs 4.71 crore during the first half of the current year. Last year the company distributed profits liberally even on an increased capital. It paid 40 per cent dividend on the bonus shares too. A show like this should have got the stockmarket reacting favourably. But it did not. On the contrary, Kirloskar Brothers scrip has been on the downtrend most of the time this year. The reason is sought in a 2:5 bonus issue last year which diluted the earnings for the investors. Despite 62 per cent rise in the net profit, the annualised earnings per share improved just 16 per cent to Rs 13.36. Besides, the promoter Kirloskars are using this company to enter into an unrelated area of business-sericulture. Through a wholly owned
subsidiary Kirloskar Silk Industries Ltd, the company has acquired 500 acres of land at Nashik with a pilot plant for silk yarn which is mainly for exports to Japan. It is yet to get confirmed commitments from Japanese buyers. Again, the untimely rain recently in Nashik has jeopardised prospects of a normal yield. Though this business would ultimately be hived off into a separate company, currently it could put burden on the parent company. Kirloskar Brothers share became ex-bonus at Rs 95 on December 23,96 and for a fortnight, fluctuated narrowly between Rs 80 and Rs 110. From this high of Rs 110 in January 97 started a the downhill course reaching the bottom at Rs 56 in early June 97. With the general market upsurge, the scrip too flared up to peak at Rs 94 during the first week of August 97. Again it resumed southward journey in consonance with the weak market conditions. And now it is at its yearly low of Rs 60.
Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.
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