For March 1998, while the sales grew by 5.6 per cent to Rs 449.47 crore. Net profits have shown a 155 per cent jump to Rs 20.54 crore. Obviously, stringent cost control, buoyant other income and a reduced interest burden of Rs 4.14 crore have also helped. As against a 5.6 per cent growth in sales, total expenditure grew by 3.94 per cent, resulting in higher profit margins at the operational levels.

Interestingly enough if the the first half results were any indication, the figures for the full year should come as no surprise. For the six months period ended September 1997, on a sales turnover of Rs 205 crore, the company had posted a net profit of Rs 11.23 crore. In fact, the profitfigure in the second half is Rs 9.31 crore. But this does not mean that the performance is bad. In normal circumstances, such a performance would have received a warm welcome from the stock market. But it has not happened in this case.

In the last six months, the stock has been moving in the range of Rs 28-38. As far as discounting goes, on the latest earnings, the stock has been getting a PE multiple of around 3 and the market is not willing to give a higher PE at least, for the time being. The perception for stock is still negative despite a proposal to pay 25 per cent dividend (nil in the previous year), did not have any impact. At the current market price, the yield works out to 6.5 per cent--which is quite impressive.

The root of this problem can be traced in the company's huge equity expansions at wrong prices. As on March 1994, the company's equity was Rs 6.10 crore. This has bloated to the current level of Rs 19.88 crore. The impact of this has been harsh as the company failed to live upto themarket expectations in the recent past. Till March 1995, the performance had been impressive. From a figure of Rs 2.77 crore in 1992-93, profit at the net level risen to Rs 24.12 crore in 1994-95. During this period, other income as percentage of the pre-tax profit had been lower. The rising trend, however, reversed in 1995-96 when profit declined by 78 per cent to Rs 5.45 crore. In fact, if the high component of other income were to be excluded, profit figure further worsens.

Besides, the nature of its low margin business also kept the foreign institutional investors away, which could have given a major boost during good times. In the last three years, the net profit margins have been hovering around 2 per cent. Even during 1997-98, when the company has done well, the net profit margin stood at 4.5 per cent. Besides, a proposed merger with Bhilwara Spinners (BSL), a group company seems to be also having its impact.

For the future, since the prices of raw materials like polyester staple fibre (PSF) andviscose filament yarn (VSF) are depressed and prices of fabrics have fallen to that extent, the company is expected to maintain profit margins. For Rajasthan Spinning, of the total raw material costs, VSF and PSF and synthetic fibre account for around 29 per cent and 43 per cent respectively. With exports to around 30 countries, exports constitute around 30 per cent to the total sales. However, looking at the past track record, discounting for the stock is unlikely to go up unless speculative element comes into the picture.