In other words, in just 11 trading days, the scrip has appreciated by more than 40 per cent. Who's behind the spurt? In May, the volumes in the scrip on the BSE fluctuated between 100 and 24,100 shares a day. Nevertheless, it recorded a five-digit figure only once. As a rule, the volumes have mostly been in hundreds. And, if market sources are to be believed, there was hardly any seller visible at HSL's counter.

This means that the scrip's upward march could be attributed to genuine but informed buying. The heavy buying on May 19 is still a matter of intrigue for the market watchers. The company is slated to declare its working results for the second half offiscal 1998 on May 29. Obviously, those privy to the still-to-be-released financials are the informed buyers. Now, what does HSL have in store for the investors? The first-half performance surely can't enthuse many.

For the half year ended September 1997, the company reported net sales of Rs 26.75 crore and a net cash profit of Rs 13.05 crore compared with Rs 29 crore and Rs 14.36 crore respectively in the corresponding period of the previous year. However, the management proposed a higher interim dividend of 25 per cent as against an interim of 20 per cent in the previous year.

Though the company's financial performance in the first half was down, the hike in interim dividend did convey some hope. The management's optimism seemed to be fully justified, as two major projects were expected to commence production during the last quarter of fiscal 1998.

Last year, HSL undertook to set up a Rs 46.20-crore spun silk/blended yarn project with a capacity of 410 tonne in collaboration with Filati Buratti ofItaly, reportedly the world's largest producer of speciality silk yarn. The backward integration would substantially reduce the company's dependence on imported silk/blended yarns. This, in turn, would obviously enhance the company's profit margin which is already very attractive at over 46 per cent at the gross level and around 38 per cent at the net level.

The company is also implementing a cotton and blended yarn weaving project at a cost of Rs 28.50 crore. Most likely, all the details are expected to be formally announced along with the March 1998 working results. With the full working of the new capacities, the company's net profit, which stood at Rs 22.55 crore in March 1997, is expected to cross Rs 30 crore.

The company's equity base remains at Rs 9.55 crore. This certainly augurs well for the scrip. Technically, too, there seems to be enough room for the scrip to appreciate further as the share did once command a peak price of Rs 580 in 1994. Currently, it is quoting below its 52-week high ofRs 190.50, which was recorded last June. Of course, looking at the 52-week low of Rs 84.25, the present price of around Rs 140 may not look attractive.

But calculations suggest that the book value of the scrip at the end of March 1998 may be over Rs 110. If the scrip has all along been poorly discounted, the management is to be blamed. It had once taken an investor unfriendly move, which is still not forgotten in the market. Until fiscal 1994, the promoters held only 26 per cent of HSL's Rs 4.33 crore equity.

But in May 1994, when the scrip was quoting at around Rs 450, the promoters reportedly allotted 20.4 lakh shares to themselves at a heavily discounted price of Rs 81 per share thereby, increasing their stake to over 51 per cent.Naturally, some of the shareholders were furious. In order to pacify them, the management came out in fiscal 1995 with a maiden bonus issue of one share for every two shares held in the company. As always, the public shareholders would be only too happy to have another bonusnow. But will the management consider it this year?

(Arranged by Investar -- The Aarthik News & Research Syndicate)