The crash in net profit could have been worse, but for a Rs 35-crore rise in "other income". Though the company did not specify any reason for the drop in profit, analysts attribute it to the general economic slowdown, depressed prices in the global petrochemical industry and huge rise in expenditure.

Net sales improved by 7 per cent at Rs 2982.90 crore compared with Rs 2,785.46 crore. Sales volumes crossed one million tonne. Operating profit margins dipped to 22 per cent against 31 per cent in 1996-97. Earnings per share stood at Rs 9.82 compared to Rs 20.56 last fiscal.

Gross profit has come down to Rs 509.73 crore from Rs 741.48 crore. Other income stood at Rs 112 crore compared to Rs 77.76 crore during1996-97.

Expenditure increased by a substantial 21 per cent at Rs 2,325.60 crore compared to Rs 1917.57 crore in 1996-97. Interest rose to Rs 259.57 crore from Rs 204.17 crore. Depreciation stood at Rs 237.35 crore as compared to Rs 148.34 crore last fiscal.

The company has provided Rs 28.69 crore for tax against Rs 82.94 crore in the previous year. Paid-up equity share capital was at Rs 249.05 crore against Rs 249.02 crore. Reserves and surplus stood at Rs 2779.21 crore as compared to Rs 2,644.31 crore in 1996-97.The petrochemcials major has decided to invest around Rs 26,000 crore over the next 12 years with an aim to reach a Rs 20,000-crore turnover by 2010.

IPCL chairman-cum-managing director KG Ramanathan had recently gone on record that the investments would be made in supply chain as part of the company's plan to focus on core competence..The corporation is expected to improve its performance in 1998-99 as the expanded ethylene and polyethylene capacities will go on stream during the firstquarter this financial year. Production at Nagothane achieved an all-time record as the complex produced over 3.65 lakh mt in 1997-98. The production at Vadodara complex stood at 4.19 lakh mt.

COMMENT

High operating costs hit bottomline

The drop in operating profits of IPCL from 31 per cent to 22 per cent is in line with the polymer industry trend during 1997-98. Net profits have been buoyed by "other income" amounting to 41 per cent of PBT, compared to 13 per cent last year. The second-half of 1997-98 has been much worse than the first-half. The entire industry witnessed a 30-40 per cent price erosion on various products owing to the south-east Asian crisis. Industry players, including IPCL, were, however, compensated by volume growth of around 38 per cent and hence the severe drop in polymer prices should not have logically resulted in a 54 per cent drop in profit before tax.

What really affected IPCL was the rise in operating cost owing to rise in cost of raw material-natural gas.Higher depreciation and interest cost also affected the bottomline. Further, the constraints on natural gas supply by GAIL has resulted in sourcing alternate raw material, which is three to four times more expensive than natural gas.