The gross margin crashed with the bottomline from 8.53 per cent last year to 5.64 per cent this fiscal. Sales turnover increased to Rs 2,821 crore from Rs 2,583 crore during the previous year. While total expenditure shot up to Rs 6,041.06 crore from Rs 5,788.52 crore during the period, interest liability at Rs 259.68 crore was lower than the previous year. Given the decline in results, the board has decided to cut back dividend from Rs 4.50 per share in 1996-97 to Rs 4.00 per share this year, approving a payout of 50.29 per cent of net profit.

At the BSE, the Tata Steel scrip dropped sharply to Rs 136.50 from Wednesday's close of Rs 143.30. The bad year and virtually stalled market did not deterTata Steel from continuing with its drive of rationalising its workforce. Tata Steel spent Rs 112.19 crore on employee-separation compensation during the year, bringing the aggregate spending on this account over the last two years to nearly Rs 200 crore. Gross revenue at Rs 6,433.49 crore was higher than the previous year's Rs 6,351.46 crore. Other income increased to Rs 83.09 crore, up from Rs 57.97 crore in the previous fiscal. With no major new projects being set up this year, depreciation claimed was only slightly higher than last year at Rs 343.23 crore (Rs 326.83 crore in 1996-97).

"The net realisation was under pressure due to intense competition and sluggish demand," Tata Steel said in a press statement. Total export turnover was higher by nine per cent at Rs 722.21 crore. "ALthough the export market was severely impacted by the events in south-east Asia which were a major destination for the export of the company's products till the middle of the financial year, the company managed to increase itsexports by six per cent in volume to 0.433 million tonnes (2.583 million tonnes).

The increase in the inventory of finished products was marginal at Rs 447 crore as on April 1, 1998, as against Rs 444 crore as on April 1, 1997). The low price realisation is reflected in the fact that while sale of products and services rose in value by a modest 1.3 per cent, the company recorded a growth of 9.74 per cent in domestic sales volume to 2.388 million tonnes as against 2.176 million tonnes in 1996-97.

Tisco claims to have fought the situation in the market and increased its marketshare. "Significant improvements in operational efficiencies and strong volume growth partially offset the pressure on margins due to the reductions in net realisations of the company's products and mandatory increases in input costs," the release stated.

INSIGHT -- fall in steel prices hit margins

The drop in the operating margins of Tisco from 16.2 per cent to 12.59 per cent is primarily due to the fall in the productprices of steel. Tisco's volume growth of 9 per cent is less than that of Essar Steel which had reported a 17 per cent rise in volumes sales. Nevertheless, the volume growth of Tisco is significant as this year the drop in steel prices had meant that freight cost becomes very important in the final cost structures. In present conditions, this difference works out close to Rs 600 per tonne for customers in the south and west.

However, what seems to have helped the company is the weak financial state of competitors, whose higher interest cost offset the disadvantage of transportation cost faced by Tisco. Moreover, Tisco's cost-cutting measures have reduced the finished goods inventory level to around 23 days, similar to that of Essar Steel, but far less than SAIL. In addition to cost-cutting and production of more value-added items, the drop in MAT rates has also helped the company's bottomline.