CESC has for the very first time posted a gross loss (after interest but before depreciation). Which interestingly enough has been despite the Budge Budge unit going commercial, improvement in PLF by 1.5 percentage points and reduction in T&D losses by 1 percentage point. Sales in the second half were lower by Rs 43 crore compared to the first half. The possible reason for which could be the planned maintainance shut down in the second half. The 1 per cent reduction in T&D losses is laudable, especially since pilferage at CESC was high at 6-8 per cent. Also despite filing more than 1,100 FIRs, the state government has hardly taken any steps to solve the issue.

Incidentally the last tariff hike granted to company was in November, 1996 and was compensated by hiking the tariff of WBSEB from which the utility purchases power. Thus the possibility of CESC posting a clear profit appears extremely bleak, unless tariffs are revised and T&D losses reduced sharply. Thus unless, the hike is granted, thecompany will continue to bleed. The problem is, populist sentiment is likely to prevent the state government from agreeing to a tariff hike for the company, which could well end up bleeding CESC dry.

SKF Bearings

SKF Bearings' results for 1997-98 are merely a reflection of the pathetic state of bearing manufacturers. The company's net sales have dipped by 9.34 per cent to Rs 362.20 crore, while expenses have disproportionately increased by 3 per cent to Rs 305.70 crore. A result of which has been the southward spiral of operating profits, which dipped 45 per cent to Rs 56.50. Thus despite a lower tax rate, the company has clocked a net profit of Rs 5.9 crore, a fall of 80 per cent over the previous year.

The plight of SKF seems worse when one compares the financial results of both the halves in the twelve months ended March, 1998. While net sales in the second half have dipped by 4 per cent compared to the first half, expenses have increased by 13 per cent. Similarly operating profits saw a dropof a massive 64 per cent, while the bottomline was witness to a second half loss of Rs 4.4 crore (compared to a profit of Rs 10.30 crore in the first half).

Thus these results clearly reflect that SKF despite its 36 per cent share and a wide product portfolio, has not been able to weather the storm. Created largely by poor offtakes, an overcapacity problem and dumping from the SE Asian markets. All of which has made it difficult for the company to command prices. Thus leading to a price cut of 15-20 per cent which is highlighted by falling margins.

The economic recession in the main user industries like automobiles, construction, power and heavy engineering, has also had a direct play on SKF's revenues which fell prey to dipping volumes. An increase in operational costs due to a major brand building exercise and hike in the dealer level margins further eroded the company's bottomline. Thus the dip in raw material like ball bearing steel has meant precious little for the company. Though SKF has planned totrim its workforce in the Pune unit, the failure to give any growth impetus to the automobile industry in the budget and with the economy not showing any signs of letting up, the fortunes of the company is likely to go further downhill.

Amara Raja Batteries

A strategy of operating in the niche segment of maintenance free-valve regulated lead acid (VRLA) batteries seems to have paid dividends for Amara Raja. As is clearly reflected in the impressive 105.52 per cent bottomline growth to Rs 31.32 crore for the year ended March, 1998. The growth in the VRLA battery segment has been greater than the conventional industry battery segment due to higher penetration levels in end-user segments. Though functionally similar to conventional lead-acid batteries, VRLA batteries are maintenance free, explosion resistant, leak-proof, spill proof, occupy about 50 per cent less floor space and enjoy a life expectancy of 15-20 years.

Obviously a lower effective tax rate of 22.71 per cent (27.59 per cent last year)and dwindling interest burden of Rs 1.4 crore, have further helped buoy earnings.

Amara Raja has also not been lacking on the operational front. As is clearly reflected in the 42.95 per cent growth in turnover, which was at Rs 144.38 crore. That the company achieves more than 50 per cent of its revenues from sales to the telecom sector -- with uses in main exchanges, rural automatic exchanges, EPABX's and satellite communication, itself tells a story.

The softening of lead prices which translated into cheaper input costs, also helped curb expenditure. In fact operating profits increased 76.62 per cent to Rs 42.85 crore and margins jumped from 24.02 per cent to 29.67 per cent.

For the future the company seems truly set on a firm wicket. What with DoT planning to increase the number of telephone lines and private cellular and basic telephony providers set for exponential growth, demand should improve substantially. Investments into backward integration for plastics, an increased product portfolio andcapacity expansions, should definitely add to the earnings. Amara Raja is also contemplating an entry into the automotive battery segment, which although a bit risky, bodes well for the company considering the recent JV with Johnson Control's of the US which is amongst the international leaders in this segment. Even Exide's entry into the VRLA segment, holds no fears as the foray is into lower ampere batteries which should not effect Amara's market share.

With contributions from Urmik Chhaya, Vikram Bhat and Percy Dubash)