Now in the last couple of years two changes have taken place within the sugar manufacturing industry that has prompted some rethinking within Jyoti. First, there has been a conscious shift amongst sugar manufacturers from smaller and scattered capacities to larger sized plants. A number of the bigger and medium-sized players have gone in for large capacity expansions or large greenfield plants.

Second, there has been a process of consolidation within the industry where the smaller players have been selling out to the larger companies. Both these processes have translated into a demand from these large sugar manufacturers for co-generation plants. Very simply, what a co-generation plant does is generate powerusing the waste bagasse obtained from the process of extraction of sugar.

This power is used by the plant and the excess sold to the concerned state electricity board. Large manufacturers such as Dhampur Sugar and the south-based Thiru Aroon Sugars have already commenced using co-generation plants. But with many more to go and given the incentives being given to new sugar plants such as 100 per cent of sugar production to be sold in the free market; there should be more capacities coming up. All this means additional business potential for Jyoti, which has the expertise to provide such co-generation units.

While most capital goods manufacturers have seen a drop in revenues and profits in the last one year, revenues for Jyoti have increased marginally from Rs 130 crore to Rs 134 crore. But margins have improved slightly. In a business which is sensitive to interest rates (as working capital forms a major component of its assets) the company benefited from the fall in rates last year; interest costs werelower by 14 per cent at Rs 5.55 crore.

Despite the improved operations, net profits rose only marginally due to an increase in taxation for the year, from Rs 0.47 crore to Rs 1.08 crore (profit before tax were actually higher by 33 per cent). Yet profits were up from Rs 2.7 crore to Rs 3.02 crore despite a drop in other income, which in earlier years used to provide a fair chunk of net income. Subsequently the return on equity has improved to 14.5 per cent from 13 per cent.

None of its potential has translated into an improvement in the stock price, which has only moved downwards since July, 1993. The stock has dipped by 90 per cent from its high of Rs 63 to the present Rs 8 as stocks of capital goods manufacturers have still not found support within the stock market. The stock trades at a 60 per cent discount to its book value.

Hindustan Zinc: Impressive jump

The audited results for 1997-98 of Hindustan Zinc have been more than discounted by the market. Thanks to higher price realisations,profits at the net level have recorded an impressive jump of 144 per cent to Rs 73.76 crore. During the third quarter of last year, the zinc prices have touched a nine-and-a-half year high of $1,730 per tonne on the London Metal Exchange (LME). Overall, prices remained up by around 25 per cent throughout the year.With a 23 per cent jump in output, sales recorded a growth of 26.98 per cent to Rs 1,233.74 crore. Higher international zinc prices have also encouraged the company to improve its capacity utilisation.

While a 38 per cent drop in the interest burden to Rs 26.74 crore has helped, a tax provision of Rs 128 crore (last year Rs 26 crore) has made a big hole in the company's pocket.

For the future, the additional 4 per cent import duty and the recent fall in the value of the rupee augurs well for the company as it will keep domestic prices high. But from the stock market point of view, the main factor which can boost the price is a rise in the international zinc prices which looking at theinternational scenario seems highly unlikely. Zinc prices on the LME have fallen to $991 per tonne, 37 per cent down from the nine-and-a-half year high.