Crompton Greaves (CG) has become the first company in the country to provide segment-wise figures to its shareholders. This is one company which has not talked too much about corporate governance, and yet it has gone ahead and provided data of real interest to shareholders.

For example, while the company as a whole has made an operating profit of Rs 126.06 crore, the digital division has made an operating loss of Rs 13.84 crore. The net loss of this division was Rs 24.91 crore, compared to a net loss of Rs 21.51 crore in 1996-97. The operations of the telecom project division are therefore being discontinued. The consumer division, although recording higher sales, made a net loss of Rs 8.48 crore, compared to Rs 10.01 crore in 1996-97. The industrial division too recorded higher sales, but net profits were down sharply by 25 per cent. Operating margins in this division was down by 2.75 percentage points. Power was the only division which did better than in the previous year, andthis was because of a 60 per cent jump in exports of the division.

The additional information starts from division wise sales (net of inter-unit transfer), exports and order book. It also discloses division-wise operating profit, interest and depreciation. The percentage stake of Crompton Greaves in joint ventures where commercial production has started is also disclosed. Crompton Greaves has a 40.5 per cent stake in Skycell Communications -- one of the telecom license holder. The company management had ruled the possibility of divesting the stake in the JV on an immediate basis but with Sec 10 (23G) being amended and investments in infrastructure facilities no longer exempt from tax effective from April, 1999, it could perhaps make more sense to sell off. The JV has incurred a loss of Rs 29.7 crore (unaudited) for 1997-98. Marketmen, however, are of the opinion that there are no buyers available in the present market.

The order book is better than last year-up by almost 18 per cent and the performancefor the current year will depend almost entirely on export performance as so far the domestic market has shown no signs of improvement. The management is consciously trying to cut costs but at best, 1998-99 will be only as good as the previous year. Although the total order book is impressive, the highest growth is in the industrial division (Rs 57 crore), and this division is an underperformer.

DSQ Software

On announcement of decent annual results and driven by the bull run on the bourse, the DSQ Software scrip had risen to a phenomenal Rs 306 in the first week of June, a steep rise of 30 per cent in a span of ten days. Thereafter it had a steady fall to trade at Rs 194 in mid-June declining further to Rs 159 in a week's time. Since then the scrip has been northward bound and has hovered around the Rs 240-250 mark. The company has posted good results for the first quarter of the current financial year ended June 30, 1998. Net sales have soared to Rs 42.18 crore from Rs 19.84 crore a rise of 112per cent. Commensurately operating profits have increased to Rs 28.15 crore from Rs 12.82 crore. Thanks mainly to higher manpower expenses the operating margins have marginally decreased to 33.26 per cent from 35.28 per cent. Incidentally the total expenditure has doubled to Rs 28.15 crore. Despite higher interest and depreciation charges it is commendable that net profits have risen by a whopping 85.71 per cent to Rs 8.84 crore.

Recently DSQ Software has become an IBM Global Service partner. In spite of the current recession, DSQ expects 100 per cent market growth in Japan alone. Its dedicated development centres for NEC, OKI, NSW are faring well. Also orders from GE's Japanese offices and from one of the top five software houses in Europe should prove to be crucial. DSQ has a comfortable order book exceeding Rs 150 crore comprising of ERP and e-commerce businesses. It has secured a US $10-million order from Ingersoll Rand and a tie up with Sun Microsystems for Java-based applications. Also the company inaccordance with Sebi norms has set aside 5 per cent of its equity for an employee welfare trust. This would help it retain manpower which is crucial to its future operations. For the previous financial year ended March 31, 1998, net sales had risen by a whopping 82.72 per cent to Rs 116.78 crore. In the first half, the company had recorded a turnover of Rs 44.10 crore and a 59 per cent jump in net profits to Rs 11.20 crore. Operating profits had increased by a sizable 39.53 per cent to Rs 34.2 crore. But quite interestingly, the operating margins had eroded to 29.28 per cent from 38.35 per cent. This was attributed to increased manpower expenses coupled with a Rs 30 crore increase in on-site expenses. Interest expense had risen marginally to Rs 6.36 crore from Rs 5.24 crore. More importantly net profits had increased by 64.48 per cent to Rs 24.92 crore.

Last year DSQ has sold its investments in DSQ Biotech at Rs 6.75 crore. In the past these inter-company investments were a major embarrassment as thecompany had diversified into unrelated areas using funds generated from software. DSQ at present operates from two software development centres at Chennai and has carried the concept of dedicated software development centres forward by creating centres for three major clients namely NEC, Nippon Systemware and Nedcar. Moreover, it has executed over half a dozen Y2K solutions project for a UK-based company and a Japanese conglomerate. DSQ would be well advised to curb high manpower turnover and onsite expenses for increasing its future profitability.