The stock is being buoyed by the prospect of large volume and revenue growth as the company has decided to go in for a major expansion of its piston rings and piston assembly capacities. During 1997-98, its capacity of piston assemblies was hiked to two million pieces and in the current year, SPL has decided to hike it further to three million pieces. It also has further plans to take its piston rings capacity to 10 million pieces from 7.5 million.

These capacity additions are linked to its effort to increase the number of users within and outside the automobile sector.Initially, Samkrg Piston catered only to the moped manufacturers, which hampered growth rates and profitability as scooter sales substituted those of mopeds. In 1997-98, the company made the shift to selling piston rings to motorcycle and scooter manufacturers, and is now setting up capacities for supplying these to LCVs and tractor manufacturers. Outside the automobile sector, the company has tapped the market for stationary engines as well, supplying to companies like Greaves Ltd. As a result, the proportion of moped-related sales will drop substantially. A partial effect of this change is already being felt. Though revenues have increased by just 9 per cent, profit after tax increased by 24 per cent during 1997-98. For the first quarter, the company reported revenues of Rs 9.8 crore and a profit after tax of Rs 1.62 crore. Recently, it has obtained a first-ever export order to Piaggio of Italy for 50,000 piston assemblies and two lakh piston rings.

Ficom Organics: Ficom Organics had undertaken amajor restructuring exercise over the last two years, which involved cutting down on the alkyl phenols business. The move involved scrapping a portion of the investments made only three years ago in its alkyl phenols plant, and instead make fresh investments in agrochemicals. Ficom Organics' agrochemicals (pesticides) business saw a 17 per cent growth in volumes, while the phenols business was reduced by 87 per cent in 1997-98. The company's reduced emphasis on alkyl phenols was intended to be a gradual one, but the huge fall was partly caused by a forced plant closure as the company has yet to comply fully with effluent treatment norms. This drastic reduction in revenues to the company hurt margins, even though it recovered in the agrochemicals business. In any case, the phenols business in India was hit by large-scale dumping and unremunerative selling prices. The difference in profitability between the two product categories could be seen from the fact that though overall revenues have fallen by 22 percent, the book profit fell by only 10 per cent.

But even the margins from the agrochemicals business in the last two years have been under pressure owing to increased competition, as the sector has begun to be dominated by MNCs, and imports. But other homegrown companies like Atul Ltd have competed successfully in agrochemicals, where its agrochemicals business grew by 36 per cent in 1997-98.

Ficom Organics, which was a pioneer and monopolised the production of malathion technical (a pesticide) in the country, has managed to complete its restructuring quickly, even though it involved painful decisions like scrapping a brand-new plant and going in for fresh investments of Rs 21 crore, funded entirely by debt (it has a current balance-sheet size of Rs 67 crore, which includes a sizable chunk of the fresh investments). The new malathion technical plant should go on stream by December 1998.

The company built a presence in the export market, which has accelerated in the last two years. One of the mainreasons for this emphasis is the difference in consumption cycles for agrochemicals between the Indian and European markets, which meant that the cash flow improved (as lean periods in India are made up by export sales), and that production is even throughout the year. For 1997-98, export sales contributed to 50 per cent of its revenues from 35 per cent in the previous year.