That the rise in the Sensex was limited to just 106 points was a little disappointing given the magnitude of the government's statement of intent regarding both shoring up market confidence and re-igniting growth. Most ofthe stocks were "buy" frozen at the circuit breaker, reflecting limited strength. ITC and Hindustan Lever commanded 32 per cent weightage in the BSE Sensex as neither moved by much.

Revathi CP:

For the second quarter of 1998-99, Revathi CP reported a 47 per cent growth in revenues year-on-year (YoY) at Rs 19.94 crore, against its performance in the second quarter of 1997-98. This has come on top of a 35 per cent growth in revenues YoY in the first quarter of the current year over the corresponding period last year. The company is well on its way to achieving its revenue target of Rs 65 crore for the entire year (representing growth of 36 per cent). There is a strong possibility that it will exceed this figure considering that in the first half itself it has achieved revenues of 35.78 crore. The Revathi CP stock, which is not very liquid even after a 1:1 bonus issue last year, found only buyers on Monday at Rs 375.

The performance for the second quarter is good even when compared to the firstquarter's figures, as revenues have increased by 26 per cent and only a fall in operating margins have restricted the net-profit growth to 12.25 per cent. Cumulative profits till the end of the first half is Rs 6.58 crore. However, the expectation being built up have pointed out to a net profit for the entire year of Rs 16 crore, or an EPS close to Rs 50. This further brings down the price-earning multiple on expected earnings to just 7.5 times. This appears to be a little ridiculous keeping in mind its consistent and above-average returns on investment.

Market concerns, if any, in the current year should only be for its cash flow, since its buyers are coal PSUs like Coal India, Bharat Coking Coal and Central Coalfields, and is dependent on these companies for its cash flow. Last year, there was a huge pile-up of debtors outstanding for more than six months, mainly dues from Bharat Coking Coal. But in the past also it has shown a tremendous ability to manage an above-average return on capital despite cashflow problems. Last year's build-up of receivables forced an expansion in the balance-sheet size, despite which Revathi CP earned a return on capital employed of 42.5 per cent, up from 33 per cent in the previous year.

Chicago Pneumatic

In complete contrast to its sister company Revathi CP, Chicago Pneumatic has reported a far worse performance in the second quarter than it did in the first. Cumulatively, for the first half of the current year, revenues have fallen marginally from Rs 20.5 crore in the corresponding period in the previous year to Rs 19.72 crore. Operating margins have been squeezed badly, which has brought down the net profit by 80 per cent to just Rs 0.23 crore, from Rs 1.24 crore earned in the corresponding first half last year.

Basically, the problems that confronted the company during 1997-98 have only intensified, with a slowdown in demand for air, gas and screw compressors both in its domestic and export markets. Export revenues were down by 10 per cent last year, eventhough the parent company (Chicago Pneumatic Tool Company, USA) is a major buyer, roughly the same extent to which domestic sales fell. There have been reports that the company is as good as operating with only two of its three plants, given the poor demand. At the rate profits have been dropping in the last two quarters, in the absence of a turnaround in demand, it is likely that the second half will see losses.