Net sales and operating revenue increased to Rs 570.72 crore during the period under review, against Rs 544.51 crore reported in the corresponding period last year. Net profit jumped to Rs 38.52 crore, compared with Rs 22.54 crore in 1997-98.

The company's vice-chairman and managing director Tapan Mitra told newspersons that the improved results were primarily because 88 per cent of its metal demand this year was met through internal generation. The company was able to lower the cost of metal by 10 per cent and bring down working capital by 17 per cent, he added.

The low sales growth, he explained, was due to a slow demand growth and lower per unit sales realisation because of reduced international prices. There was also a negative growth in key user segments such astransportation, building, packaging, consumer durables and telecom.

Indal was able to lower its interest cost by 7 per cent from Rs 21.49 crore last year to Rs 19.97 crore.

Mitra said Indal was able to hold its markets hare in all high value product segments. He explained that exports were lower in the first half as the company chose to toll its alumina domestically instead of exporting it. "As a result, we were able to lower our cost of metal and improve margins," Mitra added.

The entire management of Indal had to operate under the threat of a hostile takeover for most of the first half of the year. Sterlite Industries, the Chennai-based copper to cable maker, had made an open offer to Indal shareholders to take over the company, and Alcan, the parent, had to fight the bid by putting in a defensive bid at a price far higher than the market price and book value of the scrip.

Insight

Margins may be sustained

Soft aluminium prices, both domestically and on the London Metal Exchange,have contributed to Indal's unimpressive 4.19 per cent improvement in turnover to Rs 505.42 crore. A dip in exports of the white metal has also not helped much.

However, a clever mix of downstream value-added products providing higher realisations and operational effciencies have helped boost the company's margins. In fact, operating margins for the six months ended September, 1998 have jumped from 13.43 per cent to 17.1 per cent.

This strong operational performance has again been backed by prudent working capital management and the repayment of some high cost debt which has helped reduce the interest burden from Rs 21.49 crore to Rs 19.97 crore. Thus, even an outflow of Rs 1.20 crore (Rs 0.74 crore last year) has failed to create a dent in profitability, which increased by 70.89 per cent to Rs 38.52 crore. Net profit was also buoyed to some extent due to some one-off revenue amounting to Rs 2.35 crore received from Alcan as a share induction fee for the promoters of Utkal Aluminium.

For the interim,Indal should definitely be able to maintain its margins due to its range of value-added products. The firming up of aluminium prices should also give Indal the leverage required to hike the prices.