The net loss for the first quarter was higher at Rs 35.63 crore. A release on Tuesday states, "The improvement in sales in the second quarter, tighter control on operating cost and better working-capital management enabled the company to restrict the net loss to Rs 18.84 crore."

Reacting to the disastrous results, marketmen hammered the stock on the kerb. While the stock closed officially at Rs 114.80, after touching an intra-day high of Rs 117.70, it dipped by over 2 per cent to trade at Rs 110/111.50 at 7 pm. While the market expected the company to break even its past performance, the announcement of a further loss of over Rs 18 crore for the second quarter led to a disappointed market environment. Market sources say this could lead to a further erosion in the stock value, which had bounced back above the Rs110 levels on account of the buyback announcement.

Total income from operations also fell sharply by 29 per cent to Rs 2,746.01 crore, from Rs 3,881.56 crore. Total expenditure for the period was Rs 2,515 crore, against Rs 3,375.9 crore in the corresponding period last year. Operating profit was also down to Rs 198.66 crore, from Rs 474.27 crore. Interest was higher at Rs 149.10 crore (Rs 126.08 crore), as also was depreciation at Rs 136.24 crore (Rs 124.65 crore). The export turnover was lower at Rs 227.91 crore, compared with Rs 260.67 crore. In volume terms, domestic sales totalled 48,572 units (77,094 in the previous year), while exports aggregated 4,652 vehicles (6,259). Overall, this translates into a 36 per cent drop. Production also fell by nearly 50 per cent for the first half to 52,390 units, from 91,155 the previous year.

In the release, Telco has attributed the performance to the slow pace in the medium- and heavy-commercial vehicle segments, which continue "to suffer form the ongoingindustrial slowdown that has been affecting the country's economic health for well over 18 months". Observers also feel that the company has done relatively well in the second quarter, an indication that some belt-tightening measures have been introduced.

Chairman Ratan Tata had at the company's annual general meeting referred to the first-quarter results and said that offtake in the commercial-vehicle segment was slow, and was likely to continue. He had reiterated at that time that it was difficult to say when there would be a turnaround, but this would largely depend on the state of the economy and appropriate government policies.

Analysts say Telco could do well from 1999-2000 after its small car Indica makes its debut towards the end of this year. The car will be the prized offering from Telco, and will be available in both the petrol and diesel versions. Its competitive price would make it a formidable rival to the Maruti 800 and Zen, and the Santro and Matiz from Hyundai and Daewoorespectively.

INSIGHT -- smooth road ahead

Tighter cost control and better working-capital management have enabled Telco to restrict losses to Rs 54.47 crore. Net loss was contained to a mere Rs 18.84 crore in the second quarter, against a first-quarter loss of Rs 35.63 crore.

Net sales dipped 29.51 per cent to Rs 2,713.80 crore. A 12.53 per cent drop in exports has not helped. Sales have, however, actually improved 12.44 per cent from quarter-to-quarter. While the company's 42.53 per cent drop in production to 52,390 units (91,155 units) at first glance looks abysmal, one has to consider that although the slowdown in offtakes began last year, Telco was slow to react, and cut production only in the second half of 1997-98. Therefore, Telco's production figures will look better in the second half of the current year than in the first, as the comparable figures will be realistic.