Especially when the company is not doing too well on the sales front thanks to the intense competition in the domestic market. For the year-ended September 1998, net sales has fallen to Rs 267.18 crore. The fall would have been sharper but for the 85 per cent growth in export earnings.

With the emergence of other popular brands like Manikchand and Rajnigandha, Kothari Products has been unable to pass on the hike in levies to customers. The key to future growth, therefore, lies in its ability to sustain buoyant business volumes. The backward integration into lamination films will also help reduce packaging cost. In fiscal 1997-98, what has saved the day for Kothari Products is the spurt in other income as well as low expenditure.

Expense as a proportion to sales hasbeen brought down and, subsequently, operating profit margin has increased by 2 per cent. Other income has more than doubled to Rs 5.48 crore for the period under consideration.Kothari's near `zero-debt' status has also helped the company tide through the rough times.

Despite a six-fold rise in interest cost to Rs 6 lakh, Kothari Prodcuts has been able to post a 41 per cent rise in net profit to Rs 25.08 crore compared with Rs 17.77 crore last year. On a very low equity of Rs 5 crore, the earning per share works out to an attractive Rs 50.16.

However, the market has given a very poor discouting to the stock with a price earning multiple of 2.25. The market price of the scrip at Rs 113 is also way below the current book value of Rs 171.25. Kothari Products has also surpassed all its projections made at the time of its public issue. For the year ended September 1998, the company has earned a profit of Rs 25.07 crore as against the projected figure of Rs 9.45 crore. Even the actual dividend payout ishigher. However, the shareholders are yet to see the stock cross the issue price of Rs 200.

One reason for the poor market discouting is the illiquidity in the counter. Kothari Products has an extremely small equity base of Rs 5 crore and a large portion of this is held by the promoters, leaving a very low float in the open market. Consequently, the stock is thinly traded. The possibility of a merger of the broad-based umbrella of the Kothari group companies (ranging from plastic pens to mineral water) with the flagship also serves as a damper on the valuation commanded by Kothari Products.