But the other fertiliser companies manufacturing DAP are expected to do better in the second half. There has been good demand for DAP for the Rabi season following the unusually long spell of rainfall, which has meant better sowing conditions. In addition, subsidy arrears to the tune of Rs 650 crore are due to be paid to these companies. With the exception of companies like Deepak Fertilisers (manufactures ANP but trades in DAP), the DAP and other phosphatic fertiliser manufacturers like Hindustan Lever Chemicals suffered first-half losses.

The fertiliser companies manufacturing urea and ammonia have done very well in the first half andare expected to continue doing well in the current half, owing both due to very good demand and a stable subsidy policy towards these companies. In the first half Nagarjuna Fertilisers & Chemicals (NF&CL) reported a 30 per cent increase in revenues. However profit growth was marginal at 4 per cent.

Despite the improvement NF&CL stock has done very little in the last couple of months, despite the fact that the company has belied all expectations and performed very well so far. The yield on the stock is an attractive 12.2 per cent. The drop in the stock actually occurred prior to the annual results for 1997-98 was announced.

This was due to the uncertainty regarding the eventual implementation of the Hanumantha Rao committee report, which has called for a gradual decontrol of the urea industry. The rollback of the subsidy cut of Rs 1,000 per tonne also negatively affected sentiment for urea companies in the stock market, as these companies would have benefitted to that extent.

Bata: Bata, one ofthe best-known shoe manufacturers in the country, has taken a beating in the stock market in the recent past. In less than two weeks, the stock fell from Rs 261 to Rs 200, and the fall was supported by large volumes of over one lakh shares. The fall, however, did not come as a surprise simply because the earlier up-move was both unexpected and unnecessary.

The stock had rallied from Rs 112 to Rs 260 during the third quarter, despite the fact that the management itself suggested that the financial performance for the third quarter (June-September) would not be very encouraging. The reason for the pessimism was due to an expected increase in the cost of its raw materials, basically rubber and PVC.

When the financial results came, the market did not have any option but to believe the management. Although overall results remained encouraging, sales during the third quarter stood at Rs 170.49 crore, down from Rs 220.20 crore in the second quarter of 1998. The fall in sales was a little alarming if one were toconsider the fact that third quarter is a festive season and normally companies like Bata do well. Not only had sales declined, but profit margins have also taken a sharp beating. As compared to 6.93 per cent in the first quarter and 11.87 per cent in the second quarter, operating profit margins during the third quarter remained lower at 4.87 per cent. A rise in raw material prices besides more advertising costs seem to have their impact on profit margins.

Perhaps, the third quarter performance explains the recent fall in stock price. The trading volume on Bata counter, however has now dropped to around 8,000 shares, much lower as compared to volumes of over one lakh shares traded a few weeks ago. Now unless the fourth quarter results are above the market expectations, in all likelyhood the stock will remain dull.

As far as the performance for the fourth quarter is concerned, the company expects to post a sales of around Rs 190 crore. It would take the annual sales to around Rs 750 crore. As for margins,raw material prices would continue to play a major role and advertisement expenditure will pressurise margins in the short-run. For the future, the company is likely to add another 100 outlets to its existing strength of 1,500 outlets. The company's store improvement programme is almost complete. Moreover, with the normal retirement of almost 500 employees every year for the next three years, employee cost would definitely be reduced, especially since the company will not replace these workers.