Manufacturing companies, specially in the chemicals sector, are reporting poor performances all around but breaking the trend with a superb performance is Alkyl Amines. In the third quarter, the company recorded a turnover growth of 34 per cent from Rs 15.10 crore to Rs 22.08 crore, while its bottomline increased by a whopping 287 per cent from Rs 92 lakh to Rs 3.56 crore. For the nine-month period in the current fiscal, the topline grew by 53 per cent from Rs 44.52 crore to Rs 67.80 crore and net profit increased from Rs 2.94 crore to Rs 9.51 crore, a growth of 223 per cent.

Alkyl Amines was able to manage such a performance mainly on account of higher growth in overseas sales. Exports for the nine-month period has been Rs 21.38 crore as against Rs 18 crore for the full previous year. Not only has the company benefited from higher exports volume but also from rupee depreciation. The company has benefited a lot from lower raw material prices, which is apparent from its operatingmargins. Operating margins in the third quarter of the current fiscal increased to 27.65 per cent from 19.55 per cent in the previous year.

Debottlenecking, which has been an ongoing exercise in the company has also helped in increasing the company's volume sales. Another important factor has been the contribution of the ethyl amine derivative business, which recorded a turnover of around 1,000 tonnes (nine months) in the current fiscal against a negligible figure in the previous year.

As for the future, company officials say that the trend is likely to be maintained. Further, the company has a huge expansion plan lined up. It is setting up a 13,000 tonne ethyl amine plant in Kurkumbh. A hydrogen plant is also being set up at the same location. The company has entered into a joint venture with TH Goldsmith of Germany for a marketing tie-up for a product called Betane, which will be manufactured from the coming fiscal. Financing of these projects is likely to be through internal accruals and debt. With thedemand for amines increasing, specially in the exports segment, there is little stopping the company. Though RCF is also planning a new capacity in amines through a joint venture with UCB of Belgium, Alkyl Amines is safely placed with its well established network and high product quality, which is apparent from the growing exports to pharmaceutical companies in the developed countries.

Pentafour Software

It is Pentafour Software & Exports that led Thursday's rally in software scrips. The scrip opened at Rs 829 on the BSE, hit the upper circuit by mid-session and closed the day at a high of Rs 870. On Friday too, the scrip hit the circuit-breaker. The reasons for the euphoria are, of course, not far to seek. The company has posted excellent results for the quarter ended December 1998 and a good order book position should ensure that the next two quarters will continue to be comfortable.

Operating income for the quarter witnessed a 91.47 per cent growth touched Rs 130.95 crore. Total expenditure,on the other hand, rose by just 42.51 per cent to Rs 81.28 crore. As a result, operating profit for the quarter at Rs 52.56 crore, was 68.84 per cent higher than the corresponding period in the previous year. Other income was Rs 2.82 crore higher but the 57.71 per cent increase in interest outgo has more than offset this rise. Cash profit, nevertheless, has increased by 60.53 per cent and pre-tax profit of Rs 29.81 crore is 71.62 per cent higher.

The company has orders of over Rs 595 crore that are to be completed over a period of 15 months. The current orders alone, therefore, translate into an average revenue of over Rs 115 crore per quarter for the next 15 months. The multimedia division and the business software division currently contribute equally to the company's income. However, it is the multimedia division that is likely to dominate Pentafour's fortunes in the future. The division is currently working on the Hollywood animation motion film "Sindbad". The successful completion of this project willensure that the company continues on its growth path.

Appellate Tribunal

The ruling of the Income Tax Appellate Tribunal (ITAT), Mumbai Bench A, in case of the CMIE has caused such a stir that the Indian Merchants' Chamber (IMC), in its pre-budget memorandum, has submitted that if and when the ruling comes for appeal the I-T department should not protest and tax officers should be instructed not to make the ITAT ruling a basis for disallowances to lessors/lessees. In the said case, the department disputed the lessees' claim for lease rentals.

The tribunal was of the view that though the leased asset was returnable to the lessor at the expiry of the lease period, it was not lease but a purchase in the guile of lease. Based on this and the facts that the asset was bought specifically for the purposes of the lessee, the lease was non-cancellable except for default and the sum of rentals exceeded the cost of asset, lease rentals were treated as non-deductible expenditure. The logical conclusion ofthe ruling is that lease is a purchase and sales transaction and hence the lessor cannot claim depreciation and the lessee can't claim lease rentals.

The tribunal's judgement is not as illogical as it sounds, points out a former president of the ICAI. A lease rental has components of interest and principal. Hence, instead of allowing or disallowing lease rentals, the distinction between interest and principal needs to be drawn and a deduction should be allowed in respect of the interest component.

(With contributions from Shishir Asthana, Sarad Sarafand Urmik Chhaya)