It has a low earnings per share primariliy due to a large equity base of Rs 51 crore. The current price earning is over 75 on an annualised EPS of Rs 0.86.

Yet Vashisti Detergents is on the buy-list of a few mutual funds -- the Prudential ICICI FMCG fund and the Kothari Pioneer's FMCG fund. In the first place, the large equity base is not a worrying factor as 34 per cent is held by its parent, Hindustan Lever. Another 15 per cent is held by other companies and institutions. More, after a successful turnaround almost two years ago, the company is on its recovery path and looks set for a rebound. Besides, the company can capitalise on its strong parentage.

Vashisti has a long-term arrangement with Hindustan Lever and manufactures the latter's popular soapsand detergents like Lux, Rin, Surf and Hamam. So what helped the company stage a turnaround? Higher capacity utilization, significant improvement in operating efficiencies and debottlenecking its capacities. Further, the financial restructuring involving an equity infusion and retirement of high cost debt has helped the company report profit after a gap of four years. In the process, the outstanding debt has come down from Rs 70 crore to around Rs 20 crore, resulting in a sharp drop in interest cost.

With accumulated losses of around Rs 35 crore as on March, 1996, the equity of the company was eroded and it was on the brink of being registered as a sick company under BIFR. However, a Rs 52-crore rights issue in October last year helped Vashisti escape the BIFR dragnet as post-rights, the company's networth turned positive. Vashisti's net accumulated losses (accumulated losses less share premium reserves) stood at Rs 12.69 crore as on March, 1998. But with the company's strong parentage and changingfortunes, these numbers are more a reflection of the past than its future, which appears to be good.

A long-term contract with Hindustan Lever, whereby the latter would lift the company's output at an agreed price lends stability to Vashisti's earnings stream. This also sets to rest the apprehension of the company's survival in an industry which has such heavyweights as P&G and Nirma. Also, the price escalation clause provides stability to the earnings. This agreement has led to a steady increase in capacity utilisation. For instance, capacity utilisation of detergents has increased from just 40 per cent in 1995-96 to over 70 per cent in 1997-98. Similarly, utilisation of the toilet soaps facility has been stepped up from 29 per cent three years ago to 76 per cent last year.

For the first nine months of 1998-99, the company reported a net profit of Rs 3.66 crore against Rs 1.82 crore for 1997-98. Turnover at Rs 126.5 crore is close to the full year figure of Rs 129 in 1997-98. These, indeed, are signs ofthe good times to come.