Although most sugar stocks are yet to reflect any positive development, Balrampur Chini has given indications of bottoming out, with the stock rising by 10 per cent to firm up at Rs 90. The exact nature of the protection is not known, although the indications are that the import duty might be increased from the present 27.5 per cent to a more reasonable level.

If that happens, Balrampur Chini Mills will be the biggest beneficiary as it is the largest sugar manufacturer in the country. Its huge capacities are another reason for the improved sentiment in the stock. At present, BCML's capacity is 16,000 TCD (including those of the two acquired companies --Bhabnan's and Tulsipur Sugars). However, the company plans to increase this capacity to 32,000 TCD in the next couple of years funded through internal accruals and debt.

But increasing crushingcapacity is the easy part. Finding adequate cane to crush during the peak months of the second-half to tide over the subsequent lean periods is the difficult part. Leading companies like Dhampur Sugars have discovered this the hard way - when poor availability of cane forced its plant to remain idle between June and September 1998 and incur a loss for that period.

Despite operating from the same region, Balrampur Chini scores thanks to its captive cane and due to the above average prices paid to farmers. The company earned a profit during the bleak period last year as it had an adequate stock of sugar (it held Rs 172 crore worth of sugar in stock at the end of 1997-98). The company has grown to be the largest in the industry through a series of acquistions.

Nagarjuna Construction
If Nagarjuna Constructions (NCCL), one of the largest construction companies in the south, succeeds in selling off its cement capacities to a bigger player, it will make a substantial difference to its cash flows andprofits. The size of the deal could be Rs 40 crore, for the 0.2 million tonnes cement plant. Despite having a large number of orders on hand, NCCL has been facing a liquidity crunch for over a year. The company has a receivables build-up equivalent to one-third of its annual revenues. The company even considered floating a rights issue to meet working capital requirements, as it was borrowing heavily for its short-term needs. The debt equity ratio, as of the last published balance sheet date, was 2:1. This situation will now change whenever the deal for the cement plant is through, reducing interest costs considerably.

The NCCL stock had begun to show some appreciation following the 99-2000 Union budget and the thrust on the housing sector. The news of the asset sale will push the stock further, especially considering that it offers an attractive dividend yield of 11 per cent at the current price (the last dividend paid was Rs 2 per share). The company has consistently paid dividends and increased thepayout ratio since 1992-93, when it first started paying dividends.

Western Hatcheries
Recent reports say Western Hatcheries (WHL) is likely to post a record final quarter. The performance is expected to be much better compared with both the third quarter performance as well as on a y-o-y basis. For the third quarter of 1998-99, WHL reported a PBT of Rs 5.34 crore, while the cumulative PBT for the nine months ended December 1998 was Rs 12.84 crore. Against this performance, the pre-tax earnings for the last quarter is expected to be at least Rs 7 crore. As the PBT for 1997-98 was Rs 14.8 crore, the current expectations represent a 35 per cent jump, y-o-y. Similarly, revenue growth is expected to be 25 per cent higher than the Q3 earnings at Rs 65 crore. The stock has already begun to reflect this expectation, appreciating by 15-20 per cent in the last one week.