A detailed analysis of the annual report for fiscal 1998 shows that the company regrouped items under "other income" head for not only fiscal 1998, but also for the previous year. The company, which posted a net profit of Rs 20.07 crore, reported lower other income component in its profit and loss account to show operational profit.

The company would have shown an operational loss had it not re-grouped "other income" items as operational income.

The profit and loss for 1998 shows an operational income of Rs 1,674.34 crore for the year to December 31, 1998, against Rs 1,572.79 crore in the previous year.

Interestingly, the company showed an other income component of Rs 1.16 crore during fiscal 1998, while it actually had earned an other income of Rs 21.88 crore.

According to the company'snotes to the accounts, the income from operations includes Rs 10.99 crore earnings from various counts--Rs 23.92 lakh from disposal of assets, Rs 90.13 lakh on account of insurance and other claims, Rs 1.56 crore export incentives, Rs 2.13 crore for interest income on income tax refund and Rs 6.17 crore shown as "others".

According to the schedule explaining the expenditure, there was a net selling expense of Rs 1.14 crore which has been calculated after adjusting with a provision of Rs 2.64 crore made in earlier years and now no longer required.

According to usual accounting norms, provisions written back are shown as other income.

In addition, Philips has considered an income of around Rs 3.60 crore as insurance claim in excess over the net book value on account of outbreak of fire at the Pimpri plant in Pune, Rs 62.44 lakh as surplus from sale of electronic weighing business and around Rs 2.87 crore as profit from sale of its investments in Philips Telecommunications Industries Ltd.

Calcutta-basedanalyst Tamal Kumar Majumdar, who is also a Philips shareholder, has questioned the claim of a turnaround, since it had only regrouped its other income components to show operational profit.

Majumdar had pointed this out to the Philips management at the company's last annual general meeting on May 28. The company did not reply to his points.

Philips, which introduced new colour television models during the year, preferred to keep a large part of its own capacity idle while increasing sales. Majumdar pointed out that this must have put pressure on margins, as the company had to foot the depreciation for the unused capacity.

Against an installed capacity of 375,000 television receivers, Philips made only 45,000 receivers (a mere 12 per cent capacity use) in 1998 against 157,000 receivers the previous year. However, it sold 742,00 TV receivers in 1998 to earn Rs 366.23 crore. This it did by purchasing 701,000 TV receivers for Rs 247.75 crore.

Philips has spent a whopping Rs 350 crore since 1991-92 -- oraround Rs 50 crore annually -- as brand promotion. This includes Rs 293.72 crore on account of publicity expenses, Rs 15.79 crore for cash discount on sales and Rs 32.09 crore as selling expenses.