In addition, the operating margins also have come under pressure in the third quarter, while remaining flat for the nine month period. The stock was up in anticipation of a genuinely good performance, but the market was obviously disappointed by the operating figures, considering that the stock plunged by almost 8 per cent intra-day, when the results were announced.However, there is more to Cadbury's performance than just the profit on sale of assets. Cadbury India is a leading player in the confectionary market, holding close to 70 per cent of the market share. The confectionary business in India is a seasonal business, with the bulk of the sales coming in the month preceding Diwali. Besides, with the onset of winter, the consumption of chocolate tends to increase exponentially.

This is where the difference between the y-o-y performances of Cadbury really lies. "Last year (FY 1998), the Diwali festival came in the month of October, which saw the company record most of the bulk of its sales in September," says Deven Sangoi, equity analyst with Alchemy Finance. As a result, the third quarter performance was pushed up last year by festival-related sales and made the current years (FY 1999) Q3 appear very pedestrian. By the same logic, Cadbury's Q4 1999 will be excellent in comparison with the previous year, since the festive sales will be accounted for in the last quarter.

To some extent, the Q3 operating margins were impacted due to the increased advertising expenditure. The additional expenditure was on account of new launches of product variants such as that of Picnic in a smaller size, as well as relaunches of certain other brands such as Perk (in different flavours) and the leading food drink brand, Bournvita. According to analysts, the company usually accounts for the expenditure at the time it is incurred and does not defer it.

The benefits of the relaunches will be felt in the coming months, which is likely to have a lively impact on both the top and bottomline. For the whole of the current financial year, Cadbury should report a 25 per cent topline growth along with a cumulative volume growth of 15 per cent. But analysts estimate that the next year (FY 2000) the volume growth should accelerate to 25 per cent, as a result of the various launches. The expectation is that the topline growth will be around 30-35 per cent along with a similar jump in profit for the full year 2000. The stock had gained by 88 per cent from January 1999 when it began the year at Rs 478, until its peak of Rs 902 in October 1999. It currently trades at Rs 770.