JANUARY 21: Between August 1999 and the present, the Ingersoll Rand stock lost one- third of its 1999 peak value of Rs 550. One of the prime reasons has been the steep fall in net earnings in the third quarter over the corresponding period last year. But off late, the fall has continued, partly due to the proposed sale of the gas compressor division to Dresser Rand India, in keeping with the parent company's global strategy. The division along with air compressors have been the mainstay of IR, contributing 80 per cent of its business and without this, the company is not worth much, feel analysts. The one-time cash flow of Rs 65 crore will not compensate the shareholders for the loss of revenues from this business.For the third quarter, there was a fall in earnings y-o-y. Revenues remained flat at Rs 96 crore, but profit after tax was lower by roughly 35 per cent, to Rs 13 crore from Rs 23 crore in the corresponding period of the previous year. The nine-month profit is also lower, but by a smallermargin.
However, there has been some profit growth in the third quarter, which recorded a net profit of Rs 11 crore. One very positive aspect of the latest revenue statement is the complete absence of an interest outflow, since the company has become completely debt-free. It is not so much a poor performance as the presence of extra-ordinary orders last year, the last portion has since been completed within the first two quarters of the current year. The extraordinary revenues were on due to large orders from ONGC for compressors for use in its oil exploration wells. The order was worth a total of Rs 141 crore spread over three years.
The last portion of the order worth around Rs 21 crore was executed in the first quarter of the current financial year; which incidentally recorded the highest profit in any quarter so far this year. Under normal conditions, the company is expected to resume its long-term growth rate of around 15 per cent. But if the gas compressor business is sold, then the revenues andprofit will be lower to that extent; thus lowering the growth rate considerably.
IR will now be solely dependent on the construction and mining compressors business which is expected to do well considering that the economy is picking up.
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.