The OPM has improved considerably by 2 percentage points to 46 per cent. This can be due to the fact that there is a major shift in sales mix. The share of value-added products was 52 per cent and metal was 48 per cent, compared to previous year's 49 per cent and 51 per cent respectively. Value-added products' share will increase further to 58 per cent in FY 2000-01. Already, the OPM has jumped by nearly 3 percentage points in the last quarter to 49 per cent compared to 46 per cent registered in the whole year. The cost cutting was also effected in power consumption. Interest burden was significantly lower by around 30 per cent to Rs 60 crore due to repayment of loans worth Rs 100 crore. The interest rates have also been renegotiated with the financial institutions. The depreciation remained stagnant. The PBT was higher by 23.8 per cent to Rs 884 crore.

But the huge increase in tax liability to Rs 249 crore from Rs 147 crore meant bottomline before extraordinary items could increase only by 12 per cent. As a one time charge, the greenfield project in Orissa which was shelved, has been written off. This has further pulled down the bottomline by Rs 23 crore.

During the year, an aluminium alloy wheel plant was commissioned which produced 5,000 wheels. It has an installed capacity of 100 thousand wheels.

In the current year, 100 per cent capacity utilisation is expected. Domestic demand is expected to grow at CAGR of 8 to 9 per cent. The company is well positioned to take advantage of that through expansion. It has already set up a 1,00,000 tonnes project for alumina, aluminium and power at a total cost of Rs 1,800 crore. Its first production is expected to commence in 12 to 15 months from now. During the last year, it also acquired controlling stake in Indal which will mean reduced competition as well as a source for acquiring major raw material `alumina'. There is also a possibility of buy back considering the cash rich position of the company.

Ashok Leyland
Ashok Leyland Ltd, riding on the boom in the commercial vehicle segment, has posted an impressive sales growth of 26.9 per cent to Rs 2,602.7 crore in the FY2000 as compared to Rs 2,051.5 during the FY1999. The company sold 31,443 units in the eleven months period ended February, 2000 as compared to 22,546 vehicles sold during the corresponding period last year. With the operating profit margins improving from 8.1 per cent to 9.6 per cent in FY00, the operating profit has increased by 33.2 per cent to Rs 258.6 crore as compared to about 25 per cent growth in the income.

Ashok Leyland has reported an enormous jump of 285 per cent in the net profit to Rs 78.5 crore from Rs 20.4 crore during the last year. However, the mandatory revision in the accounting policy, related to inventory valuations to include applicable fixed overheads, has resulted in an increase in value of inventory and profits to the extend of Rs 25.3 crore.

The improved operating efficiency and a lower interest burden has also contributed to the significant jump in the bottomline.

Although the company has far exceeded the expectations of the market, industry analysts believe that the current growth has been achieved on a relatively low base and the company will not be able to repeat the same kind of performance in the current year. Moreover, the margins would be under pressure due to substantial capital investments in compliance to the new emission norms and the planned product changes. Furthermore, the negative growth in the light commercial vehicle segment is another point of concern for the company.

The commercial vehicle segment is expected to grow at rate of about 10 to 14 per cent in next couple of years. With the growing demand for CNG buses from the state transport corporations and specialised vehicles from the defence forces, Ashok Leyland's net sales are expected to grow at rate of over 10 per cent in the current fiscal. Moreover, the on-going VRS scheme, the continued focus on operational efficiency and customer orientation of operations would have a positive effect on the company.

The script has shown a breakout from the flag pattern and could rally to the price of over Rs 90 per share in the near future. At the current stock price level of Rs 77, the script appears to be a decent long term investment.

Carrier Aircon
Carrier Aircon, the subsidiary of the world's largest air-conditioner manufacturer Carrier Corporation, has reported disappointing results for the financial year ended March 2000 with sales revenues worth Rs 385.25 crore as against Rs 404.39 crore registered in FY99. Net profit has dropped sharply by 67 per cent to Rs 9.66 crore from Rs 29 crore in the previous year. As a matter of fact, the company reported an operating loss of Rs 32.6 crore in the last quarter of the FY00. The sharp decline in the operating margin from 9.1 per cent to 4.4 per cent is a point of concern.

With aggressive marketing strategies and innovative customer care services, relatively new entrants like LG, Samsung and the likes have gained significant market share, particularly in the northern region of the country. In a bid to regain the lost market share, the company opted to reduce product prices which resulted in an increased pressure on the margins. But the reduction in the product prices and the introduction of new products has failed to create any significant upsurge in the sales volumes.

Moreover, the competition is expected to further intensify with entry of multinational like Whirlpool and Electrolux in the domestic air-conditioning market.

During the FY2000, the bottomline has been depressed to the extent of Rs 2.2 crore due to the VRS offered to about 150 employees last year. The prolonged labour unrest during the peak season of last summer is another reason for the dismal performance in the FY2000. According to the reports, the continued poor performance of chiller division has adversely affected the overall growth of the company.

The recently revamped senior management team has set the stiff target of about 35 per cent growth in the current fiscal. With the increased focus on the retail segment and the recently launched new series of aggressively priced window and wall-mounted split air-conditioners, the management appears quite optimistic about reversing the trend. The company has upgraded its Gurgaon manufacturing facility which will concentrate on commercial products and compressors. Whereas the recently commissioned Daman factory will manufacture window airconditioners.

The script has been hammered down from a 52-week high of Rs 250 to a new low of Rs 71 per share. In the near future, the stock appears to be heading in the downward direction.

With contributions from Manish Joshi and Gaurav Dua