The sharp decline of 40 per cent in the net profit is primarily due to huge non-recurring extraordinary expense of about Rs 513 crore provided for the investment in the bankrupt ICO Global Communication Ltd. Besides, the substantial increase in depreciation by 38 per cent has pushed down the net profit from Rs 1,325 crore to Rs 799 crore in the current fiscal. In fact, the net profit margins excluding extra ordinary expenses has declined by about 3 percentage points.

The traffic volumes and Internet subscriber base increased by 16 per cent and 17 per cent respectively. However, due to lowering of total accounting rates by about 10 to 14 per cent as compared to the previous year and a decline in Internet access tariff, it resulted in much lower revenue realisation for the company. In the near future, the company is expected to gain substantially from the boom in Internet and the phenomenal growth of dotcom companies. Recently, the company acquired a 30 per cent stake in the portal-Indiainfo.com. This will result in a minimum revenue inflow of about Rs 200 crore in the next two years.

VSNL has built up a strong nationwide network of Internet nodes which provides points of connectivity to various companies and ISPs. Although, VSNL has increased its global point of presence bandwidth to 335 Mbps from 155 Mbps in the last year. The slew of planned international gateways by the private sector would have an adverse impact on the company. This is because the Government is expected to allow private sector companies to set up international gateways using the submarine optical fibre cable links as compared to only satellite links now.

The earning per share has declined to Rs 84 from Rs 139 in the previous year which still results in a relatively low PE multiple of about 12. The scrip has been hammered down from a high of Rs 3,072 recorded in the second week of February to Rs 1,030. With the prevailing market sentiments, the scrip is expected to move downwards in the near future.

Procter & Gamble
Procter and Gamble Hygiene and HealthCare's (PGHH) inspiring financial results for the third quarter ended March 2000 has given investors something to cheer about after a really long time. The PGHH scrip had been languishing close to its yearly low of Rs 524 at the close of last week's trading, but has looked up considerably in the last two trading sessions. In fact, the scrip has declined steadily since it hit an all-time high of Rs 1,378 in July last year, in conjunction with the plight of most non-tech stocks in the recent past.

The markets seem to have acknowledged the fact that PGHH is among the rare crop of consumer goods companies to have registered double-digit growth in topline this quarter. Sales turnover grew almost 13 per cent to Rs 130.76 crore from Rs 115.75 crore for the corresponding period last year.

Considering that sales for the first half of the current fiscal had shown negative growth, this rise in turnover is appreciable indeed.

The growth in sales can be mainly attributed to the initiatives the company has been taking on the distribution front. Besides, the launch of Whisper "Ultra" earlier this year has also helped in increasing turnover.

However, growth in operating profit margins has not been very becoming. Although OPM has improved compared to the corresponding quarter in the previous year, at 19.83 per cent it is considerably lower than the 22.35 per cent for the first half of the current fiscal. As the company's business is not seasonal in nature, the fall in OPM is considerable indeed. The increased expenditure could be regarding the launch of Whisper "Ultra", feel analysts. The company had done an extremely good job of trimming operating expenditure in the second quarter ended December 1999, in which OPM was a very healthy 24.44 per cent.

Lower financial charges and provision for depreciation have seen the bottonline growing at a robust 29.17 per cent. Although other income was considerably higher this quarter, it accounted for hardly 7.6 per cent of PBT. Also, the company has provided for taxation at a much higher rate this quarter compared to the corresponding period the last year.

Even as the company's focus on customer logistics can be expected to fuel further growth, the parent company's commitment (65 per cent holding) to PGHH reaffirms that the company can be expected to do well in future.

Cement industry
What will be the implication of Lafarge's acquisition of the 2.24 mtpa cement unit of Raymonds on cement prices in Eastern region? According to industry majors the price war will not start again. Post-acquisition of Tisco's cement unit, Lafarge was widely accused for the dropping cement prices in the region. The dominant players is the Eastern region are of the opinion that Lafarge is a "normal" member of CMA and has started complying with the norms. In other words, it is part of a cartel and complies with production quota and "price arrangement" mechanism. The biggest beneficiary of the MNC being a "normal" member of CMA, this will be Ambuja-ACC.

The reason being ACC is the largest player is East and Ambuja through its subsidiary owns Ambuja Eastern and has a 14 per cent stake in ACC. However, the end of the price war in the eastern region has come a bit too late for ACC, which is expected to have a fourth quarter in line with the first three quarters. Raymonds is a significant player in the Calcutta and Bangladesh market. The stability in prices is also reflected in the last price hike of Rs 4 per bag in Calcutta taking the price to Rs 138 per bag. Neither Ambuja nor ACC can afford to drop prices further. The bottomline is that in the East, prices will remain stable. It is believed that after establishing a firm presence in East, Lafarge is on the verge of acquiring Manikgarh unit (1.5 mtpa) in Maharastra.

With contributions from Gaurav Dua, Mobis Philipose and Urmik Chhaya