VSF and grey cement are the two main revenue earners for this company. VSFproduction went up to 52,699 MT as compared to 37,287 MT in the same quarterlast year. Grey Cement production went up from 1.98 mn. MT to 2.48 millionMT. Sales too went up correspondingly - VSF to 52,081 MT (37,013 MT) andgrey cement to 2.49mn.MT (2.05mn.MT).

Grey cement contributes 34 per cent and VSF 30 per cent of the totalrevenue. For FY2000, Grasim' net turnover went up 14 per cent from Rs 3,757crore to Rs 4,273 crore.

The other income went down to Rs 88 crore from Rs 110 crore. PBIDT marginhas gone down from 17.9 per cent to 17.3 per cent, reflecting the pressureon realisations. Average realisation on VSF has come down from Rs 66,089/mtto Rs 64,484/mt for the full year. However realisation in fourth quarterreveal that realisation has improved from Rs 62,795 in the fourth quarter ofFY1999 to Rs 64,279 in the latest quarter.

Grasim has retired Rs 210 crore worth of debt and interest charges have nowgone down from Rs 292 crore to Rs 256 crore for the full year.Consequently,the PAT margin has improved from 4.3 per cent to 5.5 per cent. Gross profitat per cent500 crore has made a 30 per cent jump over previous year's Rs.386crore. With depreciation taking a higher share at Rs 237 crore(Rs 210 crore)profit before tax has made a hefty jump of 49 per cent yoy at Rs 263crore(Rs 176 crore).

Employee seperation cost has taken a big chunk at Rs 18 crore(Rs 4 crore)leaving a profit before tax of Rs 233 crore (Rs 164 crore). PAT margin hasimproved from 4.3 per cent to 5.5 per cent. EPS has gained 30 per cent at Rs25.4(Rs 19.6). If one were to compare Q4/FY2000 results with the same periodlast year, the net turnovere is up just 8 per cent. However, after adjustingfor extra ordinary items, the gross profit is up 39 per cent at Rs 114crore(Rs 82 crore) and prorfit before tax is at Rs 54 crore(Rs 23 crore).

Apart of VSF (30 per cent) and grey cement ( 34 per cent), sponge ironcontributes 10 per cent, pulp 4 per cent, chemicals 5 per cent, yarn andfabric, and others 7 per cent each. With investors sold on the cement storywould feel glad that the revenue mix has strengthened in FY2000 with cementnow constituting 37 per cent of turnover, up from 30 per cent previous year.

But it is really the VSF, Pulp and Chemical group which has contributed to58 per cent of the profit before interest depreciation and tax.The turnoverof viscose staple fibre has actually gone up from Rs 1134 crore to Rs 1290crore. The division produced 188,002 mt (164, 355 mt) with capacity at yearend coming down from 246,775 tpa to 220,775 tpa. The Mavoor unit with 26,000tpa is closed since May '99.

The Kharach plant with 30,000 tpa capacity was commissioned during March1999. On an annual basis there was a 4 per cent depression on realisation ingrey cement and 2 per cent depression on realisation on VSF fibre. Thisresulted in the PBIDT margin coming down from 33 per cent to 31 per cent.

For Grasim viscose staple fibre will be a major anchor, as the fibre has aunique position amongst all fibres. It is akin to cotton, has a goodmoisture absorbtion and adds to the texture alone or in blends. Grasim haslaunched a merchandising effort to promote the product. As the consumptionof polyester is expanded further, the proportion of blended fabric has tomove up. That is because polyester has some negative properties in terms ofmoisture absorbtion and feel, which can be softened by blending with cottonor viscose. Texturised yarn overcomes some of these handicap, yet there isever present a great argument for blending with viscose. The margin onviscose staple fibre can get depressed at times, but the fact that theglobal production capacity is limited, the downside is not very great.

Grasim is focussing on application development and further marketpenetration and have a large scope for succeeding, as no sustainedmerchandising effort has been seen earlier. As global pulp prices rise, vsfprices too will rise in tandem. That the cement production at 8.4 mn.MT asagainst a capacity of 8.2 mn tpa is an encouraging factore.

This is a 44 per cent improvement over the 5.83 mn in the previous year.Realisatin per tonne was 4 per cent lower at Rs 1,179 per metric tonne forthe full year.

For the latest quarter the realisation is at Rs 1050 per mt, as against Rs1,215 per mt in the same period last year. The commissioning of the 0.93mtpa plant in Tamil Nadu in the fourth quarter will help reinforce margins.For the next fiscal, there is some apprehension that prices must be lowerdue to drought conditions. But given the incentives in the budget towardshousing finance, the growth momentum is likely to be sustained.

Also Grasim's strong presence in the three fast developing zones will helpto sustain its market share. It is also strengthening its distributionnetwork in rural areas, besides having a presence in the lucrative southernmarkets.

Grasim's market valuation is also buoyed by the fact that the BirlaConsultancy & Software Services (BCSS) contributing a revenue of Rs 30 crorein FY2000. It has a tie up with Lawson and intends to market and implemente-business applications in the Asia Pacific region. Also Grasim has a 17.6per cent equity holding in Birla & AT&T. This venture and TataCommunications provide cellular services and have decided to merge theiroperations under a single entity.

This combination would have 25 per cent of the national telecom subscribersand would cover Maharashtra, excluding Mumbai, Gujarat, Andhra Pradesh andGoa. An unfolding of IPO proposal in the Indian and US market in the nearfuture will add weight to Grasim's valuation. The return on networth forGrasim is poor at 8.4 per cent. The scrip price has moved southwards from Rs500 along with a market rerating of software stock prices.

The weakness in the return on networth argument stands exposed in such ascenario. Even though the EPS has improved from Rs 19.6 in FY1999 to Rs 25.4in FY2000, the weakness in the scrip is likely to persist in the bearishmood of the market. One might as well to see it establishing a bottom.