The past decade has amply demonstrated and underlined the clout that the US economy wields. And no country could remain in isolation to the happenings in the US or for that matter any other economy-thanks to the era of "globalisation". Even a small hike in the bank rate of an economy like the US can be a cause of worry for other central banks. As is common knowledge, the US markets attract huge funds from across the world. A hike in interest rates there would result in offloading of US treasury bills and bonds held by various central banks and funds.

This would result in an increase in yields and central banks would have to hike interest rates to stem outflows from their respective countries. Also, an increase in the interest rates would result in stock markets going down.

Coming at a time when the Indian stock markets are at their lowest ebb since the last eleven months, the Fed move has the potential to cause jitters in the markets. Although a recent National Council of Applied Economic Research (NCAER) has in its survey concluded that business confidence is at a high, the events at the stock markets reflect quite the opposite! The last quarter has seen the best out of corporate India wherein, a majority companies have seen a smart turnaround with excellent results. Also, the country is sitting pretty with booming forex reserves.

On the export front also, a steady double digit growth makes the position comfortable. As a matter of fact, India could gain substantially in the form of strong foreign fund inflows, as fund managers would be on a prowl for value stocks. Yet, one needs to consider that rising global interest rates have already taken a heavy toll on the Asian stocks and currencies including that of India.

The markets have discounted a 50 basis points hike in the fed rates and a higher than 100 basis points hike has the potential to kill the US bull run. This in turn, could cause irreparable damage world over and India could be caught in the cross fire, its inherent economic strength notwithstanding!Zuari Industries
The expansion of the cement division has played havoc with Zuari Industries' financial performance for the year ended March. The additional 1.2 million tonne capacity has added significantly to the turnover of the company. Net sales have grown by an impressive 63.56 per cent to Rs 1,392.44 crore. But as cement margins were under severe pressure during the year and the company had to borrow substantially for the expansion, profitability has dropped. In fact, against a net profit of Rs 15.97 crore for the previous year, the company incurred a loss of Rs 21.60 crore.

Yet, at an operational level, Zuari Industries has performed a little better than the previous year. Operating profit has risen by 104.52 per cent to Rs 94.06 crore and operating margin has improved from 5.40 per cent to 6.76 per cent. Other income has declined by 31.81 per cent to Rs 23.60 crore and interest expenses have doubled to Rs 103.56 crore. As a result, cash profit has fallen by 51.23 per cent to Rs 14.10 crore. The expansion of the cement division has also led to a 162 per cent rise in depreciation to Rs 38.17 crore. The company, has therefore, posted a loss of Rs 24.07 crore against a pre-tax profit of Rs 14.34 crore, the previous year.

Overall loss for the year is lower at Rs 21.60 crore owing to the addition of Rs 2.47 crore excess tax provided for in the previous years.

The company appears keen to sell off its cement division and there have been speculative reports indicating that Cemex has shown an inclination to buy out the division. While the sell-off (if at all it occurs) could bring in a substantial one-time cash flow to the company, the longer term prospects do not appear too bright. The fertiliser industry continues to be government controlled for all practical purposes. The returns, both from urea and other partially decontrolled fertilisers, are hardly inspiring. The company's stock price, which has plummeted from a high of Rs 135 in August 1999 to around the Rs 30-35 levels, bears a testimony to this fact.

STGI
Software Technology Group International (STGI) has shown a phenomenal growth for the year ended March. Besides a 63 per cent growth in turnover, doubling of OPM to 25 per cent has played a major role in boosting the operational profit. It would be interesting to note that the OPM for the last quarter was 35 per cent. The increase in bottomline by 340 per cent to Rs 801 crore looks even more impressive.

However, the increase in the bottomline was aided by an other income of Rs 3.5 crore. This figure mainly comprised interest income on substantial share application money as the high premium public issue was oversubscribed by 63 times. Though the company claims to have beaten all the projections made in the public issue prospectus, it would not have been possible to achieve that without other income. The company's businesses include software consulting and training. In the former, expertise in client server and Internet consulting services has helped it to grow faster. For the latter, strategic alliances with global software leaders Oracle, Microsoft, Lotus have been useful to attract students. Newly opened centres in Western India and Abu Dhabi are also doing well.

KSESH (with contributions from Sachchidanand Shukla and Manish Joshi)