The stock had earlier dipped down to as low as Rs 247. So the appreciationin market price has been around 140 per cent from this bottom. It is notsurprising then that the counter is seeing some profit booking. Around 5.7lakh shares has been picked up since the scrip hit the bottom. It remains tobe seen how much of this volume comes under profit booking.

Interestingly, investors here could perhaps also carry on for the mediumterm. The stock hit a peak around Rs 1,500 in January this year. HoweverRs 850 has been a more stable level. So there is every reason to believethat the scrip could go back atleast to Rs 850.

But this is where we need to check out the fundamentals. The rationalebehind the scrip moving down has been the fear that drought conditions willharm the company in terms of raw guar availability. The company is believedto have pointed out that it is not exactly rain dependant, but it has itsown other arrangmements like drip irrigation. Nevertheless, the marketdecided not to be kind. There are also rumours that the downside wasoperator-driven, in relation to a proposed private placement to fundexpansion. In any case, the scrip was driven down to the level of Rs 250 ona combinations of reasons argued out. How far these reasons were realistic,or what the game really was is anybody's guess.

But with the monsoon on its normal course, the fear over short supply ofraw guar could weaken.

The company posted an earning per share of Rs 72.5 for FY2000 compared toRs 40.4 in the previous year. The downside pressure on the scrip also arosefrom fears about the funding of its expansion plans. But that has now beenset to rest. The Baroda plant would cost Rs 1.95 billion.

With the company generating cash profits of around Rs 800 million thecompany should have no problem for financing this.

In fact, the company has been following a prudent policy of taking fulladvantage of depreciation provisions and keeping its tax outgo low.With the Baroda expansion, this process will continue. The Baroda plant isexpected to be operational in the last quarter of the current calendar year.Ofcourse one should expect the interest charge to move up as the project isto be funded with debt from financial institutions, apart of internalaccruals.

The company has a good operating margin and despite the interest charges canend up pushing the earning per share closer to Rs.100. The stock iscurrently traded at 8 times its FY2000 earning per share.

It is quite common for stocks which depend for their raw material on rainsand is agriculture based to be not attracting a very high PE. The vegetableoil industry is an explicit example.

But coming back to Vikas WSP, it is the potential for profit taking atcurrent level, which will hamper further rise. It has to give up some,consolidate and then move up.

This is also reflected in the technical charts. The scrip could come down toRs 410 if the profit booking intensifies.