The operations of the company include manufacturing of stainless steel viz CR strips and flats. The major raw materials are HR strips and coils, steel scrap, chrome and nickel. The prices of all these have recorded a significant rise from the levels of the last corresponding quarter. The average increase in the prices was more than 35 to 40 per cent. Nickel, one of the largest component of total raw material cost in value terms, saw even more increase than this percentage. The company's cause was not helped by unconducive domestic economy. The full rise in cost of production could not be passed on.

However, the company could negate these factors by focussing more on overseas markets, where the scenario is better. The higher volumes also provided some cushion to the topline. In line with higher sales, the production of molten stainless steel has increased by over 28 per cent to 70,911 mt. After implementation of Phase-I of the stainless steel- cold rolling project, the exports at Rs 75.94 crore account for almost 20 per cent of turnover. Earlier, the same were negligible. The completion of Phase-II will see the CR capacity going up to 90,000 tonnes.

Topline showed a growth of 74 per cent to Rs 373.98 crore. The raw material consumption shot up by 90 per cent, which accounts for nearly 90 per cent of the total expenditure. Operational profits were up by around 30 per cent to Rs 59.92 crore. With interest and depreciation figures showing a marginal rise, the bottomline jumped up by 77 per cent to Rs 14.87 crore.

Two of the company's "sticky" investments- Jindal Vijaynagar Steel and a real estate company - BPM Industries, have been moved out of the books and transferred to a new 100 per cent Jindal Strips subsidiary, Jindal Steel and Alloys.

However, this will not make much difference as the earlier investments are still continuing, albeit in a different name - as "investments in Jindal Steel and alloys".The company is planning to hive off its cold rolled steel unit at Tarapore into a subsidiary company. Though turnover will come down after this happens, profitability is expected to improve through more focus on stainless steel. But this can happen only if raw material prices stabilise and in particular nickel price.

Raymond
The complete man - Raymond is going through difficult times these days. The company declared a growth of less than 1 per cent in its topline for the quarter ended June, 2000 as compared to the corresponding quarter of the previous year (Q1). The topline stood at Rs 242 crore up from Rs 239 crore in Q1.

The company has taken steps to focus on its textiles business which is its core competence. The divestment of its stake in Raymond Synthetics and sale of cement unit to Lafarge was due to this process of restructuring embarked on by the management.

Reportedly, even the steel division is planned to be put on the block. These measures would not only make a textile focussed company but would also generate a substantial cash flow which will be used for retiring the high cost debt of the company.

The total debt of the company stood at Rs 764 crore as on 31st March, 2000 while the debt equity ratio was around 1:1. The gravity of this huge debt burden could be better understood by the fact that 41 per cent of the operating profit went into servicing the interest cost in the previous year.The sale proceeds of the cement and steel divisions would also give a boost to the growth of the high margin yielding textile division. Raymond has a loyal brand following in the high end textile products segment. However, it faces stiff competition from Reliance which is expanding its market share by aggressive marketing of its products.

The operating expenditure has gone up by 10 per cent to Rs 230 crore from Rs 209 crore in Q1. Due to this disproportionate rise in the operating expenditure, the operating margin fell down drastically from 13 per cent to 6 per cent in the current quarter. Operating profit stood at Rs 14 crore down from Rs 32 crore in Q1.

Fall in the interest cost by 10 per cent to Rs 25 crore and depreciation cost by 4 per cent to Rs 24 crore did not have a significant impact on the net loss which plummeted by 64 per cent to Rs 36 crore from Rs 21 crore in the Q1.

The amount of interest and depreciation cost would be lower in the coming quarter as the sale of the cement division is not yet completed. The company is on the right path of getting out of non-core areas and will reap rich rewards for it. The key to its success lies in the efforts it makes to expand its market reach. It should also give a push to its readymade garments segment which holds a promising future.

KSESH(with contributions from Manish Joshi and Prashant Kothari)