Apart from huge funds, the car projects involve very long gestation periods. Hence, the need for capital is quite high. Since, the commissioning of the Mitsubishi Lancer car project during the 1999 fiscal, HM's debt-equity ratio has swelled to 3.2:1 as on March, 2000. This project may be able to break-even by mid-2002 once the indigenous content in Lancer is increased from the current level of 56 per cent to 70 per cent. However, till then the profits would be hard to come by due to excessive interest cost.

The consideration for EED sale will be in cash, which amounts to nearly 55 per cent of the total debt. If all the proceeds are utilised for the cause, the annual interest cost could come down to Rs 50 crore (average interest cost of 18 per cent as per the last year's interest outgo and debt). This will be a major gain considering the previous year's finance charges of Rs 108 crore, which was largely responsible for the loss of Rs 62 crore.

Depreciation figure may not change drastically as majority of the fixed assets are for the car business. On the flip side however, the turnover of the EED, which was Rs 278 crore, will go out of the books of HM. Operating profit margin (OPM) of this business, estimated around 7 per cent (as observed from its peer Bharat Earth Movers' results), means losing annual profits of nearly Rs 20 crore. Still the gains outweigh the negatives.

The company's prospects are also improving slowly. The company's mid-size car Lancer has a 42 per cent market share in the Rs 8 lakh to Rs 9 lakh bracket. HM's gameplan is to move to higher passenger car segments rather than entering the mass market which has slackened lately.

HM has recently exported the first consignment of 12 rural transport vehicles to Bangladesh. The only dampener may be the government's proposed move to buy cars of other makes for the top bureaucrats. This segment has been a bastion of the ambassadors.

Wockhardt Pharma major, Wockardt which did well in the recent past, has floundered in the third quarter to September 2000. Both sales and expenditure increased by 13 per cent. Operating profit decreased by 3.5 per cent and OPM slipped to 18.5 per cent (21.6 per cent).

The company is likely to commission a new 40 tonnes per annum (tpa), a 100 per cent export-oriented plant for the manufacture of Cephalosporin by investing Rs 35 crore. As a result the sales income may go up by Rs 25 crore.The company plans to export 75 per cent of the production. The competition in this product may get acute what with a wide range of Cephalosporins and Alembic's recently commissioned Cepholosporin (Ceph-C) plant with a capacity of 75 tonnes at a cost of Rs 30 Crore.

Wockhardt is broadening its portfolio of products by exploring opportunities in biotechnology and genomics.

It has been talking to major research organisations such as the Central Drug Research institute (CDRI), the Indian Institute of Chemical Technology (IICT) and the Department of Biotechnology.

R&D has received a boost as expenses during the quarter more than doubled from Rs 41 lakh to Rs 97 lakh. During the current fiscal, the company has started the manufacture of Biovac-B, hepatitis B vaccines. In these products the company plans to focus on rural areas where competition is less.Smith Kline Beecham and Zydus Cadilla are rivals in this product category. The company has recently put up a plant of 40 million dozes capacity of Hepatitis B vaccines near Aurangabad. It may expand capacity to 100 million paediatric dozes per annum.

Wockhardt is a leading player in anti-infectives, pain management, cough management and corticosteroids. The company also has various formulations in psycotropics, cardiac, vitamins and medical nutritions. The company acquired Merind business during 1999. Merind is a major manufacturer of vitamin B12. and has a fermentation plant for complete local manufacture of the same.Vitamin B12 market may not be a promising area of growth in the future as all over the world the vitamin market has been on the decline. In India too, either all major vitamins have been slowing down or contracting in growth. Top four vitamins brands Evion, Polybion, Neuribion and Cobadex Forte of Merck and Glaxo have registered either a contraction or negligible growth.

Manish Joshi & Dhruv Rathi