Revenue from operations for the quarter to December, 2000 has risen by a phenomenal 152 per cent to Rs 53 crore, against a sharp fall of 57 per cent in the quarter ended June, 2000. Net profit also varied quite sharply in these quarters.

Digital is a 51 per cent subsidiary of Compaq depends on it for 90 per cent of its revenue. In fact, it is only in the current fiscal that the company has ventured out of the domain of Compaq and added a few more clients. Its alliance with Compaq is both its greatest strength as well as weakness.

This alliance ensures a smooth flow of orders from the US major as well as its affiliates. However, any major change at Compaq may adversely affect the fortunes of the company unless it reduces its over-dependence upon its parent.

The operating expenditure up 140 per cent to Rs 36 crore in the current quarter has moved in tandem with the operational revenue. Staff cost accounts for a major part of the operating expenditure and is up 334 per cent to Rs 20 crore. This increase has kept the operating margin 35 per cent at the same level as in the corresponding quarter.

Lower growth in taxation and depreciation costs has propped up net profit by a whopping 184 per cent to Rs 16.5 crore (Rs 5.8 crore).

Digital's share price stood at Rs 625 on Monday and is almost twice the low of Rs 346 touched on October 19, 2000.

Although Digital has the backing of Compaq, there is still a long way before it reduces its over-exposure to the US parent. At the same time staff costs which have almost gone up three times need to be kept under tab to maintain healthy profit margins.

Thermax
Thermax shows desperation to get out of the sticky situation as is evident from its results the quarter to December 2000. The deceleration in capital goods segment has only added to its woes. Thermax has acted on the Boston Consulting Group's restructuring plan by disposing off its fan and software businesses. Last year it disbanded the entire board of directors as part of strategy to revamp its businesses. But the effect is yet to sink in. Thermax has to a long way to go before everything falls in place.

The shareholders can take comfort from the fact that the turnover has risen by 30 per cent to Rs 107.4 crore in highly competitive market conditions. Total expenditure, up by 26 per cent to Rs 114 crore has been under control following the discontinuance of non-core and unremunerative businesses. Consequently, operational losses are down by 21 per cent to Rs 6.2 crore.

Interest and depreciation have not changed significantly to have much of an impact on the bottomline.

In fact, the company could have reported net profit. But the fall in its normally high `other income' has badly hurt it. Income from interest, dividend and sale of investments declined to Rs 4 crore from Rs 28 crore. Despite losses, analysts feel that the company has done well in water treatment plants and ion exchange resins business,its core competencies, although the division-wise figures are not available.

During the current year, the company has come out of one loss making joint venture (JV). Thermax Fuji Electric Ltd (TFEL), established as a JV company between Thermax Ltd and Fuji Electric Ltd of Japan, has been dissolved. The JV, in operation since 1996, at the end of its third year of operations, recorded a turnover of Rs 35 crore. The loss amounted to Rs 14 crore.

After completion of restructuring, Thermax is likely to focus on environment, water, chemical and energy businesses by getting out of unrelated areas. Generally, third and fourth quarters are beneficial for the capital goods industry. So, one can look forward to a better performance in the next quarter.

Prashant Kothari & Manish Joshi