The swap ratio to be decided on Saturday is expected to be in favour of GTB. And, hence, Global Trust Bank shareholders are in for gains. The bank's book value at 43.5 and an EPS accretion of Rs 8.7 is superior to UTI Bank's book value of 18.24 and EPS of Rs 3.70. These facts would weigh heavily on the outcome of the swap ratio. Further, GTB has been more tech-savvy and that reflects in its P/E ratio of 12.7 compared to UTI Bank's P/E of 9.8, mainly owing to its public sector lineage. Though the capital adequacy ratio is comfortable, the net NPAs for GTB is 1.8 compared to 4.1 per cent for the UTI Bank.

Despite the Banking Companies (acquisition and transfer of undertaking) & Financial Institution Laws (Amendment) Bill being cleared by parliament recently, it has failed to spur any M&A activity amongst the public sector banks. Since staff costs have been the bane of public sector banks, as it accentuates the variable cost, an overwhelming response to the VRS in such banks offers a glimmer of hope.

Rhone Poulenc
Rhone-Poulenc, formerly May & Baker, has seen a sales growth of 18 per cent to Rs 61 crore in the third quarter ended December 2000. Raw material consumption increased by only 9.4 per cent. The bottom line has improved as a result. As part of the company's cost-reduction strategy, raw material consumption has been sliced to 45 per cent of sales from 51 per cent on an annualised basis. It was down to 39 per cent in the third quarter.

Consequently, the operating profit improved by 30 per cent to Rs 13.84 crore and margins from 20.6 per cent to 22.7 per cent. Interest is virtually nil in the absence of debts. Net profit increased by 30 per cent to Rs 8.35 crore.

Over the last few years, the product profile of the company has been changing in favour of formulations. The share of formulations from sales income increased from 85 per cent to 89 per cent in 1999-2000. Formulation sales is increasing 12 per cent annually. The company has major presence in linctus, anti-emetic & anti-nascent, hypnotics and cough preparations. About 34 per cent of the turnover comes from the topline products like Phensedyle, Stemtil, Gardenil and Phenergran.

These four brands account for 45 per cent of the formulations sale. The company introduced five new products and four line extensions during the year. The company has major advantage as most of the products out of DPCO's price regime. Nicholas Piramal has bought 40 per cent stake from its parent company, May & Baker, at Rs 875 per share. Nicholas Piramal will spend Rs 153 crore. Nicholas Piramal has to buy another 20 per cent share from the public to conform with the takeover stipulations. The Rhone-Poulenc scrip has ben trading around Rs 765 and its 52-week high-low has ben Rs 1,394/632.

Like most other pharma stocks, the Rhone-Poulenc scrip has not caught the fancy of the market.

Sachchidanand Shukla and Dhruv Rathi