Topline and bottomline rates show sharp contrast for the quarter ended December 2000. The sales registered growth of 27.3 per cent to Rs 11,637.7 crore. Although there were some price increases, the major push to the topline has come through marketing of Chennai Petroleum's products.

Marketing is a high value-low margin business. As against that, net profit has gone southward by 19.4 per cent to Rs 113.6 crore. Operating profit margin (OPM), are down by nearly 2 percentage points to 2.5 per cent. In line with that, the operating profit went down by 25.8 per cent to Rs 291.3 crore.

Interest cost climbed up by 26.9 per cent to Rs 67.5 crore. This was primarily due to enhanced borrowings to meet increased working capital requirement. Lower depreciation of Rs 149.5 crore (Rs 193 crore) and tax of Rs 19 crore (Rs 36.1 crore) stemmed further erosion of net profit.

Currently, the company is suffering due to the fact that more than 70 per cent of its products come under administered price mechanism (APM). However, once that is dismantled in a year from now, it will benefit considerably than its peers. Merrill Lynch, a leading equity research firm, has reinforced their earlier `buy' rating. It says that `High number of retail outlets would insulate BPCL from risk after the government deregulated marketing in the sector.' Merrill has set the 12-month price objective for the company's shares at Rs 283.

Zee Telefilms
The quarter ended December, 2000 has been a tough one for the Zee Network (Zee Telefilms and its subsidiaries), which has reported a moderate growth of 10 per cent in the revenue from operations to Rs 265 crore ( Rs 241 crore).

Income from advertisement, which constitutes the major source of revenue for the company, reported a flat growth to Rs 187 crore from Rs 186 crore in the corresponding quarter. These figures prove beyond doubt that Zee has started feeling the heat from competitors. This reduction in the growth rate was inevitable since Star Plus has taken a lead in the prime slot between 9 pm - 11 pm with programmes like KBC and others (as per Intam ratings).

Subscription revenue which stood at Rs 52 crore (Rs 47 crore) is another major source. Expansion of the company's activities in the USA led to an increase of 11 per cent in the total subscriptions.

Syndication of its news-based programmes as well as serials to broadcasters in countries such as Mauritius, Bangladesh and Indonesia has provided the company with another source of income. Zee has a vast programme library that has the potential to generate huge revenue in the future. This would affect the bottomline significantly, as the revenue would be generated without any additional cost.

Lower growth in revenue has been accompanied by a higher rise of 20 per cent in operating expenditure to Rs 190 crore (Rs 160 crore). This has squeezed the operating margin from 34 per cent to 28 per cent in the current quarter. Increased debt burden due to new initiatives by the company, such as laying of fibre optic network, has resulted in the interest cost moving up to Rs 11 crore from Rs 2 crore in the corresponding quarter. Correspondingly, the provision for depreciation has also jumped 100 per cent to Rs 4 crore.

Apart from the stiff competition that Zee faces for its major channels such as Zee Tv, Zee News and Zee Cinema, the initiative taken in diversifying into regional channels will pay rich rewards in the time to come. At the same time there is vast potential to be exploited in other countries which have a huge NRI population. However, the company should not lose sight of the Indian market. High quality programming should be used to counter competition from other channels.

Manish Joshi & Prashant Kothari