E Merck (India)

However, sales growth is much lower at 10.8 per cent. Turnover grew to Rs 104.33 crore in the half-year ended June 1997 as against Rs 94.15 crore in the first half of 1996. The growth rate is considerably lower compared to the 17 per cent growth achieved in the last two years.

The impact of the cost control measures -- like the voluntary retirement scheme costing Rs 5.75 crore implemented over the past three years--has resulted in a 29.1 per cent growth in operating profit to Rs 16.87 crore (Rs 13.06 crore).

However, despite the reduction in interest to Rs 2.80 crore (Rs 3.71 crore), the gross profit grew by just 16.8 per cent to Rs 17.56 crore (Rs 15.16 crore). The low growth in gross profit is mainly due to the decline in other income component at Rs 70 lakh which is just one third of Rs 2.10 crore reported in the first half of last year.

The company is likely to continue its good run since its expansion projects worth Rs 25 crore are coming up for commissioning. In addition, the increased emphasis on the sales of pigments and reagents imported from its parent, Merck, Germany, will boost volumes. Also, once its soft gelatin capsule project is commissioned, it will give proper back up for its formulations unit at Taloja and Usgaon. While the investments at Goa will lead to tax benefits, the cut in corporate tax and removal of surcharge will benefit E Merck whose tax outflow was higher at 38.9 per cent of PBT in 1996. The E Merck scrip is likely to move up in the short term.