Kirloskar Oil Engines

Sale of investments, which includes mainly the stake of KOEL in Kirloskar Cummins to the foreign promoter Cummins Engine, US, has resulted in an additional other income of Rs 60.69 crore. Other income increased from Rs 6.79 crore in 1995-96 to Rs 66.38 in 1996-97, which is higher than the net profit of Rs 47.63 crore for the full year.

Interest burden for the full year has shot up by 53.64 per cent to Rs 54.71 crore owing to high debt burden which stood Rs 214.71 crore at the end of 1995-96.

Operating profit margin, too, declined marginally from 10.02 per cent to 9.58 per cent owing to the poor second half which showed an OPM of 6.4 per cent.

In the second half, sales too showed a steep decline of 15.46 per cent to Rs 323.28 crore. As a result, sales for the full year slipped marginally from 614.92 crore in 1995-96 to Rs 606.74 crore last year.

The markets have signalled a strong thumbs down to KOEL scrip after the company's proposal to support its group companies. The scrip has declined over 50 per cent from Rs 110 to Rs 54.

It had perked up in the same way in February-March 1997, after the company announced its decision to sell of its 25.5 per cent stake in Kirloskar Cummins to the foreign partner Cummins Engine, US. Due to the sale of stake, KOEL's fund position improved. Marketmen had, in fact, expected the company to reward its shareholders with a bonus issue, and saw excellent prospects in the company trying to consolidate its funds position.

However, the expectations have proved to be short-lived as KOEL thought of ploughing these funds into its loss making steel company Kirloskar Ferrous and Shivaji Works.