Nirma On The Mat

Not only sales growth, profit margins at the operating level have also dropped in 1995-96, as against an improvement in 1994-95.

The main reason for this was a sharp increase in manufacturing and selling expenses, particularly expenditure on discounts and exports. Manufacturing expenses rose by 51 per cent to Rs 44.39 crore. Though Nirma does not own the Nirma brand, success is very closely connected with it.

The company has a marketing and selling tie-up with Alpa Marketing Enterprise (AME) - owned by a private trust, the licensee of the Nirma trade-mark. The Nirma trade-mark is owned by Nirma Chemical Works. In other words, Nirma is only a manufacturing base for AME.

Nirma's market shares are seeing a declining trend. The rules of the game that Nirma played in late Eighties are now being used against it, especially by rural players.

The point is that since Nirma is only a manufacturing base for AME, why should it share the increasing burden of publicity? Discounts and export incentives should logically be borne by the sales arm, and not by the manufacturing facility. During periods of buoyant sales, will the company get the benefit of higher margins?

For Nirma, the only hope is an improvement in market conditions for the Nirma brand, since it is possible that lower raw material costs by backward integration, as Nirma is now proposing, could only be passed on to the marketing arm. This year, there will also be the additional burden of MAT on Nirma. If the Nirma market share continues to drop, even the excise relief in the recent budget may not help.