Pal-Peugeot

The company had already accumulated losses to the tune of Rs 79.25 crore by the end of September 1996. This means that half of the company's net worth has been eroded.

Sales have also not shown any major improvement, increasing marginally to Rs 172.69 crore from Rs 164.37 crore in the corresponding period of 1995-96.

From April 1996 to March 1997, the sales volume declined by 25.65 per cent to 7659 cars against 10301 cars in 1995-96.

The company attributes this poor performance to the labour unrest in the month of October and intense competition in the passenger car market especially the mid-size segment.

However, the steep rise in interest burden to Rs 26.26 crore against Rs 6.06 crore in the corresponding six months of 1995-96 indicates that the company is cash strapped and is in dire need of fresh funds.

Though, the company's product, especially the diesel version is perhaps technically the most sound vehicle, the company has not been able to push up sales. This may be due to consumer resistance, especially on the price front where the product is perceived to be highly priced.

However, the company is said to be selling the car at cost price. Therefore, it claims that the increase in costs cannot be passed on to the consumer due to the intense competition.

One reason for the company's higher costs is the higher import content: the product has an indigenisation level of just 23 per cent. Now the company plans to increase this to 55 per cent .`

A dull market has affected sales. The mid-size car segment has belied expectations. As against high hopes of a 25-30 per cent growth rate, this segment has not lived up to expectation.

Sales continue to show a decline, for the months of April and May, the sales dipped marginally by 4 per cent to 1359 cars against 1422 cars in the corresponding period last year.

Now it has also been plagued with production problems due to short supply of CKD kits. The production in this period has declined by 59 per cent to just 809 cars against 1969 cars in the corresponding period last year.

Analysts say that the company will continue to perform badly unless a clear cut decision is arrived between the two promoters and the demand for the mid-size car segment takes an uptrend. However, with mounting losses, it seems inevitable that the Indian promoters will at some point be forced to sell out to Peugeot.

The scrip has hardly been quoted above par. It witnessed some buying interest in April 1997 moving up from Rs 4.5 to Rs 9 on an expectation of the foreign promoter buying out the stake of Indian promoter. However, this did not materialise and the scrip has dropped back to to Rs 5-6.