255 Corporates Falter In Effective Capital Utilisation; Cor Jumps

The capital-output ratio (COR) of 500 major companies in the private sector (excluding shipping, electricity, trading and PSUs) increased in 1996-97 over the previous year, indicating a decline in the efficiency of capital utilisation.

Among the 500 companies, 234 saw a fall in the capital-output ratio, while 255 witnessed a rise in the two years under consideration The remaining companies ratios were same for both the years.

The ratio rose to 1.30 in 1996-97 from 1.26 the previous year with the bigger companies faring worse than the relatively smaller ones. In 1996-97, 19 major companies had ratios of three or more with Essar Oil leading the list with 12.35.

 

Among others were Narmada Chematur Petro (5.98),Sanghi Inds (5.18), Nagpur Alloy Castings (4.70), Kalyani Seamless Tubes (4.47), Indo-Gulf Fert (4.33), Floatglass India (3.90), Essar Steel (3.83), Ispat Industries (3.58), Jaipraksh Industries (3.54), IG Petro (3.47), Kalyani Steels (3.29), Ispat Profiles (3.24), Pal Peugeot (3.16), Gujarat Alkalies (3.16), Nath Pulp & Paper (3.11), Consolidated Fibre (3.09) J K Corp (3.09) and Hindalco (3.05).

The companies which registered capital-output ratios of three or more in 1995-96 , were Narmada Chematur Petro (12.21),Oil Country Tubular (12.90), Surat Textiles (12.20), Essar Steel (10.48), Essar Oil (6.28), Kalyani Seamless Tubes (4.76),Nagpur Alloy Casting (3.34), Floatglass India (3.33), Kalyani Steel (3.42), Rolta (3.14), Nath Pulp & Paper (3.15) and Jaiprakash Inds(3.03).

Companies which had a very low capital-output ratio in 1996-97 were Binani Metals (0.14), Suraj Vanaspati (0.22),Escorts Automotives (0.23), Apollo Intl (0.25), Lipton India Exports (0.27) and Reliance Jute (0.27). The companies which recorded the lowest capital-output ratio in 1995-96 were Binani Metals (0.16), Apollo Intl (0.16), Suraj Vanaspati (0.21), Hind Lever Chemicals (0.21),Escorts Automotives (0.25) and Reliance Jute(0.28).

A significant fall in ratio was recorded by Narmada Chematur Petro (12.21 in 1995-96 to 5.98 in 1996-97), Essar Steel (10.48 to 3.83), Surat Textiles(12.20 to 2.88), Oil Country Tubular (12.90 to 2.02) and Simbhaoli Sugar (4.05 to 1.53).

Corporates which saw a sharp increase in the ratio from 1995-96 to 1996-97 were Essar Oil (6.28 in 1995-96 to 12.35 in 1996-97), Nagpur Alloy Casting (3.34 to 4.70), Sanghi Inds (2.02 to 5.18), Indo-Gulf Fertiliser (2.14 to 4.33), I G Petro (1.71 to 3.47), Bharat Hotels (1.75 to 2.82), Jayaswal's Neco (1.33 to 1.98), Nava Bharat Ferro Alloy (1.11 to 2.55) and Ispat Alloy (1.69 to 2.54).

In 1996-97, Binani Metals, Suraj Vanaspati, Escorts Automotives, Apollo Intl, Lipton India Exports and Reliance Jute with capital-output ratios ranging from 0.14 to 0.30 showed the highest efficiency in capital utilisation.

Sectors which improved the efficiency of capital use, indicated by a decline in the capital-output ratio, from 1995-96 to 1996-97, are steel/composite/alloys (2.71 in 1995-96 to 2.27 in 1996-97), textile/silk/jute/woollen (1.53 to 1.43), tea/coffee (1.30 to 1.20), bearings (1.11 to 1.05), pesticides (1.11 to 1.01), food processing (1.29 to 0.97), tyres (0.87 to 0.81), soaps/detergents/cosmetics (0.63 to 0.55) and solvent extraction/vanaspati (0.51 to 0.45).

An increase in ratio between the two years was witnessed in aluminium (from 1.87 in 1995-96 to 2.20 in 1996-97), fertilisers (1.49 to 1.70), textiles man-made fibres (1.43 to 1.58), chemical-organic (1.33 to 1.47), textile -cotton (1.38 to 1.45), paper (1.17 to 1.38), cement (1.09 to 1.28) and engineering (0.98 to 1.01).

In 1995-96, the major industries according to capital-output ratio were steel/composite/alloys, chemicals -inorganic and alkalis and forgings. In 1996-97, the major sectors were steel/composite/alloys, construction civil/turnkey, aluminium and hotels.

In 1995-96, the bottom five were transport, domestic appliance others, solvent extraction/vanaspati, photographic & allied products and food products.

The following year, the last five were transport, solvent extraction/vanaspati, domestic appliances, food products and leather footwear. The above analysis shows Essar Oil witnessed a significant increase in capital-output ratio during 1996-97.

The capital employed by Essar Oil increased 47.9 per cent to Rs 2,610 crore in 1996-97 from Rs 1,764.41 crore the previous year.

On the other hand, the company's value of production declined 24.8 per cent during 1996-97. The company continued to build up its international oil drilling operations during 1996-97. With three additional long term contracts from Petroleum Development Oman, the company has six drilling contracts there and is one of the largest drilling contractors in Oman.

The first contract in Qatar, under which operations commenced in April 1996, was followed by a second contract the same year.

The total value of the contracts, under execution in India and abroad, is $150 millions.

In the last two years, Essar Oil has made considerable progress in setting up the petroleum refinery project at Jamnagar.

ABB Lummus Crest has been entrusted the overall single point responsibility for the completion of the project.

In the case of Sanghi Industries, the capital employed figure increased by 178.4 per cent during 1996-97 and value of production increased by only 8.5 per cent during the same period.

The company is setting up a 2.61mtpa single stream cement plant in Gujarat at an estimated project cost of about Rs 735 crore.

The project, which enjoys the advantages of rich limestone deposits, good low cost fuel and a captive jetty, is in an advanced stage of implementation.

Commercial production is slated for the near future.

Due to this new cement plant the capital-output ratio was high in 1996-97. Through continuously monitored programmes of cost effectiveness and value engineering techniques, the company has concentrated on improving productivity.

Narmada Chematur Petro too improved the efficiency of capital use. Its capital employed figure increased by 58.8 per cent during 1996-97 while the value of production climbed 224.2 per cent during the same period.

The company accepted the aniline plant as successfully commissioned and running from the foreign collaborator, Chematur Engineering AB, Sweden.The company has established a full-fledged laboratory, equipped with sophisticated instruments to carry out various tests, right from the raw material stage to the final product. The quality checking of the final product is fully automated.

The mechanical erection of the toluene di-isocyanate (TDI) plant was completed in December 1996. This has helped the company significantly increase production figure during 1996-97.

Due to the higher production figure the capital-output ratio of the company declined significantly during the year under review.