Change Of Guard

THE COMPASS

The change in the global ownership of Thomas Cook, UK is unlikely to affect Thomas Cook India (Thomas Cook) in any significant manner. Preussag AG held the majority stake in Thomas Cook, UK, with a 50.9 per cent stake. The other major stakeholders are Carlson Companies which owns a 22 per cent stake and Westdeutsche Landesbank that holds the balance 27.9 per cent. Preussag has been successful in its bid for control over UK's leading tourism company Thomson Travel. Hence, Preussag has to relinquish its control over the Thomas Cook group due to competition fears.

Carlson Companies has indicated its interest to increase its stake to 100 per cent, according to a news report. Carlson Companies is a global leader in corporate and hospitality services with a strong presence in travel and leisure. Also, reports say that along with some other players, Thomas Cook could be a possible acquisition target for Germany's second largest package holiday operator C&N Touristic.

 

In India, the impact on the company is not likely to be significant. The company will continue to operate under the banner of the Thomas Cook group, enjoying the access to global resources that it did. Moreover, about 70 per cent of its revenues came from the foreign exchange business with corporate travel and leisure travel accounting for the rest.

The company has launched a major e-business initiative to capitalise on the emerging travel opportunities from the Internet and also plans to increase the share of leisure travel in its portfolio. Its global products have been launched under the banner of Thomas Cook's global service reach which will obviously continue. Thus, operationally the deal will have no impact on Thomas Cook except that from a business perspective, it helped to have Europe's largest tourism company as the main shareholder in the holding company.

Eternit Everest

Eternit Everest is still having its share of problems, as seen from its 1999 annual report. Excess capacity in the asbestos cement market continues to be a problem, resulting in price competition as companies try to maximise utilisation. That has hurt the bottomline, however, as Eternit faced a six per cent fall in price realisations while its volume sales rose eight per cent.

Profit during 1999 has still increased substantially but this is due to excise duty exemptions and other income from write-backs of customs duty paid in earlier years. The company has paid Rs 0.21 crore as excise in 1999 while it had paid Rs 5.82 crore as excise in the previous year.

Its operating profit margin during 2000 fell to 0.02 per cent from 4.4 per cent during the previous year. Now, the company is trying to increase the share of value added products and is also diversifying its product portfolio. The company has started production trials for making asbestos-free building boards and polypropylene reinforced asbestos-cement roofing sheets. Its cash flow statement reflects difficulties on the working capital front too. Though operating profit was higher during 1999, its cash generated from operations has dropped to Rs 1.82 crore from Rs 13.3 crore. This, coupled with its interest payments and need to finance capital expenditure saw its debt burden increase to Rs 23 crore from Rs 10.58 crore in the previous year. Interest costs increased by 141 per cent to Rs 1.93 crore during the year, and unless its working capital situation improves, will increase further in the current year. Market conditions have been difficult and the recent drought in certain states is not going to help matters.

Bajaj Auto

Bajaj Auto's results reflect the difficult conditions faced in the scooters market last year, which has resulted in a 8.8 per cent drop in volume sales during 1999-00. Motorcycle and scooterette sales have increased substantially but the large contribution to turnover from motorcycles has affected sales growth.

Overall volume growth in 1999-00 was only 3.6 per cent. Sales in 1999-00 has increased by about five per cent to Rs 3810.49 crore but net profit increased by 13.54 per cent to Rs 613.73 crore. One main reason was higher other income which increased by 52.77 per cent to Rs 405.05 crore. This ensured that the huge increase in materials' cost did not affect performance adversely.

Though the company held on to staff and other costs, operating profit margin for the year fell to about 13 per cent from 17.5 per cent in the previous year.

The company is focusing on motorcycles and ungeared scooters for regaining lost ground. It will be investing in the ungeared scooters business but these investments will take time to yield returns. It has launched three products which will result in some improvement in performance in the current year. Motorcycles and scooterettes will continue to be crucial to growth till then. Relatively lower agricultural growth and the drought situation will affect rural demand, which is a crucial target segment for motorcycles.