Corporate Results Likely To Rebound In 97-98

Its darkest before dawn. Or so a Business Standard survey indicates. Led by Reliance Industries, major corporates are expected to rebound from the poor performance of 1996-97 to post improved results this year.

A Business Standard survey of a cross-section of research outfits, including SSKI Securities, Peregrine Capital and SBI Caps shows that several companies are expected to post sales and profit growth of between 25 and 50 per cent for 1997-98. This compares favourably with the results for 1996-97, when several companies actually registered negative growth in these categories.

While some corporates are expected to post higher volumes, others will benefit from either improved prices or lower costs. These factors are expected to pull several blue chips like Grasim and Hindalco out of their current morass.

 

Apart from ONGC, none of the oil companies have declared their 1996-97 results yet. Analysts expect high interests costs to hit their performance. However, these companies could still strike it rich in 1997-98 if the government hikes oil prices.

Analysts are particularly bullish on Reliance Industries Ltd (RIL). The petrochemicals giants net profit is expected to jump from last years Rs 1,323 crore to about Rs 2,000 crore, an increase of over 50 per cent. Similarly, sales net of excise and inter-divisional transfers are expected to be in the range of Rs 8,800-9,200 crore, against last years Rs 6,441 crore.

Explaining the reason for the researchers optimism about Reliance, Peregrine Capital research head V V Sivakumar said: With volumes at their (RILs) command, there is no reason why they cant grow more than 25 per cent per annum.

Reliance commissioned most of its polymer and polyester capacities last year, along with a 7.5 lakh tonne naphtha-cum-natural gas cracker at Hazira (Assam). The companys raw material import costs will decline, while high volumes are expected to offset a probable decline in product prices.

On the other hand, the Aditya Birla groups aluminium major Hindalco is expected to ride increased aluminium prices to post a profit of Rs 640 crore, a 64 per cent jump over 1996-97 figures of Rs 390 crore.

The price of primary aluminium metal is likely to rise this year following London Metal Exchange (LME) prices which are currently close to $1,700 per tonne. From an average of Rs 67,700 per tonne, realisations are expected to jump to Rs 74,000 per tonne.

Hindalco will also benefit from increased production from its smelter, pushing total production from 1.66 lakh tonnes to 2.05 lakh tonnes.

Another Aditya Birla group company, Grasim, is also expected to do better this year, with net turnover projected to rise 24 per cent to Rs 3,850 crore from Rs 3,086.61 crore.

Grasim will benefit from higher volumes. Power cuts and non-availability of railway wagons will not affect it as the company has either set up captive power plants or diesel gensets. It has also procured railway wagons to ferry coal to its plant, said an FII analyst who regularly tracks Grasim.