Interest Costs Dent Raymond

Apart from this, the cold-rolled silicon steel plant has taken more time than expected to stabilise, as a result of which production in the first half was a third of the year's target.

Thus, while sales moved up by 20.71 per cent to Rs 445.76 crore, operating profits could increase only by 14.53 per cent to Rs 83.61 crore. In turn, operating profit margins dipped from 19.76 per cent to 18.75 per cent.

But the major blow to its bottomline was on account of a huge interest cost, which increased from Rs 22.23 crore to Rs 39.09 crore.

As on March 31, 1996, borrowings jumped by 85 per cent to Rs 603.14 crore. A higher depreciation provision has further resulted in squeezing profits at the net level, which dipped by 65 per cent to Rs 14 crore.

 

The scrip has, however, not shown any major change probably because the results have already been discounted by the market. In fact, the stock has declined by almost 50 per cent of late.

One of the reasons for the decline, besides the increase in equity, could probably be the management's announcement for a non-voting shares issue.

On account of a bonus issue, the equity share capital increased from Rs 40.99 crore to Rs 50.05 crore. The company has deferred its plans to issue non-voting shares. Analysts expect turnover in the second half to be higher as production at the steel plant has now stabilised.

The commencement of the 12mw power facility will also help cement production at its Madhya Pradesh unit, which has been facing power cuts. With this, the plant is expected to attain a 70 per cent self-sufficiency.

Upgradation of the existing looms, which is expected to be completed in the third quarter of the current year, should also result in higher capacities for the textile division.

All these factors suggest that the company's performance in the second half should be better than the first half.