Mrf Hits A Rough Patch

The companys net profit declined 23.57 per cent to Rs 23.05 crore. Operating profit margins have dipped from 10.91 per cent to 10.09 per cent. Sales increased by 9.64 per cent to Rs 1,015.2 crore.

The growth rate has been quite low as compared with last years rate of over 30 per cent. Other income increased 215.8 per cent to Rs 1.99 crore which contributed 8.6 per cent to PAT.

Higher interest burden, which increased by 30.62 per cent to Rs 40.22 crore, further affected performance. This was due to the tight liquidity conditions prevailing in the market as well as the high borrowings by the company. As on September 1996, the company had total borrowings of Rs 484 crore.

 

Depreciation too increased drastically by 64.99 per cent to Rs 34.17 crore due to the commissioning of the modernisation projects. However, a decline in tax burden by 65 per cent to Rs 7 crore cushioned the companys bottomline.

Analysts feel the companys performance for the second half too may not witness much growth. However, the drastic fall in raw material prices like natural rubber and carbon black will keep the profit margins at the same levels.

The company is likely to face stiff competition with multinational players like Bridgestone (in collaboration with ACC) and MRFs former collaborator Michelin entering the already crowded Indian market.

Reacting to the companys poor performance the scrip dropped from Rs 3,200 to Rs 2,975 in the last three trading sessions. However, in view of the strong fundamentals, it may witness buying interest at lower levels.