Slowdown Hurts Sundram

And higher interest burden and depreciation further depleted earnings with profit before tax declining by 4.12 per cent to Rs 35.35 crore.

Operating profit margins were pared marginally from 18.37 per cent to 18.15 per cent.

Sales increased by 14.44 per cent to Rs 345.86 crore. However, this is considerably low compared with a growth of 26 per cent in 1995-96.

Exports also showed a lower growth of 18 per cent to Rs 45.54 crore, compared with a growth rate of 23 per cent in the previous year.

Traditionally, the sector has been working capital-intensive. And Sundram Fasteners also incurred huge capital expenditure, meaning it had to go for huge borrowings which stood at Rs 112.05 crore at the end of 1995-96.

 

Due to this the interest burden increased by 48.15 per cent to Rs 21.33 crore.

Depreciation rose by 38.04 per cent to Rs 7.62 crore. This was due to the commissioning of the modernisation and expansion projects.

However, the decline in tax liability by 49.23 per cent to Rs 3.30 crore cushioned the bottomline. Net profit increased marginally by 5.53 per cent to Rs 32.05 crore.

The stock, which was trading above Rs 700 in September 1996, has depreciated to the current levels of Rs 590. However, strong fundamentals might staunch further decline in the scrip.

The company's scrip could also become the first sector stock to ascend once the auto industry picks up.

The scrip discounts the current earnings around 19 times.