Sumo Drives Up Profits

However, a dependence on loan funds prior to the company's GDR issue has driven up interest costs from Rs 69 crore to Rs 130 crore. This, together with an enhanced tax provision of Rs 142 crore have made a dent in the company's bottom line.

But cushioned by a 30 per cent increase in non-operational income, net profit at Rs 330.53 crore was 45.91 per cent higher compared with Rs 226.53 crore posted last year.

A dilution of equity due to a bonus issue and the GDR offering has led to a dip in the earnings per share from Rs 15.98 to Rs 12.92.

 

Telco today holds a commanding 73 per cent share of the market in the HCV segment. And despite heavy competition in the LCV segment, the company has managed to maintain its market share of 59 per cent. But market sources point out that its domination in the HCV and the LCV segments is fast coming under threat from the Ashok Leyland-Iveco combine.

Experts point out that rising industrial production and a gross wagon shortage could result in an annual growth rate of 24 per cent in HCV's and 35 per cent in LCV's, which augurs well for Telco. Playing the numbers game in the upscale car market, it is fast switching production facilities from Sierra and Estate to Sumo. In fact, it is the increased volumes of Sumo that have formed a major part of the sales for the first half of the current fiscal.

But the rationalisation of the excise duty structure in the recent budget is likely to act as a dampener for Telco. In particular, the 10 per cent excise hike on its best-seller Sumo has placed the vehicle on par with all the other players. With the vehicle now set to cost more, analysts suggest that the phenomenal growth rates achieved last year could slow down. An across-the-board hike in excise for LCV's should also affect revenues.

Additionally, the proposed launch of the indigenously researched small and medium passenger cars in 1998, coupled with the successful launch of the Mercedes E 220 should enable Telco to garner a strong market presence in each vehicular segment which augurs well for the future. Moreover, the utilisation of GDR funds would also help the company to cut its interest burden in the second half of 1996-97.