Tough year for business groups

The Rs 30,000 crore Tata group had a mixed year with most of the companies in the stable except for Tisco recording higher sales and profits. Truck giant Telco, in fact, became the first private sector company to record Rs 10,000 crore plus sales in the country. Major jewels in the Tata crown like Tata Tea, Tata Infotech and Indian Hotels also showed good performance for the FY ended March 1997. However, the net profit of Tata Electric Companies declined by 48 per cent to Rs 229 crore from 443 crore last year.

The Aditya Birla group, on the other hand, had a tough time. Hindalco and Grasim, the flag ship of the group, witnessed a sharp fall in profits. “Cheaper cost for imports, high inventory levels and fall in price levels affected aluminium companies last year. But this year things appear to be good,” said an analyst with an investment house. Normally, companies with a diversified product portfolio escape from the clutches of recession.

Grasim, which falls in this category, failed to stand by the trend this time.Even though the petrochemical and textile segments generally faced a downturn in fortunes, Reliance Industries managed to swim against the tide and remained as the largest profit-making company with a net profit of Rs 1323 crore. As company chairman Dhirubhai himself told the shareholders, “In 1996-97, product prices internationally were under severe pressure and this were refelected in India as well. However, due to the good growth in volumes in India, Reliance has been able to operate its plants at full capacity and thus more than offset the effect of the decline in product prices.”

However, this was not the case with Bombay Dyeing run by Nusli Wadia. The net profit of the company nosedived to Rs 35.70 crore from Rs 117.10 crore in the previous year. According to company officials, substantial reduction in DMT prices sales of DMT came down from Rs 858.54 crore to Rs 441.21 crore coupled with dumping of PTA by Far East countries led to the sharp fall in profits.

The Thapars had a tough year with Ballarpur Industries (BILT) the flag ship of the group showing a decline in net profit from Rs 102.48 crore to Rs 38 crore. However, Greaves, another Thapar firm, showed a 27 per cent rise in net profit to Rs 41.65 crore. Thapar group officials blamed the down cycle in paper and chemicals for the fall in net profit of BILT.

Jindal Strips of the Jindal group also witnessed a fall in net profit to Rs 54.9 crore from Rs 92.42 crore previously. The fall in Jindal’s profit was mainly due to higher outgo on depreciation, interest charges and minimum alternate tax. Similarly the profit of Ispat Industries of the Mittals came down during the year. Ispat failed to achieve the profit projected in the offer letter of its recent mega rights issue.

The recessionary trend in the chemical/petrochemical sector is evident from the performance of Nocil belonging to the Arvind Mafatlal group. The net profit of the company fell to Rs 59.81 crore from Rs 91.15 crore last year. There was not only a fall in sales due to lower sales volume of petrochemical and polymer divisions, margins in these divisions were affected by hike in administered prices of naphtha and other inputs. SPIC, belonging to the Muthiahs, was in the same boat as its sales turnover and net profit declined during the year.

While Essar Steel showed lower profits following higher depreciation, interest charges and weak market conditions, Essar Oil, another company belonging to the Ruias came out with better profits. However, Ceat of the RPG group had a tough time and registered lower profits. Utility vehicle maker Mahindra & Mahindra, run by the Mahindra family, and Ashok Leyland of the Hindujas showed a better performance.

However, the current year promises to be a better one for business groups following the improvement in general demand and fall in interest rates.

MIXED BAG(Rs in crore)pCompany Sales Net profit

96-97 95-96 96-97 95-96

Hindalco 1157.1 1251.8 390.5 401.1

Grasim 3086.6 2742.1 274.5 331.8

Ind Rayon 1641.1 1402.4 214.7 184.7

Reliance 8730.0 7786.0 1323.0 1305.0

Larsen 5387.7 4,324.6 411.3 388.6

Tisco 6351.4 5854.1 469.2 565.7

Telco 10128.4 7881.0 762.3 530.0

A Leyland 2490.1 2015.80 124.9 113.1

Nocil 1174.3 1204.3 59.8 91.2

BILT 1343.6 1441.2 38 102.4

B Dyeing 1133.4 1492.5 35.7 117.1

M&M 3607.5 2899.5 209.3 168.0

PIC 1832.1 1842.8 72.6 81.1