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G. Madhan

THE improvement in the industrial growth rate and commodity prices in 2002-03 has not led to a higher number of turnaround stories in India Inc.

Even as companies with linkages to the industrial economy and commodity prices have witnessed a turnaround, companies from other sectors have slipped into the red. In the fiscal 2002-03, 104 companies moved from losses to profit and 113 companies have acquired a splash of red on their earnings card.

Companies from the steel, auto ancillary and textile sectors feature prominently among the turnaround stories. On the other hand, fertiliser and chemical producers, optical cable manufacturers and state-owned telecom companies moved from black to red.

Of the 1,450 companies that have declared results for the fiscal, 15 per cent of them have witnessed a swing in their fortunes. This is slightly higher than that of 13.8 per cent registered in 2001-02. The difference is largely due to the swing in fortunes of commodity players, especially in the steel sector.

Some of the prominent companies that moved from red to black include Bongaingaon Refinery, Tata Engineering, Jindal Iron & Steel, Eveready Industries and Gujarat Alkalies & Chemicals. Major companies that moved from black to red include ITI, Nagarjuna Fertilizers, Sterlite Optical, and State Trading Corporation.

Steel manufacturers started moving towards positive ground from the October-December 2002 quarter onwards. The buoyant prices of finished products also played a crucial part. The companies that moved from losses to profit includes companies of varying sizes — ranging from large players such as Jindal Iron & Steel to smaller ones such as Chase Bright Steel and Uttam Galva Steels.

According to the estimates of Central Statistical Organisation, textiles witnessed a negative growth in this fiscal. However, it did not stop select manufacturers such as JCT, NRC, Lakshmi Mills, Central India Polysters and Soma Textiles and machinery manufacturers like Veejay Lakshmi Engineering to form the list of turnaround candidates. The fiscal incentives such as reduction of customs and excise duties announced in the Budget are likely to act in favour of the textile companies in the future.

The strong growth witnessed by the auto segment has aided auto ancillary manufacturers to register good numbers this quarter. Amforge India, JBM Tools and tyre manufacturers Vikrant Tyres moved from red to black. Tyre companies such as Dunlop India and Good Year India that were making heavy losses also started moving towards the positive ground from the January-March 2003 quarter.

For optical cable manufacturers, the losses began from the third quarter of the last fiscal. For instance, Sterlite Optical, made losses for two quarters in a row and ended the year with a negative earnings card. Pricing pressures and shrinkage in demand for optical cables continues to act as a drag on this company.

Telecom cable manufacturers such as Tamilnadu Telecommunications, Aksh Optifibre and Birla Ericsson Optical also ended the year in the red. Telecom equipment manufacturers such as ITI and Punjab Communication also ended the second quarter in the negative territory.

A streamlining of the subsidy system appears to have affected fertiliser manufacturers. Nagarjuna Fertilizers and Fertilizers & Chemicals Travancore who both finished the year with net losses.

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