The Hindu Business Line : Swaraj Mazda: Hold

SWARAJ Mazda (SML), part of the Punjab-based Swaraj Enterprises and the country's third largest manufacturer of light commercial vehicles (LCVs), could come into the limelight again. With an excellent first quarter performance to boot, the company's stock could see some speculative interest, if the disinvestment of equity in Punjab Tractors by the Punjab State Industrial Development Corporation (PSIDC) leads to a change in the equity holding pattern within SML too.

For the quarter ended June 2002, SML reported a net operating revenue of Rs 82.30 crore compared to a net revenue of Rs 62.50 crore for the corresponding previous period. Though the depreciation provision was higher this quarter, the reduction in interest costs and the savings in operational costs helped the company post a net profit of Rs 2.10 crore, after providing for tax of Rs 1.10 crore. This was in comparison to a net profit of Rs 90 lakhs for corresponding previous period.

SML had posted revenues of Rs 295.60 crore and a net profit of Rs 6.70 crore for 2001-02, an increase of 25 per cent in revenues and an even higher 62.5 per cent increase in the net profit in 2001-02 compared to the previous fiscal.

Based on the first quarter performance, SML's earnings per share (EPS) worked out to Rs 2, compared to Rs 0.90 for the corresponding previous quarter. On an annualised basis, the EPS for the current year could be about Rs 8 compared to Rs 6.50 recorded for 2001-02.

SML had reported an increase of over 20 per cent in its vehicle sales volumes last year. The uptrend in sales is likely to continue.

Driving into new terrain.

The light commercial vehicle segment has been the best performing segment in the industry. SML has been particularly successful in promoting its mini buses. As part of its plans to tap new user segments, SML is now shifting its focus from the Government and proposing to concentrate its sales efforts towards the retail and institutional segment of the LCV market.

Further, the company is also planning to increase production capacity at its Punjab plant to 8,000 vehicles on a single-shift basis by the end of this year. It is now working at a capacity level of about 6,500 units per annum on a single shift basis.

With the current uptrend in commercial vehicle sales projected to be sustained during the next few years, SML hopes to raise the capacity to 15,000 vehicles per annum on a double shift basis, by 2003-04.

With the possibility of the PSIDC divesting its stake in Punjab Tractors, the SML stock could witness a speculative rise in price in the weeks to come, as the Punjab Government has set the ball rolling with the appointment of a merchant banker.

Earlier this year, the SML stock had hit a high of Rs 98 after the State announced its disinvestment plans.