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S. Muralidhar

INVESTORS holding on to the Clariant India stock may consider paring exposures at the current price of around Rs 145. At this price, the Clariant stock trades at a price-to-earnings multiple of about 8.7 times. During the past 52 weeks, the stock had touched a high of Rs 172 and a low of Rs 104.

Earlier this year, it had touched higher levels on the back of market rumours that its parent, Clariant International, may consider a buyback of shares in the Indian subsidiary. However, with no such announcements forthcoming from the Swiss multinational, the Clariant India stock may not move in tandem with previous trends.

Clariant is a leading manufacturer and supplier of dyes, masterbatches and speciality chemical products for the textile, leather and appliances industries. While the dyes and intermediates segment, contributing 54 per cent of the company's sales, recorded a growth of 23.5 per cent, the specialty chemicals segment, contributing 44 per cent of the company sales, achieved a growth of 3.9 per cent over the previous year.

However, Clariant India's masterbatches division continued to be a drain on its bottomline. The segment contributed to a loss before interest and tax of Rs 46 lakh. Revenue from masterbatches was also lower at Rs 7.33 crore, compared to the previous year's Rs 8.08 crore.

Despite an impressive showing on the costs and efficiency parameters, Clariant India could not post a noteworthy improvement in its bottomline for the just-ended fiscal. The company's sales turnover (net of excise) for 2002-03 was up 13 per cent at Rs 318.9 crore compared to Rs 281.7 crore reported in the previous year.Further, the adverse market conditions prevailing in the leather industry had resulted into lower domestic sales growth of 3.5 per cent. However, the company achieved an impressive growth of 35.9 per cent in exports during the year.

The dyes and intermediates division was the star performer for Clariant during 2002-03. This segment contributed to the biggest increase in revenues and also constituted the largest chunk of the company's exports.

Overall, Clariant's operating profits in 2002-03 continued to be affected due to the spiralling price rise in some of its basic raw materials and the continuous appreciation of European currencies resulting into higher input costs. After considering the extra provisions of Rs 3.3 crore due to change in the basis of accruing the liability towards gratuity and the slightly higher tax incidence, profit after tax was marginally lower at Rs 19.58 crore compared to the previous year's Rs 20.05 crore.

Clariant's working capital management has resulted in further improving its benchmark in inventory and receivables management in the industry. While the receivables constitute 12.4 percent of gross sales, together with inventory, gross working capital consists of 84 days of gross sales compared to 91 days during the previous year.

Given Clariant's parentage and leadership position in the industry, shareholders can consider re-entering the stock at lower levels.

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