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S. Vaidya Nathan

IT IS not often that large-cap companies walk away with the honours in the earnings season. Before 2002-03, the slow-down in industrial growth and sluggish commodity prices hampered the performance of such companies, which are largely in the economically sensitive sectors. But these two key parameters — industrial growth and commodity prices — took a turn for the better in 2002-03.

Here are ten companies that piggybacked on these trends to have a good January-March quarter as well as 2002-03.

Tata Steel: It is a long time since Tata Steel raked in the kind of profits it did in 2002-03.

A combination of higher steel prices, cost control measures over the past three years, rationalisation of labour force, availability of the contemporary cold-rolling facility and lower interest costs boosted the bottomline.

Profits of Rs 1012 crore make it well-poised to pursue growth and tackle any sluggish trend in prices that may lie ahead. Investment action: Hold the stock.

Tata Engineering: The other Tata group bigwig, Tata Engineering has turned around with profits of Rs 300 crore for the year. The growth in commercial vehicles, cost control and the positive contribution by the Indica car business (where volumes have been impressive) has moved Tata Engineering into a different gear.

The success or otherwise of Indigo will be a factor to watch. But with an incremental outlay of Rs 350 crore, it may not drag the performance of the company as much as Indica did in the first two years. Investment action: Hold and buy on declines.

TVS Motor: In 2002-03 TVS Motor scaled up its operations on a scale not undertaken in the past, piggybacking on the hugely successfully Victor. Victor has done for TVS Motor what Splendour and Passion did for Hero Honda.

Sister concerns — Lakshmi Auto Components and TVS Srichakra — also benefited immensely from TVS Motor's success.

Investment action: Given the sharp spurt in prices of these stocks, investors can contemplate profit booking and re-entry at lower levels.

Gujarat Ambuja: Compared to the other nine in the list, an earnings growth of about 25 per cent in the January-March 2003 quarter is not outstanding by any yardstick.

But considering the fall in cement prices between 6 and 12 per cent, a better perspective is available on the numbers. Aggressive volume push and high operating efficiencies helped Gujarat Ambuja pull ahead of its peers in the industry. Investment Action: Buy

Grasim: It is one of better cement stories along with Gujarat Ambuja. But its earnings kickers have come from the domestic monopoly and export success in viscose staple fibre and a sharp swing in contribution from its sponge iron and textiles businesses.

Sitting on piles of cash, one can expect efforts at growth through acquisitions and restructuring once the L&T issue is out of the way. Investment Action: Buy.

Bongaigaon Refinery: This is a low-priced play in the oil sector that has attracted considerable attention in the market. Benefits from fiscal concessions for its presence in the North-East have provided a one-time push to the scale of its profits.

The growth rate may not be sustainable, but the scaling up may be here to stay. Investment action: This stock may be worth keep, and tracking for investment at lower price levels.

ABB: Even as uncertainty clouds its global operations, ABB's Indian arm had an encouraging quarter. Its strong presence in the power sector helped it roll along smoothly in the last couple of quarters after sluggish trends in the last couple of years. Investment Action: Hold.

Indian Rayon: This is one more cash-rich story from the Aditya Birla stable. Aided by a sharp recovery in carbon black prices and strength in its rayon / fibre business, Indian Rayon has clocked a more than three-fold growth in earnings in 2002-03. Investment action: Restructuring is still in the offing and buying can be considered.

Oriental Bank: In a quarter that saw banks in the limelight, Oriental Bank stood out amongst its peers. A massive reduction in NPAs, the usual bounty from treasury operations and good credit-linked interest incomes boosted its bottomline. But the share price run-up was sharp. Investment action: book profits.

MphasiS BFL: Probably the only bright story from the IT sector, MpahsiS BFL continued with its trend of growth rates in excess of about 45 per cent into the January-March quarter too.

A strong presence in the BPO segment also holds scope for scaling up revenues and profits. Investment action: Buy on declines.

The big five that slipped

Cipla: The fall in revenues due to VAT problems led to a decline in earnings by about 23 per cent. Most pharma companies had an indifferent quarter. But Cipla was the prominent disappointment. Investment Action: Hold

Balaji Telefilms: With quite a few serials taken off the air, revenues and earnings slipped sharply compared to the October-December quarter.

The stock price dipped about 30 per cent in the last month. But most negatives appear priced in. Sentiment can swing quickly (even if one new success story emerges) in what is still the premier content provider for television channels. Investment action: Buy.

Ballarpur Industries: India's largest paper manufacturer simply does not have the earnings numbers to show for the firmer trends in paper prices, as compared to the previous year. Most of its peers posted growth rates of over 50 per cent while BILT managed a modest 20 per cent. Investment action: book profits.

Wipro: Billing rate pressures led to a modest 1 per cent decline in profits despite revenue growth of about 32 per cent (here it lagged Infosys by some distance). The outlook is still riddled with uncertainty. Investment action: Pare exposures.

HLL: The trend of modest top-line growth is starting to show up, with similar patterns in earnings as well. But a good monsoon may lead to a `sentiment'-driven rally in the stock price. Investment Action: Hold and sell on uptrend.

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