• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

S. Muralidhar

SHAREHOLDERS of ICI India can continue to hold the stock at the current levels of about Rs 140. At this price, the stock discounts its latest full year earnings per share of Rs 26.35 by about 5.3 times. The company's per share earnings has improved from the previous year's Rs 19.7. In comparison, the paints industry major, Asian Paints, trades at a P/E multiple of about 17.25 times.

ICI India's strategic sale of the pharmaceutical and synetix businesses during the last two years has made the company leaner and more profitable. While the company's performance during the just ended fiscal is strictly not comparable with the previous year, it still indicates the potential of its continuing businesses.

For 2002-03, ICI India reported gross sales of Rs 715 crore, only marginally behind last year's sales, despite the divestment of the synetix business. Operating profit at Rs 87 crore grew by 17 per cent over the corresponding previous year figure.

The company achieved a record profit after tax (PAT) level of Rs 107.7 crore, which was 34 per cent higher than last year, due to improved performance in the continuing businesses and higher exceptional income, which again was mainly due to the divestment of the synetix business. Continuing business sales grew by nine per cent over last year even as operating profit recorded a growth of 49 per cent.

ICI India's synetix business was sold to Johnson Matthey Chemicals India Private Ltd on December 2, 2002 for a gross consideration of Rs 155.2 crore (including Rs 13.29 crore towards adjustment for increase in the value of net assets).

The operating results and the profit on divestment of the business (net of provisions for related legal and other expenses and transaction costs) have been considered accordingly during the 2002-03 fiscal. As a result, the exceptional items for the year also consisted of the profit on sale of the catalyst business amounting to Rs 84.22 crore.

In terms of contribution to the company's total revenues, the paints business constituted over 50 per cent during the just ended fiscal compared to a lower 44.29 per cent contribution by this business segment during the previous fiscal. The pharmaceutical business of the company, which was divested in 2001-02, contributed Rs 54 crore during that year. However, though this segment's revenues were not available during 2002-03, the rise in revenues from paints made up for what was possibly lost from the sale.The paints business also turned in a profit during the fiscal 2002-03 compared to a loss during the previous year.

While the revenues and margins of the industrial chemicals business came under pressure during the fiscal under review, the consistent performance of the industrial specialties division and the good performance of the paints division helped boost the company's bottomline. ICI India's performance was also aided by the over Rs 18 crore increase in exceptional income and `other income' during 2002-03 compared to the previous fiscal.

However, the near-doubling of interest costs was a drain on the company's profits.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Yokogawa Bluestar: Accept

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line