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S. Muralidhar

`Steel'ing its way though.

THE Foseco India stock has climbed up to Rs 188 now, from about Rs 102 at the beginning of May. Investors can continue to hold on to the stock at the current levels and benefit from the potential improvement in performance of the steel and automobile sectors. Partial profit-booking may be considered after the stock crosses the Rs 200 level.

Foseco India's showing in the first half of this year was good and reflects the improved performance of the steel foundry and components industry.

The company, one of the largest manufacturers of metallurgical chemicals for the foundry industry, seems to have benefited from the uptrend in the automobile and transportation sectors.

Foseco supplies additives and chemicals to the foundry industry and auto components and foundry products to automobile manufacturers. Its performance has also been more impressive during the second quarter ended June 2003 compared to the corresponding previous quarter. This quarter has made a larger Rs 4.45 crore contribution to the total first half profits of Rs 6.9 crore.

For the half year ended June 2003, Foseco India reported a total income from operations of Rs 42.2 crore and a net profit of Rs 6.9 crore compared to an income of Rs 40.9 crore and a net profit of Rs 6.6 crore for the corresponding half year ended June 2002. There was a marginal increase in raw material costs in keeping with the increase in sales volumes.

However, the company managed a steep cut in staff costs, possibly by the labour rationalisation exercise during the period under review. Staff costs, including salaries, were down to Rs 3.23 crore during the six months ended June 2003, compared to Rs 4.07 crore during the corresponding previous period.

Foseco India recorded net interest income of about Rs 42 lakhs during the first half of this year compared to an interest charge of about Rs 51 lakhs during the same period last year.

The company also made a provision for deferred tax of Rs 1.48 crore. Despite the relative performance figures for the first half of this year and last, the performances are not exactly comparable since year 2002 numbers include the results of the discontinued steel business.

For the quarter ended June 2003, Foseco India reported a total income of Rs 21.9 crore and a net profit of Rs 4.46 crore, against a total income of Rs 18.2 crore and a net profit of Rs 2.09 crore for the corresponding previous quarter.

The earnings per share (EPS) for the quarter ended June 2003 works out to Rs 6.98 as against Rs 3.27 for the corresponding previous quarter. The EPS for the first half of this year stood at Rs 10.81.

Foseco India makes 400 products for the metallurgical industry, including for the steel and foundry industries.

The products are in the nature of additives and consumables and improve the physical properties and surface quality of castings and reduce cost of melting, moulding and castings.

The company's market covers integrated steel plants such as SAIL and Tata Steel, mini-mills such as Mukand, Kalyani, besides foundries such as Ennore Foundries and Lakshmi Machine Works. Its plants are located in Kolkata, Jamshedpur, Pune and Pondicherry.

After the open offer made by its overseas parent — Burmah Castrol plc of the UK — in November 2001, the total shareholding by foreign promoters in Foseco India exceeds up to over 66 per cent. The total public shareholding in the company is about 12.5 per cent.

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