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S. Muralidhar

Smooth ride on tough terrain

PART of the Punjab-based Swaraj group, Swaraj Mazda (SML), has leveraged the strong performance of the commercial vehicles sector the past six quarters.

The company's has carried forward the impressive performance of last fiscal into the first quarter of year. With economic indicators pointing to a potentially strong second half, the offtake for commercial vehicles is expected to continue well into this year.

The highlight of SML's performance in the year ended March 2003 was the boost to its bottomline second quarter on. This fiscal, the company has reported a substantial improvement in its profits starting with the first quarter. With the automotive industry in sharp focus, the improved potential for exports to neighbouring countries and the steady flow of orders from the military establishment should mean a further boost in incomes for SML.

For the quarter ended June 2003, SML posted net operating revenues of Rs 96.1 crore, up 16 per cent jump from Rs 82.8 crore in the corresponding previous year quarter.

After a slight increase in personnel cost and other expenditures, SML's operating profits worked out to Rs 7.2 crore for the quarter ended June 2003 (Rs 4.9 crore). Interest costs were lower at Rs 30 lakhs compared to about Rs 1.2 crore.

As a result, SML's profit after tax for the quarter under review stood at Rs 4.1 crore compared to Rs 2.1 crore in the quarter ended June 2002.The EPS for the quarter works out to Rs 3.9 (not annualised) compared to Rs 2 in the first quarter of last fiscal. This performance was compared to a net revenue of Rs 372.4 crore, net profit of Rs 14.4 crore and an EPS of Rs 13.7 for the full year ended March 2003.

A strong player in the light commercial vehicles (LCV) segment, SML has been supplying to the Defence sector and in addition to the retail/institutional segments, it has also been catering to the specialty vehicles market (ambulances, mini-buses, etc.).

Though a late entrant into the medium and heavy commercial vehicles (M&HCVs) segment, SML has managed to post impressive growth in sales in this segment. For the first four months of this fiscal, SML posted a 76 per cent jump in sales compared to the corresponding previous period. However, M&HCV sales at 787 units is low compared to bigwigs such as Ashok Leyland and Tata Motors, in this segment.

In the LCV segment, in which SML has traditionally had a good run, the the Society of Indian Automobile Manufacturers (SIAM) numbers put the company's cumulative sales in the first four months at 2,098 units compared to 1,946 units during the corresponding four months period of the last fiscal. The SML stock has appreciated sharply in the last four months. It trades at about Rs 170 after more than doubling from Rs 82 in early May.

Given the company's performance in the first quarter and the continued expectations of a buoyant economy, SML shareholders can consider holding on to the stock for medium-term gains.

The stock price may also be influenced by the possible open offer that CDC may have to make since its acquisition of the Punjab Government's stake in the group flagship Punjab Tractors.

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