The Hindu Business Line : Escorts: Ride it for a year

Schemes and features: Escorts has cumulative and non-cumulative schemes with the same interest rates. Since the interest is compounded at quarterly rests (see table for rates) for the cumulative scheme, the effective yields for the same are 8.77 per cent for one year, 9.74 per cent for two years and 10.84 per cent for three years.

Under the non-cumulative scheme, the interest is payable at quarterly intervals. Further details can be got from the company's registered office at 11, Scindia House, Connaught Circus, New Delhi - 110 001.

Business prospects: Escorts Ltd, the flagship of the Escorts group, makes agricultural machinery (tractors, paddy transplanters and sugarcane harvesters), auto ancillary components and railway components.

Agricultural machinery products are the breadwinners of this company with this segment contributing over 60 per cent of the total sales.

Hence, to a large extent, the company's fortunes are subject to the vagaries of the monsoon. For instance, the company witnessed a sharp drop in its top and bottomline in the last three years, due to the poor monsoons.

However, given the good rains this year, the scene may change.

Financials: For the year ending March 2003, the company's sales dropped 28.7 per cent to Rs 789.5 crore from the corresponding previous period.

However, its net profit rose two-fold to Rs 24 crore. The operating profit margin was 11.2 per cent (5.3 per cent) and the net profit margin 3 per cent (0.7 per cent).

This sharp rise in the profits and the profit margin is to a large extent due to the sizeable increase (over two-fold) in `other income' from sale of its equity holding in some of its joint-ventures such as Escorts JCB and Escorts Claas in 2002-03.

However, this extraordinary income buffer may not be available for the coming years.

The company has shown signs of improvement as its net sales grew 23 per cent for the quarter ending June 2003 over the corresponding prior period.

The company has also managed to cut down its losses during this period. However, given the high-risk business profile, an investment beyond a year can be avoided.

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