The Hindu Business Line : SRF Polymers: Weak links in the chain

An investment up to one year can be considered. Longer tenures, however, can be avoided considering the drop in earnings in 2003-04 and the operational risks involved.

Scheme and features: The company offers only the cumulative scheme . The interest rate for the one- and two-year options is the same at 9 per cent. As the interest is compounded at quarterly rests, the annual yields for the same are 9.31 per cent and 9.74 per cent respectively. The minimum deposit amount under the scheme is Rs 15,000.

Further details can be had from the registered office at Express Building, 9-10, Bahadur Shah Zafar Marg, New Delhi - 110 002.

Business prospects: SRF Polymers makes fishnet twine, engineering plastics and polyester films. The Fishnet twine business — which makes fishnets, fishing lines, spindles, tapes, nylon belts and straps — contributes 43 per cent of the company's revenues.

The engineering plastics business makes engineering plastic compounds used as the raw material for various applications in automobiles, white goods, electrical, textile machinery, and electronics sectors. This segment contributes 27 per cent of the turnover. The fortunes of this business segment, however, depend on the cyclical nature of the automobile industry. The company plans to sell its polyester film operations to SRF Ltd for Rs 50 crore.

The company has good growth prospects as far as the revenues go. However, the intense competition from the unorganised segment may put the margins under pressure.

Any sharp increase in the cost of key raw materials, namely caprolactarn, and any further decrease in the import duties may also impact the company's profitability adversely.

Financials: The company's revenues have grown steadily over the past three years. Sales, in 2003-04, grew 12.9 per cent to Rs 165.1 crore, over the previous year.

Earnings, however, were down by Rs 13 per cent to 13.3 crore. Net profit margin also dropped to 1.9 per cent ( against 2.6 per cent earlier).

However, at the operating level, profits were up 11.6 per cent at Rs 15.4 crore. The operating margin was 9.3 per cent (9.4 per cent).

The decline in the profits, at the net level, was due a to sharp rise in the interest and depreciation costs. The interest coverage ratio has also declined to 1.9 ( against 2.9 the previous year).

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