The Hindu Business Line : Goa Carbon up on turnaround hopes

THE Goa Carbon stock has been on the move as the market discovered the turnaround prospects of the company. The counter on Wednesday closed up around 7 per cent with good volumes. It created a 52-week high on Monday.

According to market sources, the Dempo group outfit, which produces calcined petro coke (CPC), used in manufacturing aluminium, steel, graphite and titanium dioxide, has managed to extract a 30-35 per cent hike in its product prices.

Major negotiations with its overseas and domestic consumers are over and the remaining of the annual supply contracts is to be wrapped up by the end of this month. In rupee term, the price rise is to be varying between Rs 1,000 and Rs 1,500 a tonne.

According to a fund manager, the change in fortunes on account of better price realisation and improved turnover, savings on import duty on raw material and interest costs is likely to lead to a substantial jump in profitability. "A loss before tax of Rs 1.65 crore in 2004-05 may transform into a profit before tax of around Rs 27 crore this fiscal if the average product price escalation is placed at Rs 1,000 per tonne," he added.

Management sources confirmed that the negotiations for annual contracts yielded a substantial escalation so far as demand for CPC has been seeing a strong growth across the world.

The company, which had dipped into the red last fiscal, is on a sharp turnaround course this fiscal for a number of reasons. "Over the last fiscal, the company had increased it capacity to around 2.7 lakh tonnes, reduced interest cost by half to 6 per cent by switching over to FCNRB from rupee loan and achieved greater operational synergy its three units," a company source told Business Line.

Reduction in import duty of the raw material — raw coke or green coke — by 10 percentage points has paved way for a savings of Rs 70 per tonne. Moreover, stabilisation in ocean freight rates this year has also given a significant cost relief for imports of raw material and exports of finished products (around 70 per cent of its turnover is through exports).

The sources also confirmed that the company has moved the Panjim Bench of the Bombay High Court against an order by the Tax Appellate Tribunal upholding disallowance of the I-T deductions pertaining to a period between 1997-98 and 2001-02 throwing a possibility of a tax demand of Rs 12.86 crore.

The management was confident that legally it was on a strong wicket. The reserves of the company were also enough to cover such a contingent liability, they said.

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