Financial Daily from THE HINDU group of publications
Sunday, Sep 22, 2002

Investment World
Port Info

Group Sites

Investment World - Stocks
Markets - Recommendation

Ballarpur Industries: Hold

S. Vaidya Nathan

SHAREHOLDERS can stay invested in the Ballarpur Industries' stock This may enable them to take advantage of any upside in the valuation of the stock if the recovery in the paper industry takes firm hold.

Capped upside: But the upside may be limited by the large expansion in the equity base — more than two-fold — courtesy, a rights offer. The equity has moved up from Rs 71.5 crore to Rs 128.5 crore, following rights shares. The FCDs would push the equity to between Rs 159.6 crore and Rs 185.7 crore, depending on the conversion price and affect per share earnings over the next three years at least.

These factors may lead to the stock underperforming other paper industry stocks even in the event of a bullish phase for the industry. Difficult period, but... ' BILT has managed to turn in a fairly satisfactory earnings performance in fiscal 2001-02 (July 2001-June 2002). Despite weak price trends, BILT has managed to keep the downtrend in sales (Rs 1,537.8 crore) to 1.9 per cent. Strong volumes and the less-than-proportionate decline in domestic prices have helped weather the steep decline in international prices.

What has helped the company in a difficult year is the check on costs, which have helped pushed the operating profit margin from 19.07 per cent to 19.38 per cent. This coupled with a 3.5 per cent decline in interest costs has helped BILT close the year with a 4 per cent decline in pre-tax profits.

The deferred tax liability has affected reported net profits (Rs 71.4 crore) in a pronounced manner with a 34 per cent decline as compared to 2000-01. But this profit level is important as this would be the benchmark for comparison going forward.

Cause for concern: What is, however, a cause for concern is the rather indifferent showing in April-June quarter. This quarter saw paper prices move up in two rounds in varying degrees across paper varieties. But this has not been reflected in the performance of the company with Sustainable earnings showing a decline of 5.8 per cent even after significantly lower depreciation charges (down by 16 per cent) and interest costs. Quite a few other paper majors such as Tamil Nadu Newsprint and Seshasayee Paper have reported a much sharper improvement in performance in this quarter.

Outlook: The outlook for the paper industry appears to be improving. Barring newsprint, other segments have recorded price increases at the domestic and international levels. The worst also appears to be over in the latest downward cycle.

Even if the prices prevail at the current levels, it should add to the bottomline in the quarters ahead.

But, for the BILT stock, the overhang of equity is likely to be a dominant factor. The diluted earnings per share works out to around Rs 4 after the rights and taking into account the impending conversion into equity. Investors could hold the stock and evaluate profit-booking opportunities at around the Rs 55 level.

Send this article to Friends by E-Mail

Stories in this Section
Evaluating mutual fund costs: Initial issue expenses

Zooming ahead with variants
Endgame in sight?
The sum of all fears
UTI Regular Income Scheme: Unattractive
Birla Mid-Cap Fund: Unattractive
Bonds for UTI investors
Sundaram Balanced Fund: Hold
Dhanavarsha (13): Set for premature redemption
UTI Petro Fund: Hold
UTI Index Select Equity Fund: Hold/Avoid fresh exposures
Bonds for MIP investors
K-30: Hold
Nedungadi's proposed merger with PNB: Not a credit-worthy proposition
Ballarpur Industries: Hold
Nifty companies: Struggling to stay ahead
NRB Bearings: Hold
Monsanto India: Hold
Atlas Copco: Capitalise on the rise
Bima Nivesh 2002 from LIC
Dreary outlook for key pivotals
Protecting the markets
Depressed sentiment
Pare exposure in Bajaj Auto
United Phosphorus, Zee move southward
Nasdaq: Weak undertone
Bonds: Upside limited
PSU petro stocks remain active
Why puts are costlier than calls?
Exercising option and selling
Options guide
Futures guide
Canbank Factors: Bank on it
`HMT's brand is Titan's lure'
Rebates: Avenues to reduce tax
Tax payments without PAN/TAN
SEBI's amended Takeover Code: Levelling the playing field?
Some landmark takeover cases
S&P's wake-up call
Cracking the Nifty mould too often
Attention CRB depositors
It Adds Up!

The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | Home |

Copyright 2002, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line