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Pressure on margins squeeze Indian Rayon's bottomline - Views on News from Equitymaster
 
 
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  • Jul 28, 2000

    Pressure on margins squeeze Indian Rayon's bottomline

    Indian Rayon, the flagship company of the Aditya Birla group, has posted an impressive 28% growth in sales. However, sharp increase in the raw material cost (41%) and other expenditures (65%) has squeezed the operating profits of the company, which stands at Rs 423 m in 1QFY01 compared to Rs 382 m in 1QFY00. Lower outflow in the form of interest and depreciation prevented the net profit from a sharp decline. Other adjustments here include the royalty towards technological support from Aditya Global Trading House Limited.

    (Rs m) 1QFY00 1QFY01 Change
    Sales 2,497 3,194 27.9%
    Other Income 136.2 91.3 -33.0%
    Expenditure 2,116 2,771 31.0%
    Operating Profit (EBDIT) 382 423 10.7%
    Operating Profit Margin (%) 15.3% 13.2%  
    Interest 224 199 -11.0%
    Depreciation 197 182 -7.4%
    Profit before Tax 98 133 36.0%
    Other Adjustments   27  
    Tax - -  
    Profit after Tax/(Loss) 98 106 8.7%
    Net profit margin (%) 3.9% 2.5%  
    No. of Shares (eoy) (m) 67.5 59.9  
    Diluted number of shares 59.9 59.9  
    Diluted Earnings per share* 6.5 7.1  
    *(annualised)      

    The garments division, which includes brands like San Frisco, Byford and Elements, contributed around 15% of the turnover. Though the carbon black division registered a 24% growth in sales, realisations were under pressure as the feedstock prices, the main raw material, went up by 87%. Both the production and realisations were better in Viscose Filament Yarn (VFY) and the insulator division. The insulator division witnessed considerable increase in exports due to demand from OEMs and decreasing supplies globally.

    The stock is currently trading at Rs 51 at a P/E multiple of 7.2 on the annualized first quarter FY01 earnings.

     

     

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