Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Sterlite: Deferred tax takes toll - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 7, 2001

    Sterlite: Deferred tax takes toll

    Compared to few other leading non-ferorus metal producers the economic downturn seems to have got the better of Sterlite Industries (India) Ltd. The company has posted a de-growth in sales, which is largely due to the sharp drop in copper prices on the London Metal Exchange (LME). Average copper prices dropped by 21% YoY to $1,473.4 / tonne for the quarter ended September '01. The drop is steeper compared to aluminium, which pulled back by 12% YoY over the same period.

    (Rs m) 1QFY01 1QFY02 Change
    Net Sales 7,646 7,186 -6.0%
    Other Income 34 36 4.7%
    Expenditure 6,756 6,314 -6.5%
    Operating Profit (EBDIT) 890 872 -2.0%
    Operating Profit Margin (%) 11.6% 12.1%  
    Interest 324 351 8.3%
    Depreciation 220 227 2.8%
    Profit before Tax 380 331 -13.0%
    Tax 25 91 263.6%
    Profit after Tax/(Loss) 355 240 -32.5%
    Net profit margin (%) 4.6% 3.3%  
    No. of Shares (eoy) 53.9 55.6  
    Diluted Earnings per share 25.6 17.3  
    P/E Ratio   6.2  

    The lower turnover is the result of an estimated 8.8% reduction in realisations combined with an estimated 3.1% rise in volumes. Copper sales are reported to have increased to 33,613 tonnes over the concerned period. In this challenging environment the company has managed to reign in operating expenses. Raw material expenses, which constitute 90% of total expenditure, have decreased marginally. Staff costs are down sharply by 14.2% YoY. This has enabled the company to protect operating margins, which have in fact increased by 50 basis points. However, operating profits have suffered with the slide in sales.

    The higher interest and depreciation expense have led to a decline in pre-tax profits. The sharp drop in bottomline is due to increased tax provisioning. Under AS-22, Accounting for Taxes on Income, the company has provided for deferred tax liability leading to the higher provisioning. Aggregate deferred tax liability upto June '01 will be provided at the end of the current financial year.

    The smelter debottlenecking was scheduled to have been completed by January '01 enhancing capacity to 150,000 MTPA. Competitor, Indo Gulf Industries, has also augmented capacity to same levels recently. Sterlite has indicated that copper prices are likely to stabilise at current levels due to demand in India and China. The company also believes that higher offtake of jelly filled telecom cables (JFTC) by Bharat Sanchar (BSNL) is likely to keep demand for copper robust. JFTC is the largest consumer of copper in the domestic industry accounting 30% of total consumption. Consequently, a shift from JFTC to optic fibre cable (OFC), if any, could adversely impact the domestic copper market.

    As part of rationalisation in the aluminium business the company has decided to exit the downstream aluminium foil segment. Only in FY00, Sterlite had purchased India Foils for an estimated Rs 550 m to establish a foothold in the downstream sector. The acquisition seems to have been inspired after the company took over Madras Aluminium (Malco). In FY01, the company hived off its aluminium conductor business to a 100% subsidiary. This business continues to perform well having grown by 102% YoY in 1QFY02.

    At Rs 108 the scrip is trading on a multiple of 6.2x 1QFY02 annualised earnings. Copper prices have weakened over October '01 and are currently quoting at $1,330 / tonne.



    Equitymaster requests your view! Post a comment on "Sterlite: Deferred tax takes toll". Click here!


    More Views on News

    Securities & Intelligence Services Ltd. (IPO)

    Jul 31, 2017

    Should you subscribe to the IPO of Securities & Intelligence Services Ltd?

    Why Super Investors are Underperforming in This Market (The 5 Minute Wrapup)

    Jul 8, 2017

    If Super Investors can wait for the right pitch, so can you.

    Tejas Networks Ltd. (IPO)

    Jun 14, 2017

    Should you subscribe to the IPO of Tejas Networks Ltd?

    Discover the Secrets of Hidden Smallcaps From These AGMs (The 5 Minute Wrapup)

    May 26, 2017

    Don't be surprised to come across some Super Investors there!

    A Trader's Nightmare. A Business Owner's Delight. (The 5 Minute Wrapup)

    May 19, 2017

    Not all small-cap investors see themselves as traders. Some see themselves as business owners.

    More Views on News

    Most Popular

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process)(The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working(Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    It's the Best Time to Buy IT Stocks(Daily Profit Hunter)

    Aug 16, 2017

    The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    Think Twice Before You Keep Money In A Savings Bank Account(Outside View)

    Aug 22, 2017

    Post demonetisation, a cut in bank savings deposits rates was in the offing.

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 26, 2013 (Close)


    • Track your investment in STERLITE IND. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts