The Telegraph
Since 1st March, 1999
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Telco drives out of the red
- Bottomline boost prompts board to declare 40% dividend

Mumbai, May 27: It’s a U-turn that could go down as one Corporate India’s most spectacular turnaround tales.

Telco reported a net profit of Rs 314.34 crore in 2002-03, a complete reversal of course from a loss of Rs 112.75 crore in 2001-02. The surge came on the back of record net sales of Rs 11,413.86 crore, up from Rs 9,305.14 crore previous year. Fourth-quarter net at Rs 137.57 crore, however, slid 14 per cent from Rs 161.68 crore in January-March 2002. (The figures mentioned are consolidated ones.)

Everything appeared to be going for it as the country’s biggest auto-maker saw its commercial vehicles and cars lapped up in a market that shaped up better than the expectations of analysts tracking the firm.

The high-point of the performance was that Indica, Ratan Tata’s dream project, turned in profits within four years of launch.

The recovery has been driven by a belt-tightening exercise that saved the company a whopping Rs 947 crore in raw material and interest costs over the past three years. “It is a swing of more than Rs 1000 crore. We have achieved lower break-even points, across all product categories,” Telco executive director (finance) P. P. Kadle said.

Enthused by the splendid performance, the board has proposed a payout of 40 per cent, returning Telco to the list of firms that reward shareholders with dividends. The success appeared to have been lost on the markets though, with the share losing Rs 5.40 at Rs 167.75.

Revenues (net of excise) and the vehicle sales of 2,19,859 units were the highest ever as gross profits leap-frogged to Rs 510.37 crore, a long way up from a Rs 109-crore loss.

Kadle said the cost-cutting initiatives boosted the bottomline and helped Telco claw back the way it did. Several things have changed since then: inventories of vehicles are down from six months to six weeks; credit to dealers has been stopped from April this year, executive director (commercial vehicles) Ravi Kant said.

Commercial vehicles (trucks and buses) contributed over 60 per cent to the firm’s revenues, while passenger cars (cars and utility vehicles) accounted for 40 per cent. Kadle did not say how much the two divisions generated by way of profits for the year.

Commercial vehicles sales grew 30 per cent over last year to 1,07,438 units. Market shares were up in medium and heavy vehicles (both trucks and bus segments).

Passenger car sales stood at 1,04,414 numbers, the first time it shot past the one lakh mark, in an increase of 17.5 per cent over the previous year. Indica’s market share improved from 22.8 per cent to 24.2 per cent in the year.

Kant was confident an upswing would make things better for the company this year.

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