RComm: Call drop

 RComm, which used the CDMA technology, plans to roll out its GSM network in new circles by Q3FY09; it is also aiming for a population coverage of 70 per cent by June 09.  The recent cut in tariffs by Bharti for roaming and long distance services, however, indicates that the price war could intensify. Also industry watchers believe that while the market offers opportunities for growth, there are some risks in a dual network strategy.  Analysts feel it's unlikely that RComm's valuation will move closer to that of Bharti's: on an ev/ebitda basis for FY09, the gap is now estimated at about 7 per cent.  Marico: Top line troubles  The Rs1,907 crore Marico's flagship brand Parachute has brought down the consumer goods firm's sales growth for the March 2008 quarter. Volumes for the Parachute hair oil were somewhat muted, growing at about 5 per cent, compared with 8 per cent in earlier quarters.

As such , at just under 18 per cent, the top line growth for Marico in the March quarter has been far lower than that for FY08 at 22.5 per cent, of which about 17 per cent came from organic growth.

However, value-added hair oils and edible oil brand Saffola found more takers even though Marico had hiked the prices of both Saffola and Sweekar by 20 per cent to offset higher input costs.

The subdued growth in the top line together with a substantially higher wage bill pulled down the operating profit margin in Q4FY08 by about 35 basis points to 9.7 per cent. For FY08 the margin was12.6 per cent, a fall of 100 basis points over the previous year.

Marico has built up a strong portfolio and can further leverage brands like Saffola to launch more food products. Besides, the Kaya skin clinics, of which there are 65 now, are becoming popular: in FY08 the chain posted an operating profit of Rs five crore on revenues of Rs 100 crore a growth of 34 per cent.  Marico is a play on the growing affluence of Indian consumers willing to pay for better products and services and has diversified its business model so that it has multiple revenues streams Revenues should grow between 17-18 per cent for the next couple of years but operating margins could be under pressure because of the rollouts of new Kaya clinics---15 a year -- as also the weaker international operations that will take time to contribute to profits.  The company is expected to end FY09 with revenues of Rs 2,250 crore and net profits of Rs 190 crore. At the current price of Rs 67, the stock trades at nearly 22 times estimated FY09 earnings and is expensive.