Greaves Ltd has registered a 37 per cent rise in its net profit to Rs 57.39 crore for the year ended March 31, 1998, from Rs 41.65 crore in the previous financial year, according to its unaudited results taken on record by the company board yesterday (May 29).
The rise in the net profit has occurred despite an 11 per cent drop in net sales from Rs 796.09 crore in 1996-97 to Rs 704.74 crore in 1997-98.
Greaves executive-directors S K Roy and Praveen Sachdev told Business Standard yesterday that the drop in the net sales of the L M Thapar group company had occurred due to a drop in the sales prices of its products due to a sluggish market. However, the company managed to record better profits owing to cost reduction by negotiating better deals with its suppliers and by reducing the interest cost through a better management of its capital.
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The interest paid by the company has come down to Rs 22 crore in 1997-98 from Rs 25.99 crore in the previous year, while its total expenditure has declined to Rs 645.69 crore from Rs 719.41 crore. The provision for taxation has come down sharply from Rs 14.18 crore to Rs 3.03 crore. Sachdev attributed the lighter tax burden to a write back from the provision made in the previous year, which was recently accepted by the income tax department. Another reason is the reduction in the corporate tax rate from 40 per cent plus a surcharge of 7.5 per cent to 35 per cent for Indian corporates in the last budget.
Another significant aspect is the other income, which has grown to Rs 24.13 crore from Rs 16.67 crore. Of the total other income in 1997-98, Rs 10.5 crore is accounted for by surplus from the auto undertaking at Baramati.
However, Sachdev pointed out that the undertaking had been sold to Piaggio Greaves Vehicles Ltd, in which Greaves hold 49 per cent equity with Piaggio Spa of Italy holding the rest. The joint venture would manufacture three-wheelers. The sale of the Baramati facility was part the restructuring plan initiated by Greaves under which the company is pulling out of some businesses to take up new ones and also focus more on its core business of manufacturing small internal combustion engines. Ultimately, however, the company will have fewer business than what it has now.
"We are already a dominant player in the small internal combustion engine segment. However, we want to have proprietary technology, so that we don't have to depend on licences and joint ventures. We would also like to become a global player," Sachdev said.
A new area that the company is venturing into is manufacture of tractors under a technical tie-up with Same of Italy. Prototypes of the 50-HP tractors are out and the company hopes to start mass production in October.
Greaves has already started manufacturing tractor engines in a joint venture with Same. The total investment made by Greaves in the tractor venture is Rs 70 crore till date.