A 38 per cent decline in interest cost from Rs 5.63 crore to Rs 3.51 crore during the year resulted in the company's net profit skyrocketing by 215 per cent to Rs 56.93 crore.
The fourth-quarter results of the company were even more impressive since they contributed to almost 54 per cent of the total profit for the year.
SSI booked an other income of Rs 15.45 during the last quarter helping it achieve an improved net profit figure. The point to be considered here is that a major portion of the other income was due to the rupee exchange rate differential and sale of products by the company. The recent depreciation of the Indian currency should ensure that SSI's revenues this year do not remain a one-time affair.
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The company's growth was complemented by a 220-basis point improvement in operating margins, after the exclusion of other income. This was due to proportionately higher income coming from its software development activities.
In line with its competitors such as NIIT and Aptech, SSI has also successfully ventured into software development this year.
SSI Technologies, a separate strategic business unit which will focus only on software development, went fully operational during the second quarter of the present financial year.
This makes the future prospects for SSI more brighter since the order-book position for SSI Technologies stands at around $20 million currently and these projects are to be executed in the course of this financial year.
The company also expects better revenues through software sales to Indigo Markets Inc, its 45:55 joint venture with the technology-heavy US exchange Nasdaq.
Factoring these into the next fiscal's projections, SSI should continue its 100 per cent topline growth. With higher software development income in the coming years the operating margins should witness a marked improvement from the current levels of 36 per cent helping it achieve an even better bottomline growth.
The other positives for the company are its prospects of getting better orders from Nasdaq owing to it forming joint ventures in Europe and Asia, and plans of converting its existing global depository receipts into American depositary receipts to facilitate US listing.
Oil industry
It was in May that the Union ministry of petroleum and natural gas directed refineries to cut throughput by 10 per cent. At the same time, the ministry also reduced its commitment for uplifting controlled products from Indian refineries. The CMIE monthly report for June 2000 noted this development, and pointed out that this had happened amid excess stocks of petroleum products, especially diesel.
Notwithstanding the recent slowdown in sales, there is another reason for the stock pile-up: Reliance Petroleum's commissioning of its 27 million tonne refinery in Jamnagar, Gujarat.
Moreover, in June, Mangalore Refineries and Petrochemicals Ltd expanded its capacity by adding three million tonne through the debottlenecking route.
Add to that the likely commissioning of Essar Oil's Vadinar refinery later in this financial year and you have a surge in supply on cards.
But does all these translate into a glut? Not really. Taking all the capacity additions together, the total refining capacity in March 2001 is estimated to be 114 million tonne. Throughput is estimated to rise to 96 million tonne. But consumption of petroleum products last year was around 99 million tonne.
Allowing for a five per cent increase, that would mean we would still need to import petroleum products this year, in spite of the new capacity. That may not apply to diesel, however, although analysts say that you can switch to other products depending on the quality of the crude. Diesel sales in 1999-2000 went up by 5.5 per cent.
Analysts say that there could be two reasons for the slowdown in sales. One, with the subsidies on diesel likely to come down, there could be more and more substitution of diesel by other fuels.
There's no particular reason, however, why this should start happening now. That leaves one with the only possible reason-an economic slowdown. It ties in neatly with the low growth in IIP, the slowdown in consumption demand due to the drought, the stockpiling by corporates.
The reports say that HPCL had to stop production of diesel for a few days and BPCL is likely to do the same this month. But one company unaffected by the diesel glut is Reliance Petroleum (RPL), which has an agreement with the public sector companies to lift its entire stock of controlled products. So while RPL produces at full capacity, the public sector refiners cut back production.
(With contribution from Aman Chowhan)