RCoVL: Weak tone

Revenues continue to remain flat for RCoVL

Reliance Communication Ventures Ltd's (RCoVL) proforma numbers for the March quarter are disappointing, because revenues at Rs 2,970 crore, have remained flat compared with the December quarter. In contrast, Bharti's revenues were up a good 12.7 per cent sequentially.

RCoVL has managed to bring down costs significantly to Rs 1,928 crore, which, as a percentage of revenues, are down at 64.9 per cent from 71.6 per cent in the December quarter.

Bharti's costs at Rs 2,133 crore were somewhat higher. While wireless networks are comparable, RCoVL has a global business. Both have long distance and broadband operations.

Thus, RCoVL has posted an improvement in the operating profit of 23 per cent to Rs 1,042 crore and, consequently, a higher operating profit margin of 35 per cent, a rise of 700 basis points.

Bharti's operating profit for the quarter was Rs 1,278 crore, while operating margin was 35.5 per cent. A much smaller outgo on account of interest payments for RCoVL , lower by 67 per cent has boosted RCoVL's bottom line which has risen to Rs 440 crore (before extraordinaries), an increase of 42 per cent sequentially.

Despite the addition of 3.2 million customers in the quarter, revenues from wireless are up just 7 per cent at Rs 2,120 crore. Of course, a large number of customers may have opted for the lifetime free scheme, revenues for which would have been deferred.

Margins for the wireless space are up by 400 basis points at 36 per cent, the result of cost efficiencies kicking in. Operating margins for the global business too have increased from 15 per cent to 19 per cent sequentially, though the revenue growth was just 1.7 per cent.

However, the broadband segment saw a strong revenue growth of 54 per cent to Rs 195 crore, and a smart rise in margins to 31 per cent.

ICICI Bank: Asset growth

ICICI Bank has turned in impressive numbers for the March 2006 quarter and also for FY06. While the net interest income in the quarter went up by 54 per cent y-o-y to Rs 1,216 crore, what is remarkable is the rise in fees , which jumped 80 per cent.

The bank's operating (pre-provisioning) profit increased by 69 per cent to Rs 1,481 crore. If the net profit appears lower, y-o-y, it's because of higher provisioning to the tune of Rs 597 crore in Q4 FY06, compared with Rs 80 crore in the March 2005 quarter.

This was essentially owing to higher amortisation of premium on government securities and RBI tightening the provisioning norms on standard loans from the December 2005 quarter. A lower tax also outgo helped net profit rise 29 per cent to Rs 790 crore.

ICICI Bank has seen its total assets rise nearly 50 per cent y-o-y in FY06, which compares favourably with HDFC Bank's growth of 43 per cent. ICICI's net interest margin stood at 2.4 per cent in FY06""the same level as in the previous year, which is creditable given that interest rates have moved up sharply.

Besides, the net non-performing assets fell from 0.8 per cent in the December quarter to 0.71 per cent in Q4 FY06. At Rs 577, the stock trades at about two times estimated FY07 book value and has underperformed the market in 2006 .Given the good performance and the improving quality of the balance sheet, it appears reasonably valued.

Glaxo: In the pink of health

GlaxoSmithkline Pharma (Glaxo) has benefited from a revival in domestic market sales, which allowed it to offset a rising cost structure.

Its operating profit grew by 96.28 per cent y-o-y to Rs 155.46 crore in the last quarter, which is far higher than the 54.9 per cent growth in the company's total operational income.

An overwhelming proportion of other the income is understood to comprise of income relating to clinical research work done for the global parent. Other income for the company amounted to Rs 14.35 crore in the March 2006 quarter, a y-o-y growth of 77.6 per cent.

Glaxo's net sales grew by 54.3 per cent y-o-y to Rs 426.16 crore in the last quarter. No doubt the company saw improved pick-up in its products in segments such as antibiotics, dermatology and vaccines in the last quarter, but it was also helped by a low base from the previous corresponding quarter.

Meanwhile, materials consumption jumped by 55.13 per cent y-o-y to Rs 177.67 crore in the March 2006 quarter. This rise was owing to higher excise duty paid on formulations bought from third parties, coupled with enhanced supplies of medications to its marketing network, say analysts.

Material costs as a proportion of net sales rose 23 basis points to 41.69 per cent. However, a larger turnover base allowed operating profit margin to rise 744 basis points y-o-y to 35.29 per cent in the March 2006 quarter.

The Glaxo board also decided to sell its animal health business, which will allow greater focus on the key pharmaceuticals business. Prior to this decision, the stock traded at 32.75 times estimated CY06 earnings and does not leave much room for further upside.

With contributions from Shobhana Subramanian and Amriteshwar Matahur