ICI India wore a bright coat of paint on Thursday what with the company's strong financial performance for the nine months ended 31 December 2002 providing the needed colour.

The scrip of the paints MNC climbed 3.9% to Rs 112.50 on BSE in just one-and-a-half hours of trading. Volumes were thin (just 472 shares) though, but that's no surprise for the scrip is usually thinly traded. The scrip has been moving in a range of Rs 104-114 over the last few weeks.

ICI is currently focusing on decorative paints and speciality chemicals, very much in line with the strategy of its parent ICI Plc.

t may be recalled that ICI India undertook a major restructuring of operations in recent years, whereby, substantial investments were made in growing the core businesses of paints, Quest, national starch and performance specialties. In addition, the company also sold its polyurethanes, industrial paints and pharmaceuticals businesses to get out of non-core areas. Apart from these, the company acquired a majority stake in Quest International India, a joint venture with Quest International BV and Hindustan Lever, for a consideration of Rs 152 crore (Rs 1.52 billion), on 29 June, 2001. The nickel catalyst and adhesives businesses were acquired from Hindustan Lever on 10 December 2001 and 27 December 2001, for a consideration of Rs 19.70 crore and Rs 7.88 crore, respectively.

The synetix business was sold to Johnson Matthey Chemicals India Private Ltd on 2 December, 2002 for a gross consideration of Rs 155.20 crore including an amount of Rs 13.29 crore towards adjustment for increase in the value of net assets. As per the business transfer agreement, the commercial risks and rewards were assumed by the buyer with effect from 1 November, 2002. The operating results and the estimated profit on divestment of the business (net of provisions for related legal and other expenses and transaction costs), as reported by the company, have been considered accordingly. The net sales revenue from this business in the financial year ended 31 March 2002 was Rs 43 crore.

Though sales continued to decline at Rs 501.66 crore (Rs 5.01 billion), ICI India, has registered a whopping 271% rise to Rs 93.09 crore in net profit and a 31% rise in operating profits to Rs 66.05 crore for the first nine months ended 31 December 2002. Sales during the nine months have declined marginally to Rs 501.66 crore (Rs 5.01 billion). But the bottom line has been painted bright by an EO income of Rs 72.62 crore (against an EO expense of Rs 2.69 crore). At the PBT before EO level, the company has registered a profit of Rs 48.47 crore, higher by 29%. The figures for the nine months are, however, not comparable with those for the corresponding period of the previous year in view of business disposals and acquisitions. As reported by the company, net sales and operating profit from continuing businesses have grown by 10% and 49%, respectively.

The business turned in improved profits because of higher volumes with better mix leading to increase in margins. For the third quarter ended 31 December 2002, the company's top line declined by 2% to Rs 168.9 crore (Rs 1.68 billion). But operating profit margin increased marginally to 12.4% as against 12.2% and operating profit was almost stagnant at Rs 21.02 crore. However, on a comparable basis, during the third quarter, sales from continuing businesses grew by 7% and operating profits by 13% compared to the corresponding period last year. The paints business, which contributes about half of ICI's revenues, helped in this growth during the quarter.

At the current Rs 112.50, ICI India's scrip discounts the 9-month annualised EPS of Rs 12.1 by a PE multiple of 9.2.