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CMC upheaval comes in a little too late, say analysts

NetScribes/Abhijit Basu

State-owned CMC has staged a turnaround after a dismal performance last fiscal.

The company registered a 92.6 per cent jump in its net profit at Rs 244.6 million for the fiscal 2000-01 as compared to Rs 127 million in the previous year.

Total income of the company for the year stood at Rs 5.5 billion as against Rs 4.6 billion in 1999-2000.

"This is a truly ground breaking performance by the company. However, it comes a little too late. Had the company stages this performance last year, it would have been truly wonderful. Unfortunately, the significance is buried under the poor performance of the other technology majors," said Ramesh Damani, director, Ramesh S Damani Finance Pvt Ltd.

The company's net sales rose 25 per cent to Rs 2.2 billion for the quarter ended March 31, 2001 as compared to Rs. 1.6 billion for the corresponding quarter last year. During the period, the company's net profits rose 75 per cent to Rs 175.3 million from Rs. 43.68 million for the corresponding quarter last year.

The company's employee expenses went down 25.5 per cent to Rs. 278 million for the last quarter from Rs 348.59 million for the same period last year.

Interestingly, CMC's productivity per person for 2000-01 has increased to Rs 1.9 million as against Rs 1.6 million during 1999-2000.

"These are signs that the company has finally started taking things seriously. The divestment process seems to have had a positive effect on the company," said Damani.

The company has been in the limelight after the Center announced its disinvestments plan of CMC. Reports of majors like Wipro, Compaq, IBM, Microsoft, Tata Consultancy Services and Reliance Infocom evincing keen interest in buying out the Center's stake have kept the scrip buoyant for a few months now.

The scrip rose 7.72 per cent Friday to close at Rs 261.65, up Rs 18.75 per cent from its previous close of Rs 242.90.

However, analysts have raised concerns about the time taken for the disinvestments process. They feel that one cannot be sure of the company unless the disinvestments process actually takes place.

CMC's fundamentals are also a cause of concern for some analysts. "CMC's margins are low as compared to other technology companies owing to high exposure to the domestic market," said a senior software analyst at Span Capital Services.

Furthermore, the market expects the company to improve its profit margins with the help of a good partner. The company's profit margins, according to analysts, stand at around 6.66 per cent, way below the industry average of around 22-25 per cent.

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