Moser Baer India came under selling pressure on Wednesday after the company clarified that it has exposure of about Rs 3 crore to a troubled German group.

The stock of the leading compact disc manufacturer was down by 5.7% to Rs 181.50 on the BSE in mid-afternoon trades. 3.18 lakh shares changed hands on the counter.

The scrip had rallied sharply in the last few sessions on the back of European Commission's decision to terminate anti-dumping proceedings against Moser Baer India with respect to the manufacture of recordable compact disks. Since this announcement, the scrip surged by 32.8% in 10 sessions to a high of Rs 2002 on 17 January 2003 from Rs 152 on 3 January 2003. The scrip slipped on profit-taking in the next two sessions to settle at Rs 192.60 on 21 January 2003.

The market was agog with rumours recently that one of the clients of MBIL had defaulted. The company today issued a clarification in this regard. On 20 January 2003, Emtec Magnetics filed for re-organisation and insolvency protection.

The Emtec Group consists of two main companies, Emtec Magnetics GmBh (engaged in the production of professional audio and video tape) and Emtec Consumer Media GmBh (engaged in retail sales of consumer optical and magnetic media). MBIL is engaged in business activities with Emtec Consumer Media GmBh group, which is unaffected by the insolvency of Emtech Magnetics. MBIL has no unpaid dues from Emtec Magnetics.

MBIL's current total net exposure to Emtec Consumer Media is less than Rs 3 crore and all current supplies to the company are on prepaid cash basis, according to the company. Sales to Emtec Consumer Media accounted for around 8% of the company's volume in the first half of the year.

The European Commission's decision to drop anti-dumping duty proceedings has come as a big relief for MBIL as the company exports about 45-50% of its products to Europe. MBIL is now likely to revive its previously deferred expansion plans. Earlier, it had deferred plans to increase CDR capacity from 760 million units (currently) to 1 billion units by 31 March 2003 following the anti-dumping probe by EC.

MBIL had also revised downwards its full year guidance to just 10% as against the earlier guidance of a 23% to 27% growth in net earnings.

MBIL is one of the world's largest manufacturers of optical and magnetic data storage products.

The company disappointed the market with its second quarter results, posting a 29% rise in sales but a 2% fall in profit after tax due to huge pressure on margins. For Q2 ended 30 September 2002, MBIL had reported a 1.8% fall in net profit to Rs 53.14 crore on a 29% growth in total income to Rs 215.80 crore (Rs 2.15 billion). Fall in product prices affected the profit margin of the company.