Yokogawa Blue Star surged on Friday after the Indian partner in the joint venture said it was considering offloading its equity stake in favour of its Japanese counterpart.

The scrip of the distributed process control systems and instruments firm was up by its maximum permissible level of the day i.e. 20% at Rs 44.50 on the BSE. 21,300 shares changed hands on the counter. The volume was on the higher side, given the fact that Yokogawa Blue Star is a thinly trade scrip. The scrip has been on a roller coaster ride in the last few sessions, oscillating from a high of Rs 45 and a low of Rs 35.

Today's rally on the YBSL counter comes amid hopes that the foreign partner in the joint venture will buy out the entire stake of the Indian partner. These expectations got a boost after Blue Star informed the stock exchanges that a meeting of its board of directors will be held on 27 March 2003 to consider, inter alia, a proposal for sale of its equity stake in YBSL to Yokogawa Electric Corporation, Japan. Yokogawa holds a 40% equity stake in this joint venture, while Blue Star's holding is at 28.65%.

YBSL manufactures and markets distributed process control systems and instruments. The company has four business units - systems, products, services and solutions. In systems, the company enjoyed a market share of around 35% for the past couple of years. In the current fiscal, the share exceeds 40%. In products, the company enjoys a market share of 25% in transmitters. In solutions, the share is around 5-10% and the target is to add around Rs 20 crore to the top line in this segment. The company is also planning export of engineering services for DCS to the Yokogawa group of companies. This segment has registered a growth of 30-40% as compared to last fiscal.

The continued slowdown in the capital goods sector took its toll on YBSL's top line, which fell by 7% to Rs 132.91 crore (Rs 1.32 billion) in the financial year ended March 2002. The main reason for the loss last year was due to the business mix - the lower proportion of services, both domestic as well as Exports, to the Yokogawa group of companies. Along with this were the sustained losses of the IT business in the US. The IT business registered a loss in FY 2000-01 and FY 2001-02. YBSL has shut down the IT division early this year. After making an exit from the IT business, the company is back in the black.

For the first nine months ended December 2002, YBSL's net profit was at Rs 2.34 crore as against a loss of Rs 1.97 crore in the corresponding nine months of the previous year. The operating profit margin has improved to 5.0% as against 1.7%, leading to a 181% growth in operating profit to Rs 4.32 crore. The company expects to end the current fiscal with a top line of around Rs 140-145 crore (Rs 1.4 billion), a growth of around 7% - 10%, mainly backed by the performance in the fourth quarter ending March 2003. The company believes that the medium-term outlook for capital expenditure in the power, refining, metals, pulp and paper and pharma sectors, which looks promising, will enable it to garner adequate business to sustain its growth.