| . | The week ending June 9 was one
of those rare weeks when the Indian stock markets looked up on each day
of the week. The BSE Sensex closed at 4729 up from 4454 at the beginning
of the week. Among the gainers were many traditional economy stocks including
Power and Pharma companies.
One of the developments that may have a bearing on some sectors of the market was the announcement of the RBI of the final norms for entry o NBFCs into the Insurance sector. After the infamous knee jerk reaction of the RBI in 1999, to the CRB scam, most of the companies in the sector had closed shop. The few companies who survive till date had settled down to a no growth or downsizing as a survival strategy losing favour with the stock market investors. They were looking forward to the reforms in the Insurance sector where they had opportunities consistent with their marekting strengths. While the RBI regulations stipulating
Net owned funds of Rs 500 crores for direct entry of NBFC s into the Insurance
sector effectively blocked the ambitions of many companies which were planning
direct entry to the field, smaller NBFC s heaved a sigh of relief that
any NBFC registered with RBI with net owned funds of Rs 2 crores can now
undertake Insurance business as an "agent" on a fee basis without any risk
participation. This would enable several finance companies to harness their
client base for marketing insurance products.
In the absence of reliable information, it is too early to look at specific companies in the NBFC sector ready for investments. We can in the meantime look at other sectors of the economy that may be benefited from the accelerated growth expected in the Insurance sector. One of the immediate beneficiaries in this context would undoubtedly be the the pharmaceuticals sector. We shall therefore turn our attention to the 116 year old Dabur Ltd hitting the headlines for some time now. Firstly, the company announced good results for the year ending March 2000 with the turnover crossing the Rs 1000 crore milestone. During the middle of the last year, the sales growth had dipped causing slight concern in the market. This, along with the general trend had sharply pulled down the shares in the stock markets. However the company reversed the trend posting a healthy growth of 19 % in the last quarter taking the annual turnover from Rs 915 crores to Rs 1038 crores. The growth of turnover and profits on an annual basis has been fairly consistent as the table below indicates. Table: Financial Highlights of Dabur
The company, which has a huge 500-product portfolio already, has a good presence in the rural markets. It has now embarked on a strategic marketing plan to use the Internet to reach out to its customers abroad as well as the dealers and stockists in India. It has already launched a dedicated site for its exporters with updated status of orders placed by overseas buyers and to facilitate e-orders. The company has also linked its top 50 distributors through a VSAT network to exchange information online and improve inventory and logistics management. The company is in the process of setting up e-commerce enabled website for sale in India which will create a direct marketing channel to its consumers in India. All these e-initiatives bear testimony to the forward looking nature of this old giant. On the product front, the company successfully launched several OTC products last year including products such as the Spirulina for the health concious domestic markets. The company is now expected to take up aggressive marketing of another high potential product "Bio-slim" to be marketed in the form of Chewable tablets. A new arthritis drug and a laxative are also on cards. On the financial front, the company sold its 40 % equity in Excelcia foods and 49 % stake in Genera de confiteria India to restructure its business interests. It is also reducing its debt to reduce interest costs. The cumulative effect of all these efforts should help the company to improve its profitability in the coming year. The shares were last quoted around Rs 707 way below its 52 week high of Rs 1748. It is yet to participate in the rally that occurred in the last few weeks. Even if the markets remain range bound in the next couple of weeks, this share has the potential to buck the trend and inch up gradually. If one is trying to accumulate good traditional stocks in the portfolio, this is a good choice. Na.Vijayashankar June 10, 2000 |
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