Rallis India has reported a sharp deterioration in its financials for the nine months of 2000-01. However, the company's performance at the net level has been impacted mainly by high interest costs. The company recently divested its pharma business and plans to use the cash flows to retire debt. Its success with some new product launches and extensive distribution structure are key advantages and are not captured in its current stock valuation. At Rs 34, there appears to be little downside to the stock.
Investors can therefore hold the stock in the hope of improved performance.
United Phosphorous and Excel Industries have reported a sharp deterioration in their profitability over 2000-01. Both are low cost, efficient producers of generic pesticides, with an extensive global distribution network. However, the farming crisis in Europe, falling commodity prices and the sharp fall in export realisations make for uncertain near-term prospects for both companies. Given the cascading effect of the crisis of the past two years, there appears little hope of a near-term recovery in the prices of generic products in the domestic markets as well. In the circumstances, investors can pare exposures in both stocks and contemplate re-entry at a later date.