Basic Problems Persist

Hansavivek TATA IRON AND STEEL COMPANY, which recorded the highest profit of its career in 1974-75, produced 25,000 tonnes of saleable steel more and achieved 99 per cent capacity in 1975- 76. Sales were marginally higher, but margins weresharply down and profits tumbled due to cost escalations and sluggish demand. Unsold stocks of steel rose to 2,90,000 tonnes, resulting in increase of Rs 4.5 crores in interest charges. Dividend is reduced, from Rs 8.30 to Rs 7.75 per share of Rs 75 each, which too is covered less than 1.8 times as against 2.7 times last year. The directors have decided to raise the paid-up value of eqnity shares to Rs 100 each, by capitalising Rs 12.86 crores from reserves. This is equivalent to issue of bonus shares in the ratio of 1 : 3. The management's intention is to pay a dividend of 8 per cent on the increased equity capi tal. The directors say that the price increases granted by government in October 1973 were neutralised by March 1975 by the cost increases and that during 1975-76 costs further escalated by about Rs 110 per tonne. The recessionary conditions in the steel market forced the company to offer rebates in certain categories of steel. Consequently, the average net price realised was about the same as in the previous year, notwithstanding the price increase of Rs 80 per tonne allowed by government from July 1975 to offset the price increases in coal and coke. The company, in fact, made substantial losses on nearly 30 per cent of its production.