Telco proved buoyant for all of last week on the strength of the company's FY 2002-03 financial performance.

The scrip of the Tata group commercial vehicles maker jumped 5.5 per cent for the week to settle at 181.15, its highest level in over three years.

The stock has witnessed an uptrend on the bourses over the last few months. From Rs 128.35 on 23 September 2002, the stock has gained 41.1 per cent in a little over 8 months to the current Rs 181.15.

A solid Q4 and FY 2002-03 financial performance, with the company  exuding confidence that it will sustain growth tempo over the next few years has generated further buying interest in the stock recently. Telco announced its Q4 and FY 2002-03 results on 27 May 2003. There is, however, some cautiousness expressed by some analysts about rising steel prices. Steel is a key raw material in the production of commercial vehicles.

A host of positive developments like strong volume growth in the commercial vehicles segment and the bright future prospects for the segment on the back of demand from national highway projects, the cost cutting drive implemented by the company and a good outlook for exports have driven the rally in Telco so far. The commercial vehicle segment has typically followed a business cycle of four to five years of decline, with one year of aberration. The company feels that the industry is at the fag end of this cycle of decline, and, hence, is confident that the industry is ripe for an uptrend in the next cycle, which may extend for three to four years.

As a result of various initiatives taken by the company to optimally capitalise on opportunities before it, and its inherent strengths, the management is confident that Telco will maintain the current growth tempo not only for the next two to three quarters, but also for a few years to come.

For the year ended 31 March 2003, the company staged a turnaround, with a net profit of Rs 300.11 crore compared to a net loss of Rs 53.73 crore in the corresponding period of the previous year. Total income increased by 21 per cent to Rs 9,111.26 crore from Rs 7,525.92 crore in FY 2001-02. On a consolidated basis, for the year ended 31 March 2003, the Telco group's net profit works out to Rs 298.67 crore (loss Rs 107.19 crore) on total income of Rs 9,627.92 crore (Rs 7,934.58 crore).

Telco's net profits surged in FY 2002-03, on the back of huge cost savings. The company generated total cost savings of Rs 334 crore out of which 65 per cent was due to raw material cost savings and 10 per cent per cent due to other cost savings. Simultaneously, as it cut operational costs, Telco also saved more than 75 crore in interest cost.

Telco improved its market share in commercial vehicles for the quarter ended 31 March 2003 to 66.87 per cent from 65.6 per cent, while the bus market share improved to 51.2 per cent from 50.7 per cent. However, in the LCV segment, the company's share fell to 44 per cent from 45 per cent. The company's market share in the passenger car segment improved from 12.4 per cent to 14.5 per cent while in the overall passenger vehicle segment, its market share improved to 14.6 per cent from 13 per cent.

In the current fiscal, analysts feel the company may achieve a growth of 7-8 per cent in domestic commercial vehicle sales and a 25 per cent surge in exports. In the car segment, they expect a 22.5 per cent growth whereas the utility vehicles segment is expected to record a 25 per cent drop.

In March 2003, Telco signed an agreement with Phoenix Venture Holdings, which is the owner of the MG Rover Group, to distribute Telco's Safari off-roader and Loadbeta pick-up trucks in the UK and Irish markets. Exports in this regard are likely to pick up in the latter part of the current fiscal. Further, the company is also confident of increasing exports to other markets. As a result, the company is confident of significantly driving up export volumes.