52-Week Flop: Prakash Industries

The shares of steel and merchant power producer Prakash Industries has been hammered by 62 per cent over the last one year amidst allegations of misappropriating coal meant for captive use. Higher raw material costs too have taken their toll on the business .

The company operates in three segments: Steel, Power and PVC Pipes. Steel is the company's largest segment by sales with power being a distant second followed by PVC pipes .

Power contributed 82 per cent of the company's profits during the nine months ended December 2010. Unlike the captive coal advantage on the power front, the company enjoys few cost advantages over peers on the Steel and PVC pipes front. These businesses accounted for around 12 and five per cent of operating profits respectively during the same period.

The company's sales during the nine months ended December 2010 rose by 17 per cent to Rs 1,388 crore, while net profit growth remained almost mute at Rs194 crore due to higher raw material costs. This crimped the company's operating margins by three percentage points to 20.2 per cent. This condition was exacerbated during the quarter ended December 2010 as sales rose by eight per cent and net profits sank by 18 per cent. Other factors which have dampened investor sentiment over the last one year are delays and cost-over runs in commissioning 625-MW power and iron ore mines.

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