The Mumbai-based pharmaceutical major Nicholas Piramal (NPIL) achieved sales of Rs 567 crore during the year ended March 2001 as against Rs 488 crore in the previous year. This represented a growth of 17 per cent over the previous year. The increase in sales was mainly attributed to the significant performance of formulation business. The sales of formulation, which represented 75 per cent of the total turnover, recorded a growth of 26 per cent and this has been achieved against the backdrop of sluggish performance of the industry as a whole. However, the vitamin sales, which accounted for 13 per cent of the total sales suffered and showed a negative growth of 2 per cent. This was mainly due to the reduction in the global vitamin prices from $90 per kg to $60 per kg during the year under review. According to the company, the vitamin A production was affected in the initial period due to the closure of plant operations for undertaking yield improvement measures. The low growth was also due to low cost of imports and reduced demand from user industries.
The other income realized at Rs 34.03 crore was reduced by 12.0 per cent over the previous year. This was mainly due to a decrease in dividend income from Rs 7.82 crore to Rs 3.03 crore in the year under review. In the previous year, the company had realized Rs 2.97 crore by way of sale investment in Scholl Piramal. There was also a fall of 11 percent in the interest received from Rs 22.02 crore to Rs 19.63 crore during the year under review.
The operating profit at Rs 116.60 crore registered an increase of 18.9 per cent over Rs 98.05 crore in the previous year. The operating margin stood higher at 20.5 per cent as compared to 20.1 per cent in the previous year. According to the company, higher growth in the high margin business of formulations, cost reduction and profit improvement programme across all operations and increased contract manufacturing income by optimum use of surplus capacity were mainly responsible for rapid increase in the operating profit. The company stated further that the profit would have been higher but for the reduced realization in Vitamin A business due to imports and low off-take in poultry segment and reduction in prices of certain formulation- Bactrim and Omnatax by National Pharmaceutical Pricing Authority (NPPA). Coupled with this, the combined return of Rs 28.9 crore on an equity capital of Rs 293.6 crore on subsidiaries and joint ventures have been very much on the lower side at 9.8 per cent during 2000-01.
During the year under review, the investment of the company increased to Rs 102 crore from Rs 98 crore last year mainly because of acquisition of 60 per cent in Dr.Phadke and disinvestments of equity in Scholl Piramal. Nevertheless, the income realized on this investment formed only 3.0 per cent as against 8.0 per cent in the previous year.
The gross profit at Rs 87.38 crore showed a sharper increase of 34.8 per cent over Rs 64.83 crore mainly due to the continuous effort to reduce the cost of borrowings that fell from Rs 33.22 crore to Rs 29.22 crore. The company did not show any short-term borrowings that will be used for bridging the working capital requirement. According to the company, the inventories/ receivables were maintained at steady levels despite an increase in sales. The company has also cited that it is endeavoring to reduce inventory levels and introduce better working capital cost management to improve performance. The pre-tax profits also spurted 35.4 per cent from Rs 54.25 crore to Rs 73.48 crore despite an increase in depreciation from Rs 10.6 crore to Rs 13.9 crore mainly because full year's amortization/depreciation charges on brands acquired during last quarter of previous year. Haemaccel manufacturing facilities was acquired in February 2000 and expansion of Mahad manufacturing facilities was completed in the current year. The net profit jumped faster by 41.5 per cent from Rs 46.98 crore to Rs 66.46 crore thanks to a decrease in effective rate of taxation in view of brought forward losses and permissible reduction for earlier years. The company expects an increase in tax liability for the next year onwards once the set off is completely absorbed.
The foreign exchange earnings of the company have been estimated at Rs 3.41 crore as against Rs 4.26 crore in the previous year. In these, the export of goods were only Rs 0.81 crore as against Rs 2.44 crore in the previous year. As against this, the foreign exchange outgo was higher at Rs 89.78 crore compared to Rs 84.38 crore in 1999-00. The company is a net foreign exchange spender to the tune of 86.37 crore during the year under review.
The loans and advances of the company had increased by 133 per cent from Rs 47.12 crore to Rs 109.67 crore. Nearly 74 per cent of the loans and advances were for unproductive purpose comprising loans and advances to NPIL Fininvest amounting Rs 39 crore for acquisition of equity of Rhone -Poulenc and fresh loans of Rs 28 crore to employees stock option scheme.
The joint venture between the company and Reckitt Benckiser India called Reckitt Piramal Ltd has been dissolved recently. However, a strategic alliance will remain between the two and the brands currently sold through the JV will be sold directly by the respective companies who owned or contribute these brands.
On the research and development front, drug discovery research of Quest Institute of Life Sciences reportedly made considerable progress in the discovery of new chemical entities. It also claimed to have stepped up the research activities in herbal and natural products. During the year under review, the company completed standardization studies on five projects of natural products. Of the five, Immumax-an immunomodulator was launched in last quarter of the year under review. The company has an ongoing alliance with CDRL, Lucknow and it is having discussion for alliances with others CSIR Lab. Wellquest, contract research organization became fully operational received its first overseas project for clinical research. The company is in the process of developing five compounds of which two are in CVS range, one in diabetic, one in oncology and another one in anti-fungal range. The company also filed five patents. In the genomic research programme, the company took a major initiative by entering into a knowledge partnership with Centre for Biotechnology to form genome. It plans to set up two laboratories in Mumbai and Delhi respectively with requisite infrastructure. During the year under review, the company had spent Rs 10.21 crore towards R & D accounting 1.8 per cent of the turnover.
Outlook
In line with its strategy to use mergers and acquisition to attain critical mass made a significant turn during the year when it acquired 40 per cent stake held by May & Baker of UK in Rhone-Poulenc India at a price of Rs 875 per share. The acquisition brought value brands like Phensedyl, Tixylix, Phenergan, Flagyl, Gardenal, Essentiale-L and Stemetil etc with excellent profitability and growth potential under its umbrella. Besides, the acquisition was aimed at adding an experienced sales force of 400 creating a stronger sales and marketing infrastructure, enhancing the capability of launching several new products from its R&D and creating potential for cost synergies and efficiencies contributing to overall growth.
The board of directors already approved a scheme of arrangement as a composite scheme proposing the merger of Rhone-Poulenc, Super Pharma Ltd-a Distributor Company acquired in April 2001 and certain assets and liabilities of NPIL Fininvest comprising the shares held in RPIL along with debt raised for acquisition. The scheme is expected to be effective from April 2001 subject to the approval of Hon'ble High Court. Ultimately, the company plans to operationally integrate NPIL and RPIL and thereby derive the benefits synergistic operations especially in the areas of procurement, supply chain, information technology, manufacturing and other support services. In the course of Fy-2002.
The company has also engaged McKinsey &Co, to review the strategy for formulation business as well as allied businesses like pathlabs and Diagnostics etc. the recommendation is expected to receive shortly. In the formulation business, the company's strategy is on faster growing segment. The company had introduced Omnatax-O (Cefixime) during the last quarter of 2000-01 to broaden the position in the oral anti-infective and this brand is expected to be a major contributor in the coming year. Keeping in mind the changing disease pattern, the company is also focusing on cardiovascular and anti-diabetics. Another areas in which the company plans to give thrust are rejoint, nutraceuticals and biotek.
Further, the company plans to invest in the introduction of new products through in-house development, either co-marketing or licensing from alliances to strengthen the therapeutic areas. Diagnostics division is another area where the company expects 20 per cent growth in the next year. In the case of Vitamin A business, various measures have been taken to make it more competitive. It also plans to diversify into the areas of speciality and perfumery chemicals. In its maiden foray in pathlab business, the company acquired 90 per cent stake a reputed pathlab in Kolkata. During the year under review, the company invested Rs 5.58 crore towards 60 per cent equity in the new joint venture with Dr.Phadke Pathology Laboratory and Infertility Centre to establish state -of-the-art pathology laboratory in the metros and mini-metro cities and networking them into centers of excellence to provided latest diagnostics services.
The company, which appointed Accenture (Formerly Andersen Consulting) to identify cost reduction and profit improvement areas already in the process to implement its recommendation.
The merged entity of NPIL-RPIL is expected to clock a turnover of Rs 1000 crore mark during FY 2002 representing a tardy growth of 26 per cent with a similar growth in the bottomline. While adopting merger and acquisition as a strategy for growth, the company should make endeavor to weed out the unprofitable units. It should also give thrust on increasing the export of generic items in which there is high margin.
Nicholas Piramal
(Rs.Lakh)
2000-01
1999-00
% variation
Sales
56676
48648
16.50
Less excise duty
6036
5347
12.89
Net sales
50640
43301
16.95
Other income
3403
4060
-16.18
Value of Production
51211
44476
15.14
Raw material cons.
24740
22544
9.74
Power & fuel
1196
25.89
Other mfg expenses
27.90
Salaries & wages
5597
5648
-0.90
Advt.& sales promotion
38.06
Other expenses
9968
8488
17.44
Operating profit
11660
9805
18.92
Less interest
2922
3322
-12.04
Gross profit
8738
6483
34.78
Less depreciation
1390
1058
31.38
Profit before tax
7348
5425
35.45
Less tax
-3.44
Profit after tax
6646
4698
41.46
Dividend
2689
2110
27.44
Retained profit
3957
2588
52.90
DPS(Rs)
7.69
EPS(Rs)
19.07
13.48
41.47
Current mkt. Cap (Rs Cr)
PUC (E)
3485
3485
0.00
Reserves & Surplus
37526
33568
11.79
Net worth
41011
37054
10.68
Borrowings
10695
10950
-2.33
1. Long term
10695
10950
-2.33
2.Short term
Debt/Equity (ratio)
0.28
0.33
Current ratio
2.25
2.66
Grossblock
30251
27543
9.83
Total cap. Employed
66655
58098
14.73
Profitability (%)
GP/Sales
17.26
14.97
GP/ total cap.empl.
13.11
11.16
PAT/Networth
16.21
12.68