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Kopran: Lacks future clarity

Jan 3, 2002

Recently, Kopran sold its top selling Cardiovascular ‘Aten’ brand to Cadila for a consideration of Rs 950 m. The company is also believed to be in talks with other pharmaceutical majors for the sale of its remaining formulation business. Kopran seems to trying to change the perception and business profile to that of a company focused purely on the OTC segment. So far the company has met with initial success with its brand ‘Smyle’. Kopran, promoted by Parijat Enterprise, is one of the integrated domestic pharmaceutical players. The company is in the midst of business and financial restructuring. In the first phase of restructuring process, the company hived off of its penicillin based bulk business into a separate company (KDL Biotech). In the second phase, the OTC business of privately owned Kopran Pharmaceuticals Ltd. was merged with Kopran Ltd. The company intends to focus on the OTC segment and so far the company's brand 'Smyle' has created strong brand equity.

The decision to sell brands/ formulations business seems to be due to the fact that the financial position of the company is precarious with high debt levels. The debt/equity ratio is already high at 1.2:1. The financial performance of the company is also fluctuating.

Kopran-Rising Interest Burden
Quarter Ended Sep-00Dec-00Mar-01Jun-01Sep-01
Sales (Rs. Mn.)529.0568.0607.0478.0462.0
Operating Margin (%)20%20%12%25%27%
Interest Burden (Rs.Mn.)
PBT (%)9%8%4%4%5%

At the current market price of Rs 41 the stock is trading at 6.3x its annualised earnings for 1HFY02 earnings. The cash from the sale of its ‘Aten’ brand is expected to help the company in paying off its debt burden. However, there is uncertainty as regards the business plan of the company going forward as ‘Aten’ contributed more than 35% of the company’s revenues. In the OTC segment, where the company plans to focus its attention, establishing strong brands is likely to take time.

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