Domestic pharma major Nicholas Piramal (NPIL) has announced its 1QFY04 results. While the company has registered a respectable 19% growth in the topline, it has suffered a 19% drop in the bottomline. However, the performance for the current quarter cannot be compared with that of the corresponding previous quarter as the 1QFY04 results include the revenues generated from the erstwhile Global Bulk Drugs and Fine Chemicals Pvt. Ltd, which was merged with the company w.e.f. 1st January ‘03. If the same is excluded, then topline growth will drop to 11%.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares
Diluted Earnings per share*
Let us briefly understand the performance of the company on the basis of the different business segments in which it operates.
1QFY04 as % of Total
Vitamins & Fine Chemicals
Diagnostics & Patient Care
Vitamins & Fine Chemicals
Grand Total ((A)+(B))
As can be seen from the above table, while the domestic business grew by 12%, it was the sharp growth in exports that helped NPIL record an 18% rise in revenues. This was primarily on account of Rs 131 m revenue contribution from the bulk drugs business acquired from Global Bulk Drugs and Fine Chemicals Pvt. Ltd. In the current quarter, NPIL has made one DMF (Drug Master File) and is in the process of filing a second one. On the domestic front, while there was stagnancy in the generics and diagnostics division, the company recorded healthy growth in formulations and vitamins and fine chemicals divisions.
Domestic formulations break-up
In the domestic formulations division, NPIL has outperformed the industry with a 9% growth against an industry average of 4%. In all, NPIL launched 5 new products in 1QFY04 contributing revenues of Rs 15 m. The products launched in the past two years contributed Rs 203 m to the revenues. The growth was fuelled by strong performance recorded in lifestyle segments like CNS, anti-diabetics and also in the anti-infectives segment. However, negative growth in the respiratory and CVS segment subdued the overall growth rate in the domestic formulations segment. In the domestic diagnostic and patient care division, a 40% drop in the contribution from instruments segment has resulted in a decline in the performance of this division.
On the operations front, restructuring of high-cost loans with low cost ones has helped NPIL reduce its interest expenses. However, a sharp drop in other income and an increase in the extraordinary expenses have affected the net margins of the company. This is the key reason for the company reporting a bottomline dip. The drop in the other income was on account of a fall in the dividend income from subsidiaries and joint ventures as the company received the same in 4QFY03. The rise in extra-ordinary expenses is on account of NPIL adopting the policy of writing off the entire VRS and separation cost in the quarter in which it is incurred. Earlier, the same was written off over a period of five years.
NPIL continues to increase its focus on research and development activities. The company has increased its R&D expenditure to Rs 54.7 m in the current quarter. However, at 2% of revenues, the R&D expenditure continues to be far below the average R&D expenditure as a percentage of sales incurred by other Indian companies.
During 1QFY04, NPIL has incurred capex of Rs 126 m towards upgradation of the manufacturing facilities including bulk drugs facilities at Ennore and Hyderabad. Moreover, the management has approved the proposal to transfer the shares held by the company in Gujarat Glass Pvt Ltd to a separate entity. The shares of the new entity will be distributed to the existing shareholders of NPIL in the proportion as their holding in NPIL.
NPIL is currently trading at Rs 324, implying a P/E of 12x its 1QFY04 earnings. Most of the growth achieved by the company in the recent past has been through the inorganic route. Going forward, rationalization of expenditure, reduction in the number of employees and debt restructuring is likely to improve the margins and consequently the performance of the company. However, since NPIL derives most of its revenues from the domestic markets, the introduction of product patent post 2005 could be a possible hindrance to the future growth prospects of the company.
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