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Kopran: Uncertain Future

Sep 6, 2001

Kopran, promoted by Parijat Enterprise, is one of the integrated domestic pharmaceutical players. Its products Aten (cardiovascular), Vent (respiratory) and Smyle enjoy strong brand equity. The company is in the midst of business and financial restructuring. The company is trying to change the perception and business profile from that of a commodity bulk manufacturer and supplier to a formulations based company with an ability to create strong brands. 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.

As per recent reports, Kopran is in talks with several pharmaceutical companies for sale of its formulations business or its 'Aten' brand in the cardiovascular segment. This comes as a surprise as bulk of company's revenues in the formulations business come from the 'Aten' brand. This could be due to the fact that the financial situation of the company is precarious with high debt levels. The debt/equity ratio is already alarming at 1.2:1. The financial performance of the company is also fluctuating.

Kopran-Rising Interest Burden
Quarter Ended 30/9/00 31/12/00 31/3/01 30/6/01
Sales (Rs. Mn.) 529 568 607 478
Operating Margin (%) 20% 20% 12% 25%
Interest Burden (Rs.Mn.) 51 52 80 78
PBT (%) 9% 8% 4% 4%

At the current market price of Rs 40 the stock is trading at 7x its 1QFY02 earnings. In wake of the recent development regarding the proposed sale of its formulation business, the future business plan of the company remains uncertain. It is likely that the company would concentrate purely on the OTC segment where it will have to work hard to establish strong brands.

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