Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
GSK India: What would it look like - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 25, 2001

    GSK India: What would it look like

    Glaxo India has just declared its financial results for nine months ended 30th September’01. As the merger of the company with SmithKline Pharma became effective from the beginning of the calendar year, the performance of the company is inclusive with that of SmithKline Beecham Pharma Ltd.

    On a merged basis, the company declared a drop in turnover by around 13% and drop in PBT by around 36%. Operating margins are finding difficult to cross the double-digit mark.

  • Click here for detailed financial performance.

    Apart from sluggish domestic pharma market, the poor performance of the company has been due to three major reasons:

    • Both the companies initiated a major rejuvenation to align their product portfolio and focus on high margin products. In this exercise, Glaxo did away with a number of low margin products.

    • Glaxo India also undertook a restructuring exercise in terms of shifting its manufacturing base from high cost centers, strategic change in sales and marketing structure and higher focus on creating brands. The sales division of the company was changed to ‘therapy focused’ marketing.

    • Glaxo declared a major VRS drive to achieve operational cost benefits with that of SmithKline Pharma. It also attempted to restructure salary structure differences between the two organisations to achieve smooth integration.

    The company has already incurred VRS and integration/restructuring activities related cost of Rs 80 m and Rs 102 m respectively, till date. The company is expected to incur an additional VRS cost of Rs 750 m on its Worli factory in the coming quarters.

    A new entity Glaxo SmithKline Beecham Ltd (GSK) will be created and soon be listed on the bourses. The shareholders of Glaxo and SmithKline would be allotted shares in GSK Ltd in the ratio of 2:1 (i.e. 1 share of Glaxo= 1 share of GSK and 2 share of SmithKline = 1 share of GSK Ltd). The merger would become effective on the BSE on November 9, 2001.

    Assuming that additional VRS expenses would be incurred in FY02 in the books of GSK India and excluding any extra-ordinary gains from sale of property, GSK’s snapshot can be depicted as shown in the table below.

    GSK India - What would it look like
      FY02E FY03E
    Sales (Rs m) 11,050 12,089
    Net Profit (Rs m)* 54 896
    Expected EPS (Rs) 0.7 12
    Current Market Cap. (Rs m) 18,829  
    Market Cap/Sales 1.7 1.6
    (* After deducting Rs 750 m on account of expected VRS expenses)

    In the near term, the financials of the company are expected to suffer from the integration pain. Also, the operational cost benefits from the merger are expected to take time before they become visible.



    Equitymaster requests your view! Post a comment on "GSK India: What would it look like". Click here!


    More Views on News

    Sun Pharma: Bottomline Slips into the Red Amidst Challenging Environment (Quarterly Results Update - Detailed)

    Aug 14, 2017

    A challenging environment and one-time expense pushes Sun Pharma into a loss in the first quarter.

    Lupin: Bigger Challenges or Bigger Margin of Safety? (Quarterly Results Update - Detailed)

    Aug 14, 2017

    GST impact coupled with price erosion in US leads to lower profits for the quarter.

    Dr Reddy's: US Pressure Continues to Haunt (Quarterly Results Update - Detailed)

    Aug 8, 2017

    Profits plunge due to higher raw material costs.

    Biocon: Lower Licensing Income Leads to Muted Growth for the Quarter (Quarterly Results Update - Detailed)

    Jun 23, 2017

    Net Profit lower due to exceptional items in the previous year.

    Sun Pharma: Price Erosion in US Impacts Growth (Quarterly Results Update - Detailed)

    May 30, 2017

    US markets decline while other geographies grow in the quarter.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in GSK PHARMA with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Detailed Quarterly Results With Charts