Cipla's Q2 profit before tax grows 34% on Indian business revival

Co undertook a distribution network restructuring exercise in the last few months

Mumbai-based pharmaceuticals entity Cipla posted a 34 per cent year-on-year (YoY) rise in profit before tax during the September quarter 

as its domestic business saw a rebound after a distribution overhaul.

Revenue from operations grew 10 per cent from the same period a year before, to Rs 4,396 crore. Net profit rose 25 per cent to Rs 471 crore. 

Cipla said it would opt for the new corporation tax rate from the next financial year, as it had accumulated credit on Minimum Alternate Tax this year. It had, as mentioned earlier, majorly restructured its India distribution network in the past few months. This resulted in revenue loss of Rs 200 crore in the June quarter, the first one of this financial year. The India business fell in that quarter by about 12 per cent.

Kedar Upadhye, joint president and global chief financial officer, said with the restructuring done, concentration risk in terms of distribution had come down and the model change had been successful. 

The overhaul came after a decision that the network had become too concentrated, in the hands of a very few distributors which accounted for very large sales. They were putting pressure on the company for additional discounts and the like. "We have moved away from the aggressive discounting that was forced on us. This has helped improve commercial discipline, and the quality of pending collections in the market," said Upadhye. 

In the prescription business, sales are evenly distributed among several large distributors. 

The India trade generics business saw 61 per cent growth sequentially, the company said. Year-on-year, it was flat on a billing basis. The branded generics business grew 13 per cent over a year. Overall, the India business grew six per cent over a year and 29 per cent from the earlier quarter.  

The company's US business saw some erosion in prices of the generic Sensipar (cinacalcet), a thyroid medication, as multiple other products were launched in the market. Upadhye claimed the company had held on to its market share in the product. Overall US revenues showed a  quarter on quarter decline of 15 per cent. Measured over a year, however, the US business was up 26 per cent. 

The emerging markets business clocked 62 per cent of sequential growth in revenue. Year on year, it was marginally down. The bulk drug or active pharmaceutical ingredients business was down nine per cent over a year, to Rs 157 crore.  

“I am pleased with the strong recovery across our businesses during the quarter. Our home markets continue to bode well — the India business recorded robust performance in trade generics and across all key therapies in the branded business, while in South Africa, the private market business outpaced the market significantly," said Umang Vohra, global chief executive. 

The company repaid a loan of $110 million (Rs 780 crore) during the quarter, one year ahead of schedule.