Dr Reddy's takes an earnings hit, terms it as a one-off event

Betapharm acquisition proving harder than thought to digest

Write-downs of intangible assets and goodwill worth over Rs1,400 crore related to the operations of its German subsidiary, Betapharm, caused Dr Reddy's Laboratories to post a consolidated net loss of Rs 977 cr for the fourth quarter of 2008-09, as against a net profit of Rs 92.6 cr in the corresponding quarter of the previous year.

Consolidated revenue for the group in the three months ended March 31 rose by about 50 per cent to Rs1,985 cr from Rs1,325 cr a year earlier.

On a standalone basis, however, the company has posted a net profit of Rs 156.1 cr for the quarter ended March 31, compared to the Rs 162.2 cr net profit for the quarter ended March 31, 2008. Total income of the company increased by 12.4 per cent to Rs1,166.5 cr for the quarter, from Rs1,038 cr in the corresponding quarter of the previous year.

As per the audited consolidated results, the Group has posted a net loss attributable to the shareholders of the parent of Rs 917.2 cr for the year ended March 31, as compared to a net profit of Rs 438 cr for the previous corresponding year. Dr Reddy's said the company has recorded an impairment loss with respect to intangible assets related to Betapharm, amounting to Rs 316.7 cr (Euro 47 million) before tax and with respect to goodwill of Rs 1,085.6 cr (Euro 162 million). This is a one-time non-cash charge in the income statement and incorporates the provisions of applicable accounting standards, said a press release.

Analysts said the acquisition of Betapharm in 2006 for $560 million, has proven costly. "The write-off amount is more than expected and pulled down the overall good performance of the company in its various business segments," said Ranjit Kapadia, a senior industry analyst.

Total group income for the year has increased by 34.7 per cent, from Rs 5,195.4 cr for the year ended March 31 last year to Rs 7,000 cr for the year ended March 31, 2009. The growth in revenues was driven by the successful launch of the authorised generic version of GlaxoSmithKline’s Imitrex (sumatriptan succinate) in late November 2008 and by the key markets of North America and Russia. Excluding revenues from sumatriptan, the year on year growth is 24 per cent.

During the year, the company launched 116 new generic products, filed 110 new generic product registrations and filed 55 DMFs (Drug Master Files, a formal apprisal of the amnufacture and controls on active ingredients) globally.

The company has also recommended a final dividend of Rs. 6.25 (125 per cent) per equity share of Rs 5 face value, subject to the approval of shareholders.

For the full year, the company had a net forex loss of Rs 63.4 cr, as against against a net forex gain of Rs 73.9 cr in FY08. Dr Reddy's also had to pay a net interest expense of Rs 68.7 cr in 2008-09, against a net interest expense of Rs.32.9 cr in 2007-08.