Sun Pharma sees profit hit in FY16 on Ranbaxy integration

Company says consolidated revenues would remain flat or show a decline over FY15

Drug major Sun Pharma expects to take a hit on profit for the fiscal due to the charges related to the ongoing integration with Ranbaxy Laboratories.

As a part of the integration process with Ranbaxy, the company expects to incur certain integration charges in order to generate long-term synergies from this merger, Sun Pharma said in a statement today.

Also as part of the integration processes, the company may decide to discontinue certain non-strategic businesses, it added.

As per the company's estimates, the consolidated revenues would remain flat or show a decline over FY15. Also the consolidated profits "may also be adversely impacted due to certain expenses/charges arising out of integration as well as remedial actions."

The initiatives like adhering to current global manufacturing practice (cGMP) norms and provision of certain integration charges in order to generate long-term synergies from the merger with Ranbaxy are some of the measures that are likely to adversely impact the overall revenues and profits of the company for FY16, it said.

"Post this consolidation, we believe that the company will be better placed to pursue higher than industry growth in subsequent years," the company said.

The company, which completed the $4 billion merger deal with Ranbaxy Laboratories in March this year, however expects that the integration initiatives like strengthening and building of leadership position in key markets and business segments, will help the company revert to a more sustainable growth trajectory post FY16.

The company also expects synergy benefits from the Ranbaxy acquisition to increase by up to 20% by 2018.

"Our target for the synergy benefits from the Ranbaxy acquisition has increased by 15-20% as compared to our original target of $250 million by FY18," it said.

This will be achieved by focusing on overall profitability improvement driven by revenue and procurement synergies, manufacturing rationalisation and various additional cost-management measures, it added.

For the year ended March 31, the company posted a net profit of Rs 4,540.60 crore, while the same stood at Rs 3,141.47 crore in the previous year.

Net sales of the company stood at Rs 27,286.50 crore for the entire fiscal. The same stood at Rs 16,004.39 crore in 2013-14.