Cipla

Cipla's increased emphasis on exports will minimise the slowdown in sales as contribution of exports to total sales is likely to move up to 16 per cent from 13 per cent last year. The bottomline will improve as nearly 60 per cent of its exports are of high value-added formulations.

Ciplas operating profit margin improved to 21 per cent in 1996-97 from 14 per cent in the previous year. A drastic decline in prices of bulk drugs like ciprofloxacin, norfloxacin and amoxicillin contributed to the increase in margins. Cipla derived 34 per cent of its turnover from brands like Norflox, Ciplox, Novamox and Novaclox which are based on these bulk drugs. A reduction in formulation prices in tandem with the bulk drug price cuts will put pressure on the margins.

Cipla now has Rs 90 crore of funds at its disposal from the rights issue proceeds of Rs 99 crore. Its capital expenditure programme for the next two years will need Rs 50 crore. Even if it prematurely retires its debt burden of Rs 21.70 crore, it will have surplus funds to deploy. Last year, other income accounted for 25 per cent of profit before tax, and this trend is likely to continue this year too.

Overall, Cipla has adopted the strategic alliance route to penetrate the global generics market. Also, Cipla currently outsources about half its requirement as it is cost effective. Analysts feel instead of corporate takeovers it may acquire brands to consolidate marketshare.