Side Effects

ratories (Ranbaxy) looking fully priced at the moment.Ranbaxy is the bluest of the blue chip among Indian pharmaceutical companies.

Since1991-92, the company has grown at a scorching pace, doubling net profits every year except in 1995-96 when the growth was just 22 per cent to Rs 135.02 crore. Most of the growth between 1991-92 and 1995-96 came from exports which grew 4.37 times to Rs 412.12 crore. Earnings per share tripled in the same period in spite of two bonuses and a GDR issue. It is the largest exoporter of pharmaceuticals in the country with a 14 per cent share.

 

In 1995-96, exports grew 37 per cent, contributing 47 of the total turnover. Ranbaxy will be less affected by the slump in export markets since a sizeable chunk of its exports constitute sale of cefaclor to Eli Lilly under contract which is valid till 1998. Ranbaxy has also started exporting cefaclor formulations. But realisations in exports of amoxycillin and ampicillin will certainly come under pressure.

Ranbaxy's domestic turnover mainly comprises formulation sales which accounted for 44 per cent of its total turnover in 1995-96. Ranbaxy's domestic business is skewed towards antibiotics. It has also establioshed a 100 per cent subsidiary, Solus for increasing the scope of its therapeutic business. However, recent ORG data shows that Ranbaxy has slipped from its number two position to number three. Cumulative data for seven months of 1996 shows that Glaxo-Wellcome leads in market share with 6.9 per cent, followed by Cipla at 4.2 per cent, Ranbaxy at 3.8 per cent and Hoechst-Roussel at 3.7 per cent.

Ranbaxy is currently setting up joint ventures, investing in manufacturing facilities abroad and investing in R &D at home for maintaining long term growth. It has also been making regulatory filings so that it becomes a global player in generic segment. In fact, expenditure on regulatory filings has been increasing and affecting operating margins to that extent. The aim is also to increase exports of formulations. Put differently, Ranbaxy is moving towards becoming a research-based international pharmaceutical company. It is moving towards establishing its presence in the developed and emerging markets.

The company has a manufacturing facility in USA following the acquisition of a New Jersey-based company. It has also acquired Rima Pharmaceiticals based in Ireland to target the UK market. A joint venture with Eli Lilly of USA has been established both in India and in the USA. Subsidiaries, one each in China, Nigeria and South Africa have commenced operations. It domestic joint-venture with Eli Lilly has received permission to introduce a lung cancer drug.

All these efforts will make the company stronger in the long run. However, returns will take time to reflect in the balance sheet.

Till, then growth will slow down. Some analysts expect Ranbaxy to perform in line with the market. But then why hold Ranbaxy when alternatives with a potential to beat the market are available?