Stockist Spat Slams Cipla

The stock reacted strongly to the news, dropping by Rs 34 to Rs 611 on November 14. For the full year of 1996-97, Cipla's sales and net profit growth were 25 per cent and 144 per cent respectively.

To make things worse, Cipla's margins also fell, though marginally by 1.6 percentage points to 25.3 per cent. There has been a downward pressure on margins due to lower prices of formulations in line with a decline in prices of bulk drugs like ciprofloxacin, norfloxacin and amoxicillin. Cipla derived 34 per cent of its turnover from brands based on these bulk drugs.

 

The availability of the rights issue proceeds provided Cipla with adequate liquidity. While the capital expenditure requirement over the next couple of years is only Rs 50 crore, it still leaves a surplus to deploy. The improved cash inflow in the first half of 1997-98 enabled Cipla to substantially reduce its interest burden by 78.4 per cent to Rs 1.60 crore (Rs 7.42 crore), and better its gross profit margin by 1.7 percentage points to 21.7 per cent. The higher tax provision restricted net profit growth to 11 per cent at Rs 40.25 crore.