In a related move, DRL has also decided to set aside Rs 25 crore as provisions over fiscal 1999 and fiscal 2000 to eliminate financial country risk that may arise in the CIS countries, says a Kotak Securities report on DRL.

Of the total Rs 25 crore, Rs 10 crore was set aside for the first half ended September 30 while Rs 5 crore will be set aside in the second half of the current fiscal and the balance in fiscal 2000.

However, despite these negatives, there has not been any revision in the rating for the company which currently enjoys a `market outperformer' rating from Kotak Securities. Also, fiscal 2000 sales growth estimatesfor DRL has been kept unrevised at 30 per cent by the investment banker.

The company's realised operating margin for the second quarter of the current fiscal is down to 23 per cent against 26 per cent in the first quarter. Owing to lower exports to the CIS countries and the sliding bulk drug prices, DRL expects its operating margin to further decline to a level of 20 per cent in the second half of fiscal 1999.

DRL's exports to the CIS countries suffered heavily during the second quarter of the current fiscal. Against an export turnover of Rs 20 crore to these countries during the first quarter, the company's exports to CIS countries during the second quarter were down to Rs 7 crore.

To add to its worries vis-a-vis the CIS, a number of leading Russian drug and pharmaceutical distributors have turned bankrupt after the Russian crisis took a turn towards the worst on August 17. As an after effect, DRL's distributors in Russia started hinting at distribution-related problems and are asking fordiscounts.

DRL is now reducing its exposure to Russia and focussing more on the recovery of receivables. The company has been extremely cautious in estimating provisions to the extent of 50 per cent of current outstanding receivables and does not envisage bad debts in excess of these provisions.

With regard to Brazil, which also holds some country risks, DRL will operate its marketing joint venture in the country as price realisations there are higher. Its joint venture in China, on the other hand, is slated to start its operations by March, 1999.

In the first half of fiscal 1999, DRL's sales grew at 30 per cent to Rs 223.74 crore over the year ago half-year sales figure. Net profit during the same period went up by 42.6 per cent to Rs 28.29 crore against Rs 26.85 crore earned during the corresponding period of the previous fiscal.