Portfolio strength
Alembic, one of the oldest pharmaceutical companies and a leading manufacturer of Erythromycin-based macrolides (antibiotics) in the country, plans to set up greenfield projects for growth. It is true that some of its brands have been doing well in the market but disproportionate dependence on them would be an unwise strategy in an intensely competitive market.The company's turnover during the third quarter ended September 31, 2000, was up 34 per cent to Rs 138 crore. It recently commissioned a 75 tonne capacity Cepholosporin (Ceph-C) plant at a cost of Rs 30 crore, which helped the company increase the sales turnover.
However, an increase in raw material consumption by a whopping 94 per cent to Rs 28 crore nullified the gains from hike in sales income. Consequently, operating profit margin fell from 18.3 per cent to 13.6 per cent. Net profit also declined to Rs 8.6 crore.
The new Cepholosporin (Ceph-c) plant is expected to generate additional turnover of Rs 50-60 crore in the current fiscal. After utilisation of full capacity at 150 tonne, Alembic hopes to post a turnover in the range of Rs 100-120 crore from this source in 2001-02.
The Ceph-c market presents vast scope for import substitution as the country presently imports all its Ceph-C requirement. A lembic is the only manufacturer of Ceph-C in the country. Even in this product, the company cannot afford to be complacent as it has to guard against potential competitiors.
Alembic is a market leader in the Rs 285-crore Macrolides segment too. Althrocin brand in this segment is the third largest selling brand among the top 300 brands in the ORG list. There is a 10 per cent growth in demand for macrolides. Macrolides include mainly four generic drugs like Erythromycin, Azitromycin, Spiramycin and Roxithromycin. The loss of sales in Althromycin is compensated by other brands of macrolides like Roxid (Roxithromycin) and Azithral (Azithromycin).
The demand for these two brands are growing at the rate of 10 per cent and 24 percent respectively. The company also has major brands in Nimesulide (Anti-Rheumatic non-sterioid drugs) and cough expectorants.
Among the top 15 pharmaceutical companies, the company has witnessed a decline in the sales of formulations. There are 75 manufacturers of Erythromycin salts. Roxythromycin will see many new entrants in the near future.
The company's debt-equity ratio is not favourable as interest cost is a heavy drag on its profitability. The company is expected to post a turnover of Rs 475 to Rs 480 crore during the current fiscal to December 2000. The Alembic scrip has been stuck in the groove of Rs 150 for sometime now.
Dhruv Rathi
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.