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Dr Reddy's Q1 net profit rises on better product mix

There were two important growth drivers for the company. One, the 8 per cent year-on-year growth in its global generics business, which were primarily driven by North America; and two, good growth shown in its India business.

E. Kumar Sharma | July 30, 2015 | Updated 20:14 IST
Dr Reddy's Q1 net profit rises on better product mix

E Kumar Sharma, Associate Editor
Despite slow process of approvals for new products in the US and a decline in revenues in some of the emerging markets, Dr Reddy's, for the quarter ended June, posted a 14 per cent growth in net profit to Rs 626 crore. Up from Rs 550.4 crore in corresponding quarter previous year on a total income, which during the latest quarter, rose to Rs 3,758 crore. This is up 7 per cent from Rs 3,517.5 crore year-on-year.

Plus, the financial results for the first quarter FY16 released by the company on Thursday, July 30 also show a gross profit margin at 61.1 per cent, improving by 180 basis points over last year.

There were two important growth drivers for the company. One, the 8 per cent year-on-year growth in its global generics business, which were primarily driven by North America; and two, good growth shown in its India business.

In other words, a better product mix and revenue mix helped drive this growth. For instance, in terms of products, major growth in the global generics business, according to Saumen Chakraborty, Dr. Reddy's CFO and Global Head of IT and BPE (Business Process Excellence), was because of better contribution from injectibles and through products like Valganciclovir, apart from others like Sirolimus and Habitrol. Valganciclovir, for instance, is an antiviral with limited competition.

Revenues in the India business posted year-on=year growth of 19 per cent to touch Rs 476 crore. However, the company is yet to figure among the top 10 players in terms of retail sales within India.

Dr Reddy's is still coping with slow process of approval for new products in the US. Some of the critical product approvals in the US have been delayed because of the USFDA (US Food and Drug Authority) observations on the company's API (bulk drug) plant in Srikakulam in Andhra Pradesh, which came to light in November last year.

The company has subsequently responded to the regulator and is confident that all the concerns have been addressed. Much would now depend on what the USFDA has to say or perhaps conduct another audit.

The company's revenues from emerging markets in the first quarter registered a year-on-year decline of 20 per cent. Crucial in this was the decline in revenues in Russia (year-on-year decline of 45 per cent) mainly on account of the ongoing macro-economic uncertainties and depreciation of the Rouble.

On the Bombay Stock Exchange, the company shares opened at Rs 3,730 on Thursday, and touched a high of Rs 3,933 before closing the day at Rs 3,907.55, registering a gain of 5.23 per cent.

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