The Hindu Business Line : NPIL buys 14 drugs with higher margin potential

The Rs 116-crore domestic acquisition of CEFI (antibiotics) and Anafortan (muscle relaxant) brands by Nicholas Piramal India Ltd (NPIL), using internal accruals, may add to the company’s revenues as well as margins. The stock gained 2.5 per cent on Wednesday. Nicholas Piramal’s branded formulations sales at Rs 982 crore, contributed close to 50 per cent of its consolidated revenues in the last nine months ended December 31, 2007.

Through the two acquired brands, the company will be able to address a market of about Rs 625 crore for the CEFI group and Rs 150 crore with Anafortan. The acquisition will help Nicholas gain stronger foothold in the 14 drugs, coming within its fold, that include pure and combination dosage forms. Anafortan and CEFI group medicines recorded high margins of over 40 per cent for the financial year ended March 31, 2008. These are higher than the operating margins enjoyed by Nicholas Piramal on consolidated basis.

GROWTH AHEAD

While both these brands have grown about 2 per cent last year (owing to a change in distribution network of the previous owner Khandelwal Labs), the Nicholas Piramal management expects CEFI brands to grow by 15-18 per cent and Anafortan by 10-12 per cent going forward. These estimates, if realised, would help Nicholas Piramal (one of the top five formulations company in India) to increase market share in prescription medicine market.

As a part of the agreement, Nicholas has received perpetual rights to patents on CEFI-XL and CEFI-OD from CEFI group and also on Anafortan (a Camylofin based drug) and hence, would be entitled to enjoy use of their patented delivery mechanisms. The medicines would be manufactured by Khandelwal Labs, according to a manufacturing agreement.

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