The Hindu Business Line : Dr Reddy’s takes Betapharm hit

The Hyderabad-based company, which earned a net profit of Rs 93 crore in the year-ago period, was hit by an impairment loss of Rs 1,400 crore pertaining to its German arm, Betapharm, Mr G.V. Prasad, Chief Executive Officer, Dr Reddy’s Laboratories, told newspersons here on Monday.

“The Betapharm impairment is a one-time, non-cash charge and does not impact our cash position,” he said.

In simpler terms, Betapharm impairment loss means the de-valuing of the company by writing down intangible assets and goodwill. Post-impairment loss, Betapharm is now valued at €210 million.

Dr Reddy’s had acquired Betapharm for €480 million in 2006.

Driven by revenues from Sumatriptan (and sound performance from global generics), revenue grew by 50 per cent at Rs 1,985 crore (Rs 1,325 crore).

For the full year, net loss was at Rs 517 crore despite a 39 per cent growth in revenue at Rs 6,944 crore (Rs 5,000 crore). This also included a forex loss of Rs 63.4 crore.

The loss per share stood at Rs 30.7.

While the revenues grew in North America and Russia, they were sluggish in Germany and India (at 11.2 per cent and 5 per cent growth respectively).

The revenues were impacted by the pricing pressure in Germany and in India, Dr Reddy’s shift to replenishment-based supply model and low-pace of new product launches, Mr K. Satish Reddy, Managing Director, said.

INVESTMENT

The company is planning to invest $100 million in two Special Economic Zones it is developing in Hyderabad and Visakhapatnam for finished dosages and chemical entities.

Land acquisition for the SEZs was recently completed.

“The investment in increasing capacities/infrastructure will now be a regular feature. Next year, the investment is likely to be increased to $150 million,” Mr Prasad said.

GUIDANCE

The company had projected a modest revenue growth of 10 per cent in the current fiscal year. “We expect to perform better in the second half than the first this year,” Mr Reddy said.

Priorities would be the creation of new infrastructure, controlling costs and improving supply chain and cash cycles, he said.

The company’s share price ended on Monday at Rs 598.80 (Rs 572.80) on the BSE.