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Anand Ram

CADILA has a significant presence in such broad therapeutic segments as Cardiovascular, gastrointestinal, pain management, biologicals and anti-infectives. Its formulation brands were recently re-organised into separate business units, to help the company gain therapeutic focus and streamline its sales force.

Cadila's growth depends on the frequency of its introduction of new drug formulations in the market. In this direction, the company seems to be complementing its product basket with its first-move launch of Gatifloxacin and Bonmax.Besides its in-house production, Cadila has also forged alliances with other foreign entities for collaboration in production and marketing of various formulations. The company now holds 50.66 per cent stake in German Remedies. Cadila recently acquired Aten, a hypertension formulation from Kopran for Rs 95 crore. However, with an estimated turnover of Rs 38 crore, the payback from the purchase will take some time to materialise. Aten will undoubtedly strengthen Cadila's presence in the cardiovascular segment. Further, the National Pharmaceutical Pricing Authority (NPPA) has revised upwards 0.94-11.42 per cent the price of Cadila's 10ml vial formulation of Porcine Insulin used in treating Diabetes, for its three different variants. Since significant downtrends in consumption volumes are limited, Cadila will be better placed to leverage the gains from the price increase from the last quarter of fiscal 2002.

The company's thrust towards exports will aid the expansion of market reach, besides shoring up foreign exchange revenues. Cadila has been successful in building up its presence in African, South-east Asian and CIS markets. Keeping in tune with industry trends, the company recently slashed the prices of its anti-HIV drugs 20-40 per cent. This strategy will serve to maximise sales in incidence-prone markets such as AfricaFinancials: Cumulative net sales for the half-year increased only 6.73 per cent. This is, probably, on account of the company's reliance on brands that have already seen better growth. Total income grew about 5.03 per cent on account of a drop in other income. Expenditure kept pace at 6.22 per cent thereby causing operating profits to stall by 0.3 per cent. However, profit-after-tax for the cumulative half year has grown about 9.03 per cent, buoyed by lower provisioning for tax and depreciation.

The company has retired its entire preference share liability of Rs 2 crore in the second quarter though this would prove to be a minimal drain on its cash flow as it has adequate cash balances at Rs 41.87 crore.

With an EPS of 6.88 (for HY 2002) and at a current market price of Rs 128.90 (on January 3, 2002), the stock trades at 9.36 times its earnings (half-year results annualised).

Investors who have already built up exposures in Cadila or have participated in the company's IPO will do well to stay put. Others can consider exposure, but may have to wait a while, as there is a potential long-term upside to the stock.

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