DRL targets 25% rev growth in FY09

Satish Reddy, MD, Dr Reddy's Labs said that dependence on SALUTAS has significantly reduced, especially in the last quarter.

He told CNBC-TV18 that by the end of next month, they will not be dependent on SALUTAS. He doesn’t expect a situation which will lead to steep rise in prices as witnessed two-years ago. He expects the company to grow at 25% in FY09, without any of the upsides or exceptional items.

Excerpts from CNBC-TV18's exclusive interview with Satish Reddy, MD, Dr. Reddy's Labs

Q: How much has Betapharma contributed for the full-year as well as for this quarter? How have the margins paned out in Betapharma?

A: Betapharma has clocked a turnover for the full-year of USD 205 million.  We have delivered an EBITDA of 17 million euros, which is close to USD 29 million. In the last quarter also, it has done pretty decently because a lot of things that we have done over the years have started yielding results. The overall margins at the gross level are in the region of 50%.

Q: What is your dependence on SALUTAS? How do you see it going forward? How are the pricing pressures panning out in the German market?

A: Our dependence on SALUTAS has significantly reduced, especially in the last quarter. We hope that probably by the end of next month or just after that we will no longer be dependent on SALUTAS. That is something that has gone on pretty well.

Q: What are your views on pricing pressures and rebates to insurance companies?

A: On the pricing pressures, it has not been as drastic as what we had seen in the initial stages of the health care reforms undertaken in Germany.  Fortunately, we have not seen that kind of behaviour where there has been steep drop in prices from the competition last year.

The health care reforms are here to stay, the reference prices are set every year and there is another round expected in June. This is something that will keep continuing. But we don't expect a situation which will lead to steep prices as witnessed two-years ago.

Q: Coming to your CPS business and Mexico, how do you see supply? We know that there are supply and raw material constraints. How you see it panning forward to FY09?

A: Things should look better because last year's performance was reflective of what happened in the year prior to that. One of the reasons was the high offtake by the consumer that happened in the previous year. That was an exceptional year for Mexico.

Unfortunately in FY08, we didn't have that kind of an offtake and the inventory spilled out. But more importantly, a key raw material was in short supply. We have built up international capacity for that key material, so we don't have any more problems with supply.

For this financial year, we have also opened up other products, which will be manufactured in the Mexico facility. This will give us new business and so put together, we should be able to report growth from this year onwards in Mexico.

Q: Coming to Perlican Pharma, we hear about ICICI Ventures thinking of pulling out of your R&D arm. Is there any truth to it and will you be looking at buying their stake if at all ICICI ventures would want to pull out of it?

A: At this stage, I won't be able to comment on this matter.

Q: How do you see sales and profit growth panning out in FY09?

A: At the base of USD 1.25 million that we reported for FY08, without any upsides and exceptional items, we expect to grow on revenues at 25% for FY09.