Apr 26, 2006, 10.34 AM | Source: CNBC-TV18

Avecia acquisition brought profits down: Nicholas Piramal

Nicholas Piramal has declared about Rs 15.4 crore net profit. According to Ajay Piramal, Chairman of Nicholas Piramal, net profit growth of the company was a little low because of Avecia acquisition last year.

On revenue growth

Ajay Piramal


Nicholas Piramal

Nicholas Piramal has declared about Rs 15.4 crore net profit. 

But according to Ajay Piramal, Chairman of Nicholas Piramal  net profit growth of the company was a little low because of Avecia acquisition last year. The acquisition got the company's profit down by around Rs 25 crore.

But going forward, Piramal says Avecia will add Rs 350 crore to the topline in FY07.

Excerpts from CNBC Ė TV18ís exclusive interview with Ajay Piramal:

Q: You havenít registered great growth in this year. Could you outline what brought down net profit growth for Nicholas Piramal this year?

A: On a consolidated basis, the net profit has not grown because in the last quarter, we acquired Avecia, and that has brought down the profit by Rs 25 crore. That is in some way, a one-time event because Avecia will now turn around and start contributing to profit towards the end of the current year.

Q: What Avecia is likely to contribute, and which quarter it starts in? How it could change your next fiscal year numbers?

A: Avecia was an acquisition for our custom manufacturing business in the UK as well as in Canada. This was acquired in December 2005, and we have now run it for four months. In four months, Avecia did a turnover of Rs 105 crore, and there was a loss on operating basis of Rs 25 crore. In fact, the loss after depreciation and interest is Rs 33 crore, which has been included in the results for this year.

We have now completed the operational integration and are on course to achieve the other benefits of integration that we would do with Nicholas. At the end of this year, we expect Avecia to breakeven.

Q: If Avecia does indeed breakeven, what will that do for Nicholas Piramalís revenues in total for FY07 ?

A: We are confident that Avecia would breakeven, and it will add about Rs 350 crore to the topline.

Q: How your margins have performed for this quarter, Q4?

A: The Q4 margins have been affected only because of Avecia and the resultant R&D expenditure, which has gone up because of Avecia. They are strictly not comparable with the last quarter of last year because we had the VAT impact last year.

Q: When do you expect Phensedyl sales to recover in FY07, and what do you expect from contract research and manufacturing side this year in terms of revenues?

A: Phensedyl has now started recovering in the last quarter of year ended FY06. We expect that they will remain at a level, which was there in FY06 for FY07 as well. So Phensedyl may not show significant growth, but it will not show any decline either, and will remain at these levels.

The contracts have started pouring in for contract manufacturing. We have sold about Rs 19 crore worth of goods to AMO (Advanced Medical Optics), which was our first contract in the last year. We expect that AMO plus the Fortune 500 Company will kick into FY07 as well.

Stock Open: 25 April 06 Close: 24 March 06 % Change
Nicholas Piramal Rs 252 Rs 253.80 0.7% down



Q: How many contracts do you think you will have by the end of the Q1 FY07 for cramps in specific, and the revenue contribution?

A: We now have six contracts. It is very difficult for us to establish how many new contracts, because we have several contracts in the UK and Torcan, which is in Canada. Look at custom manufacturing business on its totality; that is with UK, Canada and India put together.

Q: It has not been a big year for Nicholas Piramal in terms of revenue growth because organically, you havenít shown substantial double-digit growth in revenues. Do you see that changing in FY07?

A: We have grown 14% in this current year. We expect that in FY07. We should have a revenue growth of about 25%.

Q: Would that include the contribution of Rs 350 crore from Avecia or without it?

A: It will be about 15% organic growth and 10% of this growth would come from Avecia.

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