Looking to increase exports for price advantage: Cipla

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Pharmaceutical major Cipla has reported a net profit of Rs 309 crore in the second quarter of FY12, a growth of 17.5% as compared to Rs 263 crore in the corresponding quarter of last fiscal. Out of this, the company earns 52% from exports and 48% from domestic sales.

Speaking to CNBC-TV18, chairman and managing director YK Hamied says that they intend to increase this ratio so as to avail the benefit of higher international prices.

Below is an edited transcript of his interview with Elan Dutta. Also watch the accompanying video.

Q: Growth seems to have been driven by formulations, so could you give us the breakup between the export and the domestic formulations?

A: Domestic has increased by 12% over the previous year, the total revenues have increased by about 10% and the export turnover by 10%. So the overall picture has been pretty good. The total export is roughly balanced, about 52% is the export and 48% is domestic.

Q: What is the contribution from antiretroviral drug (ARV) sales?

A: The ARV is about 15-20% of the turnover and that is mainly to Africa.

Q: You said export is looking good but what about domestic formulations? Last quarter they had been under pressure and did not really meet with industry average. Has that sort of stabilized this time, what's your guidance going forward on that one?

A: Going forward, we would prefer that the ratio of exports increases to domestic. The export pricing is much higher than domestic. Domestic is very low, export is much higher particularly in the regulated markets of the US and Europe.

Q: What is the contribution from technology income this quarter?

A: Technology income is essentially like paying for R&D. It gets translated into a commercial business after the technology transfer is done. Cipla then manufactures products for international companies. So if the technology know-how comes down, the export of formulations and APIs goes up. So technology and know-how fees and the export formulations hand in hand.

Q: How is the Indore SEZ scaled up because you had earlier said that it would add around 10% to sales in FY12? What are the realizations from that front?

A: This quarter has been exceptionally good. We did a total of about Rs 150 crore in the quarter that has just ended, the second quarter of the year which has been exceptional and now slowly the accumulated losses of the past have been sort of written off. We can now look forward to Indore playing a much more positive role in Cipla's development and growth.

Q: Focusing on your inhaler business. There were some expectations of approvals from Europe, have that come through?

A: One or two approvals have come through. We have still pending many respiratory products in Europe, but we are very hopeful that in the next few years more and more of the respiratory products will get approved. We have one or two already approved and in all 11 have been pending for quite some time. Lets hope they get approved and that this business of respiratory products not only in Europe but in America as well takes off in the next few years.

Q: Would you like to give us some guidance in terms of topline and bottomline going ahead?

A: Why not look at Q2? I have seen the results of many pharmaceutical companies and I think Cipla results for Q2 have been inline with the best and the leading pharmaceutical companies, atleast in India. Not many companies in the pharma industry can say that the PAT exceeds Rs 300 crore for a quarter. We have had a very good performance in Q2 and hopefully this will be maintained in Q3.

But one has to realize that the material costs have come down in this quarter and therefore what is very important for business is that the product mix should change. If we are today selling less ARVs, selling less anti-malarials, the topline may change but the bottomline as a percentage improves. One has to look at the overall picture.

Q: You have had a good quarter, so does that make you bold enough to go ahead and look for acquisitions? Anything you would like to share with us?

A: We are today the largest standalone generic pharmaceutical company in the world. We have had all our growth organically and I think perhaps for quite sometime we will remain in this mode.

If you look at our figures which have been given to you, our borrowings among pharmaceutical companies is just about the lowest. From self generated income we have put up factories in Indore, in Goa, in Sikkim, etc.

We have been very national minded pharmaceutical company, not only for making profits but Cipla has a very humanitarian approach to business. We are the largest suppliers of anti-malarial drugs to Africa. We are among the leading suppliers of Aids drug. We supply drugs for neglected diseases worldwide. So, apart from business we do a lot of social and humanitarian work which is good for society in general.