R&D tax deduction unlikely to impact Wockhardt: CEO

The central government’s proposal to reduce weighted deduction on research and development (R&D) from 200 percent to 150 percent is unlikely to have a major impact on Wockhardt, says Habil Khorakiwala, Founder and CEO of the company.

In an interview with CNBC-TV18, Khorakiwala said Wockhardt will maintain a double digit growth target for FY17 and expects Indian operations to grow 15-20 percent while UK operations should grow within 15 percent.Below is the verbatim transcript of Habil F Khorakiwala’s interview with Latha Venkatesh & Reema Tendulkar on CNBC-TV18. Reema: Right now in the Union Budget they have announced that 150 percent weighted deduction on research and development (R&D) will be applicable versus 200 percent that was earlier expected. What impact will it have on the financials of your company? A: Across the board it is not a very positive development. However, as far as Wockhardt is concerned we will not have much of an impact because we have a huge carry forward because of our minimum alternate tax (MAT) on R&D for next few years. Latha: There is a 10 percent tax on income from global income of patents that is registered in India by a resident, is that going to have any impact on you all? A: I don’t think so very much it will have an impact but I think this is a very good move government has done to allow the royalty or patent with a lower income tax. In UK there is a similar provision but that includes products manufactured out of the patent also. Latha: Do these two just score off, net-net no impact on your profit & loss (P&L) even for that matter in FY17? A: Yes, I would think so. Reema: The last time we spoke to you, you indicated that you expect to see a double digit growth in FY17, do you maintain that? A: Yes, of course. Latha: Let us come to the USFDA observations on Waluj and Chikalthana. Do they continue, they kickedin in 2013, is there any chance that we should see you being able to manufacture for the US markets from these plants sometime in 2016? A: We would think so because we are in discussion with USFDA. We are clarifying some of the issues they have, so I cannot say when it will happen. However, we are making decent progress. Latha: Should we expect that in the earlier part of the year like before June is what I am asking? A: I don’t know, I can’t comment on that. Reema: On the Shendra facility you told us that all the nine observations will be resolved in the next three months. This was in January when you first got the USFDA issues at the Shendra facility what is the update? A: We had already communicated to FDA and we are in a process of resolving in a next month or so. Latha: Of these three facilities Waluj, Chikalthana and Shendra where do you think you are ahead in the talks with the drug authority? A: Very difficult to comment on that specifically, but as I mentioned earlier our Waluj facility the inspection was positive in a sense that the inspectors gave a voluntary compliance. So, relatively it is in a much better shape. Reema: We understand that a site head from Cipla, Anjani Kumar is expected to join Wockhardt could you confirm that for us? A: I cannot comment on that till a person joins our organisation. Latha: Basically which are the pockets you see good sales in FY17 globally and domestically? A: India will continue to do well between 15-20 percent growth. Our UK operation will do quite well taking out the one off which we had so as I mentioned last time it should be around 120 million pounds there with a 15 percent growth there and the emerging market will do well also.