The Hindu Business Line : Orchid targets 30 pc topline growth

Bright prospects
Orchid's prospects for the current year looked good also because of the proposed debt wipe-off. The company recently announced to the stock exchanges its intention to raise $200 million (Rs 900 crore) through GDR or ADR or FCCB issue.

Chennai , May 18

With six Cephalosporin-based antibiotics slated to be launched (as they go off-patent) in the US market and likely entry into the European market, Orchid Chemicals and Pharmaceuticals Ltd expects current year's turnover to grow by at least 30 per cent. (For 2005-06, the company had reported sales of Rs 888 crore.)

Besides, the company will start selling Cephazolin in the US market as formulations rather than bulk drugs, as it had been doing for a few years now. This will give additional revenues.

Talking to Business Line about Orchid Chemicals' outlook for the current year, the company's Managing Director, Mr K. Raghavendra Rao, pointed out that none of these activities — launching the six Cephalosporin-based antibiotics, or entering into the European market or selling Cephazolin formulations — called for any fresh investments.

Therefore, the bottomline growth should be more than the topline growth, he said.

Orchid's prospects for the current year looked good also because of the proposed debt wipe-off. The company recently announced to the stock exchanges its intention to raise $200 million (Rs 900 crore) through GDR or ADR or FCCB issue.

Mr Rao said that $40 million (Rs 180 crore) would be used for expanding and upgrading the facilities to the levels required to pass inspections by authorities from regulated market.

The other $160 million (Rs 720 crore) would be used to pay off debt. This would result in elimination of interest burden (Rs 87 crore last year). Mr Rao expects a $12-m (Rs 55 crore) saving in interest costs this year. Last year, Orchid raised $75 million through a GDR issue, of which $65 million was used to retire high-cost debt. But for this, the interest burden last year would have been higher, he said.

Last year, 40 per cent of the company's sales came from regulated markets, where margins are higher. In the current year, half of the sales would come from regulated markets, Mr Rao said. Taking together, the expected 30 per cent growth in sales, higher proportion of sales from regulated markets and near-elimination of interest burden, earnings per share would be higher despite a dilution of equity from the GDR/FCCB issue, Mr Rao said.

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