Drug-maker Wockhardt has shown a qualitative improvement in financial performance for the three months ended September 30, according to analysts, who say the company has used the opportunity to clean up its balance sheet.

During the quarter under review, the sale of Wockhardt’s nutrition business to Danone, for Rs 1,280 crore, was completed. The company cleared the entire goodwill pertaining to its French subsidiary (Negma) of Rs 621 crore and wrote off the carried forward cost of certain intangibles and research and development costs of Rs 437 crore, Wockhardt said.

R&D expense

These factors, including the write-down of over Rs 400 crore worth of capitalised research due to a change in the accounting policy, indicate that the company has used the opportunity to clean up its balance sheet, said a report from Macquarie Capital Securities India.

The entire research-related expense is included in its profit and loss statement, as opposed to the earlier system of product development related capitalisation, the analyst explained.

Qualitative growth

About 80 per cent of Wockhardt’s revenues come from outside India. And Wockhardt’s revenues in the US, at $118 million, notched up a growth of 47 per cent over the corresponding quarter of 2011-12, the company said.

Its business in the UK recorded growth of 26 per cent over the similar previous period, in an otherwise stagnant market. The company’s net debt now stands “at a comfortable Rs 1,230 crore”, the analyst report added.

Wockhardt shares closed at Rs 1,777 on the BSE, up almost 5 per cent on Thursday.

jyothi.datta@thehindu.co.in

(This article was published on November 15, 2012)
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