A gestation period at the Indore Special Economic Zone project, coupled with rupee-related exchange rate differentials and the waiting period for products to commercialise dented Cipla's bottomline for the three months ended December 31, 2010.

While the near-term profitability has been affected, revenue growth at about 12 per cent has been comparable with the industry average of about 15 per cent, said Cipla's Wholetime Director, Mr S. Radhakrishnan, adding that the long-term growth prospects remained unaffected.

The Indore SEZ has been running for the last nine months and approvals are being got from different regulatory authorities, he said. It will be some quarters before business begins from there, he said.

Rupee appreciation

During the quarter under review, Cipla posted a growth of eight per cent in income from operations. However, operating margins and profits are lower by about 16 per cent and 20 per cent respectively, primarily on account of increased factory overheads at Indore SEZ and appreciation of the Indian rupee by about four per cent on a year-on-year basis which has affected export turnover as well as realisations, the company said.

Also, there have been projects in the pipeline that have been developed in partnership and milestones and technology fees had been received by Cipla in the past. This is completed and now projects await commercialisation, again a couple of years down the line, he said.

Domestic sales grew by more than 11per cent.

In spite of a rupee appreciation of about 4 per cent, export sales grew by about 12 per cent, the company added. Technical know-how/fees for the quarter decreased by about Rs 55 crore on account of one-time fees received in third quarter of 2009-10 resulting in a high base on a year-on-year basis, the company said.

Employee costs

Material cost has been maintained at similar levels on a year-on-year basis, the company said. The increase in staff cost (Rs 46 crore) was due to increase in manpower particularly at Indore SEZ, regrouping of contractual staff at Goa facilities and annual increments.

Interest cost has decreased due to repayment of short-term working capital loans availed by the company. Depreciation has increased by about Rs 20 crore due to additions to fixed assets mainly on account of commissioning of Indore SEZ factory. Other expenditure has increased mainly due to increase in selling expenses and factory expenditure, in particular at Indore SEZ, such as repairs and maintenance, power, etc, the company said.

Cipla shares were down about 2 per cent on the BSE, at Rs 324 on Friday.

> jyothi@thehindu.co.in

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