Dr Reddy’s Laboratories Ltd’s US generics business contributed to good sales and profit growth during the quarter, and its expectations of further generic launches in the next few quarters should see it contribute to good growth in 2012-13 as well. Foreign exchange effects too helped, due to the rupee’s depreciation during the quarter.

Photo: Bloomberg

The company said this drug contributed about $99 million or Rs525 crore (at a quarter-end exchange rate of Rs53 to a dollar) to US business revenues. If one were to exclude this drug, then the US business growth would be about 23%.

Olanzipine revenues will contribute to performance in the March quarter as well. The impending launch of several key products in the next six months should also help growth sustain at high levels during 2012-13.

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In other markets, growth has been less exciting. In India, growth has improved to 11% year-on-year during the quarter, from 9% in the preceding quarter, but is still relatively low. Growth has been steadily improving due to the company’s new launches—23 drugs in nine months—and should get better.

In Russia, another key market, sales were affected by a delayed onset of winter, which caused primary sales growth (from the company to the trade) to grow by only 13%, but secondary sales (in the market) grew by 23%.

Selling, general and administration expenses rose significantly, by 21% year-on-year, chiefly due to mark-to-market losses on dollar hedging, and higher manpower costs. Interest costs, too, rose significantly, due to short-term borrowings for working capital and due to interest on bonus debentures.

However, the sharp growth in its US generics business was enough to cover up the increase in expenses and net profit rose by 88% year-on-year.

Its results were not altogether a surprise to investors, as the stock was up by only 2% on Friday.

Graphic by Yogesh Kumar/Mint

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