Mumbai: Drug maker Lupin Ltd said net profit rose 9% to Rs.290.5 crore in the quarter ended 30 September. Sales grew 29% to Rs.2,239.3 crore.
The growth in net profit failed to keep pace with the sales growth as there was a substantial increase in raw material and employee costs during the quarter. A steep increase in the interest and tax payments during the quarter also crimped net profit.
“Lupin paid a much higher interest and tax during the quarter that pulled down the net profit of the company during the quarter despite a huge growth in revenue,” said Ranjit Kapadia, senior vice-president (institutional research) at Centrum Broking Ltd.
Its total tax during this quarter rose by 92% to Rs.133.8 crore from a year earlier, while interest expenditure rose 52%, Kapadia said.
Lupin’s material cost increased to Rs.889.8 crore during the second quarter from Rs.597.7 crore a year ago. Employee costs increased to Rs.300 crore during the three month period from Rs.227 crore a year ago, the company said in a release on Tuesday.
“We have had a record first half, driven by strong operating performance and sustained growth across all our business segments. Our growth momentum continues,” Lupin’s managing director Kamal K. Sharma, said in the release.
The company’s sales in the US and Europe contributed 38% to its overall revenue during the July-September quarter. Business in these markets grew 40% to Rs.835.5 crore during this period. Local sales, which contributed 27% of its total revenue, rose by 18% to Rs.606.4 crore.
“For the quarter, the operating margin came in higher than the expectations of 19.1%, mainly on back of reduced research and development expense during the period, which declined from Rs.138 crore in the second quarter of fiscal 2012 to Rs.94 crore in the second quarter of 2013,” said Sarabjit Kour Nangra, an analyst at Angel Broking.
Lupin said in a release on Tuesday that the expenditure on research and development for the second quarter amounted to Rs.93.5 crore, or 4.2% of net sales, compared with Rs.138 crore, or 7.9% of net sales in the year earlier. “This is on account of lower expenditure towards legal and professional charges incurred during the quarter,” it said.
“The research spend was seen lower because of a lag in development process, and the slow pace of filing for marketing approvals or ANDAs (abbreviated new drug application). But, it will pick up in the second half and I am hopeful that the research spend will touch 7% of net sales by the end of the year,” Sharma said in a phone interview on Tuesday. “We have our plans ready to optimise operational efficiency which will take care of the revenue impacts of increased taxes (mainly because of expiry of tax holidays, introduction of minimum alternate tax in special economic zones etc), and also due to the shift of key revenue base to overseas markets, where taxes are high,” he said.
But, considering the one-time income that the company had in the year-ago quarter, and the increased expenses during this quarter, the current growth is quite significant and the company is confident that it can maintain the same rate of growth in the next half to touch the Rs.9,000 crore revenue for the full year, Sharma said.