Mumbai: Strong foreign exchange gains and a profitable valuation of derivative instruments helped Ranbaxy Laboratories Ltd post a massive rise in net profit to Rs675.45 crore in the June quarter from Rs23.73 crore in the corresponding period last fiscal.
However, sales at India’s largest drug maker, in which Japan’s Daiichi Sankyo Co. Ltd bought about a 64% stake last year, fell 17%. Operational profit dropped 77%.
Balanced mix: Ranbaxy chairman and managing director Atul Sobti (left) with chief financial officer Omesh Sethi in Mumbai on Friday. Manvender Vashisht / PTI
It also received serious setbacks in the US, where the Food and Drug Administration (FDA) banned at least 30 of its products and halted approval of several new medicines because two of its plants failed to meet quality standards.
The firm posted exchange gains of Rs231.2 crore—Rs190 crore of which was interest on foreign currency loans—and a profit of Rs806.6 crore on valuation of derivatives. Derivatives are financial contracts whose value is based on another security.
Ranbaxy’s shares gained 1.91% on Friday to close at Rs279.65 on the Bombay Stock Exchange. The bellwether Sensex index closed 0.97% higher at 15,378.96 points.
However, compared with net losses in the preceding two quarters—Rs680 crore in October-December and Rs761 crore in January-March—the firm has improved earnings narrowly after excluding foreign exchange and derivatives gains. Its consolidated sales during the quarter were Rs1,006.4 crore, down from Rs1,216.9 crore a year ago, largely due to the FDA action.
Ranbaxy managing director and chief executive officer Atul Sobti said in a statement that the company’s balanced market mix with a clear focus on emerging markets has helped it mitigate market pressures, including the liquidity crisis and a fall in demand.
While the firm claims that it has improved operationally over the past two quarters sequentially, operational income for the June quarter has fallen sharply to Rs55.6 crore from Rs242 crore a year ago.
“This would essentially mean the increased focus on emerging markets as well as the existing European markets haven’t helped the company much to recover from the impact of the FDA action,” said a Mumbai-based sector analyst with a foreign brokerage, who did not want to be identified.
“The results were almost on anticipated lines as investors expected the US impact to continue reflecting on the revenue,” said Kirit Gogri, a sector analyst with Mumbai-based brokerage Quant Capital Pvt. Ltd. “It will take at least another two or three quarters for the company to come back on track.”
Reuters contributed to this story.