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Business News/ Companies / Sun Pharma posts Rs1,391 crore profit in Q1
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Sun Pharma posts Rs1,391 crore profit in Q1

The drugmaker had posted net loss of Rs1,276 crore a year ago; net sales grows 13% to Rs3,927 crore

Sun Pharma’s results are almost in the expected line as analysts had estimated a flat growth in profit as the US sales was impacted due to price adjustment in Taro Pharma portfolio. Photo: Hemant Mishra/MintPremium
Sun Pharma’s results are almost in the expected line as analysts had estimated a flat growth in profit as the US sales was impacted due to price adjustment in Taro Pharma portfolio. Photo: Hemant Mishra/Mint

Mumbai: India’s most valued drugmaker Sun Pharmaceutical Industries Ltd posted a net profit of Rs1,391 crore during the June quarter as against a net loss of Rs1,276 crore a year ago. Its sales grew 13% to Rs3,927 crore.

The net profit was down 12% on a quarter-to-quarter basis as it had posted a net profit of Rs1,587 crore in the March quarter, which was up 57% compared to Rs1,012 crore in the year-ago period.

The company’s results were in the line of the market expectation.

Analysts had estimated an adjusted net profit in the range of Rs1,200-1,300 crore, considering the lower than expected sales and profits posted by its Israeli subsidiary and the key revenue contributor from US market Taro Pharmaceutical Industries Ltd during the same quarter.

The loss in the year-ago quarter was on account of a one-time provision of Rs2,517 crore towards settlement for patent infringement litigation.

The results are almost in the expected line as analysts had estimated a flat growth in profit as the US sales was impacted due to price adjustment in Taro portfolio.

Taro Pharma had last week announced a 22% decline in net profit at $45 million compared with the year-ago quarter. Its sales were down 15% to $130 million during the quarter from $153 million a year ago. The drop in net profit was mainly on the back of a $55 million charge on a contractual obligation associated with price adjustments, the company said.

Taro’s results will have a negative impact on Sun’s earnings, which are to be announced next week, Mint quoted an analyst with a foreign brokerage on condition of anonymity in a 8 August report.

“We continue to review opportunities to expand and strengthen our global footprint," said Dilip Shanghvi, managing director, Sun Pharma, in a note on Tuesday.

Sun Pharma, which plans to hold a court convened shareholders’ meeting for the approval of the merger of Ranbaxy Laboratories Ltd within itself on 22 August, is likely to face another legal hurdle as a group of minority shareholders including a couple of Singapore-based institutional investor in Ranbaxy plans to challenge the clearance to the merger deal by leading stock exchanges—BSE Ltd and National Stock Exchange—before the market watchdog Securities and Exchange Board of India (Sebi) concludes its investigation on the alleged insider trade of Ranbaxy shares by a director of Sun Pharma.

“While we are intensively planning for the integration with Ranbaxy, we remain focused on strengthening our existing businesses and developing a differentiated and speciality-driven product basket," Shanghvi added.

A group of minority shareholders had in May filed a petition at the Andhra Pradesh high court seeking a stay on the approval process alleging that an investment company Silverstreet Ltd owned by the family of one of the directors of Sun Pharma bought Ranbaxy shares just a few months before the announcement of the deal triggering a significant momentum in the share price.

Sun Pharma and Ranbaxy had jointly announced the $3.2 billion all-stock merger deal in the first week of April. This deal had valued Ranbaxy at Rs457 a share. With this transaction, Ranbaxy’s majority owner Daiichi Sankyo Co. Ltd of Japan, which holds about 63.4% stake in the Indian drug maker, will own about 9.5% equity in Sun Pharma.

The minority investors in Ranbaxy say the company, which is improving performance in the US market as well as India currently, undervalued for the deal and they are uncertain about the scope of appreciation of their significantly lowered equity holding in Sun Pharma, especially since Sun Pharma factories were also came under US FDA action and further scrutiny.

“Firstly, we want more clarity on the valuation of the deal as we are still not very confident of scope of appreciation for our comparatively smaller holding in Sun Pharma, and secondly, the buyer’s real intention of taking over Ranbaxy and the alleged insider trading in the stock," said one of the minority equity holders in Ranbaxy.

“We intend to challenge the stock exchanges’ decision to give their nod before Sebi investigation is concluded as directed by the Andhra Pradesh court," added this investor, who didn’t want to be identified.

Sun Pharma-Ranbaxy deal is already under the scrutiny of Competition Commission of India (CCI) as the merged entity will become the largest drugmaker in the country and it will have a combined market share of 23-90% in at least six therapy areas in the domestic market.

Sun Pharma’s shares closed at Rs783.90 a unit, up 2.69% on Tuesday on the BSE, while the benchmark index, Sensex gained 1.42% to close at 25,880.77 points and the BSE Healthcare Index gained 1.29% to close at 12,287.24 points.

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Published: 13 Aug 2014, 12:10 AM IST
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