Home / Companies / Lupin’s profit drops 31%, Cipla’s net rises 36%

Mumbai: Mumbai-based drug maker Lupin Ltd on Thursday reported a 31% decline in net profit from a year earlier to 156 crore in the three months ended March because of an increase in its tax burden.

Both companies posted higher revenue during the three months compared with the year-ago period. While Lupin’s sales grew by a quarter to 1,883 crore, Cipla’s sales increased at a slower pace of 8.7% to 1,814 crore. The sales growth was supported by higher domestic sales and select export markets.

The profit dip for Lupin and gain for Cipla maintained a trend of mixed financial results in the pharmaceutical sector in the last quarter. Ranbaxy Laboratories Ltd, Glenmark Pharmaceuticals Ltd, Strides Arcolab Ltd and Aventis Pharma Ltd have already reported their results.

Lupin’s tax expenditure during the quarter rose to 135 crore from 31 crore in the year-ago quarter. It included a 13.28 crore tax on unrealized gains on inventories of the company’s foreign subsidiaries. For the fiscal, the tax outgo for Lupin rose 168.3% from 115 crore to 309 crore.

Lupin shares fell 4.05% on Thursday to close at 521.35 apiece on BSE on a day the benchmark Sensex fell 0.36% to 16,420.05 points. Cipla stock gained 0.91% to 325.55.

“Tax benefits from two of our export units, which are in the special economic zones in Goa and Mandideep (Madhya Pradesh), have ended effective from this year. So all the stock that goes to the export markets including the US, Europe and Japan, including the unsold inventory, came under taxation in India at the rate of at least 25% during this period," Lupin’s group president and executive director Nilesh Gupta said in an interview.

Lupin also faced a price cut in Japanese market this year as part of Japan’s mandatory price reduction policy for generic drugs every two years. Lupin’s two subsidiaries, Kyowa Pharmaceutical Industry Co. Ltd and the newly acquired I’rom Pharmaceutical Co. Ltd, had to cut prices by 11% and 6%, respectively, this year, Gupta said. Lupin’s domestic sales during this quarter grew 29%.

Cipla’s profit growth was helped by optimized production at its new export facility in Indore, and a new product mix dominated by high-margin products, said Ranjit Kapadia, an industry analyst and senior vice-president at Centrum Broking Pvt. Ltd.

Cipla posted significant growth in the formulations business in both domestic and export markets. The company, which reduced prices on some generic cancer drugs last week, will continue to benefit from tax exemption for its new Indore facility. It may gain market share due to the price cuts.

However, it lost its position as the second largest drug maker by sales to Lupin in the full year ended March. Lupin’s sales reached 7,082 crore in the year, exceeding Cipla’s 6,905 crore.

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