Photo: Mint
Photo: Mint

Cipla impresses with faster than expected recovery in India business

  • In June quarter, the revenue growth at the company decelerated to 1.3%
  • Revenues in India jumped 29% from June quarter

Cipla Ltd steered the India business to growth delivering better than expected performance for the September quarter. Revenues last quarter expanded 10% driven by 6% growth in India.

In June quarter when business in India was hit by realignment of distributors (domestic revenues dropped 12%) revenue growth at the company decelerated to 1.3%. The impact of the changes in distribution network is expected to linger on for some time. But the recovery has been rather rapid. Revenues in India jumped 29% from June quarter.

The recovery is expected to continue. “2Q saw a recovery in Gx (generics) business that will continue in 3Q. With branded business on a strong footing and performing in-line with Indian pharma market as per secondary data, Cipla seems to have come out unscathed," Antique Stock Broking Ltd said in a note.

The trends will reassure investors. Unlike other pharmaceutical companies which derive a large part of their revenues from the US, Cipla’s dependence on India is high. Last fiscal 38% of the Cipla’s revenues came from domestic market. So overall growth are largely mimics the performance in India.

Importantly the recovery in India comes when competition for the company’s drugs are intensifying in the US. Revenues in the US jumped 25% from the year ago reflecting the contribution from new drugs. But from June quarter revenues dropped 16% implying pricing pressures.

With no new limited competition drug launches in the US in immediate future, the fear earlier was the sequential slowdown in North American market may weigh on Cipla’s earnings. But with the mainstay India business now on recovery path those concerns will be allayed to some extent. “While we acknowledge that competition to gVoltaren gel, gSensipar and gPulmicort is intensifying, domestic recovery should ensure there is no undue pressure in the next couple of quarters until material US launches re-start from 4Q," Antique Stock Broking adds.

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