One off gains, tax credit boost Dr. Reddy’s profit

Revenue up by over 26% at ₹4,812.8 cr.

Dr. Reddy’s Laboratories on Friday reported a more-than-double increase in its consolidated net profit to ₹1,106.8 crore for the quarter ended September on the back of a one-off licensing fee gain and recognition of deferred tax assets.

The significant growth, from the ₹518.3 crore registered in the year-earlier period, also came amid the revenue from the key North America market, predominantly the U.S., remaining flat at ₹1,426.5 crore.

According to the results, (as per Indian Accounting Standards Ind AS), total revenue from operations increased by over 26% to ₹4,812.8 crore while total income was 23% higher at ₹4,866.8 crore.

Chief financial officer (CFO) Saumen Chakraborty who, along with CEO Erez Israeli, spoke to the media on the results, said the company received ₹723 crore in licence fee when it sold the U.S. and select territory rights for three products, including two neurology brands, to Upsher-Smith Laboratories, LLC.

On the tax credit, the company, subsequent to the changes announced by government in the corporate tax rates, reassessed the MAT recoverability and recognised an amount of ₹498.9 crore as deferred tax asset during the quarter.

Segmental revenue-wise, the share of global generics stood at ₹3,283.8 crore, or a growth of over 7% from the year-earlier period's Rs.3060.9 crore.

The growth was primarily driven by Europe, emerging markets and India. Sequentially, global generics revenue declined marginally.

To queries on the less- than-desired performance in the the North America market, Mr. Chakraborty said besides the continued price erosion, the performance was impacted on account of voluntary recall of heartburn drug Ranitidine and temporary disruption in supplies due to logistics issues faced.

“Ranitidine story is over. We are not selling anywhere,” he said, hinting at the company regaining the lost ground since it also had alternatives to the product.

Mr.Israeli said the next quarter with regard to the business in North America was expected to be better.

Revenues from Europe grew 44% to ₹276.4 crore (₹191.5 crore). On a sequential basis it was a 15% growth. The growth in India market was 9% to ₹751.1 crore (₹686.4 crore), driven by new products, improved realisations and volume traction in base business. Generics sale in emerging markets increased 10% to ₹827.6 crore (₹749.2 crore).

The one off licencing fee gave a big boost to the revenue from Proprietary Products to Rs.808.6 crore (Rs.141.3 crore). The Pharmaceutical Services and Active Ingredients (PSAI) revenues increased 18%.

Going forward, key priorities for the company will be resolution of USFDA warning letter issued to a facility, continue with productivity improvement measures and building healthy pipeline of products, the CFO said.

In a statement, co-chairman and managing director G.V. Prasad said he was pleased with the performance across the businesses and strong cash generation during the quarter. “We are progressing well in execution of our strategy and in our transformation journey on quality and efficiency."

The company’s shares lost 1.02% to close at ₹2,754.55 each on the BSE.

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Printable version | Mar 28, 2020 10:33:10 AM |

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