Lupin’s latest annual report sheds light on how its subsidiaries, key contributors to its sales and profits, fared. It also sheds light on revenue growth drivers.
To start with, acquisitions and one-off revenues played a big role in Lupin delivering a 25 per cent sales growth in 2011-12. The licensing income from Salix Pharmaceuticals contributed 2.5 percentage points to the sales growth. Acquisition of Japanese pharma company I’rom pharmaceuticals lifted growth by another 2 per cent. The US sales were boosted by launch of four exclusive products, which may not recur in entirety. The insulin co-marketing deal with Eli Lily came as a shot in the arm for the company’s domestic business too. But numbers for the last two are not available.
Lupin’s subsidiaries, which represent its presence in foreign markets and also holding companies for its key product patents, showed a sharp improvement in profits. The Japanese subsidiary saw a 3 percentage point improvement in margins, chipping in with 11.8 per cent of the company’s net profit.
German market
While it has been turbulent times for other pharma majors in German market, Lupin’s subsidiary Hormosan Pharma’s losses declined from Rs 19 crore in 2010-11 to Rs 5 crore in 2011-12; while revenues grew 25 per cent to Rs 52 crore. This was made possible by focus on niche-generic products and cost saving with shifting manufacturing to India. Additional investment by Lupin to the tune of Rs 18 crore helped Hormosan improve its net worth from a negative Rs 12 crore in 2010-11 to negative Rs 1 crore in 2011-12.
Lupin’s South African subsidiary, Pharma Dynamics, also fared well with pre-tax margins vaulting by 8 percentage points to 34 per cent. However, the profits from Lupin Holdings BV, Netherlands and Lupin Atlantis, Switzerland, which hold the company’s product patents slumped by 43 per cent in 2011-12.
But sums owed by subsidiary companies to the parent also rose. Outstanding dues receivable from subsidiaries made up 60 per cent of Lupin’s total receivables and jumped 60 per cent to Rs 1,035 crore in 2011-12. This stretched Lupin’s working capital cycle, doubling it from 66 days to 128 days.