“I will continue to remain focussed on the pharma business,” Dilip Shanghvi, Managing Director of Sun Pharmaceutical Industries Ltd told analysts late on Saturday, referring to his family’s Rs 1,800 crore investment in Suzlon Energy.
“Recently my family made investments in a few non-pharma businesses. These are purely financial investments,” Shanghvi said, without however taking questions on the development. On Saturday, Sun’s promoter family had confirmed their decision to pick up 23 per cent in the debt-ridded wind turbine maker Suzlon.
Sanghvi’s reiteration of his focus on the pharma business, even as his family makes financial investments in other businesses, comes against the backdrop of similar developments in the industry not too long ago.
In 2011-12, Ajay Piramal-led Piramal Enterprises picked up 11 per cent equity in telecom major Vodafone as a financial investment , but with a plan of exiting in 12-to 24 months with a 17 to 20 percent return in the bag. The investment came good, with the Piramal group getting a 50 per cent return on its investment, mopping up Rs 8,900 crore on selling its equity in Vodafone, early last year.
Similar, yet different
Just as much as the Sun and Piramal deals are similar in terms of the strategy to invest in non-pharma businesses as a financial investment, they are dissimilar as well. Sun’s investment is by the promoter family in a personal capacity, while the Piramal investment was from the group signalling that the pure-play pharmaceutical company was morphing into a multi-sectoral company, says an analyst, who did not want to be named.
Q3 performance
Sun is at present in the process of wrapping up its $ 4 billion proposal to acquire Ranbaxy. Most of the approvals have been received, Shanghvi said, adding that the company was in the process of divesting the seven products mandated by the Competition Commission of India. The deal is expected to close this financial year, he added.
Sun’s net profit for the three months ended December 31, 2014 was Rs 1,425 crores, down seven percent from the Rs 1,531 crores clocked in the same period last year. Its income from operations stood flat at Rs 4,280 crores for the period under review.
Sun’s US business was under pressure since its Halol plant in Gujarat was on the mend, following regulatory action from the US Food and Drug Administration.
Remedial measures are underway, Shanghvi said, adding that it had resulted in supply constraints in the US last quarter. He expected the situation to “improve” in the current quarter of the year. Sun’s U.S. sales, accounting for 59 per cent of total sales, saw a 5 percent dip at $ 413 million for the quarter.
Factors that affected Sun’s financial performance in the last three months included, increased compliance cost, integration planning involving Ranbaxy and increased research investments towards funding the clinical development of Tildrakizumab, the psoriasis monoclonal anti-body recently in-licensed from MSD (US). Sun’s consolidated research spend for the quarter stood at Rs 389 crores, or 9 per cent of sales.