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Dr Reddy's net profit slips by 16% due to higher R&D spending

Pharma major Dr Reddy's Laboratories' net profit fell by nearly 16 percent to Rs 481.60 crore for the quarter ended March 31, 2014, due to higher research and development (R&D) expenditure.



Hyderabad: Pharma major Dr Reddy's Laboratories' net profit fell by nearly 16 percent to Rs 481.60 crore for the quarter ended March 31, 2014, due to higher research and development (R&D) expenditure.

The company had posted a net profit of Rs 570.89 crore for the January-March quarter of 2012-13.

During Q4 2013-14, net sales of the company grew by 4 percent to Rs 3,480.90 crore, from Rs 3,339.94 crore in the year-ago period, DRL President, CFO and Global Head of HR, Saumen Chakraborty said, adding the R&D expenditure for the current fiscal would be in the range of 10 to 11 percent.

"The profit margin is down due to increased R&D spending on an year-on-year basis. Last year, we spent only 6.6 percent (during the fourth quarter) and this quarter's R&D spending was 11.4 percent. This is the reason why net profit has come down," Chakraborty said at a press conference after announcing the company's results.

R&D expenses rose to Rs 398.48 crore for the quarter, from Rs 232.61 crore in Q4 2012-13, the DRL official said, adding that as much as 60 percent of the total R&D spend would go into global generics, Chakraborty said.

Shares of the company fell by 3.99 percent to close at Rs 2,610.70 on the BSE following the results.

For the entire 2013-14, DRL's net profit rose to Rs 2,151.20 crore, from Rs 1,677.62 crore, in the previous fiscal. Net sales were up Rs 13,217.03 crore, from Rs 11,626.56 crore.

Revenues from generics stood at Rs 2,732 crore during the January-March quarter as against Rs 2,257 crore for the same period last year.

However, revenues from pharmaceutical services and active ingredients (PSAI) business recorded a negative growth of 35 percent, at Rs 664 crore.

Revenues (generics) from Russia and other CIS countries were flat when compared to the Q4 of FY 13 at Rs 452 crore. 

DRL Chairman Satish Reddy said that geopolitical issues in the region including Ukraine have impacted growth of business there.

"If you look at Russia and CIS countries, there are some geopolitical problems in that region, especially in Ukraine which has had some impact. Also if you see Russia as a market, it has seen its ups and downs throughout the year," Reddy said, adding that the region is expected to witness growth and get back to normal in the coming quarters.

Speaking about the decline in the PSAI business, Reddy said that FY14 was a challenging year on the external market front due to lower demand from key customers along with lesser number of launches as compared to the previous year.

About the changed roles at the board level, Reddy said that interchange of roles are mainly for better governance.

The company announced here today that Satish Reddy has been appointed as Chairman of the Board, while G V Prasad would continue as the CEO. Prasad has also been appointed as the Co-Chairman and Managing Director. Earlier, Satish Reddy was Vice Chairman and Managing Director.

"By re-organising our roles, we would be able to focus more on distinct activities while simultaneously providing space for internal growth to our talented senior management team," Reddy said.

During the year, as many as 61 Drug Master Files (DMFs) were filed globally, including 12 in the US and 13 in Europe. The cumulative number of DMF filings as of March 31, 2014 is 631.

The board of directors has recommended a final dividend of Rs 18 per equity share of Rs 5 for 2013-14.

From Zee News

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