With 18 per cent of SBP's sales routed through over-the-counter products, the contrasting results do hold a surprise. One of the important reasons for a decline in margins is the lowering of prices of some of its important drugs. Currently, the company is selling 1 ml adult dose of hepatatis-B for Rs 485. In comparison, Shanta Labs is selling identical dosage at Rs 190. Moreover, Shanta plans to supply 0.5 ml dosage to government at Rs 75.

Further, with two more players are expected to enter this segment, there can be another round of price cut. All the producers are waiting for the government approval on extendedimmunisation program (EIP), before deciding on the pricing strategy for the vaccine. The EIP program, if approved by government, would give the user a direct access to 25 million new born babies every year.

In the OTC segment of SBP, Iodex is facing competition from 32 products. Although the company has gone for brand extension to sell three variants for IODEX , these products have not enhanced the margins for the company.

The company says that flooding in certain parts of the country have effected the sales in the OTC segment for SBP. But the same is not seen for SBCHC, whose brand Horlicks has done even better this quarter.

Analysts estimate that the malted food segment has grown by over 15 per cent in the first half of fiscal 1998-99, compared to the earlier growth rate of 10- 12 per cent. With Horlicks contributing to 45 per cent of the company's turnover, the topline has shown a increase of 16.85 per cent.

One contributor to SBCHC's improved performance has been the government decision to reduceexcise duty on the malted products from 20 per cent to 18 per cent in 1998-99. In addition, the excise duty on malt -- the key raw material -- was reduced from 10 per cent to 8 per cent, resulting in a rise in operating margins for the company from 15 per cent in the third quarter of 1997, to 18.4 per cent in third quarter of 1998.

The stock market also reflects the contrasting performances of the two companies. While the price of SMCHC has risen in this quarter from Rs 320 to Rs 490, the stock price of SBP has shown a modest gain from Rs 325 to Rs 371 in the same period. Nevertheless, the lower P/E multiple of SBP makes it a good candidate for buyback. The company has free cash flows and the parent company has already passed resolutions for increasing their stake in the Indian arm to 51 per cent and an enabling resolution for buy back of shares. The advantage for the company would be that the parent would be able to increase their stake to 51 percent, without having to bring in its own funds.