Improvement in the company's profitability has been a result of a shift in its product basket. The company had, in earlier years, restricted itself to generic bulk drug products like amoxycillin, cloxacyllin and ketrolac. These products were manufactured by all and sundry. This adversely affected the company's profitability. As a result of this, Morepen's management shifted its concentration to high margin products, specially those which were still under patent in other countries and expected to go off soon. The company has now completely stopped production of antibiotics like amoxycillin, cloxacyllin and ketrolac and is concentrating on drugs like cisapride, sultamicillin and loratadine.

Apart from the new product launches, the company has also benefited from marketing tie-ups. Take for example the male genital desensitizer, Mandelay, which delays ejaculation during intercourse. Morepen has exclusive marketing rights for the product manufactured by Majestic Drug Co, the US.

Apart from this, Morepen has also tied up with multinational generic companies to market its products after the expiry of patent in the developed and regulated markets like the US, Canada and European markets. Morepen has also entered into marketing arrangement with PARI GmbH of Germany for marketing of inhalation systems. These inhalation systems find application in the treatment of diseases of the respiratory system. This marketing arrangement is likely to be converted into a joint venture company.

However, what the company is bullish on is the prospects of Loratadine, for which Morepen is the first company in the world to have the USFDA approval apart from its innovator. Loratadine is the fifth largest selling drug in the world enjoying over 50 per cent market share in its segment. Apart from this, the company also plans brand acquisition of OTC products and proposes to enter in a big way in herbal products.

One of the factors that has positively impacted the company is the location of its plants in areas which enjoy tax holidays as well as from exports. However, an area of concern is the increasing interest cost. During the second quarter of the current fiscal, the company's interest cost has almost doubled from Rs 4 crore to Rs 7.8 crore. This can, to some extent, be reduced after the company completes its private placement of Rs 200 crore to FIIs and multinational pharmaceutical companies, which will increase the foreign holding from 2 per cent to 24 per cent. This factor is also likely to attract investor fancy.

In any case, fundamentally too, the company is well-placed on growth path both in domestic and export market (which is expected to grow faster).

Air-India
News reports suggest that Air-India is unlikely to figure among the three public sector companies, which are to be shortlisted for disinvestment during the current fiscal. Is this a candid confession by the Government that a turnaround by the airline in the current fiscal appears highly unlikely?

But this reasoning, now more than ever, is ridiculed by the fact that Air-India looks ready to turn the corner back to its profitable ways. A route rationalisation exercise by the airline with the closure of destinations with low payloads seems to have worked for the company. A fact reflected by the provisional figures for the first half (April to September 1999) which reveals that Air-India has managed to drastically reduce the drain on earnings with net losses at Rs 6 crore, down from Rs 127 crore for the corresponding period last year.

In fact, the airline is said to have made an operational profit of Rs 8 crore, compared to a Rs 52 crore operating loss last year. Thus the writing on the wall is clear, that AI is moving from a loss-making entity back into the black. Now imagine the valuations that the company would fetch, if the Government decided to disinvest now.

Importantly, in this the age of growing global alliances, the Government can easily rope in foreign airlines to pick up an equity stake in Air-India when the disinvestment process begins. Especially, since the Government has already announced that it is not averse to just such a move for the national carrier. Subsequently would not the privatisation of the airline, be a better option? But while privatisation of Air-India, through private equity participation would be a strong medicine for the malaise - clearly the political will to go through with such an exercise is currently suspect.

In the mean time, apart from the route shrinkage exercise, management at AI could also look at options such as a sale and lease back of aircraft or the securitisation of future earning streams, as alternatives for generating the working capital requirements, rather than taking on additional debt. A VRS to trim operational flab also does not seem a bad idea. Importantly, if the Government chooses not to do anything about the current state of affairs and continues to treat the national carrier as its exclusive club, the airline runs the risk of being further marginalised even in the Asian context.

With contributions from Shishir Asthana & Percy Dubash