The modest rise in domestic sales has been the bane of the company of late, though it could be said that the company has been lacking the marketing savvy of its closest competitor, Cadbury. However, the fact remains that even Cadbury, which was successful initially with product launches and market segmentation, has not been able to successfully climb out of the downtrend in Indian markets for milk and milk based products.

The total expenditure has risen by 10 per cent - almost the same percentage as that of its domestic sales. Operating profit margins have improved by 4 percentage points to 19.51 per cent. However, it is interesting to note the difference between the level of inventory for the present quarter and the half-year ended June. There was a significant reduction in inventory for the quarter which reflected in the corresponding decrease in the interest cost, suggesting better working capital management. In contrast, the inventory at the half yearly level shows a hefty rise. Still, the interest cost has come down. It means that this was achieved despite a high inventory level and the high carrying costs associated with it.

The company has been transparent in coming out with the components of changes in inventory. This break-up gives an idea as to how much profit is inflated due to the inclusion of fixed cost in stock valuation. However, there has been an abnormal hike in the provision for contingencies from Rs 30 lakh in the previous comparable quarter to Rs 630 lakh in the present quarter owing to different matters under litigation. Depreciation charges too are higher by about 15 per cent.

As expected, the current year's favourable raw material price scenario has had a positive impact on the bottomline. The net profit has seen a healthy 30 per cent rise. The prices of cocoa have been hovering around $900 as compared to the high of $1750 in the last year. However, it is imperative that the company embarks on an effective market penetration strategy to retain the market turf rather than to depend on the falling international prices of its chief raw material.

Bulk Drugs
The prices of five bulk drugs have been slashed substantially by the government of India. These drugs are sulphamethaxole, vitamin B2, vitamin B2-5 phosphate, chloroquin phosphate and pentazocine.

Most of the these drugs are used in combinations drugs. Out of these, sulphametoxazole- a sulphonamide, is widely used in many therapeutic segments in combinations with many antibacterials. The most common combination is Trimethoprim with sulphamethoxazole which is sold by many major manufactures. The prices of sulphamethoxazole has been reduced from Rs 419 per Kg to Rs 330 Kg. The price slash of this drug was necessitated by the sharp decline in global prices. There is a huge overcapacity of this drug in India and East Asia. The global price of this drug has plunged by more than 40 per cent in recent times. The global price of sulphamethaxazole is around $5 per kg which works out to Rs 220 per kg. Against this, the prices set by the NPPA is Rs 330 per kg.

The country had earlier exported large quantities of this but now it seems that it may turn the other way round and import may be a better option. There are two major suppliers of bulk drug and twenty five medium and small manufactures. Sirish Drugs and Godavari Drugs have a manufacturing capacity of 2200 and 450 tonne respectively. The present demand of this bulk drug is 2546 tonne per annum. The DPCO control price will also affect major formulation manufacturers like Burrogh Wellcome (Glaxo), Nicholas Piramal and Cipla.

Glaxo has number of combination formulations with sulphamethaxole. Their biggest brand in this catagory is Septran which is ranked number 18 in the list of largest selling drugs in India. This drug has a sales of Rs 42 crore per annum. Bactrim is the second largest selling brand and is ranked number 208 in the ORG list of top selling brands. This brand belongs to Nicholas Piramal and has a turnover of Rs 12 crore per annum. The other brands in this catagory are Ciplin of Cipla. The reduction in the price of formulations will soon be forced.

The value of sulphonamides as an antibacterial has gone down considerably due to the increasing resistance and their replacement by more active and less toxic agents. The principal use of sulphonamide, administered alone is in urinary tract infections.

The drugs are now being replaced by other molecules and this has resulted in rapid decline of its global prices.

The prices of vitamin B2 has also gone down from Rs 2800 per kg to Rs 2438 per kg. This drug is also used in combination with many other vitamins and minerals. The annual consumption of this bulk drug is around 659 tonne which is likely to increase to 797 tonne in 2002.

Major brands of this drug are Neurobion Forte (E Merck), Macrobarin (Glaxo), Optineuron (Lupin) and Sioneuron of Albert David.

The prices of chloroquin phosphate, an intermediary has also been reduced from Rs 1347 per kg to Rs 870 per kg. The major brands are Lariago (Ipca), Resochin (Bayer) and Nivaquine of Rhone-Poulenc. The present requirement of this drug is around 450 tonne per annum.

The last drug in the list of price slash is Pentazocini. Prices of this drug have been slashed from Rs 42,126 per kg to Rs 38,498 per Kg. This drug is a sedative and there are very few manufacturers of this drug.

The largest selling brand in this segment is Fortwin of Ranbaxy.

-- KSESH (with contributions from Sachchidanand Shukla and Dhruv Rathi)