For the quarter ended June 2000, performance of Cheminor was not encouraging. It has reported a marginal decline in sales of Rs 53.78 crore.

Operating profit margins has improved slightly from 28.39 per cent to 29.53 per cent. The two companies complement each other very well and hence will offer better synergies.

Strategically, Dr Reddy's has not entered the international market for generics, whereas Cheminor has concentrated its efforts on generic market.

Genric products developed by Dr Reddy's are also routed through Cheminor. Take the latest example of fluoxetine hydrochloride, an anti-depressant.Cheminor Drugs has filed an abbreviated new drug application (ANDA) in the US for fluoxetine hydrochloride. In order to do this, Dr Reddy's

Laboratories will have to secure a US Food and Drug Administration (FDA) approval for its bulk drugs unit (pilot plant), where the material for the formulation is manufactured.

Merger between Dr Reddy's and Chemnior Drugs will provide synergy in their operations and would allow both companies to capitalise on their strengths for collective benefits. Cheminor has a strategic equity alliance with Schein Pharma in the US to boost its generics thrust.

Schein Pharma holds 18.04 per cent equity stake in Cheminor Drugs. Schein will market the generic products in India. Of the two companies, Cheminor is the one that is recording faster growth rate. Among the main drivers for growth during the year were Ranitidine and Naproxen. While the former contributed 32 per cent to the turnover, Naproxen's was 29 per cent.

Exports during the quarter ended June 2000 suffered a moderate setback and declined from 40.74 crore to 37.50 crore. However, in future, exports are likely to get a major boost, mainly from the US market, as soon as the anti-ulcer drug patented by Glaxo goes off-patent, after the six-month extension.

Cheminor is likely to be a major beneficiary as it is one of the world's largest manufacturers of Ranitidine, Ibuprofen and Naproxen. The company has three manufacturing facilities to produce bulk drugs, catering to various therapeutic categories, which have been inspected by USFDA.

Cheminor manufactures 40 bulk actives, most of which are block buster drugs, giving it ready access to high quality bulk actives with total control on the process, right from the active development stage. For most products, Cheminor undertakes manufacturing from the basic stages. The company has developed processes for over 40 molecules in a short period of time.

During the past fiscal, Cheminor has filed five ANDAs for the US market and seven dossiers for Canada, Europe, Australia and South African markets. The company has already finalised marketing arrangements for Australia and is in the process of negotiating international agreements covering the markets of South Africa, Europe and Canada.

With this, it will complete the groundwork for the generic products in all its focus markets. Cheminor has laid the foundation for a highly profitable formulations business and is ready to reap the benefits.

With almost all divisions of the company showing improvement, it is well placed to maintain its high growth rate. The only division that is showing a mediocre performance is the domestic segment. This however, will improve once the company is merged with Dr Reddy's. In any case, the two companies have already started operating in a synergistic manner as can be witnessed from the launch of fluoxetine hydrochloride in the US market.

Given the prospects of higher growth rates and improved profitability, the markets are eagerly waiting for the merger.

Alloy Steel Industry
Steel can be classified into different categories based on its chemical composition namely - mild steel, medium carbon steel, high carbon steel and alloy steels. Ferro alloys are used as additives in the manufacture of alloy steel products. These give steel special properties such as toughness, corrosion resistance and higher strength.

Mini steel plants which employ the electric arc furnace (EAF) route for steel manufacturing use a mix of steel scrap and sponge iron. The ratio of sponge iron to scrap is determined by their relative cost and the quality of steel required. While sponge iron is domestically available, scrap has to be largely imported.

The excess use of sponge iron in the mix increases power consumption, thereby negating the effect of the lower prices of sponge iron compared to steel scrap.

The main ferro alloys used by alloy steel producers are ferro manganese, ferro silicon, nickel, ferro chrome and charge chrome. Most of the ferro alloys are available in the domestic market with the exception of nickel which is largely imported. The alloy steel segment finds application in automobiles, consumer durables, engineering and construction industries where quality is of prime importance.

Power is a major input in the manufacturing of alloy steel products. It constitutes almost 20 per cent of production costs and the steady rise in power tariffs has affected the margins of the industry.

The demand for alloy steel is likely to grow moderately over the medium term. The demand for stainless steel however, will grow at a marginal rate with respect to demand for alloy steel based on the expected growth of key end use sectors such as automobiles and utensils.

However, the growth in demand will not be enough to have a material impact on the bottomline of the leading players in the industry. The major corporates in alloy steel industry include SAIL and Mukand Ltd.

Dhruv Rathi and Manish Joshi