During the quarter, the topline witnessed a 12.7 per cent growth to Rs 7,262 crore, up from Rs 6,444 crore. A steady momentum in the advances and deposits, which rose by 13 per cent and 21.7 per cent respectively through the nine months ended December, has helped the topline. However, a disturbing aspect of the bank's performance is that other income has remained flat for the quarter which reflects poorly on it's ability to generate fee-based income.

A lower interest expenditure enabled SBI to retain the net interest earned ratio constant at 1.4 per cent. OPM, as a result, has improved by 2 percentage points could be expected to improve further due to reduced staff costs on account of VRS. Mandar Mhatre, banking analyst with First Global, opines that the SBI has set an example in the banking industry by confirming to international accounting standards by providing for the write-off.

Another silverlining, according to him, is the fall in staff expenses to total income ratio. Net profits, however, declined by 45 per cent to Rs 220 crore down from Rs 400 crore owing largely to the Rs 462 crore one time IMD expenses write-off during the quarter. The bottomline was set back by a further Rs 99 crore owing to revised RBI guidelines on derecognition of interest income of non-performing securities guaranteed by state governments. A sharp jump in the other provisions and expenses to Rs 820 crore( Rs 363.5 crore) further pared down the profits. SBI's bottomline may take a further hit on account of the VRS scheme. However, the variable cost would witness a drop over a period of time.

Cipla
Cipla's showing in the quarter to December 2000 has beaten the analysts' expectations. Exports was the major force behind the sterling show. Sales rose by 47.3 per cent to Rs 275 crore. Exports surged by 150 per cent from Rs 28 crore to Rs 70 crore. Operating profit increased by 51 per cent to Rs 77 crore. Net profit rose from Rs 35 crore to Rs 53 crore.

Yet the growth in sales and net profit has been accompanies by a hefty growth in operating expenses. For example, raw material consumption went up by 87 per cent to Rs 148 crore from Rs 79 crore. Staff cost as well as other expenses have risen by 30 per cent plus. The rising cost of operations may affect the company's competitive efficiency. Six topline brands accounted for 30 per cent to the sales income from formulations. New brands and a large market share in many other therapeutic segment may reduce the share of topline brands. But cost efficiency may be crucial in a highly competitive Rs 15,000 crore Indian pharmaceuticals market.

R&D is the key to its success. The company has also been making serious efforts to increase its share of the US generic market. Yet there are a few setbacks. It has been losing ground in some of the prominent drugs. Ciplox, the highest selling brand, has contracted by 6.5 per cent. Cifran of Ranbaxy and Ciprolet of Dr Reddy's have registered a growth of 2.1 per cent and 6.3 per cent respectively. Some other brands like Asthalin, Alerid and Ibugesic-plus also contracted. It appears that the initial brand building cost has been absorbed in previous year as reflected in higher cost. Now these brands are adding more to the revenue stream than the incremental cost of sales. The cost of finance is very low and the company is a zero debt company.

The growth potential of antibiotics of topline brands is slowing down. Cipla may face competition in anti-asthmatic group from multinationals such as Glaxo and Astra-IDL. Its strategy to widen product portfolio may insulate it from heat of competition but much depends on new ANDAs filed with US FDA.

Sachchidanand Shukla & Dhruv Rathi