THE INDEX / All-round growth

Manish Joshi & DhruvRathi

Blue Star (BSL), engaged in airconditioning and refrigeration business, has churned out really cool financials during the year to March 2001. Although the Rs 1,500 crore Indian room air-conditioner market has reached a plateau, BSL is growing at a rate of 20-25 per cent, which is faster than that of the market leader Carrier Aircon’s.

Revenue from operations went up by 14.5 per cent to Rs 506.3 crore, that may have more to do with volume growth, as the scope for higher price realisation is limited in the slack domestic market. The software, healthcare, and hospitality industries contributed to the rise in turnover, apart from the retail showroom segment. Several innovative products and systems were introduced that help customers save power and at the same time offer efficient cooling.

Raw material cost generally accounts for more than 75 per cent of total expenditure of Rs 462 crore (Rs 404 crore). Operating profit showed a decent growth of 15.1 per cent to Rs 44.1 crore. OPM remained stagnant at 8.7 per cent. There may be little scope for higher profitability as the raw material consumption grows in direct proportion to the sales.

Interest and depreciation were almost unchanged. Higher other income of Rs 3.5 crore (Rs 1.5 crore) helped in propelling the bottomline before tax and extraordinary items by 34.9 per cent to Rs 27.4 crore. BSL has improved the Return on Capital Employed (ROCE) to 19.6 per cent from 15.7 per cent.

The company’s order inflow has registered a growth of 20 per cent. It is looking at alliances with overseas players to widen its product portfolio in the country. Plans of launching advanced coolers and freezers, display cabinets and beverage dispensers are also afoot. Distribution network is also being expanded from the current 300 dealers to 400. Though BSL, currently exports air-conditioners to the UAE and Malaysian markets, there are no major plans to increase its presence abroad.

Panacea Biotech
Panacea Biotech, the largest biotech company in the country, derives bulk of sales income from biotech products. Sales during the year to March 2001 grew by 19.2 per cent to Rs 231.6 crore, down from 71 per cent to Rs 194.2 crore last year, thanks to a slowdown.

One of the early entrants in Hepatitis B vaccines, the company’s brand ‘Enivac HB’ is well accepted in the market. Enivac HB is a DNA recombinant product and it has received a big boost in demand with the compulsory vaccination programme. The market for vaccination has increased from one million doses in 1995 to 50 million doses in 2001. Panacea Biotech now faces competition from Smithkline Beecham, Shanta Biotech, Wockhardt and Zydus Cadila.High competition has forced a cut in the prices of Hepatitis B vaccine and margins have come under pressure. To retain its share in the market, the company commenced its new production facilities for manufacture of Enivac vaccine near Okhla, New Delhi. The company’s new brand ‘Nimulid’ in the pain management segment has been well accepted in the market, within a short period after its launch.

Recently, Nimulid MD (mouth dissolving) was successfully introduced. The company also introduced ‘Kondro’ for arthritic patients and ‘Giro’ for dysentry and diarrhoea. ‘Nimulid DS’ has also been introduced recently as a brand extension for acute cases of pain. These new brands contributed substantially in the growth of sales and profits.

During the to March 2001, operating profit increased by 42.6 per cent to Rs 61 crore down from 141 per cent to Rs 42.7 Crore in the previous year. Operating profit margin also improved from 22 per cent to 26.3 per cent. Interest quantum increased by 42 per cent to Rs 9.5 crore.

Net profit increased by 35.5 per cent to Rs 35.1 crore. The company has plans to introduce 10 more drugs in the current fiscal. It has also entered into a joint venture with Heber Biotech S.A., Cuba and formed Panheber Biotec Ltd to manufacture bulk drugs for production of Recombinant Hepatitis B Vaccines and Erythropoetin. The local production of bulk drug will spur operating profits.