Competitive pressure

Thomas Cook (I): Buyback fuels interest

THOMAS Cook India (TCI), a leader in the foreign exchange and travellers’ cheque market is reeling under pressure from competition by international credit cards.

Total income at Rs 23.23 crore was up 11.7 per cent. This is a commendable achievement, as the introduction of international credit cards by most of the credit card companies has been hitting the company hard. However, to earn additional revenue, the company had to jack up promotional expenses substantially by 64.3 per cent to Rs 4 crore. Competitive pressures have affected OPM, which declined to 22.2 per cent (30.3 per cent).

Despite negligible interest burden, the company posted net profits lower by 15.71 per cent at Rs 2.45 crore. To protect itself from the onslaught of credit card companies, Thomas Cook launched its own credit card jointly with an international bank.

This has necessitated a hike in the operating expenditure, while revenues and profit would take some time to come.

Despite dismal results, the TCI counter has been witnessing a lot of action thanks to the Sebi’s directive. According to reports, Sebi has directed the German group, Condor and Neckermann Touristic (C&N Touristic), holding 40 per cent stake, to come out with the open offer for acquiring 20 per cent of the equity of Thomas Cook (India) at the minimum offer price of Rs 475 per share. The total equity shares numbered 1.45 crore.

As SBI, having 15 per cent stake in TCI, has decided not to tender its shares in open offer for strategic reasons (since TCI is also the leading foreign exchange dealer), chances of public and other FIs to exit from TCI at the high open offer price have brightened. Even if all the shareholders decide to tender their shares for buyback, close to 50 per cent of their tendered shares will be accepted.

Novartis India
Novartis India’s net sales grew by nine per cent to Rs 102.9 crore in the first quarter to June 2001. More than half the turnover came from trading. Pharmaceutical business registered modest growth but other sectors, consumer health and animal health, grew at a much faster rate. Other expenses rose very sharply by 42 per cent to Rs 26.8 crore. It was primarily due to higher promotional cost incurred by the consumer health and animal health division.

These expenses pulled down operating profit by 16 per cent to Rs 14.8 crore and margins fell from 19 per cent to 14 per cent. Net profit was down by 10 per cent to Rs 9.15 crore.

NIL has introduced five new products in the eye care segment under the popular international brand “Ciba Vision”. During the quarter, the company introduced “Voveran” brand eye drops.

This is a line extension Voveran brand pain killer. The total number of products in this division has gone up to five. Most products under this division are free from DPCO price control. The company is trying to bring some brands under OTC drugs. During the same quarter, the company relaunched “Calcium Sandoz” tablets as OTC brand.

NIL benefited from a demand for a ban on “Eptoin” brand of Knoll Pharmaceuticals. It helped boost the growth of “Tegritol” (Carbamazepine) which is used for anti-epileptic treatment. NIL has also introduced several line extension of ‘Tegritol’, a $ 140-million global brand.

During the quarter, the company received a setback when DPCO included diclofenac sodium (Pain management) under price control. This Rs 100-crore segment is dominated by ‘Voveran’, with 50-per cent plus of market share. The company sold Goregaon land, despite shareholders’s protest, for Rs 93 crore, of which NIL will get Rs 72 crore.

Novartis’ business risk profile improved after it got rid off agri-business. It will be able to reduce working capital requirement because pharmaceutical business has very low debtors days as compared to those of agrochemical business. Consequently, return on capital as well as that on equity may improve substantially.

Novartis is likely to get better technology and new products from its parent company Novartis International AG, Switzerland. The parent company has made considerable progress in new drugs in oncology and opthalmics segments.

Manish Joshi & Dhruv Rathi .