While the hotel industry suffered owing to a drop in influx of tourists, both business and leisure tourists, the situation worsened as the employee- turnover ratio increased considerably. In fact, higher employee-turnover ratio was a reflection of better opportunities in other service sector areas such as Call Centres etc. The company tried to lure the employees back by paying them more. Although, staff cost declined by six per cent to Rs 30.4 crore (Rs 32.2 crore), its share in total revenue increased to 22 per cent (18 per cent).
Apart from staff cost, other expenses also added to operational costs. Owing to this, OPM stood at 22 per cent (33 per cent). Interest outgo almost doubled to Rs 11.7 crore (Rs 6 crore). Depreciation cost increased marginally to Rs 9.9 crore (Rs 9.7 crore). The increase in interest cost and depreciation provisioning is attributed to renovation of properties along with acquisitions.
The company has not provided for bad debts and advances which it intends to do at the end of the fiscal. It has also not provided for an amount of Rs 3.6 crore due from certain airlines that discontinued operations. During the quarter the company transferred its Air Catering business to a joint venture company with Singapore Airport Terminal Services (SATS). Although the company has transferred its Air Catering business, the capital employed in the IHCL remains at Rs 1,558.9 crore.
The generic boom did not translate into a better growth for Morepen Laboratories (MLL), worlds largest manufacturer of loratidine. The company reported a near industry average growth of 10 per cent in net sales to Rs 122.3 crore in third quarter to December 2001. Operating profit rose by 44 per cent mainly on account of other income. Raw material consumption was Rs 63.5 crore (Rs 64.2 crore). The company claims that it is the lowest cost supplier of many generic drugs in the world. Other income was Rs 10.2 crore. Margins rose from 34.5 per cent to 45 per cent, one of the highest in the pharmaceutical industry. Interest increased 30.3 per cent to Rs 11.3 crore and depreciation 29 per cent to Rs 7.5 crore. Net profit was up 11.7 per cent to Rs 24.7 crore. Morepen has made a shift from bulk drugs to formulations. The company has 65 formulations in five segments, namely neuropsychiatry, cardiology, gastroenterology, dermatology and respiratory. Formulations have helped the company improve its operating profit margins.
The twenty blockbuster molecules on its generic list did not click in terms of sales growth. This contrasts sharply with its major rival Dr Reddys Lab whose blockbuster drug, fluoxetine, netted in considerable revenue during the second quarter of 2001-02. MLL continues to depend on its main product loratidine. After the expiry of the patent of this drug, the company claims that it will benefit immensely from supplying generics of loratidine.
MLL is investing heavily in promoting Dr Morepen brand in FMCG market. Under this brand, the company is marketing instant antacid, sat isabgol, hazma candy, energy drink, low calorie sugar and throat drips. MLL has allied with companies like Diamed AG, Swiss company, Ameritek Inc of USA, Pari GmbH and Beurer GmbH of Germany for the diagnostic market that is slated to grow at 25 per cent per annum in a healthcare industry worth Rs 1,00,000 crore.
The company has set aside Rs 50 crore for possible acquisitions. The company is looking at some mid-size formulation brands in cardiac and neuropsychiatric segments. It would finance acquisitions through internal accruals and short term debt.
Morepen has evinced interest in acquiring Indian subsidiary of Abbott Laboratories of US. Abbott may not attract much valuation for its stake as its product basket is very old but it has a controlling stake in Rs 350-crore (sales) Knoll Pharma.