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Nichols Piramal India, Nirma, Mahavir Spinning Mills

NICHOLAS PIRAMAL INDIA Steering Contracts and M&As Nicholas Piramal India (NPIL) is one of the country

Companias

NICHOLAS PIRAMAL INDIA

Steering Contracts and M&As

N
icholas Piramal India (NPIL) is one of the country’s largest companies providing healthcare solutions to deal with the prevention, diagnosis and treatment of disease. NPIL’s product portfolio consists of branded formulations, vitamins, active pharmaceutical ingredients (APIs) and diagnostics.

During 2004-05, NPIL’s financial performance deteriorated. The company’s net sales declined by 2.9 per cent to Rs 1,232 crore over 2003-04; likewise net profit decelerated by 9.8 per cent to Rs 169 crore. On the export front, NPIL continued building its export strategy of collaboration with foreign companies for manufacturing contracts. Its foreign exchange earnings shot up by 120 per cent to Rs 222 crore in 2004-05. During the year under review, NPIL commissioned its new research and development (R&D) centres at Goregaon, Mumbai, one of the largest single site pharmaceutical R&D centres in the country and launched a total of 36 products under its various segments.

In sync with the wave of mergers and acquisitions (M&As) in the pharmaceuticals industry NPIL recently acquired Avecia Pharmaceuticals, UK at around Rs 76 crore and in July 2004, it acquired the Dobutrex brand from Eli Lily & Company, US, for the Indian market. NPIL also acquired 17 per cent equity shares in BioSyntech Inc, Canada for Rs 22.3 crore. This acquisition enables the company to enjoy the marketing rights of current and future products of BioSyntech Inc for India and seven other Asian countries. The company also took over the inhalation anaesthetic business of Rhodia Oraganique Fine of UK for $ 14 million.

NPIL recently entered into a contract manufacturing agreement with Pfizer International Llc (limited liability company) for veterinary related R&D services for seven years. The company signed a development and know how agreement with the Swedish multinational AstraZeneca AB. Under this agreement, the company will establish a framework for future collaboration to develop processes for the manufacture of intermediates, active ingredients or bulk drugs for supply to AstraZeneca. NPIL completed a product in-licensing agreement with Ethypharm, France, for the Indian market to source raw materials and manufacture dispersible formulations using the technology at its Pithampur plant. It will distribute the product in the Indian market under its own brand name, which will further augment its presence in the fields of pain relief and paediatric care.

NPIL registered 8.8 per cent growth in net sales at Rs 373 crore for April-June 2005 and net profit rose by 11 per cent to touch Rs 54 crore over the corresponding period of the previous year. Export for the quarter surged by 49 per cent to Rs 56 crore. For the quarter ended September 2005, net sales dipped by 2 per cent to Rs 345 crore; however, net profit grew by 37 per cent to Rs 54.9 crore over the same period of the previous year. Exports for the quarter increased by 21.6 per cent to Rs 53.4 crore.

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NIRMA

Chugging Along

N
irma is one of the forerunners in the fast moving consumer goods industry in India. Its product segment comprises of items such as edible salt, soaps, detergents and scouring and industrial products such as soda ash, sodium silicate, etc.

During 2004-05 Nirma posted a healthy financial performance. Its net sales increased by 5.5 per cent to Rs 1,838 crore and net profit rose by 15 per cent to Rs 284 crore over 2003-04. The company’s foreign exchange earnings stood at Rs 66 crore – a rise of 6 per cent. Nirma registered 4.6 per cent growth in detergent sales by achieving sales of 7.7 lakh tonnes during the year under review. The company is one of the major producers of soda ash in India and registered a growth of 15 per cent to produce 5.4 lakh tonnes of soda ash over the corresponding period of previous year.

Faced with soaring oil prices in the local as well as global market Nirma witnessed a rise in the cost of production in toilet soaps, which declined by 5 per cent over 2003-04 to 97,630 tonnes. The company’s production of glycerine was also lower by 10 per cent at 5,486 tonnes and the sale of single super phosphate fertiliser also decreased by 6 per cent to 81,061 tonnes.

For the soda ash project, Nirma has imported dry lime process technology from Akzo Nobel Engineering BV of the Netherlands. The technology was selected to achieve the advantages of energy conservation, reduced stream consumption as well as water requirements and lower effluents. In June 2005, Nirma acquired the S K Birla group-controlled Saurashtra Chemicals from the Asset Reconstruction Company of India (Arcil) at a cost of over Rs 300 crore.

At the extraordinary general meeting (EGM) of Nirma held in November 2005, shareholders of the company have approved the split of equity shares in the ratio of 1:2. As per the scheme, every Nirma shareholder with one fully paid up equity share of Rs 10 would get two equity shares of Rs 5 each, fully paid up. The EGM also approved the composite scheme of the compromise and arrangement between Core Healthcare (CHL) and Nirma, whereby one equity share of Rs 5 each of Nirma would be allotted for 80 equity shares of Rs 10 each held in CHL.

During April-June 2005, Nirma’s net sales showed a marginal improvement of 0.3 per cent at Rs 488 crore while net profit grew by 27 per cent to Rs 77 crore over the same period of the

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Economic and Political Weekly January 14, 2006

The Week’s Companies

(Rs lakh)

Nicholas Piramal Mahavir Spinning Nirma Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04

Income/Appropriations
1 Net sales 123225 126905 185086 108141 183887 174238
2 Value of production 129680 128059 183804 109691 182143 173108
3 Other income 3912 2433 1791 1128 872 1099
4 Total income 133592 130492 185595 110819 183015 174207
Raw materials/stores and spares/
power and fuel consumed 65515 62665 111253 68312 114077 98499
6 Other manufacturing expenses 2710 1560 11339 4349 2215 2171
7 Remuneration to employees 14129 12904 9962 5496 4192 4099
8 Other expenses 24587 29329 22397 15028 11087 13306
9 Depreciation 4742 4109 9701 5678 15671 15557
Gross profit 21909 19925 20943 11957 35773 40575
11 Interest 1750 1642 5909 4024 967 2936
12 Operating profit 20159 18283 15033 7933 34806 37639
13 Non-operating surplus/deficit 470 0 934 302 475 64
14 Profit before tax 20629 18283 15967 8235 35281 37703
Tax provisions 3672 -518 3891 2219 6816 13023
16 Profit after tax 16957 18801 12076 6016 28465 24680
17 Dividends (includes tax on
dist profit) 5983 5867 1733 1159 3986 3192
18 Retained profits 10974 12934 10343 4858 24479 21488
Liabilities/assets
19 Paid-up capital 9137 5300 2575 2575 8217 8217
Reserves and surplus 45430 35296 7618 47479 179251 155339
21 Long-term loan 2003 5976 11634 7642 51120 52858
22 Short-term loan 33408 27721 63324 44098 6650 15069
(i) of which, bank borrowings 33408 27721 63324 44098 6650 15069
23 Gross fixed assets 85401 66015 153682 79177 274696 272269
24 Accumulated depreciation 16608 13009 72810 35604 82824 67267
Inventories 27467 19559 52693 40110 30660 31961
26 Total assets/liabilities 126385 108512 179234 115526 295201 283261
Miscellaneous items
27 Excise duty 15243 16561 8051 7416 31034 29312
28 Gross value added 39375 37287 39528 22360 55009 59397
29 Total foreign exchange earnings 22189 10083 41308 27691 6608 6037
Total foreign exchange outgo 24277 14166 17559 9959 18471 22753
Key financial and performance ratios
31 Turnover ratio(sales to total assets) 1.2 1.4 1.3 1.0 0.7 0.7
32 Gross value added to gross
fixed assets (%) 52.0 68.9 34.0 28.5 20.1 22.0
33 Return on investment (gross profit
to total assets) (%) 18.7 20.0 14.2 10.6 12.4 14.2
34 Gross profit to sales
(gross margin) (%) 17.8 15.7 11.3 11.1 19.5 23.3
Operating profit to sales (%) 16.4 14.4 8.1 7.3 18.9 21.6
36 Profit before tax to sales (%) 16.7 14.4 8.6 7.6 19.2 21.6
37 Tax provisions to profit before tax (%) 17.8 -2.8 24.4 26.9 19.3 34.5
38 Profit after tax to net worth
(return on equity) (%) 35.6 47.9 40.1 12.6 16.2 16.1
39 Dividend (%) 56.3 96.5 57.9 39.2 41.6 33.9
Earnings per share (Rs) 8.9 9.9 46.9 23.4 35.9 31.1
41 Book value per share (Rs) 28.7 21.4 39.6 194.4 236.2 206.0
42 P/E ratio (multiple) 16.6 19.0 10.1 7.3 11.1 9.5
43 Debt-equity ratio (adjusted for
revaluation) 0.65 0.83 7.35 1.03 0.31 0.42
44 Short-term bank borrowings
to inventories (%) 121.6 141.7 120.2 109.9 21.7 47.1
Sundry creditors to sundry
debtors (%) 143.8 89.9 19.7 13.1 42.9 71.7
46 Total remuneration to employees
to value added (%) 35.9 34.6 25.2 24.6 7.6 6.9
47 Total remunerations to employees
to value of production (%) 10.9 10.1 5.4 5.0 2.3 2.4
48 Gross fixed assets formation
(% growth) 29.4 56.4 94.1 2.2 0.9 1.3
49 Growth in inventories (%) 40.4 14.9 31.4 28.7 -4.1 16.4

previous year. However, for the quarter ended September 2005, net sales suffered by 16.6 per cent to reach Rs 485 crore over the corresponding period of previous year, but net profit shot up by 118 per cent to Rs 99 crore.

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MAHAVIR SPINNING MILLS

Spinning Successfully

V
ardhman Group is one of the leading textile producers in India. Among the companies of the group, Mahavir Spinning Mills (MSM) is the only one that has exposure in an industry outside of textiles. MSM is engaged in the manufacture of cotton yarn, acrylic yarn, blended yarn, sewing threads and alloy steel ingots. The company has two subsidiaries and it has recently promoted Vardhaman Yarns and Threads as a wholly-owned subsidiary.

During 2004-05, MSM achieved robust financial performance. Its net sales galloped ahead by 71 per cent to Rs 1,851 crore over 2003-04; likewise net profit surged by 100 per cent to Rs 120 crore. The company’s exports grew by 49 per cent to Rs 413 crore during the year under review. The sales revenue of yarn increased by 52 per cent to Rs 997 crore over 2003-04; similarly the revenue of sewing thread rose by 9.5 per cent to Rs 255 crore.

MSM recently announced its plans for the expansion and modernisation of its plants. This plan is divided into two parts

– Rs 540 crore for expanding and modernising its existing capacities of spinning, weaving and fabric processing in Himachal Pradesh and Punjab, and Rs 1,075 crore investment for doubling its fabric processing capacities and setting up additional facilities for spinning and weaving in Madhya Pradesh. The implementation of these projects will be in phases and is expected to be completed by 2007-08.

During April-June 2005, MSM’s net sales improved marginally by 2.2 per cent to Rs 422 crore over the same period of the previous year and net profit rose by 62 per cent to Rs 28.9 crore. For July-September 2005, net sales declined by 3.9 per cent to Rs 459 crore over July-September 2004; however, net profit increased by 62.5 per cent

Note: P/E multiples are the latest with corresponding last year’s figures. to Rs 39.9 crore.

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Economic and Political Weekly January 14, 2006

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