Dishman: On course

THE COMPASS

The management at the Ahmedabad- based Dishman Pharma believes revenues could rise to Rs 1,050 crore in the current year, a growth of 30 per cent over revenues of Rs 803 crore in 2007-08.That should not be difficult to achieve given that the firm has posted a revenue growth of 38 per cent in the first half of the year, though partly aided by a depreciating rupee.

The company which specialises in CRAMS—contract research and manufacturing services—is in a good position to ride the outsourcing wave for the next couple of years. It is currently executing contracts from multinational firms such as GlaxoSmithkine and Pfizer and recently bagged a contract from Astra Zeneca for 14 active pharmaceutical ingredients (APIs).

What’s of concern though are the foreign exchange losses — Rs 47.5 crore in the six months to September 2008 —even though these may be notional. In fact, if these losses are taken into consideration, the profit after tax in the September quarter is only Rs 2.7 crore. Already, the operating profit margins fell by 200 basis points y-o-y to 19.8 per cent in the September quarter because the product mix was skewed in favour of lower-margin items such as Quats — compounds that act as catalysts.

However, the margins could improve in the later part of the year since the company is trying to make more value-added products.

In the meanwhile, it is concerned about whether smaller biotech firms, from whom its Swiss subsidiary CarboGen gets manufacturing contracts, will be affected by the current liquidity squeeze. CarboGen’s revenues were up just 14 per cent in the September quarter and the business from these smaller firms accounts for about 25 per cent of its revenues. However, that could be just a temporary problem; the outlook for the longer term is bright because once CarboGen commissions the fourth phase of its plant, at Bavla in Gujarat, to make oncology products, it can take on more contracts from bigger players.