Foreign exchange losses to the tune of Rs 174 crore have resulted in the Rs 2,488 crore Jubilant Organosys posting losses before tax of Rs 53 crore in the September 2008 quarter. Had the forex losses—which are translational in nature---not been taken into account, the profit before tax would have been Rs 121 crore, a growth of 36 per cent y-o-y.
The pharma and life sciences player’s revenues grew 52 per cent to Rs 940 crore – the growth is partly on account of the recent acquisitions of Draxis Healthcare and Holister which contributed 178 crore. Even without these, the growth would have been a reasonably good 38 per cent. However, with expenses keeping pace, Jubilant’s operating profit margin was up just 50 basis points at 18.8 per cent.
The company operates primarily in the contract research and manufacturing services (CRAMS) space which has grown at 60 per cent during the quarter and should continue to see momentum.
The industrial products and performance polymers segment, which contributes approximately 38 per cent to total revenues, has grown at 42 per cent, thanks to prices being firm. However, with prices likely to come off, the business could lose pace. In FY08, the division had grown by just 5 per cent.
What is worrying is the company’s foreign currency debt of about Rs 3,300 crore, some of which was taken on to fund the overseas acquisitions. Interest costs increased by 103 per cent y-o-y to Rs 22 crore in the September quarter and could rise further. The firm’s debt equity ratio at 1.5, excluding an FCCB is not low but should be manageable.
Jubilant is expected to end FY09 with revenues of Rs 3,700 crore, a growth of around 50 per cent over FY08. However, given that currency movements are uncertain, there could be a fall in the net profit.
Since July 2008, the Jubilant stock has underperformed the Sensex falling by 41 per cent compared with a 17 per cent fall in the Sensex.
