With the exit of Taliban from the Afghan scenario, the post war economic
opportunities in Afghanistan have started opening up for friendly countries
like India. The last month has been a very satisfying period for investors
as the Sensex has moved from 3059 as on November 8 to 3436 on December
7. Over the last week many of the tech stocks did extremely well regaining
nearly 10 to 20 % in a single week. The total market capitalization accretion
from 200 top IT stocks during the week was estimated to be Rs 15,400 crores
bringing back the lost cheer to many investors.
Some of the top gainers were Satyam, HFCL, SSI, Infosys and Wipro.
The media stocks such as Balaji Telefilms have also done well in the wake
of improved forecasts for the industry in the coming days. This has also
increased the net asset values of most of the IT sector mutual funds. Amongst
them, Birla IT fund was the leading gainer with the NAV appreciation of
over 9 % during the last one week.
With the future prospects of IT industry continuing to be fundamentally
strong, there is no reason why the IT stocks cannot gain further. However,
knowing the nature of the operators, profit booking can be expected during
the second and third weeks of December until the up trend can resume in
the New Year. Investors should therefore not go overboard with IT stocks
in the next two weeks.
With the positive changes that have happened in the Afghan scene, the
intensified terrorist activity in Andhra Pradesh has really caused concern
for the country. It also highlights the reality that the fight against
terrorism is far from over and needs to be addressed with greater determination
nearer home. In this context the long-term role of Companies in the pharmaceutical
industry becomes critical. While health care is a continuously growing
business proposition, in the current scenario, the leading pharma companies
may be required to service huge global demand for their products and services.
There opportunities have therefore multiplied.
While we can spot many prospective winners in the industry, the steady
growth of Ranbaxy over the last six months of turbulent times makes this
leader still attractive for investment at the current relatively high prices.
The shares of Ranbaxy were last quoted at Rs 741, which represented a P/E
of nearly 45. In the normal circumstances this would be considered very
high compared to the current market conditions. However the share has appreciated
from around Rs 500 to the current levels in the last six months and always
maintained a continuously improving trend, which was not seen even in Infosys.
This single characteristic of “Growth during turbulent times” makes this
share worthy of long-term acquisition.
Ranbaxy’s last quarter performance for September 2001 indicates that
the sales for the quarter were Rs 538.30 crores as against 464 crores in
the corresponding previous year. The Profit after tax was RS 89.1 crores
as against Rs 53.1 crores during the same period. For the first nine month
period of the current year, the Sales have registered a 17 % rise at Rs
1483.3 crores while the Profit After tax has increased by 43 % from 132.6
crores to Rs 189.8 crores.
Performance Highlights of Ranbaxy (Rs in crores)
| Particulars |
1999 |
2000 |
2001 (9 Months) |
| Sales |
1559.8 |
1745.9 |
1483.3 |
| PAT |
196.9 |
182.4 |
189.8 |
| Equity |
115.9 |
115.9 |
115.9 |
| EPS |
16.99 |
15.74 |
16.38 |
Ranbaxy is known to be India’s largest pharmaceutical company manufacturing
branded generic pharmaceuticals, bulk substances and Intermediates. Its
focus on R & D has made it one of the few non-US companies, which have
been consistently able to penetrate the US markets and get several FDA
approvals. The Company has already set up ground operations in 25 countries
and manufacturing operations in 6 countries. It’s export sales for the
last nine months was Rs 262 crores and the exports are growing faster than
the domestic sales. In the context of the global opportunities available
to Pharma companies, this achievement truly reflects the strength of the
Company to prosper in the competitive environment. Presently Ranbaxy is
one of the few Indian Companies, which is truly multi national.
The recent FDA approvals for Ranbaxy Pharmaceuticals Inc. (RPI), a wholly
owned subsidiary of Ranbaxy Laboratories Ltd for Acetaminophen and Codeine
Phosphate has opened up new opportunities for the Company in the US markets.
The doubts about the possible revenue loss from a royalty contract with
Bayer were also removed making Ranbaxy a preferred buy in the markets for
most of the institutional investors.
In view of the long-term potential of Ranbaxy to be a globally successful
company, the shares are good for acquisition even at current prices.
Na.Vijayashankar
December 8, 2001
