Home surge to help Cipla ride out poor Q1 show

ET INTELLIGENCE GROUP: Investors are likely to give a thumbs up to the ‘we are on track’ message of Cipla’s new COO-turned-CEO, Umang Vohra, following its first quarter results. The elevation of Samina Vaziralli (from the promoter family) to be the executive vice-chairman of the company is a strong signal — putting to rest speculation about Cipla being up for sale.

The Q1 performance of Cipla was disappointing with 6% drop in consolidated revenues impacted by the high base effect in the US business and regulatory changes disrupting the domestic market business. The operating margin stood at 17%, lower than the year ago level of 28%. The management nevertheless is confident of meeting this fiscal’s guidance of double digit revenue growth and EBITDA margin of 17-18%. This is likely to be achieved by an improvement in performance of the domestic market, which contributes 40% of its revenues, and strong growth momentum maintained in the US base business. This reinforces confidence in the company’s strategy and its restructuring exercise.



However, there are certain pain points like change in strategy in the European business, withdrawal from certain emerging markets, resolution of FDA issues concerning Indore plant. Besides, the Street would want to see the latest rejig in the top management to be conclusive in nature and the company’s restructuring exercise producing results at a faster and more aggressive pace. The new management team has its task cut out — reinforcing stability in the functioning, flawless execution of strategy in a dynamic global environment and winning back shareholders’ confidence.