Rouble fallout: Dr Reddy’s, Ranbaxy’s profit in trouble

Depreciation of the russian currency poses a risk to the profitability of Indian pharma companies such as Dr Reddy’s, Glenmark and ranbaxy. Russia, a key market for these companies, contributes 5% of overall Indian pharma exports.
RussiaCIS accounts for 10% of overall sales of companies like Dr Reddy’s, Glenmark, Ranbaxy , IPCA and Torrent. In the September quarter, they began reporting that the Russian currency devaluation was hurting business. This could worsen.

Political crisis in Russia and weakening crude prices have resulted in sharp rouble depreciation against the US dollar (83% since March 2014). Analysts say an unchecked rouble slide would hurt profitability, especially if rupee holds stable (versus USD).

dr. reddys and Glenmark could take a hit as Russia CIS constitutes 9-15% of their total revenues. But the impact on Torrent and IPCA would be nominal, owing to lower sales RussiaCIS, Rajat Rajgarhia, MD institutional equities, Motilal Oswal Securities said. Ranbaxy’s 15-month earnings (Jan 2013-March 2014) from Russia was Rs 650 crore. But some compa nies may escape the rouble depreciation consequence net-net, as their loss will be offset by rupee depreciation (against the dollar).

But some analysts say the impact may not be large. “It’s unlikely to impact Dr Reddy’s profitability much as it earns only 15% of its sales (FY2014) from Russia, says Sarabjit Kour Nangra, VP research (pharma), Angel Broking.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s