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Capturing newer markets

Cipla is already a market leader in India, with bigger plans to tap the African market through its South African JV

Cipla, for long has caused trouble for some of the biggest pharma companies in the world. By far, its most radical move has been to supply AIDS treatment drugs at a cost of $1 a day. This at a time when the standard cost was at $12,000 for the same treatment. It is estimated that around 40 per cent of HIV patients undertaking antiretroviral therapy (used in the management of AIDS) use drugs supplied by Cipla. Another major market that Cipla has cornered for itself is that of asthmatic inhalers. Within the country, Cipla has a 70 per cent market share in this segment. It is trying to take this success aboard.

How does the rupee depreciation help?
Around 53 per cent of Cipla's revenues come from exports (FY13). Cipla has raised foreign currency denominated debt of $175 million for its Medpro acquisition. That debt is fully hedged so it doesn't stand to lose out there. On the earnings side, it is estimated to earn net foreign receipts of $330 million in FY14 while it has hedged only around $210 million. The company stands to gain from the remaining receipts this year.

Watch out for: Cipla's Indore SEZ to pump up growth rates. Cipla has sunk-in over `900 crore in its Indore SEZ. The Indore facility has received USFDA approval. This facility accounted for revenues of around `600 crore in FY13 and operates at 70 per cent of its tablets and capsules capacity.
In May this year, Cipla announced that it would fully acquire Cipla Medpro -- a JV between Cipla and South African company Medpro Pharmaceutica -- for $512 million. The JV company is South Africa's third-largest pharma company with presence in anti-retroviral, cardiovascular, respiratory and neuropsychiatric verticals. This acquisition provides Cipla with a strong long-term launch-pad to enter other African markets. But this would be a long drawn play, the results of which may not be visible immediately.

This report is a continuation our previous story about companies that stand to gain from falling rupee. Cipla is one of them.