October results will be a repeat performance
After a strong rally in September and a slew of positive news, the market is looking forward expectantly to the second quarter results. However, the trend will not be significantly different from the June quarter. That trend was muted sales growth and strong profit growth. “We expect the same story for the September quarter,” says Vetri Subramaniam, chief investment officer, Religare Mutual Fund.
 
There has been a surge in operating profit for some sectors in June quarter which has led to a rerating of stocks but sales or revenues which are the single-most important parameter of a company’s performance have not grown in line with the surging operating profit. For instance, the companies in the Moneylife Auto Sector posted a growth of 70% in operating profit in June quarter over the same period last year but sales grew by just 9% in the same period. Auto component companies posted 26% growth in operating profit but their sales declined by 4%. ML Consumer Products and ML Software & IT Services posted a growth of 28% and 37% in operating profit respectively. But their revenue growth has been not been as high—10% and 8% respectively. Operating profit for the refineries sector soared by 61% while the revenues dived by 32%.
 
All these examples underline that the unbridled investors’ optimism about the economic rebound is misplaced. The rise in profit against the backdrop of low revenue growth owes mainly to the fact that Indian companies tightened their belts and cut costs. Another reason was that raw material prices had softened during this period. This significantly boosted their operating profit. The same phenomenon of higher operating profit will be witnessed in the forthcoming results as well because last year’s September quarter was quite depressed. What the analysts would be keen to see is whether sales growth too remains lacklustre. Given the fact that commodity prices have gone up in the past few months and old lower-priced inventory will be run be down soon, Indian companies may not enjoy successive quarters of higher operating profits beyond the September quarter.
 
 

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‘Wake Up Sid’ proves lucky for PVR
 
UTV’s latest movie Main Aur Mrs Khanna could only pull 50% of the crowd to the theaters but its previous movie Wake Up Sid, a Ranbir Kapoor starter, which was released in theatres on 2nd October is still able to pull in 85% occupancy.

PVR’s first weekend collection for the movie was about Rs2 crore across India and in the Diwali weekend the numbers crossed Rs25 lakh.
 
“On Diwali weekend, especially on Friday and Sunday, we reported 80%-90% occupancy level across India and this movie is holding good in our theaters,” said Prakhar Joshi, head programming, PVR cinemas.
 
The movie produced with a budget of Rs15 crore by Dharma Productions and distributed worldwide by UTV Motion Pictures, was able to garner Rs2.2 crore over the first weekend. The movie also collected about $165,934 in the UK while for the US the collections were $355,532. In the Gulf region the film’s per print average was $9,575. [email protected] 

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Sex sells—in drugs too

Revital and I-pill are the best-selling drugs dislodging perennial favourites, cough syrups and vitamins. Pre-sex and post-sex drugs of Ranbaxy and Cipla are selling at a scorching pace

For years, cough syrups and vitamins used to dominate the list of best-selling drugs in India. But now, for the first time in India, a sex stimulant drug has become the largest selling drug in India. Revital, an over the counter drug from Ranbaxy has dislodged Corex (Pfizer) and Phensedyl (Nicholas Piramal) and is ranked as the largest selling drug in India. Revital, a combination of ginseng, vitamins and minerals, from Ranbaxy had sales of Rs66 crore during seven months to July 2009 and growing by healthy 25%. Given this growth, it is likely to cross Rs125-Rs130 crore this year and will create a huge lead in the pecking order of top Indian drugs. A combination of social and economic reasons has pushed the sales of Revital to a new high: higher disposable income, changing lifestyles and increased advertising and promotion. Ranbaxy has spent heavily on advertisements that turned this product into the highest selling drug.
 
It is not the only the pre-sex drug for men that is hot. The after-sex drug for females has also beaten cough syrups and vitamins. I-pill, a drug from Cipla, used for protection against pregnancy, recorded huge growth and was the second-largest selling drug. Its annual sales are expected to be around Rs80 crore-Rs90 crore. The interesting thing about I–pill is that it is expensive and has even then recorded such massive revenues. This drug costs Rs75 a tablet but obviously demand is huge and price inelastic. Thanks to massive advertisements, I-pill is flying off the shelves. According to industry sources, Cipla has spent Rs20 crore on advertisements for this drug.
 
It is the advertising that may have done the trick for both Ranbaxy and Cipla. After all, the prescription drugs and Indian equivalent to Viagra (sildenafil citrate) like Kamagra from Ajanta Pharma, Caverta from Ranbaxy, Manforce from Mankind, Penegra from Zydus Cadilla and Suhagra from Cipla are nowhere near the top. Only OTC products can be advertised. Those companies selling prescription drugs cannot. The two companies are also spending hugely on media and public relations.
- Dhruv Rathi [email protected]
 
 

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