Merck Limited

© Merck India, 51% subsidiary of Merck KGaA – Germany, operates in Pharmaceutical formulations and Chemical (bulk drugs, pigments and life science products) segments. It has manufacturing facility at Goa, where it manufactures bulk drugs, soft gelatin capsules and injectables. Merck is the only manufacturers of Vitamin E and Guaiazulene (cosmetic color additive) in India.

© Changing demographics, rising health consciousness, product patent protection and expanding health insurance sector are some key drivers for growth of pharmaceutical industry and company intends to capitalise on this potential thru aggressive marketing strategies, foray in new therapeutic segments and new product launches over next few years.

© MIL is giving more thrust to top-line growth to achieve significant scale. Company is trying to increase share of non-vitamin formulations in its product mix by launching products in fast growing therapeutic categories like cardiovascular, hematinics, topical anti-inflammatory, diabetes and dermatology. It plans to launch 10-12 products in CY 2008, of which ~ 20% will be OTC products. Just recently, company launched Electrobion SIP (Apple and Lemon flavour). These new products, mostly out of DPCO preview, will help company not only to increase volume but also to improve profitability over a period of time.
© Company set up separate CHC division in pharmaceutical business to focus on certain therapeutic segments in CY 2007. These measures should result in tangible improvements in operating results, beginning with 2008. Has aggressive plans for CHC business

© Merck is pursuing aggressive marketing strategy. Towards this end, it has 700 recruited outsourced field force to own / existing force of 400 reps. to ensure deeper penetration with doctors and chemists. Besides, company will also be penetrating in rural and semi-urban areas. Increased field force has not only led to faster growth of new launches but also growth of old matured products.

© In chemicals business, company is setting up bulk chemical (Oxynex) plant at Goa @ capex Rs. 27-30 crore in CY 2008, which will enhance Oxynex ST capacity to 150 TPA (22 TPA). This 100% EOU is expected to commence production in Sep–Oct 2008. The plant is expected to generate revenues of Rs 22-25 crore at full capacity by CY 2009 with gross margin of 20%.

© Some concerns are 1) ~ 58 % of turnover (i.e. vitamins) is under DPCO. However, more contribution from value-added new products will lower this concentration. 2) Parent company has 100% subsidiary - Merck Development Centre Pvt. Ltd. in India, which could to some extent, pare interest of the listed entity.

© It is cash rich company with liquidity of ~ Rs 350 crore (Rs 206/- per share) as on Dec. 31, 2007. This available surplus will afford greater opportunities to acquire good businesses / brands.

For Q1 CY 2008, Net sales grew @ 18.4% to Rs 83.36 crore. OPM% dropped to 17.11 % (21.67%) because of 30% increase in staff cost of Rs. 10.5 crore (Rs. 8 crore ) and also in Other expenses of Rs. 26 crore (Rs. 20 crore). Nevertheless good sales growth coupled with 15.5% higher Other income of Rs. 10.8 crore led to 1.6% rise in PAT of Rs 16.2 crore (Rs. 15.9 crore).