Drowsy dose

Mumbai, April 20: Pharmaceuticals major Wockhardt today announced a disappointing first-quarter profit of Rs 38 crore against Rs 41.1 crore in the corresponding previous period. The company blamed the 7.54-per cent drop on the market uncertainty in the run-up to value-added tax (VAT).

Under VAT, stockists have to pay a lower 4 per cent tax. Therefore, to take advantage of the new rates from April 1, stockists had cut down their purchases from manufacturers during the quarter ended March 31.

Wockhardt witnessed a 19 per cent dip in domestic sales during the period.

Formulation sales on a consolidated basis in the domestic market was down 20 per cent at Rs 83.8 crore (Rs 104.8 crore). Bulk drug sales declined 9 per cent to Rs 5.5 crore (Rs 6.1 crore). The combined domestic sales dropped to Rs 89.3 crore from Rs 110.9 crore, a fall of 19 per cent.

Wockhardt said with the introduction of VAT, while India is moving towards a more efficient and transparent system of tax collection, the stockists and traders have reacted negatively. This was due to a lack of uniformity in VAT rates and the continuation of central sales tax for all inter-state sales

?In the current phase, VAT has been implemented by the governments of 21 states only and hence all the other states remain outside the purview of VAT. Also the states have been given the power to prescribe rates in their own territories resulting in differential VAT rates,? the company said.

Wockhardt added that while the trading community adopted ?de-stocking strategy?, most pharmacies were averse to fresh purchases.

However, sales to Europe, the US and the rest of the world rose 11 per cent, 91 per cent and 25 per cent, respectively.

Nicholas Piramal India had recently told the bourses that domestic formulation sales, which was at Rs 782 crore and formed 77 per cent of total and stand-alone net sales till December 2004, was adversely affected by the market conditions that prevailed in the January-March quarter.