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The Economic Times

An old hand’s back, but can Lupin and he make it count?

Lupin on Friday announced the reappointment of Ramesh Swaminathan as the company’s CFO and executive director. Some might have raised an eyebrow, as Swaminathan had served the company for 12 years before quitting as the CFO in November 2018 to explore opportunities outside of the pharma sector. In September that year, Lupin’s share got removed from the benchmark Nifty-50 index.

In the one-and-half years when Swaminathan was not with the company, the already-battered Lupin share lost a third of its value. The company did not fill the vacancy for seven months and eventually elevated its president-finance as the interim CFO in June 2019.

Now that Swaminathan is back, Lupin’s shareholders may expect improvement in the company’s performance, both on the ground and on the bourses.

But Swaminathan has returned at a difficult time — the Lupin share has lost a fourth of its value in the past one year and is now valued at just one-and-half times its trailing four quarters revenue. The company’s revenue for the latest quarter to December has been the lowest in the last six quarters. The profitability has been impacted by increased expenditure on remedial measures, higher interest outgo, and staff cost.

Most of the strategic moves made in the past have failed to pay off over the long term. The company’s foray in Japan through acquisition of the branded generics business didn’t play out as expected and the business was eventually divested at a loss earlier this year. Lupin’s push on making its place felt in the US branded drugs market failed to develop into a sustainable growth stream. Despite having one of the largest pipelines of drugs to be launched, the generic drugs business in the US is facing challenges, like pricing pressure and regulatory clampdowns on its manufacturing units from the USFDA.

Consequently, the company has been under-performing in both its key overseas markets — the US and Japan. Intensifying competition and drug price control are the challenges faced by the company in the domestic market. Cost and product rationalisation, along with reduction of leverage, may begin showing result on the company’s financials over the coming quarters. In such a situation, it remains to be seen how much differently Swaminathan can manoeuvre Lupin in his second innings.

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