Cipla found little sympathy from the market and turned out the Sensex's biggest loser after the company's results proved below analysts' expectations.

By 9:56 IST on Monday, the scrip of the domestic pharmaceuticals major dropped 3.36% to Rs 875. A total of 852 Cipla shares were exchanged on BSE.

Cipla announced its third quarter results on Saturday. For Q3 ended 31 December 2002, the pharma major posted a modest 6% rise in net profit to Rs 66.46 crore compared to Rs 62.65 crore in the corresponding period of the previous year. Net sales increased by 5% to Rs 387 crore (Rs 3.87 billion) from Rs 366.91 crore (Rs 3.66 billion).

Both net sales as well as net profit came in below capitalmarket.com poll projections - a 20-30% growth in net profit to Rs 75 crore-81.6 crore and net sales of between Rs 423.7-Rs 439 crore (Rs 4.23 billion-4.39 billion), a rise of 15.7-19.8%.

The 60% fall in other income and 63% rise in depreciation capped the rise in PAT at 6%. Despite the modest results, the company registered a decent 320 basis points rise in operating margins to 23% from 19.8%.

Analysts are disappointed with the results but feel that some consolation can be got from the fact that operating margins have risen. The stocks is considered overvalued compared to peers like Ranbaxy. The company is also expected to lie low on the new developments front especially because there has been no clear indication from the company over its non-CFC inhalers (which were expected to be a trigger for the company).

Last month, the Drug Controller General of India directed the state drug authority of Silvassa to suspend the license for the manufacture of Montair Plus. Montair Plus is a fixed dose combination of montelukast and bambutarol, which was manufactured by Okassa Pharma and marketed by Cipla. The suspension was necessitated as Okassa Pharma had not taken the necessary approval from the Drug Controller General of India for manufacturing and marketing the product. The DCGI has also advised Cipla to withdraw all the stock of the product from the market.

The company, meanwhile, has also entered into a strategic alliance with California based Watson Pharmaceuticals Inc., to develop, manufacture and market 10 generic pharmaceutical products, many of which are currently under development. Under the agreement, Watson will have exclusive US marketing rights to all the developed products and will also own the regulatory filings. On approval of the products, Cipla will manufacture and supply products to Watson.

The promoters' holding in Cipla currently stands at 39.9%, while the total foreign shareholding is 34.37%.