in at $1.06, page-41

They may be the best in the country but they are competing in a global market. It might be OK to be the best in the country if you are a company like Sonic Healthcare because it will never reach the point where we are sending bloodtests to India and back it doesn't make economic sense. On the other hand it does make a lot of sense to import drugs from India if they can be obtained for a cheaper price. Firstly we are competing against lower labour costs which is already a big disadvantage. Secondly if you look at the Ranbaxy they are operating with gross margins of 60% which will be pretty tough to beat. Sigma reports gross margins of 12% which is not directly comparable since that includes the naturally lower margin wholesaling business. I wish they would provide proper segmental reporting so that we as owners could make better informed decisions.

Even without this information it would be a brave person who could claim that globally Sigma operates from a position of cost leadership. I think the acquisition of Orphan was strategically a move in the right direction since you do not want to be competing directly on price unless you are the lowest cost operator. In 20 years time the size of the market will be much bigger that is inevitable. However it does Sigma very little good if Ranbaxy can set a price point at which it is making a profit whilst Sigma is making a loss. If I had to bet the house on one company it would not be this one.