Last week Taro restated its results for 2004 and 2005 and presented the first audited results for 2006. Surprisingly, even the audited results for 2004-05 have gone through large changes. Expectedly, re-classification aside, most changes are on charge-backs.
Taro obtained data on wholesalers’ inventories, and found them to be much higher than expected, necessitating higher provisioning. The summary of all changes is in the 2006 book value: it fell 49% to US$50 mn. A US$96 mn drop in end-2004 book value is partially offset by the reduced loss in 2006. The end-2004 revision is largely due to reduced receivables (higher charge-backs), and higher current liabilities created (mainly returns reserves and dues
to customers).
The 2006 sales rose by US$68 mn (37%-plus), much of it flowing to PAT.
Uncertainties on Taro’s accounts have been brought forward to 2007 onwards, although this reduced uncertainty does not improve our confidence, especially after audited numbers were re-stated. Taro plans to audit 2007-09 numbers now. Similar restatements should be expected, given the new reserves estimation methodology.
Sun's EPS is expected to be Rs 63 for Fy 10 and Rs 70 for FY 11
