The recent Black Swan event, demonetization of high value notes, has heavily impacted the fortunes of Small and Medium Scale Entrepreneurs (SMEs), involved in the manufacture and sale of lab chemicals and equipment in India. However experts feel that this is only a temporary setback and are quite optimistic about the long-term prospects of these sectors.
Despite the global economic slowdown a few years ago, the Indian pharma industry has continued to flourish and is reputed not only as a base for API and formulation manufacture but also as an emerging hub for contract research, biotech, clinical trials and clinical data management. All this had propelled the growth of lab chemicals and equipment market in India.
But the unexpected demonetization move has hit the SMEs of these sectors as the sales have fallen steeply and the growth rate has slipped from 20-25 per cent to 15 per cent.
According to B. L. Bothra, CEO of Lab Equipments & Chemicals, Kolkata, with demonetization, the markets for Laboratory chemicals and equipment across West Bengal has become dull and the growth rate of this market has drastically reduced from 25 per cent a year back to 15 per cent at present. “Already the SMEs were reeling under pressure due to lack of funding and support from the state and central governments. In addition to this, the recent demonetization of high value notes has totally crippled this sector. At present, the markets are dull and it may take another year or more to recover,” opined B.L. Bothra.
Established in the year 1973, Lab Equipments & Chemicals headed by B.L Bothra has been leading in the market, particularly in West Bengal with its niche chemicals for laboratories equipment. Apart from laboratory chemicals and reagents, the company also supplies a gamut of laboratory equipment which includes testing equipment, laboratory instruments and metal testing instruments which are all high precession engineering products offered at affordable prices.
“We started our company way back in 1973 with a small turnover of Rs. 40,000 to Rs. 50,000, and now we have reached a turnover of more than a crore and have made a mark in the field of scientific trade and commerce during the past three decades. Though entering the lab chemicals and lab equipment market was a tough task, we could overcome all hurdles and gradually grow to the present level. Until last year, the market was moving fast at a growth rate of 20-25 per cent, but post demonetization, we have all fallen flat with an anodyne market. Though this dullness may last only for a temporary period, it has given an unexpected jerk to our business and its impact may prevail for over one to two years,” observed Bothra.
However despite minor hiccups the prospects for laboratory chemicals is still bright. Though still at a nascent stage, the ever growing pharma, biotechnology and academic institutions is likely to fuel the growth of this sector in the coming days, opine industry cognoscenti.
Pharma sector, major driver of growth
The burgeoning pharmaceutical sector had been the major factor for the growth of lab equipment and lab chemicals markets in the country. During the past few years, India has emerged as the favoured destination for global pharma giants lured by the dual benefits of a combination of skilled labour and low costs. This has led to a boom in contract research and contract manufacturing opportunities.
Thus not only the pharmaceutical industry, the ever -expanding clinical research organisation (CRO) sector across the country is also expected to give a boost to the lab chemicals and equipment markets in India. “CRO’s make up the largest proportion of our Indian customer base for lab chemicals. These are the companies which are at the forefront of research, particularly in the pharma and biotechnology sector. They require the basic testing chemicals and lab equipment used in the laboratories and definitely are the major drivers of growth for this niche segment,” observed S. V. Krishna Prasad, CEO of Cito Healthcare from Hyderabad.
One of the strengths of the Indian lab chemicals market is that, there are significant numbers of well- respected, high technology companies operating on the sub-continent and this ensures a healthy return for those companies that are also willing to make the investment in researching and developing new products to support their activities.
India’s remarkable economic growth, combined with the fact that it is the second most populated country in the world, with an increasing per capita disposable income, continue to drive the growth of pharmaceutical consumption within the domestic market.
Indian CROs are seeing extraordinary growth in the number of strategic alliances with many major western pharmaceutical companies, all of whom continue to expand their operations in India. These partnerships serve to capitalize on the comparatively low costs of manufacturing and innovation that India can offer, within facilities that are cGMP compliant.
Laboratory equipment market
Coming to laboratory equipment, though the Indian pharmaceutical industry is still dependent on imports for high end precision engineering equipment, the recent Make in India initiative by the Prime Minister Narendra Modi has infused a new lease of life for the domestic manufacturers and the industry is hopeful of growing faster with the support from the government. Having said this, one of the most notable driving forces of the Indian laboratory equipment manufacturing industry is the lower costs compared to developed regions such as the United States and Europe.
Indian laboratory equipment manufacturers have played a key role in the growth of the Indian pharma sector as they have supplied products to the domestic manufacturers at affordable costs and in fact they have also increased their product portfolio and quality to international standards and are today able to capture a sizeable portion of the global pharma market. Moreover, the growing stature of Indian pharmaceutical machinery in the international markets has also supported the growth of Indian pharma.
However the flip side of lab chemicals and equipment market in India is its excess dependence on imports. In spite of huge resources, many lab chemical and equipment suppliers in India are sourcing products from other foreign countries and distributing in India. This trend has to be changed and domestic players need to invest in research and development and come up with custom based equipment on par with international standards and must expand their reach not only in the domestic market but also capture international markets, opined industry experts.
Commenting on the present prospects of growth of laboratory equipment industry in India, Meghdoot Thakkar, from PacMac Solutions said, “Despite of all ups and downs, Indian laboratory industry has enough stuff to grow; many local pharma companies are sourcing their equipment from local vendors and not depending on imports. Only a few big companies are importing some specific high end equipment from other countries.”
Growth in Andhra Pradesh and Telangana
Particularly Andhra Pradesh and Telangana states are fast emerging as India’s leading hub for pharmaceutical research and development. This is a major driving force for the growth of lab chemicals and lab equipment segments, because both the states are having a large base of both private and government pharmaceutical, biotechnology companies along with leading National institutions like National Institute of Pharmaceutical Education and Research (NIPER), Center for Cellular and Micro Biology (CCMB), National Institute of Nutrition (NIN) and Indian Institute of Chemical Technology (IICT) and a host of other academic institutions and universities which have all instituted most sophisticated research laboratories with most advanced laboratory equipment for conducting research experiments in the fields of food and nutrition, chemistry, pharmacy and biotechnology.
“The laboratory equipment industry in Andhra Pradesh has witnessed an overall growth of 19 per cent in the year 2013. Though this might have slowed down a bit temporarily due to demonetization, it is expected to grow over 20-25 per cent in the coming days. This is possible because of the government support for research and development and encouraging new investors in the areas of pharma, biotech and educational sectors,” said a spokes person from SD Corporation.
Industry to bounce back
With pro-active governments both at the state and central governments, which are allowing foreign investors and devising new industrial policies to encourage investor friendly industry environment, the coming days may witness more growth for the lab equipment and chemicals segment in the country. As has been witnessed during 2012-13, the growth is projected at 20-25 per cent per annum. It may even touch and cross 30 per cent in the next five years, provided the SMEs and the pharma industry get a good support from the governments, observed experts.
"As many drugs approach the stage of patent expiry, there is a constant need for the R&D of newer drugs to fill the void and India has become a hub for an entire gamut of outsourced activities, ranging from drug discovery to clinical trials. The high demand for laboratory analytical instruments in the booming pharmaceutical space will have a positive impact in the Indian laboratory analytical instruments market,” said industry analysts.