The Information, Grading and Research Service of ICRA India has predicted positive results from the attempts of the pharmaceutical companies to expand their geographical base and strengthen export destinations. The industry analysis of ICRA stated that such initiatives may enable the players further diversify their revenue streams.
"In the short to medium term, exports are expected to continue to play a key role in driving the growth of domestic pharmaceutical companies," the analysis pointed out.
The report says that the financial performance of prominent companies was mixed during Q3 of 2004-2005. "Although there has been volatility in the sales growth for prominent companies in the past few quarters (resulting from increased competition in the generics market of developed countries), their initiatives to expand the product portfolio and strengthen their presence in export destinations besides efforts to widen their geographic presence may yield results going forward," it says.
While the net sales of ICRA sample of pharmaceutical companies reported a healthy growth during Q3 of 2004-2005, on an individual company level the results were mixed.
"Selected companies such as Nicholas Piramal, Torrent Pharma, Cipla, Ipca Laboratories, and Wockhardt reported healthy growth in net sales on the strength of higher exports. Among the other companies, net sales of Morepen declined significantly even as the net sales of Novartis, Dr. Reddy's Laboratories and Aurobindo Pharma were lower vis-à-vis previous quarter," ICRA report said.
The agency has attributed the de-growth in net sales of Dr. Reddy's Laboratories Limited (DRL) to the sharp decline in its active pharmaceutical ingredients and generics exports. "Moreover, a substantial decline in the PBDIT and PAT of DRL can be attributed to higher investments in R&D, an increase in selling, general and administration expenses and overheads along with lower other income," it said.
For Ranbaxy Laboratories Limited (RLL), there was an overall growth in net sales, but substantial increase in various cost heads led to a decline in the PBDIT in absolute terms as well as in PBDIT/Net sales of the company in the quarter under review. "Further, the company's net profits were 29 per cent lower in Q3 of 2004-2005 vis-à-vis corresponding previous. For the aggregate, an increase in various cost heads such as employee expenses, selling and administration expenses and other expenses (as percentage of net sales) despite a decline in material costs led to a decline in the PBDIT/Net Sales during Q3 of 2004-2005," it says.
The PBDIT for ICRA sample in absolute terms declined by 3.6 per cent during Q3 of 2004-2005 over the corresponding previous. Decline in PBDIT/ Net Sales and higher depreciation could not be offset by a decline in the tax outgo (as percentage of net sales) leading to a decline in the net profit margin (NPM) of the sample in the quarter under review. In absolute terms, the net profit declined by 2.8 per cent during Q3 of 2004-2005 over the corresponding previous, the analysis said.
The report takes note of the MRP based excise (as against the ex-factory cost) issue and considers it as one of the biggest problems before the small and medium scale units who are suppliers to large units.