The net sales of ten MNCs viz., increased only by 9.4 per cent to Rs 5,046 crore during the year 2005-06 from Rs 4,612 crore in the previous year.
With the introduction of patent regime in India from January 2005 the multinational pharma giants (MNCs) are consolidating their position in Indian market. Besides ten listed companies several new well-known pharma companies like Eli Lilly, Teva and Merck & Co have set their operations and commenced marketing. To overcome the high cost of manufacturing, R&D and clinical trials in western countries, MNCs are entering collaboration agreement with Indian players.
Once the government policy regarding Data Exclusivity is clear, more and more MNCs are likely to enter the Indian market. With strong R&D base, easy availability of scientific talent, low cost of skilled labour, highest number of US FDA approved facilities and huge market size, the MNCs are looking Indian manufacturers as their partners in manufacturing, research, contract manufacturing and clinical trials.
The existing ten listed multinational pharmaceutical companies operating in India posted net profit growth of 27.7 per cent during the year 2005-06 with the help of extraordinary items. Their profit before interest, depreciation, taxation and other adjustment improved only by 9.3 per cent. AstraZeneca Pharma, GSK, Novartis India, Wyeth and Pfizer announced strong performance, but Aventis Pharma, Abbott India and Solvay Pharma failed to generate positive growth and put pressure on aggregate working of MNCs in 2005-06.
The net sales of ten MNCs viz., Abbott India, Astra Zeneca Pharma, Aventis Pharma, Fulford (India), GlaxoSmithKline Pharma, Merck, Novartis India, Pfizer, Solvay Pharma and Wyeth Ltd increased only by 9.4 per cent to Rs 5,046 crore during the year 2005-06 from Rs 4,612 crore in the previous year. Out of ten MNCs, AstraZeneca, Fulford (India) Novartis, Wyeth and Solvay Pharma achieved double-digit growth in net sales during 2005-06. GSK maintained its leadership position among MNCs in India with net sales of Rs 1485 crore, a rise of 8 per cent. Aventis remained at second spot with net sales of Rs 808 crore. Pfizer notched up net sales growth of 7.3 per cent during 2005 and its net sales touched to Rs 599 crore.
The aggregate other income of ten MNCs declined to Rs 270.37 crore during 2005-06 from Rs 279.05 core in the previous year. The other income of Abbott India, and Wyeth declined sharply to Rs 14.86 crore and Rs 20.30 crore in 2005-06 from Rs 57.54 crore and Rs 43.02 crore respectively in 2004-05.
The raw material cost reached at Rs 2314 crore as against Rs 2035 crore. The staff cost increased by 2.1 per cent to Rs 549 crore from Rs 538 crore. The cost cutting measures restricted other expenditure to Rs 1048 crore as against Rs 1007 crore. The interest cost came down to Rs 3.26 crore from Rs 4.04 crore and depreciation provision also declined to Rs 76 crore from Rs 80 crore. Though the MNC managed to control expenditure, the meager rise in net sales and lower other income impacted the growth of EBDIT and PBT during 2005-06. The profit before tax improved by 15.2 per cent to Rs 1399 crore during 2005-06 from Rs 1214 crore in the previous year.
The huge amount of extraordinary income regarding sale of two properties in Mumbai for Rs 196 crore by GSK and exceptional expenditure in respect of amortization of compensation to employees of Rs 23.37 crore impacted the aggregate net profit positively by almost 27.7 per cent to Rs 1105 crore during 2005-06 from Rs 865 crore in the previous year.
MNCs are rewarding their parent companies as well as investors handsomely. With strong performance GSK stepped up its dividend to 280 per cent during 2005-06 as compared to 240 per cent in the last year. Merck Ltd, Solvay Pharma, and Fulford stepped up equity dividend to 150 per cent, 60 per cent and 30 per cent respectively. Aventis and Pfizer maintained equity dividend at 160 per cent and 100 per cent. Abbott India reduced its dividend to 175 per cent from 350 per cent and AstraZeneca to 200 per cent from 500 per cent in the last year. Novartis and Wyeth pushed their dividend rate to 300 per cent and 250 per cent from 200 per cent in the last year.