Karnataka pharma companies which are predominantly into exports are seriously affected by the appreciating rupee with a 10-20 per cent dip in profits. Prominent exporters in the state include Biocon, Micro Labs, Bal Pharma, The Himalaya Drug Company, Anglo French, Kemwell, Medreich Sterilabs and RL Fine Chemicals.
There is no scope for price increase because buyers will not accept it. To counter the negative impact of rupee appreciation, the Union government should increase the Duty Entitlement Passbook (DEP) benefit which at the moment varies between 2 and 8 per cent, stated Jatish N Seth, secretary, Karnataka Drugs Pharmaceutical Manufacturers Association and director Srushti Pharmaceuticals.
"In such a scenario companies should do costing at Rs 38 for a dollar or even less. They also have the option of quoting in Euro," added Seth.
According to Suresh Khanna, managing director, Dossier Solutions and Services, profits from exports are under pressure. The fall in profits is estimated to be at least 10 per cent. It is a difficult situation and the only way to offset it will be to control manufacturing costs by looking at efficient operational systems, besides price hike. However, the situation is not a long-term one, he added.
Since the advent of Union government's excise duty on MRP regime in 2005, companies considered global market entry as a lucrative proposal following the hostile domestic market scenario.
Now with the rupee appreciation, the sector is in deep trouble, stated sources from Anglo French.
"The economic forces are creating problems for the pharma-biotech sector and the government should intervene and revalue the rupee otherwise there will be a serious ramifications for the industry,'' stated RS Iyer, pharma consultant.
The appreciating rupee is restricting growth in its second-quarter net profits and has compelled Biocon to contemplate a price increase across all product categories and services. We are expecting only a 20 per cent increase in second-quarter net profits and revenues will be driven by contract research services, stated Kiran Mazumdar-Shaw chairman and managing director, Biocon Limited.
Shailesh Siroya, managing director, Bal Pharma said rupee appreciation has impacted the company with loss of sales and net margins. The customer is not ready to shell out any additional value due to this rise. ``If we insist in demanding a higher price, chances are that India might end up losing business to other countries with customers looking for alternatives. The strategy to reduce this impact can be worked out by government and industry addressing the issue jointly," he added.
Industry analysts stated that rupee appreciation is definitely a concern and the pharma-biotech industry is making efforts to take a re-look at its entire operations. If raw materials are imported then the impact is not severe, they added.
While no one can predict the movement of the currency, industry experts stated that these companies could possibly look at a hedging strategy.