Profitability of Indian pharmaceutical companies is on the rise despite the continuing pressure on margins and restrictions on the imports of Indian drugs by European Union. A Pharmabiz study of 75 leading pharmaceutical companies in the country shows that the net profit of these companies in the first six months of the current year improved by 28.5 per cent to Rs.5,168 crore from Rs.4,023 crore achieved in the corresponding period of the previous year.
The net sales of these companies increased by 15.3 per cent to Rs.39,031 crore in the first half of the current year from Rs.33,843 crore achieved in the same period of the previous year. Going by their performance so far in the current year, Indian pharma industry should post a net sales growth of 12 to 14 per cent and net profit growth of over 30 per cent in 2010-11.
A dozen major companies from the Pharmabiz sample of 75 pharma companies showed significant growth of over 50 per cent in their bottom lines during six months period. They are Sun Pharma, Glenmark Pharmaceutical, Torrent Pharmaceuticals, Surya Pharmaceutical, Panacea Biotec, Ind-Swift Labs, Elder Pharmaceuticals, Twilight Litaka Pharma, Parenteral Drugs, Parabolic Drugs, Ajanta Pharma and Vivimed Labs.
However, some of the major companies like Aurobindo Pharma, Jubilant Life Sciences, Wockhardt, Ankur Drugs, Dishman Pharma, Shasun Pharma, Nectar Lifesciences, Hikal, Granules India and Fresenius Kabi suffered setback in their profitability.
Dr Reddy's Laboratories (DRL), a leading company in the Pharmabiz sample, has suffered setback on the revenue front and its net sales declined by 2.8 per cent to Rs.3,554 crore from Rs.3,656 crore in the corresponding period of last year. However, companies like Cipla, Sun Pharma, Lupin, Cadila Healthcare, Aurobindo Pharma, Glenmark, Biocon, Torrent Pharma, Surya Pharma, Ipca Laboratories, etc achieved double digit growth in net sales. Panacea Biotec notched up sales growth of 47.7 per cent, Parenteral Drugs 73.8 per cent, Twilight Litaka 43.3 per cent and Neuland Labs 50 per cent during the first half of 2010-11. Sun Pharma Advanced Research Co also pushed its net sales to Rs.41 crore from Rs.9 crore in the last period.
The Pharmabiz sample excluded Piramal Healthcare as it sold its formulation and diagnostic division and showed huge profits during the first half which is not strictly comparable. The company's sales amounted to Rs.1,571 crore as compared to Rs.1,810 crore in the last period. The company showed exceptional income of Rs.16,222 crore for sale of its divisions and due to this its net profit touched to Rs.12,621 crore as compared to Rs.191.37 crore in the last period. Similarly, several MNCs like Ranbaxy,. GlaxoSmithKline, Aventis Pharma, Pfizer etc are not included in the study as their year ends in December.
Orchid Chemicals has turned the corner and earned net profit of Rs.45.63 crore during the first half ended September 2010 as against a net loss of Rs.42.96 crore in the corresponding period of last year. Similarly, Sun Pharma Advanced Research Co, a demerged entity from Sun Pharma, has also achieved a net profit of Rs.9.30 crore as compared to a net loss of Rs.19.16 crore. Dr Reddy's Laboratories, Cipla, Divi's Labs, Ind-Swift Ltd, Unichem Laboratories, FDC Ltd, Venus Remedies have recorded single digit growth in profits.
The other income, including other operating income, of 75 companies increased by 6.8 per cent to Rs.815 crore from Rs.763 crore. The other income of Cipla, Sun Pharmaceutical and Lupin declined declined during first half and that of Dr Reddy's Labs, Cadila Healthcare, Glenmark Pharma, Orchid Chemicals increased significantly. Glenmark's other income went up by 81.3 per cent to Rs.61.33 crore from Rs.33.82 core and that of Orchid Chemicals increased by 245 per cent to Rs.43.54 crore from Rs.12.59 crore. DRL's other income jumped by 155 per cent to Rs.40.54 crore from Rs.15.92 crore. As against this, Sun Pharma's other income declined to Rs.46.83 crore from Rs.93.45 crore and that of Lupin moved down to Rs.53.33 crore from Rs.75.10 crore.
The cost of raw material, including increased/decrease in stock and purchases, of 75 companies increased by 13.7 per cent to Rs.17,306 crore from Rs.15,218 crore in the corresponding half of 2009-10. The staff cost also increased by 15.1 per cent to Rs.4,684 crore from Rs.4,068 crore and other expenditure moved up by 15.1 per cent to Rs.8,746 crore from Rs.7,600 crore.
The Earnings Before Depreciation, Interest, Taxation and Adjustments (EBDITA) increased by 18 per cent to Rs.9,110 crore from Rs.7,720 crore in the same period of last year. The EBDIT of Sun Pharma increased smartly by 68.8 per cent to Rs.1,130 crore and that of Lupin moved up by 35 per cent, Cadila Healthcare by 31.4 per cent, Glenmark Pharma by 44.7 per cent, Surya Pharma by 48.3 per cent and Panacea by 62.3 per cent. The EBDITA of DRL declined by 1.1 per cent to Rs.787.60 crore and that of Jubilant Life by 9.6 per cent. Cipla's EBDITA up by only 0.5 per cent to Rs.750.55 crore.
The depreciation provision by 75 companies increased by 13.5 per cent to Rs.1,564 crore during the first half ended September 2010 from Rs.1,378 crore. These companies managed to reduce interest burden by 10.3 per cent to Rs.885 crore from Rs.987 crore. Sun Pharma earned interest income of Rs.57.10 crore and Glenmark Pharma reduced its interest cost to Rs.58.56 crore from Rs.89 45 crore. Similarly, Orchid Chemicals also managed to cut down its interest burden to Rs.47.82 crore from Rs.108.28 crore. Lupin, Cadila Healthcare, Aurobindo Pharma and Jubilant Life Sciences also reduced their interest burden in first half of 2010-11. The tax provision also declined by 1.53 per cent to Rs.964 crore from Rs.979 crore in the last period. Thus the reduction in interest and taxation assisted well to push bottom line during first half.
The foreign exchange gains for the period under review amounted to Rs.17 crore as compared to Rs.16 crore in the last period. However, other adjustments reached at Rs.546 crore from Rs.369 crore. Wockhardt has shown exceptional loss of Rs.417.62 crore for settlement of loan disputed derivative liabilities during the first half. Further, Marksans Pharma also incurred a loss of Rs.81.12 crore as extra ordinary item during first half of 2010-11.
View Highlights for 75 pharma companies