North India pharmaceutical industry continues to present a mixed bag of fortunes. On the one hand the so-called excise-free zones are losing sheen and loan-licensing is getting less attractive under the burden of technology upgradation , on the other some major and medium players are still riding on the hope of future growth.
On the positive side, a few leading players are still hopeful of the bright prospects of the Indian pharma industry. They are confident that they can avail of a windfall from the vast number of patented drugs going out of the patent basket in the near future since they are among the leading generic players in the country.
Secondly, with the new policy in the offing and growth potentials of the generic drugs, the contract manufacturing will continue to support a vast number of small and medium scale units who have already complied with Schedule M norms.
Third and the biggest strength of North India is that Delhi will remain as the most vital centre of regulatory network as far as the pharma industry is concerned. The activities, if not manufacturing or exporting, will continue in North India which was one of the most promising regions for the industry till some time back.
And North India is still important for the pharma players as states like Uttar Pradesh, Delhi, Punjab, Haryana will continue to be major markets of consumption, thanks to the demographic and geographic strength of the region.
But on the flip side, the story is getting worse. The excise-free zones are not as lucrative as before, loan manufacturing have competition and pressure, small scale units are gasping for breath and not much help from the government is also coming on its way.
The ground realities
Even going by the old statistics, North India has already lost its sheen as a happening place for pharma industry as such. According to official numbers, there are more than 10,000 manufacturers in the country. Whereas Maharashtra is the home to as many as 3139 formulation and bulk drug units, Delhi has just 540 units. Delhi has been one of the pioneering spots for the Indian pharma industry to take roots in the early days and during its peak time, the national capital region including Noida, Gurgaon, Ghaziabad and Faridabad had over 2000 units, if the industry leaders are to be believed.
Gujarat is growing strong with 1526 units and Andhra Pradesh has 727 companies while West Bengal has 756 units. Even Tamil Nadu has 570 firms. And interestingly, the South in general and TN in particular may soon become an attractive destination for pharma ventures, thanks to the extreme penchant of the current Chemicals Minister for his home state. Delhi accounts for just 5.1 per cent in the total business in the country, while Maharashtra dominates with 29 per cent share. Gujarat is contributing about 14 per cent of the business while AP has a share of 6.9 per cent. Haryana, another prominent destination till some time back, has 315 units while Punjab and Jammu Kashmir have very few units. The only silver lining is the rise of Himachal Pradesh which has officially 368 units and Uttaranchal with nearly 200 units in the recent past.
``In 1970 and 80s, Delhi and outskirts were leading hubs for the pharmaceutical industry, mostly led by small scale and medium players. Then slowly biggies emerged and gained grounds while some existing units diversified. Though the inland container depots helped the small players also to grow for some time, struggle continued for them as big players captured the markets fast. Even in the small scale sector, formulation segment have come up better while the bulk drug manufacturing is to reach the potential,’’ said senior industry leader Lalit Kumar Jain.
The major pharmaceutical units in the region are Ranbaxy, Panacea Biotec, Venus Remedies, Ind-Swift, Ind-Swift Laboratories, Surya Pharma, Dabur Pharma, Jubilant Organosys, Nectar Lifesciences, IOL Chemicals and Pharma. Over the years, unlike Gujarat or Maharashtra, the region could not witness the rise of any new player to reckon with, other than Mankind Pharma.
Pharma hubs
The pharma hubs in Himachal Pradesh and Uttarakhand are no more lucrative destinations for the pharma industry. With stiff competition from the non-excise free zones and no more big sops from the authorities, many of the small and medium scale units are mulling to down shutters.
``Excise-free zone is no more a favoured place as its attractions have virtually ended. When it was launched, the excise duty was 16 per cent outside the zones and it lured the companies to migrate and cash on this. The duty was cut down to four per cent over the years and those outside the units now can get more benefits through reimbursement through MODVAT. After paying just four percent duty on their production cost, they can earn more by reimbursing four percent of the MRP. Thus earns more than we stand to gain,’’ according to Himachal Pradesh Drug Manufacturers Association general (HDMA) secretary S L Singla .
Baddi, once a hotbed for the pharma, has still 400 units, but 70 per cent of them are in the small and medium scale sector. Only 20 per cent of units are owned by established big companies who are less disturbed by the changing situations. The area accounts for 35-40% of the total production of drugs in the country.
``Given a chance, upto 40 per cent of the units want to shut shops and sell off business. But there are no takers too. It is precarious situation, but without any concrete solution as the Government also cannot help much to save them,’’ he said. The HDMA, which has over 700 members in the state, has been taking up these issues with the govt, he said.
The plight is the same is the same for other such hubs like Haridwar, Roorkee, Dehradun and Rudrapur in Uttarakhand also.
SME sector
The story has been the same for the small scale sector over the years, across the country with North being no exception. Schedule M compulsions, less friendly pollution norms, less sops from the government and competition from the biggies have been slowly pushing the small players out of the horizon. Perhaps, except for the tax free havens, the story has been worse for North Indian units.
``If thousands of small units either shut down their operations or facing the closure across the country, there only a handful left outside the excise free zones in the North India to fight for existence now. Almost 75 per cent of the small scale units have moved to comparatively safer havens of excise free zones now. And there is no exact number of SSI units in existence now. There were at least 300 units in Haryana but now only 50-60 are left. In Delhi, there could be just 30-40 working now. So is the case with Punjab where once there were 500 units and now hardly 50 remaining. Majority of them moved to free zones while others faced the logical end of their struggle—premature deaths,’’ according to a senior leader from the SME industry.
Formulations and API units
Unlike other regions, the North India cannot boast of any major bulk drugs activities. There are only a handful of players engaged in the Active Pharmaceutical Ingredients sector while in the case of pharmaceutical and food excipients, the north remains a forsaken land both for the industry and the govt.
``We have still some companies to reckon with in API sector of North India. But when it comes to excipients, even industry is not keen so much. In the pharma hubs also, companies are focusing on formulation units,’’ an industry leader pointed out.
The recent developments in the Europe over the API following the amendment in EDQM standards has also hit the north Indian players, as in the case of other regions. The industry has asked the government to take steps to overcome non-tariff barriers faced by the bulk industry.
North India continues to be less attractive for the bulk drug players who opt for places nearer to seaports like Mumbai and Kolkota in the past. There are some small players like Pharmchem, Seapharm Labs, Surya Medicare, Saurabh Chemicals and Betalife operating in the region, but less number compared with other regions like Chennai, Hyderabad and Mumbai.
Big players
However the few big players who dominate the north Indian scene are less worried about the government support or regulatory conditions as they are hoping the best out of the changing global scenario that will prove to be a boom for the Indian generic players.
Ranbaxy, the flag-bearer of the region, consolidated its sales during the quarter ended on September 30, 2012 and recorded 53 per cent growth during the one year, as per the last audited records. Panacea Biotec, a Rs.700 crore vaccines major, has managed to reduce its net loss to Rs.62.28 crore during the third quarter ended December 2012 from Rs.71.72 crore in the corresponding quarter of last year. It net sales improved by 8.7 per cent to Rs.166.28 crore from Rs.152.98 crore. Its loss before depreciation, interest and taxation came down to Rs.10.15 crore from Rs.26.83 crore. EPS worked out to negative Rs.10.17 as compared to Rs.11.71 in the last period.
Likewise, the companies like Venus Remedies, Ind-Swift, Ind-Swift Laboratories, Surya Pharma, Dabur Pharma, Jubilant Organosys, Nectar Lifesciences, IOL Chemicals and Pharma have a stronger bottom line, compared to the crisis-hit SME players. More importantly, these companies hopes to share the bright growth story of Indian pharmaceutical industry in the future.