The secondary market in India exhibited volatile price movements so far in the year 2006. Almost all sectors went through sharp ups and downs. However, improved overall sentiment and better confidence level of investors pushed the scrip prices at higher level with all-round gains. Crucial factors like higher corporate earnings, strong support from foreign financial institutions (FIIs), better economic indicators, significant growth in foreign exchange reserves, well spread monsoon, easy availability of credit and lower interest rates assisted the sentiment. Further, SEBI and other watchdogs are keeping close watch on day-to-day trading, which built up confidence among investors.
The Bombay Stock Exchange (BSE) Sensex of 30 companies is currently moving over 12,000 points as compared to 9397.93 points as at the end of 2005. The Sensex reached at its 52 weeks peak level at 12671.11 on May 11, 2006 with strong support from investor community. However, the Sensex had gone through several volatile movements and touched to its 52 weeks lowest level of 7656.15 points during October 2005. In line with Sensex, the BSE Healthcare (BSEHC) index of 25 leading pharma companies also gone through ups and downs. Currently the BSEHC index is moving in the range of 3575 and 3600 as against close of 3114.85 points at the end of 2005.
BSEHC includes Indian majors like Ranbaxy Laboratories , Cipla, Aurobindo Pharma, Cadila Healthcare, Dr Reddy's Laboratories, Lupin, Nicholas, Glenmark, Matrix, Orchid, Sun Pharma, Wokchardt, Torrent Pharma, Biocon, Divi's Lab, Unichem Laboratories, Marksans and others. The index also includes MNCs like GlaxoSmithKline Pharma, Aventis Pharma, Novartis India, Pfizer and Wyeth Ltd. MNC scrips also moved up significantly with strong financial performance and support from their parent companies.
The total market capitalisation of 95 pharma companies worked out to Rs1,49,965 crore on September 15, 2006 as compared to Rs 1,31,179 crore as at the end of 2005 for 92 companies. These figures are not strictly comparable due to issue of bonus shares or preferential shares or conversion of FCCBs in to equity shares by several companies during the first nine months of 2006.Further several companies split their face value of equity shares which changed the range of market prices. Overall market prices of several companies were under pressure during first nine months of 2006.
With the better sentiment, several companies entered the capital market with huge premium. Plethico Pharma, Amar Remedies, Opto Circuits (I), Mangalam Drugs and Organics entered the capital market through Book Building process. Plethico Pharma entered capital market with premium of Rs 300 per share during April 2006.The company received good response from the investors and was oversubscribed by 25.63 times. Opto Circuits issued 40 lakh shares of Rs 10 each in the price brand range of Rs 240-270 during March 2006. Amar Remedies issued 150 lakh shares at a price brand between Rs 24-28 during August 2005.
The market capitalization (Mcap) of 21 leading pharma companies from 'A' Group on the BSE improved to Rs 97,879 crore on September 15, 2006 from Rs 82,616 croreas at the end of 2005. This is basically due to the bonus issue by Cipla in the ratio of 1:1. Further, Lupin, Orchid and Torrent also announced bonus issues, which increased the equity capital of these companies and also market capitalization. (Similarly the Mcap of 10 MNCs moved up to Rs 23,959 crore from Rs 23,467 crore in the same period.)
The price movement during 2005 of pharma segment was under severe pressure due to uncertainty regarding the impact of Patent regime. The fear was expressed on the working of the Indian companies after the implementation of Patent Laws. It was stated that MNCs would eat market share of Indian companies with the strong support from their parent companies and patented products. Further, changes in the MRP based excise duty structure and implementation of VAT created some trouble for trading community. Despite these odds, scrips of Indian pharma companies gained significantly during 2006 and same trend is likely to continue in short-term as well as long-term basis.
The Indian pharma companies overcome the domestic problems successfully and also fight odds in the international market. The stiff generic competition in the regulated markets, adverse fluctuation in the exchange rates, stringent approval norms outside and legal hassles put pressure on working of few companies. But overall results were encouraging with strong export growth. The Indian companies entered new markets aggressively with number of new products. With better R&D setup and cGMP manufacturing facilities, International giants are looking Indian companies as their partners.
With strong fundamentals and ability to tap new opportunities in the International pharma market, the investors gained handsome returns on Indian bourses during first nine months of 2006. The Indian pharma companies consolidated their business operations and delivered strong financial performance during the year 2005-06 as well as in the first quarter of 2006-07. The pharma companies have taken due care of their investors and paid higher equity dividends. This resulted in spurt in share price of almost all pharma companies during last few months. The pharma companies are awaiting final outcome of government policy in respect of data exclusivity, drug price control and other related issues.