The net profit of 100 listed pharmaceutical companies in the country declined sharply by 40.3 per cent to Rs 6,075 crore in 2008-09 from Rs 10,173 crore reported in the previous year. This is primarily because of the huge foreign exchange losses incurred by most of these companies during the year. Net profit before foreign exchange losses and other adjustments, on the other hand, went up by 25.7 per cent to Rs 11,513 crore in from Rs 9,156 crore in the previous year.
Considering global slowdown, increasingly tough approval norms, stiff generic competition, volatile foreign exchange rates and steep rise in interest burden, performance of Indian pharma sector at operational level is satisfactory in 2008-09. S Ramesh, president - finance & planning, Lupin Ltd, said, "The pharmaceutical industry is witnessing a change to a new world order, with India at the forefront of the generics story. New avenues such as contract manufacturing & in-licensing deals have added to the revenue growth of many Indian companies."
"The global push towards generics, combined with around $65 billion worth of drugs going off patent soon will provide the Indian pharmaceutical sector an added fillip. Indian generic drug manufacturers have also played a vital role in the expansion of the pharma sector, organically and inorganically, thereby increasing their market presence across regulated and semi-regulated markets," Ramesh added.
When compared to the performances of international pharma giants also, Indian companies have fared better during 2008-09 with better growth in top line and in bottom lines (before foreign exchange losses). The major factors assisted the growth are world-class manufacturing facilities with continues investment in R&D, skilled people, expansion and aggressive entry into highly regulated markets.
This was further supported by mergers & acquisitions, marketing tie-ups and launching of new products. Several players are strengthening their product pipeline to tap upcoming opportunities with the patent expiration. These companies are focusing on drug discovery and undertaking drug delivery research in line with global standards. The analysts pointed out that "The in-licensing income of R&D based companies is likely to strengthen the operations in near future. The Indian companies have already established strong presence in CRAMS and now entering into clinical trials and biotechnology area in a big way."
The analysis is based on the audited/unaudited results announced by these 100 listed companies. Due to change in Accounting Standard during 2008-09 in respect of provision for mark to market losses and foreign exchange loss or gain, the bottom line of these companies impacted adversely.
The Pharmabiz Study of 100 companies showed that their net sales increased by 22.8 per cent to Rs 84,589 crore during 2008-09 from Rs 68.893 crore in the previous year. Ranbaxy, now belonging to Daiichi Sankyo of Japan, has maintained its top slot with consolidated net sales of Rs 7,421 crore as against Rs 6,781 crore in the previous year. This was followed by Dr Reddy's Laboratories, Cipla, Sun Pharmaceutical and Industries and Lupin during 2008-09.
As per the Pharmabiz sample of 100 companies, there were 22 pharmaceutical companies with net sales of over Rs 1,000 crore during 2008-09 as against 19 in the last year. Sterling Biotech, Dishman Pharma and Strides Arcolab entered in Rs 1,000-crore sales group. The net sales of these 22 companies worked out to almost 72 per cent (Rs 60,762 crore) of the aggregate net sales of 100 companies during 2008-09. Similarly, there were 19 companies with net sales of over Rs 500 crore during 2008-09 and their net sales touched to Rs 13,493 crore (16 per cent of aggregate net sales of 100 companies) as against Rs 11,636 crore in the previous year. Thus the major chunk of pharma business is dominated by these 41 players.
A major contributing factor to the total revenues of these companies is other income. The other income, including in-licensing fees, of 100 companies increased by 32.3 per cent to Rs 2,951 crore from Rs 2,231 crore in the 2007-08. Other income of Aurobindo, Cipla, Glenmark, Ranbaxy, Sun Pharma, Strides Arcolab and Pfizer increased significantly and assisted to boost their bottom line during 2008-09. Aurobindo's other income went up to Rs 174.34 crore from Rs 24.94 crore, Cipla's other income moved up to Rs 365.68 crore from Rs 273.23 crore, Glenmark's to Rs 174 crore from Rs 45.82 crore and that of Ranbaxy increased to Rs 270.62 crore from Rs 136.23 crore. However, the other income of Lupin declined to Rs 95.37 crore from Rs 206.45 crore, Dr Reddy's other income moved down to Rs 209.67 crore from Rs 281.28 crore and that of Matrix Labs' declined to Rs 44.01 crore from Rs 57.91 crore in the previous year.
The raw material cost of 100 companies went up by 21 per cent to Rs 37,039 crore during 2008-09 from Rs 30,618 crore, which includes purchases of Rs 8,312 crore as against Rs 6,866 crore in the previous year and stock increase/decrease adjustment for 100 companies worked out to minus Rs. 1,605 crore and Rs 1,389 crore in 2008-09 and 2007-08 respectively.
Indian companies are investing heavily in expansion of manufacturing and R&D activities as well as in manpower. The staff cost of 100 companies during 2008-09 increased by 27.4 per cent to Rs 9,973 crore from Rs 7,830 crore in the previous year. Ranbaxy's staff cost increased to Rs 967 crore from Rs 892 crore in the previous year. It remained the highest spender on staff followed by DRL at Rs 992 crore, Jubilant Organosys at Rs 657 crore, Wockhardt at 607 crore and Piramal Healthcare at Rs 501 crore. Sun Pharma and Lupin also incurred staff cost of Rs 439 crore and Rs 487 crore during 2008-09. The other expenditure including selling, marketing, administrative and R&D expenditure of 100 companies went up by 23.8 per cent to Rs 21,784 crore from Rs 17,129 crore in the previous year.
The earning before interest, depreciation, taxation and adjustments (EBDITA), including foreign exchange loss or gains, of Pharmabiz sample of 100 companies went up by 20.6 per cent to Rs 18,745 crore from Rs 15,547 crore in the same period of last year. The pharmaceutical companies recorded better growth in EBDITA during 2008-09 and out of 100 companies, 27 companies EBDITA received setback and remaining 73 companies achieved satisfactory growth. EBDITA of Ranbaxy declined marginally by 0.7 per cent to Rs 849.67 crore. Glenmark Pharma also suffered heavy setback and its EBDITA nosedived by 25.7 per cent to Rs 628.99 crore from Rs 846.35 crore. EBDITA of few majors like Orchid Chemicals, Alembic, Panacea Biotec, Shasun Chemicals, etc declined during 2008-09. However, EBDITA of Aurobindo Pharma, DRL, Jubilant Organosys, Matrix Laboratories, Ipca Laboratories, Dishman Pharma, Strides Arcolab, Opto Circuits, J B Chemicals, Nectar Lifesciences, Unichem Laboratories went up sharply.
Though the EBDITA of 100 companies increased by 20.6 per cent, the profit before tax and adjustment (PBT) remained under pressure during 2008-09 on account of heavy interest burden. The credit crunch on hand and expansion on other hand pushed the interest burden by 69.3 per cent to Rs 2,442 crore from Rs 1,442 crore in the previous year. Wockhardt has made a hefty provision of Rs 270.40 crore for interest payment as compared to Rs 163.80 crore in the previous year. The company's borrowings reached at Rs 4,235 crore as at the end of December 2008 from Rs 2,900 crore. Ranbaxy's interest burden went up by 46 per cent to Rs 205 crore. Orchid also provided significant higher interest of Rs 156.45 crore as compared to Rs 82 crore. Sun Pharma and GlaxoSmithKline received interest payment during 2008-09 which helped to strengthen their PBT level.
The depreciation provision of 100 companies increased by 27.7 per cent to Rs 3,378 crore in 2008-09 from Rs 2,645 crore in the previous year. Depreciation provision of Cipla went up to Rs 175.65 crore from Rs 130.65 crore, Ankur Drugs to Rs 21.63 crore from Rs 8.40 crore, Glenmark to Rs 102.68 crore from Rs 71.68 crore and Jubilant Organosys to Rs 163.24 crore from Rs 103.91 crore. Similarly, depreciation provision of Lupin, Piramal Healthcare, Orchid Chemicals Sun Pharmaceutical, Cadila Healthcare and Wockhardt increased significantly.
The profit before tax improved by 12.7 per cent to Rs 12,919 crore from Rs 11,461 crore in the previous year. The PBT of major companies like Aurobindo Pharma, Dishman Pharma, Hikal, J B Chemicals, Matrix Laboratories, Opto Circuits, Unichem Laboratories, TTK Pharma and Zandu Pharma increased by over 50 per cent during 2008-09. Aurobindo's PBT increased by 73.5 per cent to Rs 385.86 crore and that of Dishman moved up by 85.3 per cent to Rs 157.46 crore from Rs 84.99 crore.
With the heavy foreign exchange loss, tax provision for the 100 companies declined to Rs 1,406 crore during 2008-09 from Rs 2,305 crore, a decline of 39 per cent. Due to lower tax provision, the net profit after tax, but before adjustments, increased to Rs 11,513 crore from Rs 9,156 crore, representing a growth of 25.7 per cent. The leading three companies viz., Ranbaxy, Dr Reddy's Laboratories and Wockhardt suffered heavy setback and incurred a net loss of Rs 951 crore, Rs 917 crore and Rs 139 crore respectively during 2008-09 on account of provision for foreign exchange losses. Similarly, net profit after adjustment of Aurobindo, Glenmark, Biocon and Alembic declined by over 55 per cent. Few companies like Opto Circuits, Unichem Laboratories, Sharon Bio-Medicine, Vinati Organics, Zandu Pharma, Amrutanjan achieved strong growth in bottom line during 2008-09.
Ranbaxy provided Rs 1856 crore for foreign exchange loss during 2008-09 and Wockhardt Rs 711 core. Further, Aurobindo's foreign exchange loss mounted to Rs 255 crore, Biocon's at Rs 147 crore Jubilant at Rs 104 crore, Panacea Biotec at Rs 175 crore, Piramal Healthcare Rs 82 crore during 2008-09 as against gains in the previous year.
Despite blow from the provision for foreign exchange losses, the pharma companies declared handsome dividend for the year 2008-09. The equity share capital of 100 companies stood at Rs 2,597 crore as against Rs 2,325 crore in the previous year. Divi's Laboratories declared equity dividend of 300 per cent and also offered liberal bonus in the ratio of 1:1.Similarly, Sun Pharma, Piramal Healthcare, Jubilant, Ipca Laboratories, Dr Reddy's Labs and FDC declared dividend of more than 100 per cent. MNC's companies like GlaxoSmithKline paid dividend of 400 per cent, Abbott (140 per cent), AstraZeneca (750 per cent), Aventis Pharma (160 per cent), Merck (175 per cent), Novartis (200 per cent), Pfizer (125 per cent), Wyeth (325 per cent) and Solvay Pharma (175 per cent). However, due to losses Ranbaxy and Wockhardt skipped dividend for the year 2008-09.
The Indian pharmaceutical segment is going ahead despite challenges and has established strong brand image in the international market. The net profit during the first quarter ended June 2009 of Dr Reddy's Labs, Piramal Healthcare, Biocon, Jubilant, Zandu Pharma and Opto Circuit improved significantly and the trend is likely to continue for other pharma companies in the coming quarters of current year. S Ramesh of Lupin added, "Pharmaceuticals is one of India's most promising sectors, and could arguably be one of its finest success stories. Today, the Indian pharmaceuticals market is pegged to grow to US$20 billion, the tenth largest globally, by 2015.All in all, the opportunities are aplenty and Indian companies can carve a niche of their own by virtue of their highly skilled workforce, huge R&D potential and a robust product pipeline."
View Table Information