Indian pharmaceutical industry is investing huge amount in plant and machinery to meet the challenges from ever increasing competition in the international as well domestic markets. The investment in fixed assets, including Research and Development (R&D) started yielding results during last couple of years. This has significantly pushed up the capacity utilization of the Indian companies during 2005-06. With investment in assets, Indian Pharma companies are now in a position to give a tough competition to international giants by launching cost effective products.

As per Pharmabiz study, the top 75 listed companies recorded a 27 per cent growth in net profit and 18.4 per cent growth in net sales during the year 2005-06. The same trend is likely to maintain in coming years with investments in fixed assets and better utilisation of manufacturing capacities. Pharmabiz has taken a look at the capacity utilisation and investments in fixed assets by top ten companies namely Ranbaxy Laboratories, Cipla, Dr Reddy's Laboratories, Lupin, GlaxoSmithKline Pharma, Aurobindo Pharma, Nicholas Piramal India, Sun Pharmaceutical Industries, Cadila Healthcare and Wockhardt Ltd.

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While Indian companies are investing heavily in fixed assets, MNCs in the country are reducing their investment by selling assets in prime locations. Several MNCs sold their valuable assets in Mumbai and also reduced work force during last few years. These companies generated much higher other income and strengthened their bottom lines as well as reserves. They are getting strong support from their parent companies abroad. However, Indian companies have no choice but to move ahead with huge investments in assets.

The top ten Indian pharmaceutical companies, investment in gross fixed assets increased by 19.2 per cent to Rs 9012 crore during the financial year 2005-06 from Rs 7562 crore in the last fiscal. Out of these, major investments were in plant and machinery. The capital work-in-progress of these companies during the same period increased by 28.2 per cent to Rs 1315 crore. The gross fixed assets of Cipla moved up by 43 per cent and that of Ranbaxy increased by 28.3 per cent. The investment in capital work-in-progress of Ranbaxy, DRL, Nicholas Piramal and Wockhardt increased by 63.9 per cent, 87.8 per cent and 66.8 per cent and 51.7 per cent respectively.

Ranbaxy stepped up its installed capacity for tablets and capsules to 6518 million and 2380 million from 4098 mn and 1630 mn. It's actual production of tablets rose to 4007 million from 3531 million in the previous year. However, the production of capsule has declined from 1639 million to 1374 million.

Aurobindo's capacity utilization remains static around 24 per cent for injectables during 2005-06. The company enhanced increased its install capacity for injectables to 570 lakh from 420 lakh in the previous year. It also increased its capacity for tablets and capsules to 24402 lakh from 15096 lakh. Aurobindo increases its syrup manufacturing capacity to 325 lakh from 111 lakh and its actual production has taken quantum jump to 28.34 lakh from 7.84 lakh. It has also pushed its capacity for bulk drug and intermediates. With better capacity utilization, Aurobindo's sales of formulation (Manufactured) items increased by 153 per cent to Rs 270.36 from 106.82.

Cipla the second largest Indian pharma company has also invested huge amount in expansion plans at Baddi at Himachal Pradesh and Goa. The companies new export oriented manufacturing unit for APIs and drug formulations is nearing completion at patalganga. It is expected to commence production in the second quarter of 2006-07. The company has also planned major addition to its manufacturing facilities at Kurkubh and Bangalore. Cipla's manufacturing capacity for tablets and capsules to 12296 mn in 2005-06 from 9468 mn. The capacity utilization worked out to over 91 per cent. It has also increased the manufacturing capacity of injections and sterile solutions to 107 kiloliters (KL) from 610 KL and the production increase to 1296 KL to 802 KL in the 2004-05.

The install capacity of leading MNCs - GlaxoSmithKline (GSK) Mumbai based pharma company remains same for several products during 2005-06. However, the install capacity of capsules and tablets declined to 6350 mn from 8300 mn. Its production also declined to 6414 mn from 7213 mn. Similarly its production of Liquid - Orals, Topicals, Parenterals and Malt has also declined to 5132 KL from 5420 KL. GSK is in process capability improvement initiatives in respect of 20 key products generated benefits on yield and overall productivity. Better management and reduction in door time resulted in reduced inventory levels by 40 per cent in comparison with 2004.

The capital work-in-progress of Nicholas Piramal reaches to Rs 175 crore from Rs 105 crore in the last financial fiscal. The company's gross fixed assets moved up by 19.1 per cent to Rs 892 from Rs 749. During the year Nicholas Piramal India Limited (NPIL) has created additional formulations manufacturing capacity at Baddi, Himachal Pradesh, which will give significant excise and income tax, benefits admissible for a back ward area development.

Over the last three year, NPIL has made significant investments in domestic formulation field force, new manufacturing facility at Baddi, new state-of-the-art integrated R&D centre, API and formulations assets for the custom manufacturing business and acquisition.

Besides top ten companies, several mid-cap companies like Torrent Pharma, Alembic, Panacea Biotech, FDC, Indoco Remedies and others have invested large funds in capacity expansion in Baddi, Himachal Pradesh. The Indian companies are now focusing more on more lucrative export market. Further, expansion of manufacturing facilities and up gradation to meet international quality standards assisting Indian companies to get more contract manufacturing orders.

Thus, Indian companies have set up state-of-the-art infrastructure and improved capacity utilisation with low cost and high quality products. This makes the country a one-stop shop for production of bulk drugs and formulations.