The Pharmaceutical scrips are slowly gaining momentum to new peak on Bombay Stock Exchange with significant support from investors and FIIs in the last few weeks. However, compared to the Sensex growth of around 48 per cent, the BSE Health Care (BSEHC) index achieved an yearly growth of 32.3 per cent only at the close of trading on July 6, 2005.
Despite poor financial growth rates in the quarter ended March 2005, the sentiment is showing distinct improvement for drug companies during the past few trading sessions. The BSE Health Care (BSEHC) index for the 23 pharma companies is marching ahead every day and is likely to touch its previous 52-weeks high level of 3094.79 in near future. Currently, the BSEHC index reached at 2888.51 with a total market capitalization of around Rs 10,0000 crore for 23 pharma companies.
The strong support exhibited from investors and FIIs pushed the scrip prices. A pharma analyst pointed out that the poor performance in the quarter ended March 2005 was an exceptional case and beyond the reach of companies. The change in the government policy regarding excise on MRP and implementation of VAT put some burden on working. The analyst added that the mid-cap pharma companies are doing well and moving fast than the major companies with sales turnover of Rs 1000-crore or above. Further, the pharma companies are paying their investors handsomely by way of bonus or dividend. During the last year, several pharma companies split the face value of shares, which also pushed the liquidity and trades in the markets.
The Indian pharma companies are now entering aggressively in the international market with noteworthy investments in Research and Development, upgradation, tie-ups and acquisitions. Though the top multinational companies are spending huge amounts on R&D to grab higher market share, the Indian companies are also following the same trend and their investment is rising every year. The R&D investments are always for long term and generally these investments start yielding results after 10-12 years. Further, the outcome is uncertain.
A Pharma analyst from a broking firm said the long term outlook would be better than short term prospects, since the R&D efforts of Indian companies would take time to generate higher yield. The pharma companies are currently busy in filing more and more DMFs and ANDAs in the regulated markets. These players are getting their facilities approved by the various regulated authorities. Contract research and contract manufacturing will be future growth area for the Indian companies and several drug companies are taking necessary steps, the analyst pointed out.
Ranbaxy, a leader in the Indian Pharam segment with net sales of Rs 3,474 crore in 2004-05, has highest market capitalization of Rs 19,952 crore followed by Sun Pharmaceutical of Rs 11,298 crore and Cipla of Rs 9,602 crore on July 6, 2005. Ranbaxy scrip is currently moving quoted at Rs 1072 as against its 52-weeks highest level of Rs 1300. The second largest, Sun Pharmaceutical, in terms of market capitalization, is quoted at Rs 609 as against its yearly high of Rs 610. Its market capitalization worked out to Rs 11,298 crore. Cipla scrip is hovering around Rs 320 with a market capitalization of Rs 9602 crore. Dr Reddy, which suffered heavy setback during 2004-05 and lost legal battles, was continuously moving southward during last full year and is currently moving around Rs 790 as against its peak level of Rs 890. Its market capitalization worked out to Rs 6027 crore. Besides Indian pharma companies, MNC scrips are also moving ahead on exchange.