The overall financial performance of Indian pharmaceutical industry may be under pressure in the current year 2014-15 due to new Drug Price Control Order and quality problems raised by US FDA. The growth in sales as well as profits before adjustments may be under pressure despite lower interest cost and modest rise in other costs. The rupee depreciation against US Dollar during last couple of months may increase export earnings of Indian companies. The amalgamation of Ranbaxy Laboratories with Sun Pharmaceutical will create a new pharma giant having an estimated turnover of around Rs.30,000 crore in 2014-15.

The net sales of leading 25 Indian pharmaceutical companies, which registered over 75 per cent of sales of Pharmabiz 100 top pharma companies in 2013-14, increased by 12.9 per cent to Rs.1,01,693 crore during nine months ended December 2014 from Rs.90,080 crore in the corresponding period of last year. For the full year ended March 2014, these 25 companies recorded net sales of Rs.1,24,253 crore as against Rs.1,61,724 crore by 100 leading pharma companies.

Few major companies like Ind-Swift Laboratories, Plethico Pharmaceutical, Orchid Chemicals, Elder Pharmaceutical and Abbott India were not included in this study due to change in year ending or lower sales. Similarly two MNCs viz., GlaxoSmithKline Pharma and Sanofi India not included due to December year ending.

Among the 25 pharma companies, the net sales of Pfizer and Aurobindo Pharma went up sharply by 82.2 per cent and 55.2 per cent during first nine months ended December 2014 to Rs.1,371 crore and Rs.8,899 crore respectively. The sales of Cadila Healthcare, Torrent Pharma, Divi's Laboratories, Ajanta Pharma, and Granules India improved by over 20 per cent and that of Lupin and Dishman Pharma moved up by 18.8 per cent and 17.2 per cent. However, sales of Ranbaxy Laboratories, Wockhardt, Ipca Laboratories and Strides Arcolab declined mainly due to quality problems with US FDA and likely to be under pressure in the coming months.

Similarly, the sales of Sun Pharma, Cipla, Jubilant Life Sciences, Biocon, Nectar Lifesciences, Vivimed Labs and Unichem Laboratories improved only by single digit. The second largest pharma major Dr Reddy's Laboratories registered net sales growth of 12.5 per cent during the nine months under review to Rs.10,948 crore from Rs.9,736 crore.

Their earnings before depreciation, interest, tax and adjustments (EBDITA) improved by 11.7 per cent to Rs.26,337 crore from Rs.23,477 crore. Staff cost went up by over 15 cent to Rs.16,309 crore from Rs.14,172 crore and the raw material cost moved up by 12.4 per cent to Rs.34,637 crore. After depreciation and interest, the profit before tax and adjustments improved by 13.1 per cent to Rs.20,320 crore from Rs 17,970 crore mainly due to lower interesThe overall financial performance of Indian pharmaceutical industry may be under pressure in the current year 2014-15 due to new drug price control order and quality problems raised by US FDA. The growth in sales as well as profits before adjustments may be under pressure despite lower interest cost and modest rise in other costs. The rupee depreciation against US Dollar during last couple of months may increase export earnings of Indian companies. The amalgamation of Ranbaxy Laboratories with Sun Pharmaceutical will create a new pharma giant having an estimated turnover of around Rs.30,000 crore in 2014-15.

The net profit after tax, but before adjustments, of 25 companies increased by 13.2 per cent to Rs.14,907 crore from Rs.13,155 crore in the corresponding period of last year. Tax provision of 25 companies increased by 12.4 per cent to Rs.5,413 crore from Rs.3,816 crore. Forex loss declined to Rs.272 crore from Rs.583 crore and adjusted income went up to Rs.2,088 crore from Rs.450 crore. This reductions impacted favorably and the net profit of Pharmabiz sample of 25 companies increased by 28.4 per cent to Rs.16,723 crore from Rs.13,022 crore.

Piramal, which incurred a net loss before adjustments of Rs.49 crore during the first nine months ended December 2014, has shown a gain of Rs.2,804 crore from sale of investment in Vodafone India, scaling down the R&D activities of the new chemical entity and other. Sun Pharma has shown minority interest of Rs.642 crore. It shown Rs.2,517 crore as exceptional expenditure in the similar nine months of last year in respect of patent infringement litigation related to generic version of 'Protonix'. Similarly, Strides Arcolabs has shown Rs.471.55 crore in respect of dividend income from non-current investment in wholly-owned subsidiary and Rs.96.40 crore as gain on sale of long term investments during first nine months ended December 2014. Thus the total adjustments of 25 companies worked out to income of Rs.2,088 crore as against Rs.450 crore in the corresponding period of previous year, which pushed consolidated net profit up by 28.4 per cent to Rs.16,723 crore from Rs.13,022 crore. Equity capital of 25 companies stood at Rs.1,527 crore.

Considering the above performance, the overall sales growth of pharmaceutical segment will be in the range of 8 to 10 per cent in 2014-15 and their profit before adjustments may rise in the range of 10-12 per cent only. Higher exports due to rupee depreciation against US Dollar may release some pressure on topline. Compared to last couple of years, the year 2014-15 will be more challenging for growth of Indian pharma.



Highlights of 25 major pharma