The outlook for the Indian pharmaceutical sector for the year ending March 2016 will be extremely bleak if the half yearly performance of top companies is any indication. Based on the financial performance of leading 50 Indian pharmaceutical companies for the first half ended September 2015, the top line and bottom line growth will be only single digit for 2015-16. The quality issues with US FDA, competition, slower approval rate from regulatory authorities, drug pricing policy and uncertainty regarding exchange rates are impacting the working. However, investment in R&D, lower interest rates and new product launches may help to manage overall growth.

The consolidated net sales of leading 50 companies in the first half ended September 2015 increased only by 9 per cent to Rs.85,088 crore from Rs.78,034 crore in the corresponding period of last year. The net sales of almost similar sample of 50 companies posted full year of 2014-15 was Rs.16,2486 crore and their adjusted net profit worked out to Rs.21,547 crore.

The sales growth is impacted adversely mainly due to lower net sales by Sun Pharmaceutical Industries, Lupin, GlaxoSmithKline Pharma (GSK), Ipca Laboratories, Vivmed Laboratories, Hikal, Vinati Organics, Sterling Bio, Ind-Swift Laboratories, Suven Life, Venus Remedies and Ind-Swift Ltd.

Further, major companies like Dr Reddy's Laboratories (DRL), Jubilant Life Sciences, Pfizer, Nectar Life, Dishman Pharma, Shasun Pharma, Unichem Laboratories, J B Chemicals, Indoco Remedies, Novartis India, Merck, Natco Pharma, Panacea Biotec, SMS Pharma, TTK Pharma, AstraZenenca Pharma, and Neuland Laboratories have registered only single digit growth in sales during the first half ended September 2015.

Few leading pharma companies like Cipla, Piramal Enterprises, Torrent Pharmaceuticals, Wockhardt, Divi's Laboratories, Alembic Pharma, Ajanta Pharmaceutical, Syngene International, Claris Lifesciences, Sequent Scientific and IOL Chemicals & Pharma registered strong net sales growth of over 20 per cent in the first half ended September 2015. Cipla's net sales improved by 35.3 per cent to Rs.7,139 crore and that of Torrent Pharma gone up by 54.3 per cent to Rs.3,541 crore. Wockhardt's net sales increased by 22.3 per cent to Rs.2,372 crore despite lower sales in the US. Alembic Pharma posted net sales growth of 52.9 per cent to Rs.1,590 crore.

The consolidated net profit of 50 companies declined by 8.8 per cent to Rs.11,509 crore during the first half ended September 2015 from Rs.12,615 crore in the similar half of last year as several companies posted poor performance. The leading companies like Sun Pharmaceutical and Lupin registered significant fall in profit of 51.3 per cent and 25.6 per cent during the first half of 2015-16. Sun Pharmaceutical's net profit declined sharply to Rs.1,586 crore from Rs.3,255 crore and that of Lupin declined to Rs.934 crore from Rs.1,255 crore. Piramal Enterprises profit declined sharply to Rs.449 crore from Rs.2,506 crore mainly due to gain on divestment of investment in Vodafone in the previous period. GSK's net profit declined by 16.6 per cent to Rs.189 crore from Rs.227 crore.

The net profit of Ipca Laboratories declined sharply by 84.6 per cent to Rs.31 crore from Rs.198 crore. Similarly, few companies like Unichem Laboratories, Hikal, Merck, Claris Lifesciences, Natco Pharma, Sterling Bio, Ind-Swift Laboratories, Suven Life Sequent Scientific and Venus Remedies suffered heavy setback during the first half ended September 2015. The net loss of Sterling Bio declined to Rs.273 crore as against Rs.330 crore in the similar period of last year. Panacea Biotec's net loss increased to Rs.54 crore from Rs.30 crore and that of Ind-Swift Ltd and IOL Chemical net loss increased to Rs.55 crore and Rs.31 crore respectively.

Though the investment in pharma segment is considered safe on capital market, the returns may be adversely affected in coming year. With lower sales and profits, the income from dividend may be under pressure during 2015-16.

Highlights for top 50 pharma cos: First half ended Sept 2015