What's in store for Indian pharma? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

What's in store for Indian pharma?

Oct 20, 2009

The overall growth for the Indian pharma sector has been mixed in the last few quarters. While there were some factors that impacted the entire sector as a whole, there were certain developments which were company specific. Nevertheless they were instrumental in determining the performance of the companies. Many domestic pharma companies, especially the ones who had taken on foreign debt on their books, had a tough time in the last few quarters as the rupee depreciated sharply against the US dollar. This compelled them to report huge forex losses which dented profitability. Companies such as Ranbaxy and Sun Pharma ran into trouble with the US FDA as their manufacturing plants were found not to be complying with the quality standards of the US FDA. This adversely impacted their sales from the US. The global crisis also impacted the business of the pharma companies to a certain extent especially in the semi regulated markets of Russia and the CIS as the latter's currencies got significantly devalued. As a result many companies were compelled to focus more on receivables in these markets even if that meant foregoing some sales.

The September quarter results season for the pharma sector will begin this week and they are expected to be much better than what was witnessed in the latter half of FY09. The magnitude of forex losses is not likely to be pronounced this quarter given that the Indian unit has appreciated against the US dollar. While most of the companies are likely to post decent revenues from the domestic market, the exports performance is expected to be a mixed bag. Revenues from the emerging markets are likely to grow at a robust pace but sales are likely to be relatively lower in the developed markets of US and Europe. For those plagued by US FDA issues, growth in sales from the US market is not likely to be much.

MNC pharma companies are also expected to post better results as compared to what they did in the past two years. It must be noted that the performance of MNC pharma was hampered in FY09 due to trade issues, sale of non-core assets and rising input costs. But this scenario has changed as was evinced in the last two quarters and the top companies have begun to post decent growth in sales. Infact, dabbling in generics has emerged as an area of interest to these MNCs and some such as Pfizer India have already launched a couple of generic products in the domestic market to bolster performance.

Having said that, looking at only quarterly numbers should not form the basis of investing in stocks, including those in the pharma sector. Infact, investment decisions have to be based from a 2-3 year perspective. In this regard, the long term prospects of the pharma sector look intact as the fundamentals in terms of governments across the world veering towards low cost generics have not changed. However, mirroring the Indian stockmarkets, pharma stocks have also rallied considerably over the past few months. Hence, we advice investors to adopt a stock specific approach while investing in the sector.

Equitymaster requests your view! Post a comment on "What's in store for Indian pharma?". Click here!

  

More Views on News

The Top 6 Artificial Intelligence Plays in India (Views On News)

Dec 6, 2021

Investors looking to tap into AI theme need to keep an eye on tech firm leveraging the power of AI are making things possible.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

6 Indian Companies Betting Big on Renewal Energy (Views On News)

Dec 7, 2021

Here's the list of companies pouring in the big bucks to push India's sustainable energy industry to the next level.

Is it a Good Time to Trade OMC Stocks? (Fast Profits Daily)

Dec 7, 2021

This is how you should think about trading OMC stocks.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Dec 7, 2021 (Close)

MARKET STATS