OVERVIEW OF INDIAN PHARMACEUTICAL INDUSTRY

Introduction
The Indian Pharmaceutical industry is third largest in terms of volume and
thirteenth largest in terms of value, as per a pharmaceutical analysis by Equity
Master. The main players in the industry are branded generics which constitute
nearly 70 to 80 per cent of the market. Considered to be a highly fragmented
industry with more than 20,000 registered units, consolidation has increasingly
become an important feature of the Indian pharmaceutical market. There is
severe price competition amidst tight government control.70% of the countrys
demand for bulk drugs, drug intermediates, pharmaceutical formulations is met
by the Indian Pharma industry itself

India has achieved an eminent global position in pharma sector. The country also
has a huge pool of scientists and engineers who have the potential to take the
industry to a very high level.The UN-backed Medicines Patents Pool has signed
six sub-licences with Aurobindo, Cipla, Desano, Emcure, Hetero Labs and Laurus
Labs, allowing them to make generic anti-AIDS medicine Tenofovir Alafenamide
(TAF) for 112 developing countries.

Current Scenario

The Indian pharmaceutical industry is estimated to grow at 20 per cent

compound annual growth rate (CAGR) over the next five years. India is now
among the top 5 global emerging pharmaceutical markets. The markets grew by
12.3 % for the September 2014 Quarter. Indian pharma market is expected to
reach USD 22-32 billion by 2017.

On the back increasing sales of generic medicines, continued growth in chronic

therapies and increased penetration into the rural markets, the domestic pharma
market is expected to grow at 10-12 percent in FY 15 as compared to 9 per cent
in FY14.

MAJOR PHARMACEUTICAL COMPANIES IN INDIA

Some of the leading players in Indian Pharmaceutical Markets that have been
analysed in detail are

Company

Revenue in INR
billion

Aurobindo Pharma
Cipla
GlaxoSmithKline
IPCA Labs
Lupin
Novartis
Torrent
Glenmark

Aurobindo Pharma

To improve liquidity and maintain profitability, the company needs to get rid of
worthless assets. In last few years, the company has invested in acquisition of
assets of other companies like Natrol. Along with assets, it has taken over the
current liabilities of that company too. Its' PE ratio is moderate, if not high. The
P/E as well as the share price are lower than the industry average, significantly,
which shows that the company is undervalued and has better opportunity for
growth.

Cipla

Cipla Limited is a pharmaceutical company. The Company's business units

include Active Pharmaceutical Ingredients (APIs), Respiratory and Cipla Global
Access. The Company offers APIs, formulations and veterinary products. As of
March 31, 2015, the Company offered its services across five continents across
the world. The company has witnessed healthy growth from 2010-13 but its
operating profits have not improved significantly in the last two years .The
company has spent on fixed assets and inventories in a big way. Although the
revenues have seen a continuous increase, the same has been countered by

successive increase in expenditure which has resulted in reduced profit margins

for the past two years.
Glenmark
Glenmark has shown substantial improvement in recent years with increase in
profit by more than 60% on YoY basis. It has followed effective measures to
improve its market presence by raising money through investors and have
reduced debt substantially. They have faced regulatory issues in outside India
market which adds to major portion of its revenue, hence inventory has
increased as sale of such drugs have been stopped temporarily. This has affected
their revenues and hence they are taking care of these aspects and get
clearances from regulatory bodies which will clear their path to become market
leader in their segment.
GSK Pharma
Company needs to clear off its excess inventory piled up to increase the profit
over the year and decrease the working capital. Also the operating profit needs
to be revamped thereby helping in the liquidity ratios and add further to the
investors confidence. Hopefully the huge money invested in fixed assets this
year will pay off in the future run and hence the profitability of the company will
increase YOY. Comparing with the competitors like Sun pharma (P/E ~35),
Novartis (P/E ~15) and Aurobindo pharma (P/E ~15), GSK's price to earnings
ratio is quite good. Hence investors might anticipate a higher growth in the
future.
Ratio Analysis

Profitability Ratios

Profitability Ratios

Return on Equity

Return on Assets

Liquidity ratios

ROE

ROA

Operating Margin

Net Income Margin

ROC

Liquidity ratios

Current ratio

Quick Ratio

Cash Realization ratio

Efficiency Ratios

Receivables Turnover Ratio

Payables Turnover Ratio

Inventory Turnover Ratio

Assets Turnover Ratio

EPS

P/E Ratio

Dividend Payout ratio

Credit Ratios

Credit ratios

Debt Equity Ratio

Debt to Total Assets ratio