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Pharma poised for an excellent FY22 on the back of Covid-led demand

Improving exports and a weak rupee could support profit boost

pharmacy, drugs, medicine, pharma companies, pharmaceuticals
Despite mismanagement of the domestic vaccine programme and a devastating second wave, there’s been a focus on India’s generics capacity. But that has to be buttressed by increased R&D
Devangshu Datta New Delhi
3 min read Last Updated : Apr 24 2021 | 12:08 AM IST
The pharma industry may be poised for an excellent fiscal. The opening up of the Covid-19 vaccination programme to 18+ will create a huge pool of demand and that will, in itself, generate substantial domestic revenues. This could be a repeat revenue stream since Covid vaccines will probably be an annual affair until the pandemic is beaten.

Apart from that, the industry had an excellent 2020-21, with exports surging 18.7 per cent to $24.44 billion spurred by strong demand for generic drugs. This was the best growth rate in many years, despite the global pharma market shrinking and despite the first quarter (April-June 2020) being hit by lockdowns. In the previous 2019-20 fiscal, exports increased by 7.57 per cent to $20.58 billion.

North America remains the largest market, accounting over 34 per cent share. Exports to Africa increased 13.4 per cent. South Africa emerged as a large market with exports up 28 per cent. Growth in exports to the EU, the third-largest market behind Africa, was about 11 per cent. There is also growing demand in non-traditional markets like Latin America (growth of 14.5 per cent), CIS countries (23.5 per cent) and the Middle East (17.5 per cent). The growth rates for markets such as Australia and Ukraine, etc., were also encouraging.

The industry had to cope with difficult times in 2020-21 when it turned in this performance. First, it suffered shortages of active pharmaceutical ingredients (API) due to the lockdown in China – Wuhan is a global hub for APIs. This was followed by operational issues due to the Indian lockdown. As a result, it had to retool supply chains and processes, and accelerate digitalisation. This will stand the industry in good stead in future and it’s one reason why the growth trend is expected to continue.


Apart from being acceptable in terms of quality and cost-competitive, Indian pharma stands to gain from probable currency weakness. The rupee strengthened through Q2 and Q3 of 2020-21 after dropping in Q1. It started weakening again in March 2021 and that trend of a lower rupee could continue through much of 2021-22. This would boost profits.

Another factor is the optics of Covid-19. Despite mismanagement of the domestic vaccine programme and a devastating second wave, there’s been a focus on India’s generics capacity. But that has to be buttressed by increased R&D. This requires policy support as well as pro-active moves by the industry which has to look to forge more global partnerships.

The Nifty Pharma Index has underperformed the benchmark Nifty by returning 42 per cent versus the Nifty’s 56 per cent in the past 12 months. However, it has outperformed in the past month, when it has returned 11.8 per cent (Nifty minus 3 per cent). The Pharma index is running at a PE of 35, which is a small premium to the Nifty (PE of 32) and below its own long-term valuations of 40-plus.

Topics :CoronavirusPharma industryRupee vs dollar

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