As far as revenues are concerned, the September 2008 quarter should be a good one for Indian pharmaceutical firms. Both generics players, as also those in the business of contract manufacturing and research (CRAMS), should turn in a strong top line growth — 22-24 per cent — driven by growth in both overseas and home markets. Much like in the June quarter, better revenues should help them post better operating margins, which, say analysts, should expand by about 80-100 basis points.
However, some companies could suffer mark-to-market translational losses because of the depreciation of the rupee during the quarter. The rupee has depreciated by about 8 per cent against the dollar between July and September. Multinational companies are likely to see a muted growth in revenues because of divestments; GlaxoSmithKline, for instance has sold of its fine chemicals business and so revenues should grow by about 4 per cent while margins may remain flat owing to cost pressures.
The Rs 6,976 crore Ranbaxy should manage to grow sales by 20 per cent and also post better operating margins. However, the bottom line could be hurt due to exchange losses. Cipla’s top line may see less of an increase –just about 11-12 per cent— partly due to a high base effect.
In the June quarter, Cipla had posted a top line growth of nearly 34 per cent driven by 50 per cent growth in exports. The Rs 5,001 crore Dr Reddy's top line growth should come from the branded formulations business. In the June 2008 quarter, exports of formulations were up 19 per cent with the company doing brisk business in the Russian and CIS markets.
The recently acquired BASF's US facility will help boost sales since the company can participate in US government tenders. Operating margins, for Dr Reddy’s have been weak in the past and could, therefore, see an expansion. CRAMS player, like the Rs 803 crore Dishman should turn in better top line growth than their generics peers.
However, their operating margins could contract because of higher input costs. For the Rs 1,033-crore Divis Labs, which operates both in the generics as also the custom chemical synthesis segments, sales should be up by about 26-28 per cent while operating margins should grow by about 30-50 basis points. Industry watchers estimate the generics opportunity at about $1.5 billion, assuming a price discount of 97 per cent, in the next three years.
