Indian pharmaceutical companies, despite their smaller size, exhibit strong business profiles compared to some of their global peers on account of low leverage ratio and geographic diversity, according to Moody’s Investors Service.”When compared with their global counterparts, Indian pharmaceutical companies have stronger financial profiles with low leverage and high coverage metrics,” Moody’s Vice President and Senior Analyst Kaustubh Chaubal said in a statement.
However, increasing competition, challenges in preserving their historical superior profitability and consolidation among large global generic companies will drive M&A activity for the Indian pharmaceutical sector, Moody’s Associate Analyst Diana Beketova said. Moody’s findings are part of a report titled “Indian Pharmaceutical Companies — A Deep Dive”, co-authored by Chaubal and Beketova.
India’s generics market is the second largest in the world, behind only the US in terms of volume, although it forms only 1 per cent of the global pharmaceutical market by value.
Over the last several years, the domestic pharmaceutical companies have grown their global presence and now operate in diverse regulated and unregulated markets.
Indian companies exhibit good geographic diversity, with a focus on developed markets and in particular the extremely lucrative but highly competitive US market, the report said.
“However, they also face regulatory challenges, with a rising number of adverse findings by the US FDA hurting their US sales and causing supply disruptions,” it added.
Moody’s further noted that the pharmaceutical industry has been undergoing consolidation globally, driven by a need for product and pipeline diversity, scale and pricing power.
“The Indian pharmaceutical sector is not immune to this trend, and Moody’s expects companies will explore inorganic growth primarily overseas, as the large promoter ownership stakes may dissuade domestic M&A activities,” it said.