The Hindu Business Line : `Bumper quarter' likely for pharma cos

After the heart-burn of a difficult quarter in the three months leading up to the implementation of value added tax (VAT) from April 1, sales have now started picking up, observes a promoter of an Indian drug major.

Some analysts are, however, more optimistic than that. They expect sales to grow by about 20 per cent in the bulk drug segment, or the ingredients that go into a finished medicine.

As for the formulations or finished medicine forms, an analyst expected company revenues to grow by about 25 per cent over the last year.

In the three-months leading to the VAT regime, the pharma trade was not picking up stocks from companies.

Traders feared that they would have to bear the difference between the rate at which they bought the medicine and the VAT rate of four per cent.

These fears have been sorted out and though there are problems on the ground, the flow of goods has resumed, the analyst said.

Traders are now adding to the shrunken pipeline and as a result domestic pharma companies are going to see better revenues, the analyst said.

Besides VAT-related uncertainties, the three-months ended March had also been difficult due to the Centre's directive on levying excise duty based on the Maximum Retail Price (MRP).

And the pharma industry's cup of woes began to overflow, when traders stopped stocking psychotropic drugs such as medicines for epilepsy, depression etc., for fear of raids by the Narcotics Control Bureau. While the psychotropic drugs issue has been resolved, the industry has resigned itself to the MRP-based excise.

Dr P.A. Mody, Unichem's Chairman and Managing Director, agrees with the analysts' observation.

However, is not as optimistic as they are. He expects companies to post growth of over 10 per cent. "Companies in segments such as cardio-vascular of diabetes will not be affected by seasonal variations," he said. "Those in the anti-infective segment will see more sales due to the monsoon season," he added.

Similar sentiments were echoed by an official with Sun Pharma, who felt that sales would recover some lost ground in the last quarter, with the uncertainties of VAT being slowly put to rest.

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