Macro Economy

Pharma sector to continue growth in double digits: Moody’s

PTI Mumbai | Updated on August 25, 2014 Published on August 25, 2014

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The Indian pharmaceutical market will continue to grow in the double digits, representing a better growth opportunity than many other geographic markets, Moody’s Investors Service says.

However, drug companies in the country could face higher debt levels as the pharmaceutical sector grows, resulting in mergers and acquisitions, it said.

“As consolidation in the industry continues globally, particularly among generic drug companies, Indian firms will increasingly look to become involved in global mergers and acquisitions. We have already seen some Indian companies increasing their pace of acquisitions,” Moody’s senior vice president Michael Levesque said in a report here.

“Even if India’s GDP growth slows or is uneven, the Indian pharmaceutical market would still represent a better growth opportunity than many other geographic markets, because of improving socioeconomic conditions and access to health care, against the backdrop of a rising prevalence of diseases such as diabetes and cardiovascular problems,” Moody’s vice president and senior analyst Kailash Chhaya said.

While Indian firms do not face the same growth pressures as other players across the industry, they could become involved in global merger and acquisition activities; thereby pressuring their leverage from currently low levels.

However, for most Indian companies, debt headroom is large as balance sheets are generally lowly leveraged.

Moody’s report acknowledges that as a general rule, key Indian players have maintained low financial leverage and demonstrated their aversion to risk, due to their unique structures — when compared with global pharmaceutical firms — of high ownership levels by founding family members, known as promoters.

Published on August 25, 2014
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