Bulk drug makers eye 20% growth this year, bet on niche products

Major API makers have seen good growth in exports to regulated markets, declining imports from China has helped smaller players get better realisations

While price control might have affected the revenues of formulation makers in the country, bulk drug makers, however, have a reason to cheer, as the industry expects 15-20 per cent growth during the fiscal.

Most major active pharmaceutical ingredient (API) manufacturers in India have seen good growth in exports to the regulated markets, in turn boosting their margins. Add to this, imports from China are on the decline, point out industry insiders, thus enabling the small and medium manufacturers to have better realisations in the domestic market as well.

The industry size is expected to be around Rs 12,000-15,000 crore. According to Jayant Tagore, president of the Bulk Drug Manufacturers Association (BDMA) said that overall the bulk drug industry has done well this fiscal, especially on the back of the good growth in the exports markets.

"As such an average growth of 15-20 per cent is expected in the bulk drug industry this year. Indian manufacturers are already present in most regulated markets, however, many have managed to either enter new markets, or have focussed on high-end and niche APIs to drive growth," he said. His own firm Synthokem Labs, which makes APIs and intermediates, is expecting to clock a 25 per cent growth this year.

As Ranjit Kapadia, analyst with Centrum Broking pointed out, "Domestic companies have managed to establish their expertise in niche areas like cardiology, anti-infective, anti-baterial, CNS in the export market, and we expect a 50 to 100 basis points improvement in margins of major bulk drug players in India this fiscal."

One of the leading bulk drug players in the country, Dishman Pharmceuticals and Chemicals Ltd, which has started production at its high-potency oncology unit at Bavla last year, expects to achieve a topline of $25-30 million from this unit alone in the next two to three years.

A senior official in Dishman explained, "Approvals in regulated markets take time, however, once they are in, the prospects are extremely good. Nearly 90-95 per cent of our export turnover comes from regulated markets."

For that matter, Dishman is focussing mainly on exports rather than the domestic market which is extremely price sensitive.

As Tagore says the domestic market is extremely price sensitive, but, companies have had a chance to improve their realisations from the overseas markets.

Industry insiders also point out that there is an emerging trend of Chinese imports declining gradually. Nearly, 50 per cent or more of India's bulk drug requirements are imported from China, mainly fermentation products, vitamins etc.

Tagore claims that off late China has increased focus on environmental regulations, and reduced subsidising its domestic industry, thus making Chinese bulk drugs not so price competitive now. This gives an advantage to several small and medium manufacturers.