Pharma margins to get rupee boost in Q2, highlights report

This would also safeguard them from margin pressure, said the report

Riding on depreciation of the rupee vis-a-vis the US dollar, analysts expect the pharmaceuticals sector to report higher margins in the second quarter of the financial year. 

A recent report by India Ratings and Research highlighted that while pricing pressure in regulated markets, input cost inflation and increased competition are the key concerns for the remaining FY19, the rupee will continue to weaken against the dollar, and thus support  topline growth. This would also safeguard them from margin pressure, it noted.

The report also noted that majority of drug firms, which focused on the domestic market, would register muted growth in Q2FY19 y-o-y. "The growth in Q2FY18 was because of channel restocking after the implementation of the Goods and Services Tax. Large pharma firms are likely to report topline growth in low double digits for Q2FY19, and Ebitda margin improvement in the range of 100-150bps on a y-o-y basis," the report noted. 

"Nearly half of the revenue growth in FY19 is likely to be driven by a weaker rupee. Companies like Sun Pharma, Cadila Healthcare, Lupin, Aurobindo are likely to see improvements in Ebitda margins thanks to the rupee depreciation," said Amey Chalke, analyst, HDFC Securities. He added almost 80 per cent of the exports by the major pharma firms are in dollar denominations.