Pharmaceutical sector set to gain from rupee fall despite API dependence

Exporters like Sun Pharma, Dr Reddy's may see 7-8% revenue lift, yet margins pressured by high raw material import costs

The pharmaceutical sector is set to gain from the rupee’s fall as the country exports drugs and pharmaceutical products worth over $30 billion annually, and is one of the top generic drug suppliers to the world.  However, at the same time, India also imports nearly 60-70 per cent of its bulk drug or active pharmaceutical ingredient (API) requirements to make the formulations. Data from Capitaline shows that companies like Sun Pharmaceutical Industries ($1,970 million), Dr Reddy’s Laboratories ($1,865 million) and Zydus Lifesciences ($1,238 million) drew a significant amount of their revenues from exports.  According to an industry insider, the topline of the major exporters is likely to get a 7-8 per cent boost thanks to the rupee sliding by nearly 5 per cent year-to-date vis-a-vis the dollar. However, the exports gain will be partly offset by the rising input costs.  However, the exports gain will be partly offset by the rising input costs.  India imports almost $10 billion worth of APIs and intermediates annually, and this would hit the bottom line.

 

“For exports to the US or other regulated markets, most companies have captive API production. Even then, some chemical intermediate or excipient is always imported. However, Indian drug firms import the low-end and common APIs, and here there will be an impact,” said the head of a pharma association.