The Indian pharmaceutical industry supplies over 50% of the global demand for various vaccines, 40% of generic demand in the US and 25% of all medicines in the UK. Being the largest provider of generic drugs globally, India provides an important position in the global pharmaceutical sector. Currently, over 80% of the antiretroviral drugs used globally to combat AIDS is supplied by Indian pharmaceutical companies. At present the Indian pharmaceutical industry is valued at around US$33 billion, which is expected to reach US$55 billion in the next few years. India’s pharmaceutical exports currently stand at around US$17 billion and is expected to reach US$20 billion by 2020. Medicine spending in the country is expected to increase at over 10% CAGR over the next few years, driven by increasing consumer spending and rapid urbanisation. The Indian government has taken several initiatives listed below to promote the pharmaceutical sector. The National Health Protection Scheme is the largest government funded healthcare programme in the world and is expected to benefit 100 million poor families in the country by providing a cover of up to Rs 5 lakh per family per year for secondary and tertiary care hospitalisation. The Drug Controller General of India has recently announced plans to start a single window facility for approvals aimed at giving a push to the Make in India initiative. Foreign direct investment has also been allowed up to 100% under the automatic route to the pharmaceutical industry for manufacturing of medical devices, which is expected to benefit the sector tremendously. Alembic Pharmaceutical Ltd is a 100-year-old company headquartered in Gujarat and one of the few companies in the country whose manufacturing facilities for the international markets are all FDA compliant. The company reported healthy earnings performance for Q1 FY 2019, with profit jumping 36% on the back of growth across all territories. It reported a consolidated total income of Rs 862.53 crore and net profit of Rs 90.47 crore for the quarter ending June 2018, as against Rs 648.19 crore and Rs 66.68 crore, respectively, for the same period last fiscal. The Alembic Pharmaceutical stock quoting at Rs 600 is a good fundamental short term buy for two quarters’ time horizon, with a 12%-15% price appreciation.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.