India Ratings and Research (Ind-Ra) in its latest report has said that pharmaceutical industry in India is likely to register higher margins in Q2 (July- September) of 2018-19 on a year-on-year basis, on the back of rupee’s depreciation against the US dollar. It also said that about 9 percent year-on-year depreciation in the rupee in Q2FY19 will help pharmaceutical companies in passing on input cost hikes and manage the pricing pressure.
According to the report, although the pricing pressure in regulated markets, input cost inflation and increased competition continue are the key concerns for the remaining FY19, the rupee will continue to weaken against the dollar, and thus support topline growth of pharmaceutical companies and safeguard them from the margin pressure. It expects that the positive currency impact to continue and the rupee to average Rs 69.79 per US dollar in FY19, a fall of 8.3 percent. Besides, it said that the domestic market offers a relatively high scope to large-sized players to pass on increased input costs than a highly competitive regulated market such as the US.
For most large-sized players, Ind-Ra has stated that the benefits of a weak rupee and reduced remediation costs, along with traditional cost cutting measures, are likely to help in compensating margin contraction to a large extent in FY19. It pointed out that the domestic pharmaceutical market has so far briskly grown in FY19. However, it said that the majority of pharmaceutical companies focused on the domestic market will register muted growth in Q2FY19 on a year-on-year basis.