In July 2010, this highly organised sector reached a whopping US$ 10.04 billion in size. A report by McKinsey & Company states that this figure can touch US$ 55 billion in 2020, with the potential to reach US$ 70 billion if growth is aggressive.
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The Strengths of the Sector
Increasing tech savvy: The pharma sector has been using latest means of technology in manufacturing and packaging. We now have machinery and equipment that can produce all sizes of tablets, capsules, cosmetics, ointments and liquid. From simple headache tablets to complex compounds, every type of medication is now being made in the country. The Indian Pharmaceutical Machinery Manufacturers have marched faster in low-cost technological offerings to value-added advancements in engineering with integration of new-technologies as well.
Healthy HR practices: PwC survey says Indian Pharma sector boasts the second-highest average salary per employee compared with other industries surveyed. The study says Indian Drugmakers spend more on training per employee than other industries. Yet the sector is facing fierce challenge in retaining employees. The report says, one third of Indian Pharma employees resign within a year of joining a job. This indicates that the sector is lacking in practising good employee retention policies.
Lifestyle changes: Progress is a double-edged sword, indeed. Highly stressed city-zens are falling increasingly prone to lifestyle diseases such as heart problems, diabetes, depression and even cancer. These conditions demand upgraded medical facilities and higher drug consumption, which high income group families are now able to afford.
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| HR Facts |
| • Pharma spends the highest on employees for Learning & Development (Rs 10,000) and delivers the highest number of L&D hours per employee. It also pays the high average remuneration and generates high return on its investment on its people. • In Pharma, the size of the HR team relative to the total work force is smaller than in other sectors. • Average salary / employee is the highest in the FMCG sector, followed by Pharma. • Eng/Mfg sector generates the most revenues and profits per employee, followed by FMCG and Pharma sector. |
Research and Development
Indian Pharma has a vast pool of talented scientists competent in producing high degree of chemical synthesis skills, while our engineers have developed competencies in producing molecules cost effectively. These skills help Indian companies tap generic markets abroad. The total amount that is currently being spent on innovative discovery programs and development in the bio-pharma sector in India is about US$2 billion. Reports predict that this amount can grow to US$25 billion by 2025 if concerted efforts are made by various stakeholders like the government, academia and industry on developing R&D and innovation.
Healthcare Expenditure
The Indian healthcare system is largely run by the government with the private sector playing a minor, but important role. The public expenditure on health has been growing at a decent rate while private expenditure has been recording marginal growth.
| CRISIL Comments |
| CRISIL’s analysis of more than 280 SMEs in the pharmaceutical industry reveals superior business and financial risk profiles of enterprises from Andhra Pradesh (AP) over their counterparts from other regions. The analysis reveals similar findings for enterprises registered as companies and non-corporates. Rated SMEs from AP displayed stronger management and business strengths over their peers in other regions. Similarly, the AP enterprises had higher interest coverage and lower gearing than their peers in other key regions — Gujarat, Himachal Pradesh (HP), Maharashtra, and the NCR. They also had higher profit margins than players in other regions, with the exception of HP. HP has attracted several enterprises owing to its industry-friendly policies during the past few years, and this is reflecting it the profit margins of the players from the state. Thus, enterprises from HP during 2009-10 had, on an average, PAT margin of 13.47 per cent vis-à-vis 9.77 per cent for players from AP and national average of 7.44 per cent. Companies which constituted 53 per cent of the sample showed a higher operating margin, interest coverage, and lower gearing compared to partnerships and proprietorship firms in 2009-10. The average size of the SME registered as a company in the sample was `187 million, as against `165 million for a partnership and `154 million for a proprietorship firm. The pharmaceutical industry is relatively immune to economic cycles unlike most other industries, where macro-economic fundamentals play an important role in determining the overall demand levels. Thus, the turnover of SMEs grew by a CAGR of 35 per cent during 2007-08 and 2009-10. The average number of employees also increased to 152 from 100 during the same period. However, these enterprises face financial challenge of sizeable working capital requirements. The average inventory holding levels of the enterprises in the sample was 107 days as on March 31, 2010. |
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