Market Size INR 4.

08 lakh cr
Healthcare and Pharmaceuticals Growth Rate 9.8%

All figures
based on
2019-20 data
Revenue INR 33,473.5 Cr INR 23,098.5 Cr INR 17,460 Cr INR 17,131.9 Cr INR 15,142.8 Cr

Net Profit INR 3,764.9 Cr INR 2,831 Cr INR 1949.8 Cr INR 1,546.5 Cr INR 908.8 Cr

Founded 1983 1986 1984 1935 1968

Market Share 8.2% 2.4% 2.5% 4.6% 3.6%

Revenue of Top 10(INR Billion) Market Share (%) Export Trend(%)

25
Revenue(INR Billion) MARKET SHARE AS PERCENTAGE
350 9.00%

300 8.00% 20 19.1

7.00%
16.9 16.8 17.3
250
6.00%
200 5.00% 15
150 4.00%
3.00% 10.8
100
2.00% 10
50 1.00%
0 0.00%
5

2016 2017 2018 2019 2020

API vs Formulation Revenue News and Facts Other Major Players

Revenue from API to Formulation
• RBI Infuses INR 50,000
Alembic Pharma
Dr.Reddy's
15%
15%
85%
85%
Crores liquidity in to the
Aurobindo 13% 87% Pharmaceutical Sector to
Glenmark 10% 90%
Lupin 9% 91% fight Covid-19.
Sun Pharma
Cipla 4%
6% 94%
96%
• Domestic pharma industry
Cadila 3% 97% to grow at 8-11% CAGR in
0% 20% 40% 60% 80% 100%
FY 2020-23: ICRA
API Formulation

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Pharmaceutical Industry

• The Indian Pharmaceutical Industry consist MARKET SHARE AS PERCENTAGE

of many domestic generic formulations 9.00%

companies and over 1,00,000 drugs across 8.00%

various therapeutic categories, are 7.00%

produced annually. 6.00%

• The market is highly fragmented in terms 5.00%

of both, number of manufacturers and 4.00%

products. There are 300-400 organised

3.00%
players and about 15,000 unorganised
players. 2.00%

1.00%
• However, organized players dominate the
market, in terms of sales. In 2019-20, the 0.00%
Sun Pharma Cipla Cadila Lupin Torrent Dr.Reddy's Aurobindo Glenmark Alembic Wockhardt
Pharma Pharma
top 10 formulations companies accounted
for 43% of total sales.
• From the above graph it is evident that Sun
• Indian pharmaceutical companies mostly
operated from Maharashtra, Gujarat and pharmaceutical has a major share of 8.2%.
Andhra Pradesh. However, after the Considering the fact that even top most
government imposed an MRP-based player account for less than 10% market
excise duty system in 2005, many players share clearly shows the level of
have shifted their manufacturing bases to segmentation in the market .
excise-free zones such as Baddi (Himachal
Pradesh), Haridwar (Uttaranchal) and
Sikkim.But Hyderabad still is the home for
major Pharmaceutical companies.

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Pharma Industry Revenue sources

Segments of Revenue:
Revenue from API to Formulation
• Pharmaceutical Industry revenue comes
from three main Segments: Alembic Pharma 15% 85%
1. Domestic formulation
Dr.Reddy's 15% 85%
2. Formulation Export
3. Bulk-Drug Export Aurobindo 13% 87%

• Most of the revenue generatedin this Glenmark 10% 90%

sector is from Generic Drugs when
compared to patent Drug.
Lupin 9% 91%
• The segment revenue could further be
classified based on the type of drug Sun Pharma 6% 94%
produced and sold, such as:
Cipla 4% 96%
1. API(Active pharmaceutical Ingredient)
2. Formulation Drugs(Over the counter drug) Cadila 3% 97%
• In India majority of the pharmaceutical
0% 20% 40% 60% 80% 100%
companies earn their revenue from
formulation when compared to production
and export of API.
API Formulation

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Domestic vs International Market

• The Revenue of top 10 companies reveal 25

that Sun pharmaceutical is the leader in Export Trend
terms of revenue followed by Cipla, Cadila,
Lupin, Dr.Reddy etc.
• But the revenue sources could be from 20 19.1
different segments such as from domestic
market or International market. 16.9 17.3
16.8

Domestic market Vs International market 15

10.8
10

0
2016 2017 2018 2019 2020
International market Domestic market

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Domestic Vs International Market

• Companies generate revenue both at domestic Revenue(INR Billion)

market and also at International market & 350
exports have been the cornerstone of growth
of the Indian pharmaceutical industry, with the 300
global market offering strong opportunities. 250
• It is necessary for companies to be not 200
dependent on one market and to diversify its 150
market to avoid unforseen conditions.
100
• The following two graphs shows Indsutry 50
revenue (In Billion INR) and the different
percentage of those revenue comming from 0
International and domestic markets.
• It can be observed that Aurobindo pharma
revenue is mostly from export of formution.

Aurobindo Pharma 10% 90%

Dr Reddy's 17% 83%
Wockhardt 27% 73%
Sun Pharma 31% 69%
Glenmark 31% 69%
Lupin 34% 66%
Alembic Pharma 35% 65%
Cipla 39% 61%
Cadila Healthcare 45% 55%
Torrent Pharma 48% 52%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Domestic International

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Value Chain

• The chemical Ingredient form the basis of

all pharmaceutical products,as it can also
FORMULATION
be seen in the value chain diagram they
make up API or bulk drugs which are
furtner synthesized to form over the
counter drugs (Formulations).
• In Pharma Industry production of API itself
is major segment of business and it is used
Active Pharmaceutical both in the domestic market and also
Ingrediants(API) / Bulk Drug exported to International market.
• India also Imports API from other nations
especially China to meet its domestic
need.
• The Indian API market is expected to grow
rapidly with a CAGR of 8.57% during the
2020-2026 phase.
CHEMICAL INTERMEDIARIES
• Major API producers in India are Cipla,
Inc., Sun Pharmaceutical Industries Ltd,
Divis Laboratories, Aarti Drugs etc.

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Active Pharmaceutical Ingredients

• Bulk drugs or active pharmaceutical Revenue from API to Formulation

ingredients (APIs) are raw materials used
to manufacture formulations, which are
ready to use forms of bulk drugs (including Alembic Pharma 15% 85%

capsules, tablets, syrups and injections) Dr.Reddy's 15% 85%

administered to patients. Bulk drugs are Aurobindo 13% 87%

manufactured by combining more than Glenmark 10% 90%

two chemicals or intermediaries. They Lupin 9% 91%

directly influence the diagnosis, cure, Sun Pharma 6% 94%
mitigation, treatment or prevention of a
disease. Cipla 4% 96%

Cadila 3% 97%

• The API are also produced in India and, the 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Indian API industry’s strengths are cost-

competitiveness and advanced process API Formulation

chemistry skills, domestic players are well-

placed to tap into this opportunity and
increase their presence in the
International market
• But the Indian Industry is still lagging bulk
production of China Pharmaceutical
Industry which gives them a unique cost
advantage over Indian products. Even
though Indian players have skill to produce
they can’t match the cost of Chinese
competition and so some API’s
predominantly imported from China.
• During the Galwan Crisis when the governemnt
imposed Ban on Chinese products, API shortage
occured which wasn’t readily matched by Indian
producers.
• This clearly indicates that there is a huge
demand for API in India and if the companies
are to produce them and government impose
additional duty on Chinese product it could
provide the Indian players some competitive
advantage.

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Covid-19 and its Impact

• Most recently the RBI has announced an infusion of INR 50,000 crore in the healthcare
sector to fight covid-19, after which all the major healthcare sector stock rose significantly.
• Two widely produced vaccines in India CoviShield and Covaxin are product of Serum
Institute of India and Bharat Biotech respectively.
• Recently Bank of Barodha has sanctioned 500 crore to serum institute of India under the
RBI liquidty infusion.
• Even though these are private companies at the moment they may go public very soon as
indicated by their strong growth.
• As of FY20, Dr Reddy's, Glenmark, Sun Pharma, Aurobindo pharma and Wockhardt have
high exposure to the export markets as compared to other players.
• It could also be observed that all Healthcare related stocks have increased significantly rose
and not just the Pharmaceutical companies.
• Other important Healthcare Stocks are Fortis Hospital, Apollo hospital, Narayana Hruda,
Healthcare Global, Dolphin medicine etc.
• The shortage of healthcare facility in India is significantly visible in this pandemic and not
just for Covid cases but even for general necessity it is not able to match the needs of
people and it could be associated with less investment in Healthcare facility from the
government side.

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Future of Pharmaceutical Industry

Research and Development FY 2020 • The pharma industry domestically is

16% growing with a CAGR of 9.8%. In addition
to that export is also significantly growing.
14% • In this decade (2020-2030), it is envisaged
14%
that the Indian pharma industry will have
to grow at a CAGR of 12% to reach $130
12%
billion by 2030 from $41.7 billion in 2020,
11%
said the EY FICCI report titled 'Indian
10% 10.30% Pharmaceutical Industry 2021: future is
now.’
8.80%
8% • The growth of pharma especially in this
VUCA world it is necessary to invest in
6.50%
Research and Development the graph
6%
6.10%5.90% Indicates top 10 companies who invest in
5.50% R&D.
4.90%
4%
4.10% • It can be observed that not only the top 5
pharma companies but other companies
2% also invest more in their R&D as a part of
revenue. It can be expected in the future
0%
that these companies may also grow
significantly.

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NIFTY PHARMA & NIFTY 50

Comparison of Nifty 50 and Nifty Pharma

16000

14000

12000

10000

8000

6000

4000

2000

0
2021-Jan 2021-Feb 2021-March 2021-April 2021-May Lowest

Nifty Pharma Nifty 50

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Disclosure & References

References:
• https://www.businesstoday.in/sectors/pharma/domestic-pharmaceutical-industry-to-grow-
at-8-11-percent-cagr-in-fy-2020-23-icra/story/412250.html
• The market Size of 2.9 lakh crore(20.03 billion USD) represent only the domestic market
and not the entire market which also includes export.
https://www.crisilresearch.com/#/industry/pharma/industryUnderstandingDetails
• https://www.crisilresearch.com/#/industry/pharma/peerComparison
• https://smallcase.zerodha.com/smallcase/SCTR_0009?utm_source=kite&utm_campaign=st
ockrelatedSmallcases&utm_medium=stockhover

References:
• The initial market size of 2.9 lakh crore rupees only represent the Domestic pharma
market.
• The CAGR value also corresponds only to domestic market and not to Export.

Editors: Sanjay T G, IIM Sirmaur | Anmol Raghuvanshi, IIM Kashipur

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