SINCE THE START OF COVID-19, Centre has procured 175.41 crore doses of vaccines, of which 130.1 crore (Covishield) were supplied by one company — Pune-based Serum Institute of India Pvt. Ltd. (SIIPL). SIIPL got ₹25,585.88 crore out of ₹36,397.65 crore the government spent on buying Covid-19 vaccines till July 31, 2023.

For healthcare industry, Covid-19 revenues are history now, but SIIPL, the world's largest vaccine maker by volumes which produces over 1.5 billion vaccine doses every year for sale in 170 countries, continues to enjoy economies of scale. "SIIPL's diversified product profile and new products under development shield it from sharp revision in price of any vaccine. Further, vaccine manufacturing is highly regulated. Need for approvals from WHO and USFDA (for sale in U.S.) along with huge capital and research and development expenditure limit threat from new entrants," says credit rating firm Care Edge. SIIPL has been enjoying profit before interest, lease, depreciation and tax (PBILDT) margins of 54-55%. The all-weather performance explains the 66.24% jump in wealth of promoter Cyrus Soli Poonawalla in Fortune India's Rich List this year.

That is not all. Two dozen promoters of pharmaceutical companies figure in the list. The bulk of increase (₹1.47 lakh crore) in their combined wealth has come from rise in Poonawalla's net worth (₹1.07 lakh crore). But that doesn't mean FY23 was not a great year for Indian pharmaceutical companies in general and the ones owned by those in Fortune India's Rich List in particular. Despite the absence of Covid-related revenues, leading pharmaceutical companies improved their performance due to growth in domestic market, new product launches in markets such as U.S. and specific measures to improve profitability.

For instance, Sun Pharmaceutical Industries Ltd., India's largest pharmaceutical company by market capitalisation, reported consolidated sales of ₹43,278.9 crore. "FY23 was good for us with consolidated sales growing 12.6%, driven by strong performance across markets, all of which reported double-digit growth. We recorded strong global specialty sales, up 29% to $871 million. The contribution of specialty business has more than doubled from 7% of consolidated revenues in FY18 to 16% in FY23," says Dilip Shanghvi, managing director, Sun Pharma. Shanghvi's net worth grew 19.1%.

Zydus Lifesciences Ltd. reported 14% growth in consolidated revenues to ₹17,240 crore on the back of strong growth in U.S. market. Chairman Pankaj Patel's networth grew 46%. Dr. Sharvil Patel, MD, Zydus Lifesciences, says the U.S. formulations business had a great year with revenue momentum improving every quarter on account of new launches and volume expansion. "We received 63 ANDA (abbreviated new drug application) approvals during the year, which is one of the highest in a single financial year for the company. The complex product pipeline developed in-house over the years, coupled with strategic business development and licensing efforts, should deliver sustainable revenue growth. Our agile supply chain will help us capitalise on one-time buying opportunities in the U.S. generics market," says Dr. Patel.

The promoters of Dr. Reddy's Laboratories, G.V. Prasad & Satish Reddy families, also feature in the list of rich pharma entrepreneurs with their wealth increasing by 18.4%. Dr. Reddy's saw growth across businesses. Revenue from North America (generics) and India/emerging markets branded segments crossed $1 billion for the second consecutive year. "This has been an outstanding year. We touched all-time high in sales, profits and generated healthy cash flows. We continue to strengthen core businesses while investing in building businesses of the future," G.V. Prasad, co-chairman and managing director, Dr Reddy's, said after the company declared its FY23 results early this year.

Ahmedabad-based Torrent Pharmaceuticals, whose promoter Sudhir Mehta and Samir Mehta saw an 18.46% increase in net worth. The company says consistent margin improvement through increase in share of branded generics, particularly in India, cost optimisation initiatives, use of operating leverage and improving in-clinic effectiveness, which is one of the highest in the industry, are keeping the company on the growth path. Torrent significantly accelerated product launches in India, Brazil and rest of the world markets (except Germany and U.S.) in FY23.

Lupin Ltd.'s promoter family, which saw a 37% jump in wealth during FY23, reported double-digit growth in India business and improvement in U.S. margins. "We are committed to sustaining this momentum into new fiscal year and driving strong growth across regions, in particular India, apart from U.S., aided by new product launches," says Vinita Gupta, CEO, Lupin.

While most leading Indian pharmaceutical companies have strong U.S. presence to support growth, Mankind Pharma, which got listed early this year, has grown by focusing on the domestic market. In fact, Mankind is the only company whose promoters figure twice in Fortune India's Rich list. In addition to Ramesh Juneja and Rajeev Juneja (combined net worth), Prem Kumar Arora has also found a mention in the list. However, the Juneja family's net worth is 3.57% lower than the previous year. In a year when overall growth of the domestic pharmaceutical industry moderated after two Covid-19 years, Mankind maintained its growth trajectory, indicating deep penetration of the Indian market. "Our domestic business continued to outperform the Indian pharmaceutical market (IPM) in 2023 with 11% year-on-year growth against 7.9% growth of IPM during the year. Within this, our chronic segment grew 14% with market share of 34% in domestic sales as against 33% last year," says Rajeev Juneja, vice chairman and MD, Mankind Pharma. The company also integrated the product portfolio it had acquired from Panacea Biotec's India business during the year, adding to sales. However, higher raw material and employee costs (due to additional headcount from Panacea) and one-off cost of integrating Panacea impacted revenue margins. "EBITDA was ₹1,913 crore with a margin of 21.9%. Our margins were lower by 390 bps due to higher API costs, especially in first half of 2023. We have taken measures to improve margins and are confident that we will be able to deliver our historical margin of 24-26% in the medium term while growing at 1.3x to 1.4x of IPM," says Juneja.

The other companies whose promoters have seen a decline in their net worth in the Fortune India Rich list include promoters of Macleods Pharmaceuticals, Divis Laboratories, USV, Cipla, Biocon, MSN Laboratories, Alembic Pharmaceuticals and IPCA Laboratories.

The Indian pharmaceutical sector seems to be on the rise, though. Credit rating agency ICRA estimates that IPM will grow 8-10% in FY24 because of WPI-linked price hike of 12.1% allowed for products under the National List of Essential Medicines (NLEM), new product introductions and annual price hikes for non-NLEM products. It, however, expects U.S. market to grow by 6-8% in FY24 given the large base and continued mid-high single-digit price erosion for base products.

In a recent analysis ICRA looked at 25 pharmaceutical companies (which account for about 60% of Indian pharmaceutical industry) to understand growth drivers for the coming years. "Overall credit profile of Indian pharmaceutical companies is expected to remain healthy, supported by stable earnings profile, comfortable leverage and coverage metrics, and a strong liquidity position," says ICRA.

With high raw material costs stabilising, more complex generics and speciality product launches in U.S., operating profit margins of the industry are expected to remain steady. And that will have its impact on fortunes of its rich promoters, too.

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