Finance: In the recent times we have witnessed a huge down fall in the pharmaceutical sector’s share values, as we are all aware that this can be attributed to adverse results with respect to the USFDA approvals and observations there on. But if we look at the bigger picture here the Indian Pharma sector is hugely dependent on the sales outside India. Which is a positive attribute for getting in Dollars into the country however any global disturbances will hugely impact the company’s revenue and land up their shareholders into misery.
In my opinion the USFDA situation can also be attributed to the changes occurred globally i.e change in the norms and guidelines which Indian companies could not keep up with due to number of internal and external reasons. If we actually want to know the dependency of the pharma sector here are some numbers for you, from the total revenue generated by DR.Reddy’s 60% comes from outside India and if we observe in case of Aurobindo and Sun Pharma more than 50% of their products are exported.
The declining Dollar rates and observations with respect to USFDA audits made the share prices drop to the levels of their 52 week low with a positive deviation of 10%.We can also observe the severity of this by looking at DIVI Labs LTD which fell form the levels 1150 in December to 630 in the month of April which is only caused by a very adverse report given by the audit team in respect of USFDA.
In the opinion of many institutional investors and Mutual fund agencies this is a very temporary phenomena, which will reverse in the span of a month or two. Hence if people want to invest in pharma for long term or for mid-term this is the right time to enter but an investor should keep in mind the audit results and look into whether the observations made can be rectified if yes how fast can they do so and get the approvals to bring production back on track.