Hopes hinge on better margins for pharma & higher volumes for healthcare in ‘Samvat 2080’

In the lexicon of the Indian bourses ‘Samvat 2080’ is more than the traditional Hindu accounting year beginning today. As always, there is a renewed air of anticipation as the bourses herald the new Samvat with their decades-old practice of Muhurat (auspicious hour) trading. Post the pandemic, while the businesses have rebound with airlines, hotel-chains, cab-hire outfits getting busy, hospitals are also seeing increased footfalls with patients preferring a physical meet with the physicians than over a zoom call and other health needs that took a back seat during the pandemic getting priority. What then is the outlook for the pharmaceutical industry and the healthcare providers.

Many in the pharma world today talk of a year ahead that will see the expansion of the domestic pharmaceutical market aided by factors driving focus back to chronic ailments (like hypertension, diabetes and cancer) in addition to push towards higher insurance cover. Some of the leading Indian pharma companies with better cash reserves and choice of therapeutic areas could also see expansion in global footprint.

The fund manager at InCred Asset Management and a leading pharma and healthcare analyst who has tracked the sector over the past two crucial decades, says, while the domestic price increases would vary from one company to another, it has been overall at around 6 to 7 per cent in the current year. However, the raw material input supplies from China have improved and there is cost reduction in their prices, it again depends on the product and the cost reductions ranging between 10 and 70 per cent – this wide range is because of a huge basket of some products. There are however still some challenges. For instance, in some cases like Penicilin-G there has not been a price fall at all.

From a margin perspective going by the index-level aggregate numbers, pharma companies on an average lost between 300 and 400 basis points of gross profits margins over the past two years and the hope is now that this will start reversing.

For the hospitals and diagnostics industry, many, including Khemka, expect the coming year to see a game of volume growth unfold. The sector has seen a lot of churn and disruptions during the pandemic with several online platforms competing on prices and for patient eye-balls but then many ended up burning cash. But then, in times when interest rates are rising, the ability to get access for cash burn may not be easily forthcoming and with investor expectations rising for return on capital invested, this could trigger a move towards higher volumes in footfalls to hospitals and diagnostic chains. All eyes now therefore on how the year will unfold.