Pharma firms tide over GST impact
AHMEDABAD: Normalcy seems to have been restored in the domestic pharmaceutical market with improvement in drug inventory of stockists. This is evident from an uptick in domestic market sales of top pharmaceutical companies in the state such as Cadila Healthcare Limited, Torrent Pharmaceuticals Limited and Alembic Pharmaceuticals Limited. The trend is industry-wide with non-listed drug firms registering growth in sales during the second quarter of the current fiscal.
Pharma firms had seen their revenues negatively impacted in the first quarter due to destocking ahead of the GST implementation.
The domestic formulations business of Torrent Pharmaceuticals Limited recorded revenues of Rs 607 crore for the quarter ended September 2017, a rise of 30% over Rs 464 crore revenues registered in Q1 of the fiscal 2017-18. Similarly, Vadodara-based Alembic Phamaceuticals Limited's sales from domestic market surged by 63.3% to Rs 385 crore in Q2 from Rs 236 crore in Q1. Cadila Healthcare, too, witnessed its domestic sales increase to Rs 895 crore in Q2 this fiscal.
Pharma industry players say that during April to June period, several pharma companies had seen their sales from domestic market declining as stockists reduced drug inventories ahead of the GST implementation to avoid the burden of dual taxation on unsold stocks. The stocks continued to deplete in July as the number of inventory days declined to 17 at the time of the GST implementation. The inventory days, according to All India Organization of Chemists and Druggists (AIOCD), in pre-GST period used to be 40 days.
With the industry aligning itself with the new tax regime, inventory days at the stockists level increased to 30 days in September, pushing up the sales of pharmaceutical firms. "Almost all pharmaceutical companies — listed and non-listed —have seen their sales going up with stockists again building inventories," said Viranchi Shah, the chairman of the Gujarat State Board-Indian Drug Manufacturers Association (IDMA).
"The demand for drugs generally remains constant. There was a kind of vacuum created during the months of June and July as dealers reduced their stocks on account of the GST," Shah added. "The Indian pharmaceutical market's growth had eased to around 3%, which has again picked up to 9% for the month of October."
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