Friday May 25, 2018

Indian drug makers to go for more overseas buys

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photo credit: www.indiatrendingnow.com
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By NewsGram Staff Writer

Chennai: Indian pharmaceutical majors are expected to be on a search for greater overseas purchase as domestic drug makers have entered the consolidation phase in the global pharma industry, a research report from Jefferies stated.

photo credit: www.businesstoday.in
photo credit: www.businesstoday.in

In its research report on the Indian healthcare sector, Jefferies said the global pharma consolidation has continued unabated this year.

In 2015, there has been mergers and acquisitions (M&A) worth $110 billion which is on track to exceed last year’s record M & A of $140 billion, Jefferies said.

“Over the past year Indian companies have also joined the consolidation phase with Cipla and Lupin announcing large US generic acquisitions,” the report said.

According to the report, Indian players have done M & A worth $2 billion in 2015.

“With global players like Teva, Mylan increasing their size and relevance, Indian players also need to inorganically grow their portfolios. We expect players like Lupin, Dr Reddy, Torrent to be on the lookout for more acquisitions. Valuations though would be a major concern as price of assets have seen a sharp rise in past couple of years,” the Jefferies report stated.

According to the report with the pace of US Food and Drug Administration (USFDA) approvals remaining muted and the global consolidation progressing unabated, M and A by Indian drug companies has increased and the trend is expected to continue.

Though the USFDA approvals have picked up pace it is well below the requirements.

The abbreviated new drug application (ANDA) approvals by USFDA has remained strong for the past five months with 49 ANDAs approved every month against the historical average of 37, the report said.

According to Jefferies, the preference is for Indian companies that are not dependent on US approvals or inorganic drivers for growth.

“Sun Pharma remains our preferred pick among the large caps as we expect earnings to improve going forward led by improvement in Halol supplies and lower Ranbaxy integration expenses. We remain cautious on Lupin as we believe growth will be muted and risks of acquisition at premium valuations are high,” the report said.

While the depreciation of Indian currency is positive for the domestic pharma sector, the benefits have been offset by the appreciation of Indian rupee against European currencies, the research report added.

(With inputs from IANS)

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Jefferies: Jio’s Sharp Discount Postpaid Offer May Hit ARPU of Other Players

The report further said postpaid churn is lower and it is believed that shift to Jio will be gradual

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Jio’s sharp discount postpaid offer may hit ARPU of other players.
Jio’s Sharp Discount Postpaid Offer May Hit ARPU of Other Players. IANS

A day after Reliance Jio announced its postpaid offer at Rs 199, global investment banking firm Jefferies on Friday said the sharp discount launched by Jio would make incumbents respond to it which may further cut average revenue per user (ARPU) for Bharti and Idea.

Jio on Thursday launched a new postpaid plan at Rs 199 offering 25GB of data and unlimited voice and SMS. It is also offering international roaming rates of Rs 2/min for voice, Rs 2/MB for data and Rs 2/SMS. It also offers Rs 500/day roaming pack with Unlimited voice/data/SMS. The subscription will start from May 15.

Jio
Jio (Wikimedia Commons)

“This is at 50 per cent discount to comparable packs by incumbents and 60 per cent discount to postpaid ARPUs. We have been concerned on Postpaid as it contributes 20 per cent plus of revenues. With the sharp discount launch by Jio we expect incumbents to also respond and thus expect further decline in ARPU for Bharti and Idea. This is likely Jio’s first offer aimed at enterprise market. Remain cautious on the sector,” the Jefferies report said.

“We have been concerned on the postpaid revenues for incumbents given the cost to consumers is 3x of prepaid. Postpaid while making up only 7 per cent of Top 3 operators subscribers, contribute 20 per cent plus of their revenues. While the ARPU for the segment had dropped 25 per cent it was lower than that witnessed in prepaid,” it added.

Also Read: Reliance Jio Launches AI Based Platform — JioInteract

” Incumbents will, in our view, have to respond to Jio’s plan and cut plan prices. Any 10 per cent cut in postpaid prices will lead to around 2 per cent cut in overall ARPU. Any 10 per cent cut in postpaid prices will lead to 12 per cent/6 per cent EBITDA (Earnings before interest, tax, depreciation and amortization) hits for Idea and Bharti respectively,” the report said.

The report further said postpaid churn is lower and it is believed that shift to Jio will be gradual. “Around 40 per cent of the postpaid customers are corporate, and these would be a key target, in our view.” (IANS)

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