The Indian Pharmaceutical Industry - Fundamentals vis-a-vis Market Perception

Abstract

When the Indian economy shifted from a process patent regime to a product patent regime in 2005, there was a thought as to whether Indian pharma companies would be able to weather the change in the regime. However, they have indeed succeeded in this transition and have grown in size. The world pharma majors' confidence in Indian manufacturers has increased and the growth of the domestic pharmaceutical industry has outperformed the growth of the global pharmaceutical industry. The purpose of this paper is to explore the change in market perception about Indian pharma companies in the background of their fundamental performance and their growth prospects. We focus on the PE multiples of Indian pharma companies and their determinants. The study is relevant in today's market context where there are signs of a global slowdown and which has affected stock markets across the world, including the Indian stock market.

Keywords: TRIPS, Price Earnings (PE) multiple, Contract Manufacturing, EPS, Interest Coverage ratio (ICR)

JEL Classification: I11, L65, G10