| According to a special report, published by Fitch | | | | anticipated profitability improvements. This would |
| Ratings, the Indian Pharmaceutical Sector will | | | | remain a key risk factor for future margins. |
| remain stable in 2010, with demand benefiting | | | | Regulatory issues can also have an impact, mainly |
| from rising global acceptance of generic | | | | regarding approvals for new products and any |
| pharmaceuticals. The agency also expects the | | | | rigidity in quality controls. |
| credit profiles of some of its rated entities to | | | | The report further states that a majority of the |
| remain stable - a result of limited capex spends | | | | entities within its rated national pharmaceutical |
| and subsequent improvement in cash flows. | | | | portfolio are not likely to see any large future |
| The global pharmaceutical industry is facing a | | | | capacity expansions. They will focus on |
| period of significant drug patent expiries, which | | | | consolidating their recently expanded capex in the |
| expands the addressable market for generics | | | | next couple of years. Nonetheless Fitch views any |
| companies. Regulatory steps taken by developed | | | | large debt-led capex programme with concern. |
| countries towards curtailing growing health care | | | | With the global liquidity scenario improving in 2010, |
| budgets can also boost the demand for generics. | | | | Indian pharmaceutical exporters should see |
| The agency expects the global acceptance of | | | | shorter cash cycles for their working capital, |
| generics along with outsourcing of manufacturing | | | | versus the increase in working capital cycles |
| by global pharmaceutical companies to low cost | | | | during the tight liquidity situation in 2008-H109. |
| locations will benefit the export oriented Indian | | | | Liquidity is thus expected to generally remain |
| pharmaceutical companies. Steady demand | | | | comfortable. The improved liquidity scenario |
| growth will continue to give advantage to the | | | | coupled with improved cash flows in the near |
| domestic pharmaceutical companies of India. | | | | term should partly offset the refinancing risks |
| However, Fitch Ratings stated that pricing | | | | faced from foreign currency convertible bonds |
| pressures because of greater-than-expected | | | | outstanding on the books of many Indian |
| increase in competition could moderate the | | | | pharmaceutical companies. |