INDIAN ECONOMIC REVIEW
Amid a challenging global scenario, the Indian economy showcased resilience and emerged as the worlds fastest-growing major economy in FY23. With a GDP growth rate of 7.2%, driven by private consumption growth, continued investments and net exports. India demonstrated robust growth despite global factors, input cost escalation, and disparities in disposable income distribution. In response to inflationary concerns, the Reserve Bank of India (RBI) took proactive measures by raising the repo rate.
Indias economic reforms have been instrumental in fostering growth. The countrys formalization drive has enhanced transparency, benefiting businesses. Initiatives like Aatmanirbhar Bharat and Make in India have propelled the manufacturing sector, positioning India as a potential manufacturing hub.
Looking ahead, Indias GDP is projected to grow at a rate of 6.5% in FY 2023-24, indicating a positive outlook. The central governments commitment to significantly increase capital expenditure, despite targeting a lower fiscal deficit of 5.9% of GDP, will act as a catalyst, stimulating demand and fueling economic growth.
Inflation is projected to moderate to 5% in FY 2022-23, assuming a decline in oil and food prices. Subsequently, it is expected to slow further to 4.5% in FY 2023-24 as inflationary pressures subside. Monetary policy is anticipated to be tighter in FY2022-23 due to persistent core inflation, gradually transitioning to a more accommodative stance in FY 2023-24.
The current account deficit is forecasted to decline to 2.2% of GDP in FY 2022-23 and further reduce to 1.9% in FY 2023-24. Meanwhile, growth in goods exports is expected to moderate in FY 2022-23 before regaining momentum in the subsequent years. Overall, the Indian economy presents a positive outlook for FY 2022-23 and FY 2023-24, driven by improving labour market conditions, increased capital expenditure, inflation moderation, and a projected decline in the current account deficit. These factors are poised to sustain economic growth and foster stability in the years ahead.
API INDUSTRY
The global active pharmaceutical ingredients (APIs) market was valued at $ 222.4 billion in 2022 and is expected to grow at a CAGR of 5.90% from 2023 to 2030. The growth will expansion is fueled by various factors, including advancements in API manufacturing techniques and the rising prevalence of chronic diseases like cardiovascular diseases and cancer. Furthermore, favorable government policies supporting API production and evolving geopolitical dynamics contribute to the overall growth of the market. The API sector has also undergone significant transformations due to the disruptions caused by the COVID-19 pandemic, leading to changes in supply chains and preferences for API sourcing.
Extensive research efforts have yielded promising outcomes, leading to the development of several innovative products expected to be launched during the forecast period. This trend not only fosters market expansion but also encourages new players to enter the segment, driving further growth and competition. The demand for targeted therapies featuring high potency API compounds, including highly potent active pharmaceutical ingredients (HPAPIs), has witnessed a significant surge. Personalized medicines, particularly those leveraging antibody drug conjugates (ADCs) that utilize linker technology to target cancer cells, have gained traction in the pharmaceutical industry. As pharmaceutical companies pursue the development of such advanced therapies, the market for ADCs and similar innovative treatments is expected to experience robust growth.
This has led to an increase in the production and adoption of generic API medications, particularly in countries like Brazil and India, where there are substantial unmet clinical needs and a growing acceptance of over the counter (OTC) drugs. The global API market has undergone significant changes due to the supply chain disruptions caused by the COVID-19 pandemic. Geopolitical considerations and the need to reduce dependency on China for API products have led to a shift in preference towards countries like India for API exports. Governments of various countries have recognized the importance of API production and have formulated plans and incentives to promote domestic API manufacturing, ensuring a more robust and resilient supply chain.
Amidst these circumstances, the API market in India is projected to grow from $12.59 billion in 2023 to $18.76 billion by 2028, reflecting a CAGR of 8.31% during the forecast period. This growth is driven by various factors including rising prevalence of infectious, genetic, cardiovascular, and chronic disorders necessitates a consistent supply of APIs for the
production of effective medications. Furthermore, the governments initiatives, such as the allocation of significant funds and the introduction of production-linked incentives, have incentivized domestic API manufacturing. These measures are aimed at enhancing the production of critical key starting materials (KSM) and APIs used in essential drugs for treating various medical conditions, including diabetes, tuberculosis, steroids, and antibiotics. Such initiatives are expected to drive the growth and development of the API market in India, ensuring a robust pharmaceutical industry.
OPPORTUNITIES
The retail pharmacy sector is estimated to comprise of at least 6,00,000 licensed outlets. Most are small, independent businesses, but pharmacy chains and e-pharmacies are a growing force. Pharmacy chains have expanded aggressively with MedPlus at 3,000+ stores and Apollo at 4,000 stores. In 2022, the market for online pharmacies was worth 25.50 billion. It is anticipated to expand at a compound annual growth rate (CAGR) of 22.20% from 2022 to 2027. This will increase access to organized pharmacies across the country and consequently drive increased demand and healthy competition.
Promotional tie-ups between foreign companies and local partners are an established feature of the market, but co-marketing deals for new drugs have been increasingly introduced over the last few years. For multinationals, these agreements enable more widespread detailing of key brands, while for local manufacturers, which have seen lesser
Partnerships between Indian companies and MNCs are expected to continue to grow due to benefits provided to both parties, as well as the opportunity to make relevant patient impact.
Though the opportunity in the API industry has been utilised, there is a larger opportunity waiting for India, to be an end-to-end supplier of medicines. The raw materials for APIs are still being imported. With enough backward integration, the space of Key Starting Materials (KSMs or intermediates) can be seized.
Indian pharmaceutical companies are experiencing difficulty to survive in global markets due to the competition, lack of market knowledge, complex regulatory pathway, and not embracing the latest digital technologies. The studies have found out that there is a clear need for domain-based digital tools for Indian pharma companies to compete and sustain in global markets. The leading generic companies of the industry have mixed performance.
The Indian pharma industry has the capacity to grow. The growth drivers of domestic pharma industry incorporate increasing economic domestic growth, strong growth in the US market, introduction of new innovative products, and increased grip in markets, such as, Japan. The Indian pharmaceutical industry, being global drug supplier, has huge potential in terms of (i) establishing a market in the US generics and developing trade with other countries making it worlds biggest drug supplier (ii) manufacturing high-quality medicines at an affordable price, to offer the low-priced drugs to reduce patients costs and become a part of the scheme to implement universal healthcare in the country (iii) as a world leader to
set a goal of launching of 3-5 molecular entities or doing of late clinical trial phases and about 10-12 innovations launches per year till 2030.
Threats, Risks and Concerns
The Russia-Ukraine war, foreign exchange shortages faced by various countries, political uprisings, are affecting various parts of the world. Currency shortages are especially affecting the ability of customers to import goods and more specifically APIs. While pharmaceuticals are being placed in priorty lists for imports in such countries, the overall currency shortages are affecting the market.
Indias significant dependency on imports of API/bulk drugs/intermediates poses a threat to the countrys pharma industry. With more than 60% of APIs sourced from other countries and import dependence reaching 80%-90% for specific APIs, any disruption in the supply chain could severely impact the manufacturing capabilities of the Indian API/bulk drugs industry. The high import dependency on China, which accounts for 66% of the total bulk drugs and intermediate drug imports by India, poses a significant risk as any disruption in Chinas bulk drugs market directly influences the Indian pharma industry. The COVID-19 pandemic-induced supply chain disruptions highlight the importance of reducing the dependency on a single source to avoid further threats to the pharma industry. Although the Government has announced schemes to encourage domestic manufacturing of APIs/bulk drugs, the continued reliance on imports remains a significant threat.
The Indian pharmaceutical industry faces a significant threat from the regulatory barriers imposed by the US Food and Drug Administration (USFDA) in the past. The Indian pharmaceutical industry relies heavily on the US market, and any increased scrutiny by the USFDA for compliance with GMP regulations can lead to significant delays or even rejection of product approvals. Additionally, the regulatory clearance process in India is much slower than in other countries, taking 20-40% longer on average, which can severely impact the launch of new products. Such regulatory obstacles and delays pose a significant threat to the growth and success of the Indian pharmaceutical industry.
Technological obsolescence in drug development processes, manufacturing automation, precision medicines, and drug testing techniques pose a significant threat to business models. This can disrupt operations, reduce the need for staff, and increase the risk of cybersecurity threats. As technology rapidly evolves, companies that fail to keep up with advancements, risk becoming outdated and unable to compete in the market. This could lead to significant revenue and market share losses as competitors who have adapted to the latest technologies take over the market. Additionally, businesses may face increased cybersecurity risks as they adopt new technologies, potentially leading to data breaches or other security incidents that could damage their reputation and financial stability.
The OTC sector in India has been growing at a healthy rate driven by increased access to information and an evolving, and more informed consumer. The Drugs Technical Advisory Board (DTAB) approved a new OTC regulation policy in January 2022 to create an explicit OTC category and remove ambiguity from the current OTC definition. Post acceptance of the proposed amendment to the Drugs and Cosmetics Act, up to 100 drugs currently dispensed under a prescription can be shifted to the OTC category.
Internal Control Systems and its adequacy
The Company has adequate internal control systems including suitable monitoring procedures commensurate with its size and the nature of the business. The internal control systems provide for all documented policies, guidelines, authorization and approval procedures. The Company has an internal audit department which carries out audits throughout the year. The statutory auditors while conducting the statutory audit, review and evaluate the internal controls and their observations are discussed with the Audit committee of the Board.
Human Resources
The human resource plays a vital role in the growth and success of an organization. The Company has maintained cordial and harmonious relations with employees across various locations. During the year under review, various training and development workshops were conducted to improve the competency level of employees with an objective to improve the operational performance of individuals. The Company has built a competent team to handle challenging assignments. The Company strives to enhance the technical, work related and general skills of employees through dedicated training programs on a continuous basis.
Cautionary Statement
Statements in Management Discussion and Analysis describing Companys objectives, projections, estimates and expectations may be "Forward Looking Statements" within the meaning of applicable laws & regulations. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to companys operations include but are not restricted to the economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which Company operates, changes in the Government regulations, tax laws, and other statues, as also other incidental factors.
By Order of the Board of Directors Nutraplus India Limited
Mukesh D. Naik Chairman & Managing Director DIN:00412896
Place: Mumbai Date: August 28, 2023
Invest wise with Expert advice
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Capital Services Support WhatsApp Number
+91 9892691696
IIFL Securities Limited - Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.