Which pharma cos will gain from the falling rupee? Find out

Moneycontrol Bureau

With nearly half of total revenues coming from exports, the recent sharp deprecation in rupee spells good news the pharma sector. The rupee has depreciated against the US dollar in recent months. It even breached the 54 mark against the US dollar on Thursday. The total Indian pharmaceutical industry size is about USD 20 billion, with exports accounting for around USD 9 billion of that. Many Indian pharma companies have high exposure to western markets, especially US, for export of active pharmaceutical ingredients [API], formulations and intermediaries. So to that extent the companies will certainly cheer this rupee decline, say some analysts. "The rupee depreciation will be positive for pharma companies. The full impact of this will be seen in the margins in the third quarter, which should get a boost," Hitesh Mahida, healthcare analyst at PUG Securities, told moneycontrol.com. Sun Pharma, for instance, has a zero hedging policy and thus stands to benefit significantly, he says. Exports account for around 70% for companies like Dr Reddy's, Aurobindo Pharma, Dishman Pharma and Ranbaxy Laboratories. So as rupee depreciates, revenue will appreciate. Others like Divi's Lab and Cipla too stand to gain. However, not all companies will be able to digest this depreciation in rupee completely. Mahida points out that Ranbaxy has USD 700 million worth of forward contracts and so stands to loose to an extent. Aurobindo too has USD 600 million in forex loans. So even as rupee depreciation will boost its revenue by 10% in the second half of this fiscal, impact on profit will be limited to 3%, according to a report by Deepak Malik and Ashish Thavkar of Emkay Global Financial Services. "Divi