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Pharma PLI Scheme: Industry worried about large capex & tough competition

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

The last date for application of pharma PLI scheme for APIs and bulk drugs is November 30. However, players in the pharma sector have said that there is only a lukewarm response to the government’s production linked incentive scheme and some suggest more incentives and tweaks may be needed to ignite interest.

Pharmaceutical companies have been lukewarm to the government’s production linked incentive scheme announced for the sector. This scheme was announced back in April and till now not a lot of them have applied for it.

Speaking in an interview to CNBC-TV18, Vijay Garg, Joint MD of IOL Chemicals & Pharmaceuticals said, “We will not be applying for the pharma PLI scheme.”

The last date for application of pharma Production Linked Incentive (PLI) scheme for active pharmaceutical ingredients (APIs) and bulk drugs is November 30. However, players in the pharma sector have said that there is only a lukewarm response to the government’s production linked incentive scheme and some suggest more incentives and tweaks may be needed to ignite interest.

Garg said, “The major thrust under PLI is on fermentation based products, which isn’t IOL’s area of expertise.”

According to him, industry is worried about large capex and tough competition from China. “2-3 years is a short time to bring in robust technology to compete with Chinese products,” he said.

Meanwhile, Adhish Patil, CFO of Aarti Drugs said that the company will be applying for the pharma PLI scheme.

“However, the government will take 4 months to decide on who is eligible under PLI scheme,” he said.

According to Sujay Shetty, Partner & Pharma Head of PWC India, the capex required to set up capacities under PLI scheme is a concern.

Shetty also said, “Some API plants are subject to green clearance norms which could be a concern.”

For entire discussion, watch video

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index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
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nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

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This chemical stock is up 322% this year; here’s what the management says about its outlook ahead

IOL Chemicals and Pharmaceuticals stock is up 322 percent for the year. However, in a report by Spark Capital on the API industry, they said that they do not think the API growth in Q1 is sustainable for a long period. They added that Q1 performance cannot be extrapolated for the remaining quarters.

To discuss the company’s outlook going ahead, CNBC-TV18 spoke to Vijay Garg, Joint MD of IOL Chemicals and Pharmaceuticals.

Watch the video for more.

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Coronavirus concerns: Supportive govt policies needed to ramp up production for APIs in country, says Zydus Cadila

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Summary

China is the only manufacturer of some APIs in the world, said Pankaj R Patel, CMD of Zydus Cadila Healthcare, adding that we need supportive government policies to ramp up production for APIs in the country.

The rising concerns over shortages of active pharmaceutical ingredients (APIs) and key raw materials for drugs like paracetamol due to coronavirus outbreak in China, India’s pharma sector seems to have taken a hit due to supply chain delays.

Discussing the impact, Vijay Garg, joint MD of IOL Chemicals & Pharmaceuticals  said that BASF (in US) shutdown and coronavirus is leading to ibuprofen shortage. “We are sitting on 6 months of ibuprofen inventory and have 6 month inventory of sodium metal raw material, which is from China,” he said.

Chinese companies have increased prices of ibuprofen to USD 18/kg versus USD 15/kg. We expect ibuprofen prices to move up to USD 20/kg this year, said Garg.

On production front, Garg said, “We are operating at 800 metric tonne per month and out of that 50 percent goes in exports and 50 percent is domestic.”

As far as domestic market is concerned, we have not increased the prices, said Garg because most of the customers are on long-term basis. “We have yearly contracts with Cipla, Abbott, Sanofi. All the big names buy from us. Therefore, I don’t think we will increase prices in domestic market but export market is an opportunity, so definitely prices will go up there,” he added.

“Ibuprofen is not China dependent product; it’s an independent product. There is no impact as far as supply is concerned. India supply will continue but in countries like Latin America and Asian countries like Vietnam, Indonesia  supplies were coming from Chinese companies and so we have started getting the enquiries from them as their demand is increasing and they want to build up inventories again,” added Garg.

According to Pankaj R Patel, CMD of Zydus Cadila Healthcare, the main price rise that is seen in the market is more a trader related price rise where traders who have imported and have some stocks are taking advantage of the situation.

One good thing is that the northern part of China, where the problem is not there and since some of the APIs come from there, we are seeing shipments being sent now. “So, some shipments are coming from northern part but most of the APIs come from Wuhan and Hubei region and there the factories have not yet started. If things don’t improve there by April then we would start seeing some challenges with regards to supply,” Patel added.

In such a situation, said Patel, “There is no impact on consumers because all the pharmaceutical products are under price control and price increases cannot be done unless it’s approved by National Pharmaceutical Pricing Authority (NPPA). So, we don’t expect consumers to get impacted by this price but for people who buy on spot basis would have to buy at a higher price.”

China is the only manufacturer of some APIs in the world, said Patel, adding that we need supportive government policies to ramp up production for APIs in the country.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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Tags

#Russia #Ukraine #UkraineRussiaWar #Sievierodonetsk #RussiaAttack #Global #World #HelpRussia

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

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Global Top Gainers Top Loosers nifty sensex
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -72.15
sensex ₹1,882.60 +28.30
nifty IT ₹2,206.80 +30.85
nifty bank ₹1,318.95 -14.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95
index Price Change
nifty 50 ₹16,986.00 -7.15
sensex ₹1,882.60 +8.30
nifty IT ₹2,206.80 +3.85
nifty bank ₹1,318.95 -1.95

Currency

Company Price Chng %Chng
Dollar-Rupee 73.3500 0.0000 0.00
Euro-Rupee 89.0980 0.0100 0.01
Pound-Rupee 103.6360 -0.0750 -0.07
Rupee-100 Yen 0.6734 -0.0003 -0.05
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Coronavirus: No plans regarding ban on exports of active pharmaceutical ingredients, says Indian Pharmaceutical Alliance

There is no plan regarding a ban on the exports of active pharmaceutical ingredients (APIs) at the moment, clarified Sudarshan Jain, secretary-general of Indian Pharmaceutical Alliance, after reports indicated that a high-level committee constituted by the Department of Pharmaceuticals of the government is contemplating a restriction on exports.

“We are closely monitoring the situation, taking stock of the inventory, how we can service the patients’ needs and I don’t think there is any decision at this particular moment regarding exports. The critical task at the moment is to take the inventory of the situation, evaluate alternate sources and then keep on monitoring the situation. At this moment, there are no suggestions to stop the exports of Active Pharmaceutical Ingredients (APIs),” said Jain.

The reports claimed that restrictions may be put on crucial antibiotics and vitamins in the light of the coronavirus outbreak.

“The biggest hit will be taken up by cephalosporin or Penicillin G manufacturer because almost most of the companies in India have shut down their shops and they source it from China because they are cheapest there,” Surajit Pal, pharma analyst at Prabhudas Lilladher, said.

Reacting to the news, Vijay Garg, joint MD of IOL Chemicals, said, “If the export ban is there then problems definitely will come but as far as IOL is concerned, we are majorly into pain management. Our flagship product is Ibuprofen. So we are very minimal dependent on China and moreover the product which we are importing from China is not in the epicentre of the outbreak. We are covered for six months plus we have an alternative. Definitely the problem will come only in antibiotics or in diabetics where the dependence is much more.”

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IOL Chemicals and Pharmaceuticals expects FY20 revenue growth of 30% YoY

earnings

IOL Chemicals and Pharmaceuticals on Wednesday said it expects FY20 revenue to see a minimum growth of 30 percent year-on-year (YoY) after the company reported strong Q3 results.

In an interview to CNBC-TV18, Vijay Garg, joint managing director, said ibuprofen is still in a short supply globally as there is no official news in the market on the re-opening of BASF Texas plant in America.

According to Garg, global ibuprofen prices have increased from $12 to $16, “If I compare the prices with Q3 of FY19, there is a 40 percent increase in prices. In India, it was in the range of Rs 750 and now it’s in the range of Rs 1,050 and the same is happening in the global market.”

On production level front, Garg said, “IOL Chemicals was at Rs 1,000 crore and this year we will be doing around Rs 1,750 if I consider the same number for Q4. So we will be growing at the rate of 70 percent this year.”

“Presently, IOL Chemicals runs ibuprofen plant at 100 percent capacity, whereas our chemical plant is running at 80 percent capacity utilisation. As far as FY20 is concerned, we expect minimum growth of 30 percent and it will be in the range of Rs 2,200-2,300 crore for FY20,” he added.

IOL makes active pharmaceutical ingredient (API) and bulk drugs and Ibuprofen is its flagship product.

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Ibuprofen prices likely to sustain as there is short supply and rising demand, says IOL Chemicals

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Vijay Garg, joint managing director,  IOL Chemicals and Pharmaceuticals said that the ibuprofen price increase is around 20-30 percent and the 20 percent price increase is in Indian market whereas international market prices has gone up by 30 percent.

“The profitability in ibuprofen has increased because of ibuprofen price increase in the market,” he added.

He further said that ibuprofen prices likely to sustain as there is short supply and rise in demand.

Talking about capacity, Garg said, “We were operating our plant at 72,000 tonne per annum last year, so now my capacity has increased up to 10,000 tonne.”

“We don’t see higher supply until 2021 when BASF’s plant comes on stream,” he said.

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Expect to repay debt of Rs 26 crore, says IOL Chemicals

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We expect to repay the debt of Rs 26 crore, said Vijay Garg, joint Managing Director, IOL Chemicals and Pharmaceuticals.

“Around Rs 26 crore is our repayment which is scheduled for this year. So debt will definitely not increase,” said Garg to CNBC-TV18.

IOL Chemicals and Pharmaceuticals is in focus after reporting a strong set of numbers this quarter.

Garg said the company next year will be adding few quantities in the chemical and pharmaceutical segment and we are confident that we will be able to add another 30%.

“This year, we have done 29.46% in topline. Next year, it will be around 30-40%,” he added.

He further said that bottomline will increase this year as we will be signing new contracts with all our customers to whom we have supplied material last year.