ICRA upgrades Pharma Companies as China reopens
Mumbai: As China restarts manufacturing activity, including for pharmaceutical raw material, rating agency ICRA has revised its outlook for the Indian pharma sector to ‘stable’ from ‘negative’ earlier.
When ICRA revised the rating earlier this year, the fear was that a shutdown in China prompted by the Covid-19 pandemic would block key active pharmaceutical ingredients (APIs) from coming into the country. APIs are the basic ingredients for drugs.
Management of supply chain
Five months since that revision however, Indian drug companies have managed their supply chain. The bottleneck that hit production though came from the countrywide lockdown which also hit air travel and movement of cargo. In a report, Icra said manufacturing activity has gradually started in China with shipments and air cargo arriving for APIs, intermediates and key starting materials.
This has helped producers, although capacity utilisation across plants has yet to reach levels seen before the lockdown due to restrictions on movement of people and availability of non-critical raw material like packaging. Most companies said earlier they held inventory for 2-4 months, both at the manufacturing as well as at the distributor level, sufficient till the end of the lockdown.
Also read: WHO-GMP/CoPP validity extended by six months: CDSCO
Raw material prices had however increased and there could be a slight “moderation” in profits of pharma companies due to higher costs. On the exports front, Indian companies remain stable for now, ICRA said, due to the inelastic nature of prescription drugs for chronic therapies. It is possible that companies might also gain because of the rupee’s depreciation against the dollar, it said in the report.
Drug companies told that getting staff back to work was proving difficult. Companies are promising high daily wages and a “sanitised” work environment to employees, and those who could not work during the lockdown period are also being paid salaries.
