The need of Industry Spotlight
MSME sector plays a critical role in the economic growth of our nation. In India, more than 6 crore MSMEs contribute around 29.7% of the GDP and provide employment to more than 11 crore persons. The MSME sector is a vibrant and dynamic sector and has also been a major export contributor, with 48.1% share in the total exports during FY 2018-19, thereby holding the promise of taking the GDP growth of the nation to next level. Accordingly, it becomes critical for the policy makers to frame policies based on real time tracking of the data. Flow of credit has always been a good indicator for assessing the health of the industry sectors and their prospects.
Clusters have been the mainstay of the Indian growth story and in view of the same SIDBI and CRIF High Mark have collaborated to present the “Industry Spotlight” report, which presents sectoral deep dive of a prospective export intensive industry sector in its each edition. The report analyses the credit landscape of the sector, major lenders, sectoral composition, borrower segments along with its risk analysis. The unique feature of the report is the analysis of credit flow at cluster level, with further slicing at the level of established v/s emerging clusters in the respective industry sector, while factoring the state of MSMEs in the respective cluster.
Executive Summary - Indian Drugs and Pharmaceutical Industry
Growth in Drugs and Pharmaceutical Industry
The industry has grown rapidly over the last decade, leading to increased penetration of generics globally. India is world’s third-largest pharmaceutical market in terms of volume. The annual turnover of the drugs and pharmaceutical industry stood at INR 2.5 lakh crore during the year 2018-19 and it provides direct and indirect employment to over 2.7 million people
The drugs and pharmaceutical industry contributes significantly to India’s exports. In 2019-20, the country’s exports stood at US$ 20.6 bn with a Y-o-Y growth of 7.8%. India accounts for 20% of global exports in generic drugs. Low cost of production and R&D, availability of large skilled labour pool boosts efficiency of Indian drugs and pharmaceutical companies, giving a fillip to exports
Growth in Credit
The overall amount of credit availed by the drugs and pharmaceutical industry stood at INR 78K crore (credit value) as of Feb 2020, at a Y-o-Y growth of nearly 9%. The quarterly growth in March 2019 stood high at 7.1% after which growth was muted in June 2019. As the industry witnessed a slowdown coming into June 2019, due to low volume sales, credit availed by the sector also saw muted growth of only 1.6% Q-o-Q. However, the industry has regained some momentum and simple projection based on past quarterly trends suggest that the industry portfolio is expected to grow by nearly 13% by Mar 2021
The drugs and pharmaceutical industry has largely witnessed a healthy portfolio in the recent past with NPAs declining every quarter in the last one year. As of Feb 2020, the NPAs of the industry stood at 9.5%, declining by over 3% in a span of one year and by 9 bps over the previous quarter.
Export Credit Growth
Overall amount of export credit (value) to the sector witnessed 15% Y-o-Y growth as of Feb 2020. On a quarterly comparison, export credit to the industry has seen a continuous increase in the last year, with a significant growth in Mar 2019, standing at 14%. Thereafter as a slowdown in the industry ensued, export credit also witnessed muted growth
76% of the overall number of loans to the sector is availed by micro, small and medium segment of the borrowers
The drugs and pharmaceutical industry in India comprises of many small and big players. 76% of the overall number of loans (credit volume) to the sector is concentrated in the MSME borrower segment. Micro borrower segment alone constitutes 43% of the credit volume as of Feb 2020 although their share has reduced by 3.2% over the previous year. Share of large corporates has increased by nearly 4% over the previous year.
86% of the overall credit amount to the sector is concentrated in the top 10 clusters
Top 10 drugs and pharmaceutical clusters in India constitute 86% of the overall amount of credit (credit value) availed by the industry as of Feb 2020. Established clusters comprising Mumbai Cluster, Hyderabad Cluster, Ahmedabad, Delhi – NCR Cluster, Chennai Cluster and Vadodara Cluster together contribute to 73% of the overall sectoral credit. Some of the identified emerging clusters based on portfolio growth and performance are Solan, Pune, and Haridwar. The MSME credit to the top 10 clusters stood at INR 11.6K crore as of Feb 2020, constituting 17% of the credit portfolio in these top 10 clusters.