Industry Spotlight Vol-I

Indian Drugs & Pharmaceutical Industry

September 2020
Analytical Contacts

Nikunj Bhagat Subhrangshu Chattopadhyay

Senior Vice President, Head of Products Senior Vice President, National Head – Sales
[email protected] [email protected]

Rakesh Rallapalli Saumya Sah

Senior Manager, Research & Insights Analyst, Research & Insights
[email protected] [email protected]

Kailash Chander Bhanoo R. Prabhavathi

Chief General Manager, Economic Research Deputy General Manager, Economic Research
and Data Analysis Vertical and Data Analysis Vertical
[email protected] [email protected]

Soham Nag
Manager, Economic Research and
Data Analysis Vertical
[email protected]
 Foreword
SIDBI, in collaboration with CRIF, is pleased to introduce ‘Industry Spotlight’,
a quarterly report based on Industry sectors/ clusters, with focus on
MSMEs. Every quarter we would be coming out with such an analytical
report on different sectors with Pharmaceutical being first in the series.
The report attempts to provide insights to the policymakers, bankers and
other stakeholders including MSMEs drawing upon analysis of granular
cluster level data.

The initiative is part of SIDBI’s continuous endeavour to make MSMEs real-

ize their inherent potential in the light of the latest industry and market
trends as well as emerging opportunities. I hope that this report, over time,
will emerge as an important reference point for the policy makers and
Shri Manoj Mittal practitioners in the MSME ecosystem.
Deputy Managing Director
Small Industries Development I congratulate both SIDBI and CRIF High Mark teams for their collaboration
Bank of India in bringing out this report.

It is a proud moment for CRIF India to partner with Small Industries

Development Bank of India (SIDBI) for the launch of ‘Industry Spotlight’, a
quarterly report that will provide insights and trends on key industry
sectors in each edition.

India has kickstarted its promising journey towards growth and is expect-
ed to become one of the fastest-growing economies in the upcoming
years. With the advent of government initiatives like ‘Make In India’, the
vision doesn’t seem far from reality. When the voyage is so inspiring, it is
vital to closely track its progress. To this effect, CRIF is proud to have part-
nered with SIDBI and present a deep-dive analysis into the Drugs and
Pharmaceutical Industry in the first edition of Industry Spotlight. Owing to
.
Navin Chandani the prowess contributed by this sector in manufacturing high quality,
MD & CEO, CRIF High Mark affordable medicines, we are looking at its promising future. It is now the
perfect time to closely monitor this industry to tap the growth prospects.
CRIF High Mark, majority owned by CRIF, is India's first full-service credit bureau, licensed by RBI, operating in
retail, commercial and microfinance sectors. We pioneered the setup of the first microfinance credit bureau in
India. Today, we are partnered with over 5,800 financial institutions in the country and assist millions of credit
related decisions every month.

We believe in providing the support and acceleration to every business and individual who relies on CRIF for
their credit decisions. Through this initiative, we aim to provide deep-seated insights to exemplify the next steps
for different industry sectors in each edition.
Table of
CONTENTS

01 Indian Drugs and Pharmaceutical Industry | Executive Summary

03 Introduction & Current Market Scenario

04 Credit Landscape in Drugs and Pharmaceutical Industry

04 • Portfolio and NPA Trends

07 • Drugs and Pharmaceutical Industry – Borrower Landscape

10 • Borrowing and NPA trends in MSME borrower Segment

13 • Established and Emerging Drugs and Pharmaceutical Clusters in India

17 • Exports Credit Landscape

19 Revised MSME Definition – Impact on Bureau Classification of MSMEs

20 Way forward for Drugs and Pharmaceutical Industry

23 Disclaimer

23 About CRIF India

23 About SIDBI
 Preamble

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 sector has
also been a major export contributor, with 48.1% share in the total exports during FY 2018-19. During the recent
years, the sector has undergone various structural changes on account of introduction of GST, formalization
etc., which contributed significantly to the robustness of the sector.

MSME sector is a vibrant and dynamic sector and holds the promise of taking the GDP growth of the nation to
next level. However, the sector has also been badly affected, at times, due to the global trade tensions and the
slowdown in demand affecting the large corporates. 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.

In view of the above, 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.

Clusters have been the mainstay of the Indian growth story and through this report, SIDBI and CRIF High Mark
aim to provide more granular cluster level data to the policymakers, to enable them to identify the pain areas
in the industry sector. The quarterly report shall cover one industry sector in each edition and shall revisit the
sectors after covering the major sectors in first round.

The credit profile in the report pertains to finance extended to drugs and pharmaceutical industry in India. The
credit analysis presented in this report has been done purely on fund-based facilities i.e. considering Term
Loans, Working Capital Loans, etc. and non fund-based facilities have been excluded from the analysis.

Borrower segments are segregated based on the overall credit exposure of enterprises, inclusive of funded
and non-funded exposure i.e. Micro segment being <1 crore exposure, Small 1 crore - 10 crore, Medium 10 crore
- 50 crore, Mid Corporates 50 crore – 100 crore and Large Corporates >100 crore exposure. The report is an
amalgamation of insights from primary data reported to the bureau as of February 2020 and secondary data
collated from publicly available domains.

Note:
The report is based on credit data up to February 2020 and the statements and projections do not account for the
impact of COVID-19 on the sector.
 Indian Drugs and Pharmaceutical Industry

Executive Summary

The Indian drugs and pharmaceutical industry has played an important role in driving better
health outcomes across the world through its high quality, affordable and accessible medicines.
The industry not only drives better public health outcomes, but also contributes to the economy in
a significant way.

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 2018-191 and it provides direct and indirect
employment to over 2.7 million people2.

Export Prowess
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%3. India accounts for 20% of global exports in generic
drugs4. 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 crore5 (credit
value) as of Feb 2020, at a Y-o-Y6 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 20217.

Portfolio Health
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.

1 Annual Report 2019-20, Department of Pharmaceuticals, Government of India

2 The Indian pharmaceutical industry – the way forward, June 2019, Indian Pharmaceutical Alliance

3 Pharmexcil – Pharmaceuticals Export Promotion Council of India, Ministry of Commerce and Industry

4 Annual Report 2019-20, Department of Pharmaceuticals, Government of India

5 Figures in ‘K’ throughout this report refer to ‘thousands’

6 Y-o-Y change throughout this report is based on observations between Mar 2019 and Feb 2020

7 Actual performance may vary due to COVID -19 impact which may be beneficial or detrimental to the sector

Page: 01
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.

Page: 02
 Introduction & Current Market Scenario
The Indian drugs and pharmaceutical industry has played a key role in driving better health outcomes across
the world through its high quality, affordable and accessible medicines. The industry has grown rapidly over
the last decade, leading to increased penetration of generics globally. Along with driving public health
outcomes, the industry has contributed to India’s economic growth. Today, India is world’s third-largest
pharmaceutical market in terms of volume.

The drugs and pharmaceutical industry in India produces a range of bulk drugs –key ingredients having
medicinal properties that form basic raw materials for formulations. Bulk drugs account for roughly 20% of the
industry output, while formulations form the rest. It has been observed that this sector has 25K credit active
units as of Feb 2020. India has the second highest number of United States Food and Drug Administration
(USFDA) approved facilities.

The annual turnover of the drugs and pharmaceutical industry stood at INR 2.5 lakh crore during the year
2018-198. The industry directly and indirectly provides employment to over 2.7 million people, in high-skill areas
like R&D and manufacturing9.

One of the key strengths of the drugs and pharmaceutical industry in India is its strong export potential, with
Indian exports reaching over 200 countries including highly regulated markets of US, West Europe, Japan, and
Australia. The country exported pharmaceuticals to the tune of US$ 20.6 bn at a Y-o-Y growth of 7.8% in 2019-20
over the previous year, backed by the government’s thrust towards manufacturing under the ‘Make in India’
initiative. India is the largest supplier of cost-effective generic medicines to the world, accounting for 20% of
global exports10.

Indian manufacturers also rely heavily on Active Pharmaceuticals Ingredients (APIs) from China to produce
medicine formulations, procuring around 70% from China, the top global producer and exporter of APIs by
volume. The recent Coronavirus (COVID -19) outbreak in China in Dec 2019 has disrupted imports from China.
However, Indian drugs and pharmaceutical industry with a manufacturing prowess and with government’s
support has been eyeing this as an opportunity to push manufacturing of bulk drugs to reduce dependency
on China.

Experts believe that Indian drugs and pharmaceutical industry owing to its strong fundamentals, superior
manufacturing capabilities, advanced technologies and the availability of a large labour pool can embrace
these challenges and overcome this transient environment to strengthen its growth story and emerge as one
of the top 5 pharmaceutical industries by value by 203011.

8 Annual Report 2019-20, Department of Pharmaceuticals, Government of India

9 The Indian pharmaceutical industry – the way forward, June 2019, Indian Pharmaceutical Alliance

10 Annual Report 2019-20, Department of Pharmaceuticals, Government of India

11 The Indian pharmaceutical industry – the way forward, June 2019, Indian Pharmaceutical Alliance

Page: 03
 Credit Landscape in Drugs and Pharmaceutical Industry
Portfolio and NPA Trends
The Indian drugs and pharmaceutical industry has positioned itself as a strong and potent industry with a
large manufacturing base and a sizable number of diverse players leading to an increased need for funding
by various financiers such as Private and Public sector banks, NBFCs and Foreign Banks.

The industry has witnessed continuous growth in credit availed by value12, observed over the previous 12
quarters, standing at INR 78K crore as on 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. In terms of volume13, the industry stood at 57K active loans as of Feb 2020.

The demand for credit in the drugs and pharmaceutical industry is observed to peak in Q3/Q4 of the financial
years in the last 3 to 4 years with the peak volumes being as high as nearly 4.8K loans sanctioned in just one
quarter. The average quarterly volume of loans disbursed is observed to be nearly 3.65K14.

Credit portfolio by value stands at INR 78K crore

as of Feb 2020, with a Y-o-Y growth of nearly 9%

Chart 1: Drugs and Pharmaceutical Industry – Overall Credit Trends

78,075 Cr
75,582 Cr
75,399 Cr
72,939 Cr
71,802 Cr

3.30%
67,036 Cr

0.24%
3.37%
65,453 Cr

1.58%
62,366 Cr
60,475 Cr

7.11%
60,025 Cr

2.42%
57,456 Cr

4.95%
52,280 Cr

3.13%
0.75%
4.47%
51,831 Cr

9.90%
0.87%

Feb-20
Dec-18

Dec-19
Mar-18

Mar-19
Sep-18

Sep-19
Dec-17
Mar-17

Jun-18
Sep-17

Jun-19
Jun-17

Source: CRIF Bureau, India

12 Value, in the context of credit, refers to the Rupee value or amount of loans in Rupee crore, throughout this report

13 Volume, in the context of credit, refers to the number of loans active/disbursed as applicable, throughout this report

14 The new loan disbursements data is available with the credit bureau with a lag of a quarter to two, which is also disrupted

recently due to COVID-19 situation in India

Page: 04
 Observing the past quarterly trends and simple projections*,
the credit to the sector is expected to be 13% higher by March
2021 to nearly INR 87K crore

*Actual performance may vary due to COVID -19 impact which may be beneficial or detrimental to the sector

NPAs stand at 9.5% as of Feb 2020, declining by

over 3% in a span of one year

Chart 2: Drugs and Pharmaceutical Industry – Delinquency Trend

15.77%

15.00%
15.04%

14.92%

14.80%
14.37%

13.29%
13.31%

12.51%

10.87%

10.30%

9.59%

9.50%
Feb-20
Dec-18

Dec-19
Mar-18

Mar-19
Sep-18

Sep-19
Dec-17

Jun-18
Sep-17

Jun-19
Mar-17

Jun-17

Source: CRIF Bureau, India

The drugs and pharmaceutical industry has largely seen a healthy portfolio 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 (Refer Chart 2).

Public sector banks are the largest contributors in providing finance to the drugs and pharmaceutical
industry with a share of 36.8% in volume as of Feb 2020, followed by private banks (35.4%), NBFCs (16.5%), foreign
banks (8.1%) and others (3.0%) (Refer Chart 3a). In terms of value however, private banks have the largest share
at 37.2%, followed by foreign banks (25.9%), public sector banks come close at 21.6%, NBFCs (11.4%) and others
(3.7%) as of Feb 2020. (Refer Chart 3b).

Page: 05
 Public Sector banks have the largest share in credit volume
(36.8%), Private banks, the largest share in value (37.2%)

Chart 3a: Drugs and Pharmaceutical Industry – Chart 3b: Drugs and Pharmaceutical Industry –
Financing Pattern (Market Share by Volume) Financing Pattern (Market Share by Value)

Others Others
3.04% 3.75% NBFCs
NBFCs
16.52% 11.45%

Private
Banks
37.27%
Private Foreign
Banks Banks
57K 78,075 Cr
35.43% 8.13%
Foreign
Banks
25.91%

Public Sector Banks Public Sector Banks

36.87% 21.63%

Source: CRIF Bureau, India

In terms of value, term loans account for 42.5% in overall credit availed by drugs and pharmaceutical industry
as of Feb 2020 (Refer Table 1a), while the overall NPAs of term loans stand at 16.1% (Refer Table 1b). Working
capital loans form 34% of the portfolio of drugs and pharmaceutical industry, with 6.3% delinquency, followed
by other funded credit facilities at 24%15. Out of the total finance availed as of Feb 2020, term loans credit
offered by private banks stand at 17.6%. Corresponding NPAs stand at 1%. Term loans credit offered by Public
sector Banks has a share of 11% of the overall portfolio as of Feb 2020, while the corresponding NPAs stand at
41.2%. Working capital loans credit offered by foreign banks have the highest share (13.18%) of the overall credit
availed, compared to other lenders, with delinquency at <1%, as of Feb 2020. Further, as of Feb 2020, out of the
total term loans credit, 41% is availed from private banks while, out of the total working capital loans credit, 39%
is availed from foreign banks.

As of Feb 2020, term loans credit offered by private banks

stand at 17.6%. Corresponding NPAs stand at only 1%

15 Other fund based credit facilities include credit data which is submitted to the bureau without a specific credit facility identified

against the loan account.

Page: 06
 Table 1a: Product Categories and Lender Mix (Value) Table 1b: Product Categories and Lender Mix Delinquency

Lender Type TL WC OTHERS Grand Total Lender Type TL WC OTHERS Grand Total

Private 13,736 Cr 9,283 Cr 6,081 Cr 29,100 Cr 1.00% 2.41% 0.78% 1.40%

Private Banks
Banks 17.59% 11.89% 7.79% 37.27%

Foreign 2,659 Cr 10,289 Cr 7,278 Cr 20,225 Cr Foreign Banks 11.05% 0.68% 0.16% 1.85%
Banks 3.41% 13.18% 9.32% 25.91%

Public Sector 8,634 Cr 4,596 Cr 3,657 Cr 16,886 Cr Public Sector 41.20% 22.29% 4.80% 28.17%
Banks 11.06% 5.89% 4.68% 21.63% Banks

NBFCs 6,020 Cr 1,660 Cr 1,259 Cr 8,939 Cr NBFCs 17.12% 9.93% 9.00% 14.64%
7.71% 2.13% 1.61% 11.45%

Others 2,183 Cr 574 Cr 167 Cr 2,924 Cr Others 15.29% 34.66% 19.13% 19.31%
2.80% 0.73% 0.21% 3.75%

Grand Total 33,231 Cr 26,403 Cr 18,442 Cr 78,075 Cr Grand Total 16.11% 6.37% 2.06% 9.50%
42.56% 33.82% 23.62% 100.00%

Source: CRIF Bureau, India

Vintage Analysis on Term Loans and Working Capital Loans given to the sector prior to FY 2016-17 (up to FY
2015-16) shows deteriorating 90+ days past due performance, which is leading to very high delinquencies
for Public Sector Banks.

These delinquent loans are largely concentrated with mid and large corporate borrowers, which are
mostly private limited and partnership based entities.

For loans sanctioned in the last 4 years starting FY 2016-17, public sector banks are observed to have
delinquencies of 6% with term loan delinquencies at 3% and working capital loan delinquencies at 9%. This
also reflects in the overall sectoral delinquency being only 3% for loans sanctioned since FY 2016-17.

Drugs and Pharmaceutical Industry – Borrower Landscape

The drugs and pharmaceutical industry is a fragmented industry with a diverse mix of large and small players
operating under various types of businesses. The sector has a presence of nearly 25K credit active units as of
Feb 2020 as observed in the credit bureau data.

The MSMEs are the backbone of drugs and pharmaceutical industry, having capitalised the cost advantage
to manufacture high quality products not only for other large Indian companies but also leading
multinationals. Simultaneously they have been able to reach out to even remote corners of the country to
make medicines available to all.

In terms of availing credit, 76% of the overall number of loans (credit volume) is concentrated in the MSME
borrower segment. Micro16 segment borrowers have the largest share of 43% as of Feb 2020. Small borrowers
and large corporates have a share of 21% in the volume of loans availed as of Feb 2020, followed by medium
segment at 11.5% and mid-corporates at 2.6%.

As of Feb 2020, the share of credit to micro players in the industry has decreased from Mar 2019, whereas that
of large corporates has increased (Refer Chart 4a).

16 Borrower segments are classified based on the total credit exposure of enterprises. Micro segment <1 crore exposure, Small 1 crore -

10 crore, Medium 10 crore - 50 crore, Mid Corporates 50 crore – 100 crore and Large Corporates >100 crore exposure

Page: 07
 76% of the overall credit by volume is concentrated in the
MSME borrower segment. Micro segment borrowers have
the largest share of 43%

Chart 4a: Drugs and Pharmaceutical Industry – Chart 4b: Drugs and Pharmaceutical Industry –
Market Share by Borrower Segments (Volume) Market Share by Borrower Segments (Value)

3.80%, 2,297 3.01%, 2,160 2.52%, 1,966

10.66% 9.80% 8.37%, 6,538
6,445 7,034
43.32% 12.14%
46.57% 12.69% 9,479
25K 14.34% 9,115
28K 8,671
56.79%
28K 8.45%
7.52% 6,594
9.03% 5,401
5,461
11.58%
10.99% 7K
7K
10.52%
5K 21.09% 66.98% 68.52%
21.13% 12K 62.18% 53,499
13K 37,601 48,092
18.49%
9K 2.64%, 1K
3.91%, 2K
2.96%, 1K 17.41% 21.37%
11.24% 11K 12K
6K

March 2018 March 2019 February 2020 March 2018 March 2019 February 2020

Micro Medium Small Mid-Corporate Large Corporate

Figure in K in chart 4a indicates the number of loans sanctioned. Figure in chart 4b indicates the amount sanctioned in INR Crore.
Source: CRIF Bureau, India

Credit to MSME borrowers constitutes 23% of the overall

portfolio by value as of Feb 2020

In terms of value, it is the large corporates who have availed of the maximum loan amount, observed over the
last 3 years, standing at 68.5% as of Feb 2020 (Refer Chart 4b). Credit to MSME borrowers together constitutes
23% of the overall portfolio as of Feb 2020.

Owing to its huge potential for growth and contribution to health and economy, the drugs and
pharmaceutical sector, considered a sunrise sector has been a strong focus of the government. According to
the Union Budget 2020-21, the budget allocation to the Department of Pharmaceuticals, Government of India,
has been US$ 44.47 Mn. Further, as per Economic Survey 2019-20, government expenditure (as a percentage of
GDP) increased to 1.6 per cent in FY20 from 1.2 per cent in FY15 for health. The government has permitted FDI up
to 100% in pharmaceutical sector through automatic route for greenfield investment and up to 74% for
brownfield investment. Beyond 74%, FDI in pharmaceutical sector for Brownfield investment is permissible
through Government approval route17.

17 Annual Report 2019-20-Department of Pharmaceuticals, Government of India

Page: 08
The government's thrust on universal healthcare through Ayushman Bharat which is the National Health
Protection Scheme18, which will cover over 10.74 crore poor and vulnerable entitled families (approximately 50
crore beneficiaries) providing coverage of INR 5L per family per year for secondary and tertiary care
hospitalization, is likely to bring more individuals under the ambit of formalised healthcare, in turn providing a
fillip to the industry.

The government has also emphasised the importance of alternative medicine – AYUSH (Ayurveda, Yoga &
Naturopathy, Unani, Siddha and Homoeopathy) for better health solutions and earmarked a budget of INR
1939.7 crore for 2019-202019. To encourage small and medium scale AYUSH units, the Department of
Pharmaceuticals, Government of India proposes to extend the benefits of an interest subvention to at least
250 such AYUSH pharmaceutical units.

These measures have encouraged small and large players to set up manufacturing facilities in the country
which has fuelled demand for credit.

An assessment of type of borrower with the type of business reveals that largest share of borrowers is the
micro segment borrowers which are proprietorship entities by business. Nearly 13% of the credit volume is
availed by small borrowers which are private limited entities. Another 10% is the micro segment borrowers in
private limited entities. 15% of the credit by volume is availed by large corporates which are public limited
entities.

One-fifth of the loans to the sector are availed by

Proprietorship based micro borrowers (21%). Overall,
Private Limited entities have 37% of the total loans to
the sector and micro entities enjoy 43% of the total
loans to the sector

Table 2: Drugs and Pharmaceutical Industry – Borrower Landscape as of Feb 2020

Borrower
Proprietorship Partnership Private Limited Public Limited Others Grand Total
Segment

Micro 21.27% 6.06% 10.01% 0.84% 5.14% 43.32%

Small 3.05% 3.62% 12.55% 1.26% 0.60% 21.06%

Medium 0.39% 0.77% 7.82% 2.43% 0.18% 11.58%

Mid -
0.12% 0.31% 1.40% 0.71% 0.09% 2.64%
Corporate

Large
0.1% 0.16% 5.94% 15.04% 0.22% 21.37%
Corporate

Grand Total 24.84% 10.92% 37.73% 20.28% 6.24% 100.0%

Source: CRIF Bureau, India

18 Pradhan Mantri Jan Arogya Yojana, Government of India

19 Ministry of AYUSH, Government of India, total budget allocation

Page: 09
Borrowing and NPA trends in MSME Borrower Segment
10.3K loans were disbursed to the drugs and pharmaceutical industry in FY 2019-20 YTD20.
In terms of value, INR 75K crore was disbursed to the drugs and pharmaceutical industry in FY 2019-20 YTD. Out
of this, working capital limits constitute 75%, while the WC utilisation is only at 32%. Another 19% is constituted by
term loans with a utilisation of 40% as of Feb 2020.

Micro borrowers have 42.7% share of the loans sanctioned

in FY 2019-20 YTD; large corporates have the largest value
share at 74%

Chart 5a: Drugs and Pharmaceutical Industry - Chart 5b: Drugs and Pharmaceutical Industry -
Borrowing Trend by Borrower Segments (Volume) Borrowing Trend by Borrower Segments (Value)

3.05%
5.14% 9.21%

9.45% 4.45%
7.20%
42.72% 5.41%
48.14% 5.09%

23.90%
23.36%
76.95% 74.06%

15.89%
14.87%
3.41%
2.49%
11.14% 14.08%

FY 2018-2019 FY 2019-2020 YTD FY 2018-2019 FY 2019-2020 YTD

Micro Medium Small Mid-Corporate Large Corporate

Source: CRIF Bureau, India

MSME borrowers constitute 82.5% of the disbursements for FY 2019-20 YTD by volume (Refer Chart 5a). Share of
fresh disbursements to the micro segment stood at 42.7% as of Feb 2020, as against 48.1% in FY 2018-19. Share
of mid and large corporates increased from 14% in FY 2018-19 to 17.5% in FY 2019-20 YTD.

In terms of value, fresh loans disbursed to large corporates have the largest share at 74% in FY 2019-20 YTD, as
against 77% in FY 2018-19. (Refer Chart 5b). MSMEs constitute 21% of the fresh loans disbursed in FY 2019-20 YTD,
as against 18% in FY 2018-19. Micro segment borrowers alone constitute 9.2% of the fresh disbursements in
FY 2019-20 YTD. The share of small and medium borrowers has reduced by almost half in the last 3 years
standing at 11.6% in FY 2019-20 YTD.

20 YTD - Year till date refers to the period April 2019-Feb 2020

Page: 10
 Y-o-Y NPA level for Medium, Mid and Large Corporates
has improved as of Feb 2020

As of Feb 2020, delinquency for large

Chart 6: Drugs and Pharmaceutical Industry –
corporates stands high at 10.07% (Refer
Delinquency Trends by Borrower Segments
Chart 6). Although in value terms, NPAs
Borrower
March 2018 March 2019 February 2020
Segment stood higher than in Mar 2019, the
2,297 Cr 2,160 Cr 1,966 Cr percentage has reduced from 14.2% to 10%
Micro
3.82% 5.47% 6.13% in Feb 2020. NPAs for other segments also
6,445 Cr 7,034 Cr 6,538 Cr remained high as of Feb 2020, with micro
Small
6.83% 6.90% 8.23% segment at 6.13%, small at 8.23% and
8,671 Cr 9,115 Cr 9,479 Cr medium at 8%.
Medium
12.20% 9.56% 8.86%
Figure in Crore represents the portfolio
5,461 Cr 5,401 Cr 6,594 Cr
Mid-Corporate outstanding of the segment. Percentage
12.98% 11.90% 8.01%
figure indicates the delinquency of the
37,601 Cr 48,092 Cr 53,499 Cr segment as of the observation period.
Large Corporate
18.02% 14.28% 10.07% Source: CRIF Bureau, India

Chart 7: Drugs and Pharmaceutical Industry – Portfolio and Delinquency Simple

Projections by Borrower Segments

Mid + Large Corporates

Micro SME
18.16%
17.38% 67,881
17.29%
17.38% 64,167
17.14% 15.65% 60,092
16.45% 65,220
56,704 60,948
15.38% 14.04%
53,493 56,925
54,892
47,282
43,140 47,677 11.00%
10.28% 41,430 44,558
9.91% 11.39% 9.84%
9.61% 37,714 43,062
9.23% 10.18%
9.64% 8.60% 9.27%
9.33% 8.40% 8.42% 37,528 8.06%
8.19%
8.49% 8.43%
6.95% 8.67%
7.90% 8.12% 7.83%
6.37% 7.44% 7.45%
5.94% 5.94%

4.48% 4.37% 4.86% 6.13% 5.94% 5.94% 17,653

5.47% 5.31% 16,149 16,564 16,638
14,708 15,414
12,820
4.10% 4.29% 16,804
4.03% 3.82% 15,116 15,690 15,884 16,017
12,620

2,480 2,608 2,035

1,683 2,177 2,131 2,035 2,035
2,297 2,160
FY 2017 Q4

FY 2018 Q1

FY 2018 Q2

FY 2018 Q3

FY 2018 Q4
FY 2019 Q1

FY 2019 Q2

FY 2019 Q3

FY 2019 Q4

FY 2020 Q1

FY 2020 Q2

FY 2020 Q3

FY 2020 Q4

FY 2021 Q1

FY 2021 Q2

FY 2021 Q3

FY 2021 Q4

FY 2017 Q4

FY 2018 Q1

FY 2018 Q2

FY 2018 Q3

FY 2018 Q4
FY 2019 Q1

FY 2019 Q2

FY 2019 Q3

FY 2019 Q4

FY 2020 Q1

FY 2020 Q2

FY 2020 Q3

FY 2020 Q4

FY 2021 Q1

FY 2021 Q2

FY 2021 Q3

FY 2021 Q4

FY 2017 Q4

FY 2018 Q1

FY 2018 Q2

FY 2018 Q3

FY 2018 Q4
FY 2019 Q1

FY 2019 Q2

FY 2019 Q3

FY 2019 Q4

FY 2020 Q1

FY 2020 Q2

FY 2020 Q3

FY 2020 Q4

FY 2021 Q1

FY 2021 Q2

FY 2021 Q3

FY 2021 Q4

Portfolio Outstanding (Cr)

Delinquency

Source: CRIF Bureau, India

Page: 11
 An analysis of the past quarterly trends in growth of portfolio and NPAs for the
drugs and pharmaceutical industry by borrower segments shows that the credit
availed by the mid and large corporates which stood at INR 56.9K crore in Dec 2019
is likely to increase by 19% by Mar 2021* (Refer Chart 7). An increase of 6% is
expected in the small and medium borrower segment by Mar 2021*.

NPAs for the mid and large corporates are projected to witness a steep decline to
reach 7.45% by Mar 2021, while that for the SME borrower segment are likely to
remain nearly same between Dec 2019 and Mar 2021*.

*Actual performance may vary due to COVID- 19 impact which may be beneficial
or detrimental to the sector.

NPAs for large corporates which are partnership-based

entities stood the highest at 21.9% as of Feb 2020

Table 3: Drugs and Pharmaceutical Industry – Borrower Landscape

Delinquency Trends as of Feb 2020
Borrower
Proprietorship Partnership Private Limited Public Limited Grand Total
Segment

Micro 7.03% 3.94% 5.34% 15.96% 6.13%

Small 11.15% 7.60% 7.30% 10.78% 8.23%

Medium 0.08% 3.40% 11.93% 3.13% 8.86%

Mid -
0.54% 11.53% 10.11% 3.63% 8.01%
Corporate

Large
0.00% 21.93% 11.97% 4.61% 10.07%
Corporate

Grand Total 7.59% 8.55% 11.21% 4.52% 9.50%

Note: Borrower Business Type as Others with 6.2% of the total credit by volume is excluded from this analysis.
Source: CRIF Bureau, India

A cross analysis of NPAs for borrower segments and business type shows that for large corporates and small
borrowers, the maximum delinquencies are for partnership and proprietorship-based firms, respectively.
Further, for micro segment, public limited companies have the highest delinquency at 15.9%, and for medium
borrower segment, private limited companies have the highest delinquency at 11.9% as of Feb 2020 (Refer
Table 3).

Page: 12
Established and Emerging Drugs and Pharmaceutical Clusters in India
The drugs and pharmaceutical industry in India is spread far and wide across the country in small and large
manufacturing facilities which operate out of geographically concentrated areas and are inter-connected
by the flow of goods and services across these clusters. The government of India encourages such clusters by
bringing them together under a ‘Cluster Development Scheme’ through which financial assistance is provided
for creation of common facilities in any drugs and pharmaceutical clusters including Bulk Drug, Medical
Device, Ayurvedic, Unani and Cosmetics Units21.

Top 10 drugs and pharmaceutical clusters in India

constitute 86% of the overall credit availed as of Feb 2020

Emerging clusters performing well, backed by favourable

government measures

21 Annual Report 2019-20, Department of Pharmaceuticals, Government of India

Page: 13
 Chart 8: Drugs and Pharmaceutical Industry – Top Clusters

18,979 Cr

12,359 Cr 11,184 Cr

4,991 Cr 4,656 Cr 4,606 Cr 3,846 Cr 3,091 Cr 2,157 Cr 1,150 Cr

Mumbai
Cluster

Hyderabad
Cluster

Ahmedabad

Delhi-NCR
Cluster

Chennai
Cluster

Vadodara
Cluster

Bangalore-
Mysore
Cluster

Solan
Cluster

Pune

Haridwar

Source: CRIF Bureau, India

Number of Credit Active Units in Top 10 Clusters

Bangalore
Mumbai Hyderabad Delhi-NCR Chennai Vadodara Solan
Cluster Ahmedabad -Mysore Pune Haridwar
Cluster Cluster Cluster Cluster Cluster Cluster
Cluster

Number
>5000 3000-4000 1500-2000 4000-5000 1500-2000 1000-1500 2000-3000 1000-1500 1000-1500 <1000
of Units

Vadodara cluster includes Vadodara and Bharuch (Ankleshwar) districts and Haridwar cluster includes
Haridwar (Roorkee) and Dehradun districts.

Page: 14
Mumbai cluster is the largest drugs and pharmaceutical cluster having an outstanding portfolio of INR 18.9K
crore, and a share of 24% of the overall credit as of Feb 2020 (Refer Chart 8).

Overall, the top 10 clusters account for 86% of the overall credit to the drugs
and pharmaceutical Industry as of Feb 2020. The top 6 clusters by size of
portfolio comprising Mumbai cluster, Hyderabad cluster, Ahmedabad,
Delhi – NCR cluster, Chennai cluster and Vadodara together constitute the
established clusters and contribute to 73% of the overall credit as of Feb
2020 (Refer table 4).

Among the top 10 clusters, Vadodara cluster and Ahmedabad recorded the highest Y-o-Y growth in credit
availed, at 92.2% and 54.5% as of Feb 2020, respectively. Ahmedabad being largely driven by mid and large
corporates segment while Vadodara receiving a strong push from the MSME borrower segment.

Pune with a relatively smaller portfolio of INR 2.1K crore has witnessed growth, driven by the MSME borrower
segment at 16.5% Y-o-Y. Solan cluster (INR 3K crore) and Haridwar (INR 1.1K crore) have also shown relatively
good performance over the last 2 quarters. While the MSME borrower segment has a stronger play in the Solan
cluster, Haridwar is driven by mid and large corporates. These 3 clusters together are identified as emerging
clusters in the drugs and pharmaceutical industry.

Overall delinquency as of Feb 2020 in these top 10 clusters stood at 9.7%.

Among the established clusters, Chennai cluster saw the highest
delinquency at 31.3%, followed by Delhi – NCR cluster at 16.6%, Mumbai
cluster at 11.8% and Hyderabad cluster at 2.1%. Ahmedabad and Vadodara
cluster had NPAs <1% as of Feb 2020.

These top 10 clusters also provide employment to a large number of people, with nearly 50% of the
employment generated by the drugs and pharmaceutical industry in these clusters itself, as per government
sources22. Among these clusters, Hyderabad (9%), Vododara Cluster (7%) and Ahmedabad (6%) have the
largest share of employment in 2018-1923 (Refer Chart 9).

Chart 9: Top 10 Clusters - Share in Employment FY 2018-19

10%
9%
8%
7%
6%
6% 5% 5% 5%
4%
4% 3% 3%
2% 2%

0%
Bangalore-
Mumbai Hyderabad Delhi-NCR Chennai Vadodara Solan
Ahmedabad Mysore Pune Haridwar
Cluster Cluster Cluster Cluster Cluster Cluster
Cluster

Source: Annual Survey of Industries (ASI) Frame FY 2018-19, Ministry of Statistics and Programme
Implementation, Government of India

22 Annual Survey of Industries (ASI) Frame FY 2018-19, Ministry of Statistics and Programme Implementation, Government of India

23 Annual Survey of Industries (ASI) Frame FY 2018-19, Ministry of Statistics and Programme Implementation, Government of India

Page: 15
 MSME borrower segment constitutes 17% of the credit
portfolio in the top 10 clusters

Table 4: Drugs and Pharmaceutical Industry – Comparison of Top Clusters

February 2020

AHMEDABAD
HYDERABAD

BANGALORE
VADODARA

HARIDWAR
DELHI-NCR

-MYSORE
CHENNAI
CLUSTER

CLUSTER

CLUSTER

CLUSTER

CLUSTER

CLUSTER

CLUSTER
MUMBAI

SOLAN

TOTAL
PUNE
Portfolio Outstanding
18,979 12,359 11,184 4,991 4,656 4,606 3,846 3,091 2,157 1,150 67,018
(Cr)

Y-o-Y Change 7.36% -2.42% 54.50% -3.57% -0.03% 92.25% -14.58% -19.83% 1.18% -4.26% 8.97%
Overall

Delinquency 11.84% 2.10% 0.40% 16.64% 31.34% 0.15% 1.86% 43.06% 11.28% 2.51% 9.73%

WC Utilisation Ratio 34% 33% 57% 63% 39% 67% 57% 78% 32% 99% 43%

TL Utilisation Ratio 67% 57% 44% 81% 72% 70% 43% 65% 57% 30% 60%

Portfolio Outstanding
3,295 1,663 1,066 1,742 756 1,342 705 443 528 86 11,625
(Cr)

Y-o-Y Change -9.26% -8.39% 1.90% -3.80% -27.68% 76.22% -9.29% -2.20% 16.56% -21.22% -2.32%
MSME

Delinquency 11.65% 8.48% 2.93% 11.55% 6.65% 0.51% 1.75% 17.50% 11.22% 5.26% 8.33%

WC Utilisation Ratio 34% 43% 40% 54% 49% 78% 33% 58% 43% 63% 45%

TL Utilisation Ratio 50% 48% 19% 58% 56% 53% 32% 56% 65% 68% 44%

Source: CRIF Bureau, India

In terms of utilisation of funds, the overall industry wide utilisation of Working Capital loans (WC) stood at 43%,
and at 60% for Term Loans (TL), which is the same as that for top 10 clusters. Term Loans utilisation refer to the
ratio of outstanding balance by the total sanctioned loan amount, while Working Capital utilisation refers to
the ratio of outstanding balance by the drawing power of the borrower.

Higher TL utilisation ratio indicates higher deployment of credit for capacity

expansion needs, while higher WC utilisation ratio indicates higher
deployment of credit for meeting operational needs of the business. Among
the established clusters, Delhi – NCR cluster had the highest TL utilisation
ratio, followed by Chennai cluster at 72% and Vadodara cluster at 70% as of
Feb 2020. Solan and Pune – identified as emerging clusters have also had
high TL utilisation ratios at 65% and 57%. Solan cluster and Haridwar have had
high WC utilisation at 78% and 99% respectively.

Page: 16
With the government approving up to 100% FDI through automatic route for greenfield investments,
established as well as emerging regions such as Vadodara, Ahmedabad, Surat and Bharuch –
pharmaceutical clusters in Gujarat have displayed good growth and a healthy portfolio as of Feb 2020, along
with high capacity expansion reflected through growth in term loans availed (30% in the last year), projected
to be another 27% by the next year.

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 the top 10 clusters. The overall utilisation ratio within MSME borrower segment of working capital
credit stood at 45% and of term loans credit at 44% as of Feb 2020.

Exports Credit Landscape

India boasts of a strong drug manufacturing infrastructure, with competitive land rates, skilled labour, low
costs of resources like water and electricity, making India's cost of production approximately 33% lower than
that of the US and almost half of that of Europe. Additionally, the industry’s focus on innovation, research and
development (R&D) and product variety makes it one of the top rankers among developing countries. The
ASEAN economies have a considerable generics production capacity, and it accounts for a large percentage
of the region’s pharmaceutical revenues. However, only an extremely small percentage of manufacturers
throughout Southeast Asia possess the capabilities to manufacture APIs. India enjoys comfortable position
among the South Asian countries, with most markets depending on India and China for API imports.

Low cost of production and R&D boosts efficiency of Indian drugs and pharmaceutical companies, which in
turn leads to competitive exports. Exports in the drugs and pharmaceutical industry have been growing
steadily over the last several years (Refer Chart 10a), having reached US$ 20.6 bn in FY 19-20 at a 5 year CAGR
of 6.7%24. North America is the largest export destination for India’s drugs and pharmaceutical industry (Refer
Chart 10b).

Chart 10a: India's Drugs and Pharmaceutical Chart 10b: India's Drugs and Pharmaceutical
Exports (USD Bn) Exports by Region FY 2018-19

25
20.6 North America,
19.1 32%
20 Others,
16.9 16.8 17.3
3%
14.9 Asia (excl.
15 Middle East), 4%
CIS, 4%
10 South Asia, 4%
Africa,
Middle East, 5% 18%
5

LAC, 7%
0
ASEAN, 7% European
FY 19-20
FY 14-15

FY 15-16

FY 18-19
FY 17-18
FY 16-17

Union, 16%

Source: Pharmexcil-Pharmaceuticals Export Promotion Council of India, Ministry of Commerce and Industry

24 Pharmexcil – Pharmaceuticals Export Promotion Council of India, Ministry of Commerce and Industry

Page: 17
Overall, on a year on year comparison, export credit to the sector witnessed 15% growth as of Feb 2020. On a
quarterly basis (Refer Chart 11), export credit to the industry has seen a continuous increase in the last year,
with a significant growth in Mar 2019, standing at 14%.

Export credit to the sector witnessed 15% Y-o-Y

growth as of Feb 2020

Chart 11: Drugs and Pharmaceutical Industry – Export Credit Trends

8, 0 3 6 C r

7, 970 C r
7, 76 5 C r

-0 .82 %
7, 4 2 1 C r

3 .4 9%
7 , 0 82 C r

6 , 94 9 C r
6 , 82 5 C r

4 .6 4 %
23 .0 5%

6 .79%
13 .99%
2 1.6 0 %

6, 2 71 C r

6, 096 C r
5,755 Cr
5 , 7 19 C r

- 13 . 9 3 %
5 , 613 C r

- 8.11%

12. 3 0%
5 , 125 C r
- 1. 86%

- 18. 28 %

Feb-20
Dec-18

Dec-19
Mar-18

Mar-19
Sep-18

Sep-19
Dec-17

Jun-18
Sep-17

Jun-19
Mar-17

Jun-17

Source: CRIF Bureau, India

Owing to high costs and regulatory pressures in the developed economies to setup manufacturing
units, India with favorable factors such as low cost of production and abundant availability of labour,
is fast emerging as a preferred destination for many global pharmaceutical companies to switch to
Contract Manufacturing and Research Services (CRAMS), and outsourcing of research and clinical
trials to India.

India’s CRAM industry offers high value in terms of cost and quality benefits and are estimated to
result in potential savings of about 30-40% compared to developed markets such as the US and
Europe. It is globally recognized for its high-end research services and is one of the fastest growing
segments of the country’s drugs and pharmaceutical industry.

Page: 18
 Revised MSME Definition – Impact on Bureau Classification of MSMEs
Micro, Small and Medium enterprises as per the MSME Development Act 2006 are defined based on the
investment in plant and machinery in manufacturing and services sector separately. This definition has been
revised as below effective 1 July 2020:

Revised MSME Definition

MSME Development Act 2006
effective 1 July 2020

Criteria Investment Investment and Turnover

Type Manufacturing Services Both

Up to Up to Investment: Up to INR 1 crore

Micro
INR 25 Lakh INR 10 Lakh & Turnover: Up to INR 5 crore

INR 25 Lakh INR 10 Lakh Investment: Up to INR 10 crore

Small to INR 5 crore to INR 2 crore & Turnover: Up to INR 50 crore

INR 5 crore INR 2 crore Investment: Up to INR 50 crore

Medium to INR 10 crore to INR 5 crore & Turnover: Up to INR 250 crore

In May 2020, as an immediate relief for MSMEs impacted severely due to COVID-19 and the lockdown, the
government as part of several other measures proposed a revision in the MSME definition to expand the MSME
coverage to a larger number of enterprises. The Cabinet Committee on Economic Affairs approved the
revision of definition to the current one, to be implemented effective 1 July 2020.

MSME borrowers are classified in the bureau based on the overall credit exposure of enterprises, inclusive of
funded and non-funded exposure as below:
Micro: < INR 1 crore Small: INR 1 crore – INR 10 crore Medium: INR 10 crore – INR 50 crore

To access the impact of the revised MSME definition, an analysis on random sample of 3375 borrowers
available with the bureau was undertaken and the results are presented in Table 5 below.

Table 5: Comparison of Turnover v/s Credit Exposure of Enterprises by MSME Segments

Revised MSME Average Credit Bureau Average Coverage by Bureau

Credit
Category Definition basis Turnover Classification basis Classification as a ratio of the
Exposure
Turnover (INR) (INR crore) Overall Credit Turnover Based Classification
(INR crore)
Exposure (INR)

Micro Up to 5 crore 2.52 Up to 1 crore 0.29 95.65%

Small 5 crore - 50 crore 27.46 1 crore - 10 crore 4.64 95.57%

Medium 50 crore - 250 crore 91.54 10 crore - 50 crore 25.05 96.85%

MSME Up to 250 crore 60.24 Up to 50 crore 15.37 96.02%

The coverage by bureau classification as a ratio of the turnover based classification indicates that the use of
overall credit exposure-based classification of enterprises by the bureau for MSMEs is a reliable methodology.

Page: 19
 Way forward for Drugs and Pharmaceutical Industry
The demand for drugs and pharmaceutical products is going to increase to meet the needs of a growing
population. According to the United Nations, India’s population is set to touch 1.45 billion by 2028, making it the
world’s most populous nation25. Rising incomes, greater health awareness, increased prevalence of lifestyle
diseases and improved access to affordable healthcare will be instrumental in driving growth of the drugs
and pharmaceutical industry in the country.

Owing to favourable policy interventions through continued efforts by the government and policy makers, the
drugs and pharmaceutical industry in India, has been known for its manufacturing prowess, attracting
investments and generating large scale employment opportunities for the country.

Supported by the government under its ‘Make in India’ initiative, India’s drugs and pharmaceutical industry is
expected to continue its high growth trajectory in the years to come which in turn is expected to give a boost
to credit demand in the industry.

• Projected growth in Credit Portfolio to the Industry 13% by Mar 2021

• Industry NPA at 9.5% as of Feb 2020

• Projected growth of Credit to Mid and Large Corporates 19% by Mar 2021
• Mid and large corporates NPA projected to improve by nearly 3% to
reach 7.45% by Mar 2021

• Projected growth of SME Credit to the Industry 6% by Mar 2021

• NPAs for SME borrower segment likely to remain stable at around 8%
between Dec 2019 and Mar 2021

Analysing past trends indicates that the sector has witnessed continuous expansion in the invested capital
over the last several years. According to latest available government data26 between FY 2013-14 and FY
2017-18, the invested capital to the sector grew with a CAGR of 9.2% (Refer Chart 12).

Chart 12: Investments and Employment (in Lakh)

7.4
6.8
6.2 6.5
6.1

125.9 132.9 155.7 166.2 179.4

FY 2013-14 FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18

Invested Capital (INR) Total Persons Engaged

Source: Annual Survey of Industries FY 2013-14 to FY 2017-18, Ministry of Statistics and Programme Implementation,
Government of India

25 World Population Prospects 2019, United Nations

26 As per scope and coverage defined in Annual Survey of Industries FY 2013-14 to FY 2017-18, Ministry of Statistics and Programme

Implementation, Government of India

Page: 20
The sector boasts of a large supply of competent labour pool, providing the necessary enabling environment
for labour force to grow and nurture. The sector witnessed a whopping 44% growth in employment in
2018-19, and a CAGR of 4.5% between FY 2013-14 and FY 2017-18 as per latest available government data27 .

In terms of the geographical spread, Gujarat, Maharashtra, Telangana, Karnataka and Andhra Pradesh are
the top 5 states constituting as much as 65% of the employment generated by the sector in 2018-1928.
Himachal Pradesh, Uttrakhand, Tamil Nadu, Goa and Madhya Pradesh account for another 20% of the overall
employment in the sector in 2018-1929.

In the recent times, the drugs and pharmaceutical industry has gained renewed global attention due to the
crisis brought about by COVID-19, with Indian companies having joined the race to develop and
mass-produce an effective vaccine to fight the novel Coronavirus. While, India has had a steady flow of FDI in
this sector in the past, permission to invest 100% in greenfield projects has given further impetus to the many
global players who are looking at moving operations out of China.

Moreover, in the wake of COVID-19 causing drug and personal protective equipment (PPE) shortages across
the world, the recent USFDA approvals of several large companies in India for their manufacturing facilities in
cities like Nagpur, Bangalore has given further boost to pharmaceutical and related manufacturing in India
and attracting further investments in the sector.

However, the pandemic has also brought about challenges for the MSMEs in the drugs and pharmaceutical
industry, hampering smooth functioning and increasing costs of operations for them. Based on a short survey
of the enterprises, assisted by SIDBI, some of the most widely faced impediments are:

Marketing Related Supply Chain Related

Marketing Representatives (MRs) are not able to Transport costs have increased resulting in
travel to market the product due to lockdown distribution / transportation issues

Launch of new products is getting hampered Delay in export dispatch due to limited number
as doctors are not attending their clinics of operating flights, increasing costs further

Policy Related Finance Related

Product approval policies and procedures Increase in raw material costs

are complex and need to be made simpler
Shorter repayment cycles of credit for raw
material
Delayed realization of receivables

27 Annual Survey of Industries FY 2013-14 to FY 2017-18, and ASI Frame FY 2018-19, Ministry of Statistics and Programme Implementation,

Government of India
28 Annual Survey of Industries Frame FY 2018-19, Ministry of Statistics and Programme Implementation, Government of India

29 Annual Survey of Industries Frame FY 2018-19, Ministry of Statistics and Programme Implementation, Government of India

Page: 21
With the gradual easing of lockdown and continuous efforts by the government to curtail the pandemic as
well as support the MSMEs in these tough times through favourable polices and financial assistance, the
sector is expected to bounce back with the same fervour, in no time.

The increasing penetration of health insurance in the country is another factor that is expected to boost
growth of the drugs and pharmaceutical industry. Growth in adoption of health insurance is expected to drive
expenditure on medicine leading to expansion of health care services and pharmaceutical market in India.
This has also received government support, with INR 6,400 crore being allocated to Ayushman Bharat Scheme
in FY 2020-21.

DROC Analysis

DRIVERS RESTRAINTS
Having received clearances from USFDA, several MSME credit to emerging pharmaceutical clusters
mid and large corporates are looking to expand in the country is still at only 8% of the overall MSME
their manufacturing capacities in India, also credit to the sector
reflected in projected increase in growth of credit
by 13% by Mar 2021* Despite efforts by the government, awareness,
accessibility and affordability of healthcare
Global demand for generics is on the rise driving systems still remains a concern in several
India’s exports small/rural pockets of the country

Favourable government policies and fiscal Regulatory interventions like price controls in
stimulus in the recent past to support Indian domestic market and compulsory genericization
companies in the sector and strong focus on in overseas market
alternate medicine - AYUSH which already has a
presence of nearly 9000 manufacturing units

DROC
Indian Drugs and
Pharmaceutical
Industry
CHALLENGES OPPORTUNITIES

Dependency on China for import of raw material Recent developments in the global markets due to
for generic medicines production the COVID-19 pandemic have provided the
opportunity for India to further expand its drugs
Counterfeit parallel market reduces sales and and pharmaceutical exports
profit margins for genuine players
Surge in medical tourism for general and alternate
Relatively slow pace of innovation and small R&D medicine with inflow of patients from outside India
investments, impacts the ability of the industry to
expand its manufacturing capabilities India’s CRAM industry has a high potential for
growth with many large global players looking to
outsource pharmaceutical manufacturing and
research to India due to cost and quality
advantages

*Actual performance may vary due to COVID- 19 impact which may be beneficial or detrimental to the sector

According to industry body, IPA30, the next wave of growth could come from increasing exports to large and
traditionally under penetrated markets such as Japan, China, Africa, Indonesia, and Latin America. At this
juncture, there is need for stronger collaboration between drugs and pharmaceutical companies, the
government and the regulatory agencies to achieve the aspiration of becoming one of the top 5 drugs and
pharmaceutical industries by value, and the largest supplier by volume, in the world by 2030.

30 The Indian pharmaceutical industry – the way forward, June 2019, Indian Pharmaceutical Alliance

Page: 22
 Disclaimer
This report contains only aggregate level information. It does not contain any Credit Information and shall not
be construed as Credit Information Report or part thereof. The analysis in this report is based on Credit
Information in CRIF High Mark’s database. The results are NOT to be construed or used as a "legal description".
CRIF High Mark strives to keep its data accurate and up to date but does not guarantee its accuracy. CRIF High
Mark does not assume any liability for any errors, omissions, or inaccuracies in the data provided regardless
of the cause of such or for any decision made, action taken, or action not taken by the user in reliance upon
any data provided herein. The contents of the report shall not be reproduced in part or whole without
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recipient(s) and no liability or responsibility is accepted by CRIF High Mark for the content herein.

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