Collating the different investment rationales together, we feel this is fundamentally the best time to invest into the Indian Pharmaceutical space.
One of the essential triggers to bet on is the much awaited huge Generic opportunity for which the Indian Pharma Companies are aptly placed with strong chemistry, manufacturing and regulatory skills.
On the domestic front as well, the Indian players have been equally focused with the shift towards the high margin chronic segments.
The financial profile of the Indian companies will be further enhanced due to the cash flow support by the one-time opportunities and the strong pipeline of products.
The transition towards becoming conservative players in terms of acquisitions has helped in rationalizing the investments into high risk R&D portfolios.
Going forward, developments in terms of increasing the target markets, better product mix and improved business strategies would lead to margin expansions with high revenue visibility with limited downside that should help sustain the Pharma industry's premium valuations.
Furthermore, with the global players facing immense business pressure owing to the patent expiries, no major blockbusters to bet on and the regulatory environment that is getting tougher by the day, there is a diversion of business towards the emerging markets, major beneficiary of which being the Indian pharmacos.
Thus, with the business environment conducive for the Indian Pharma companies, we recommend a selective investment approach towards the sector, emphasizing on companies that have the capability to capitalize on patent expiries in the US, have a strong and stable core business, sound financials to bet on and rich pipeline of growth.