The healthcare market in India is expected to reach a staggering US$ 372bn size by 2022, on backs of rising incomes, greater health awareness, lifestyle diseases and the corresponding growth of the insurance industry. The recent depreciation of the Indian Rupee (INR) is a welcome act for the Indian healthcare companies, which have a high US sales exposure. This has led to material margin tailwinds for healthcare companies, notably Cadila, DRL, Lupin, Glenmark and Sun. Rising cost of raw materials is however, a rising concern as disruptions in the supply of key starting materials from countries like China, along with the depreciating INR has led to price increases, causing a 100-150bps impact on sector sales thus far in FY2019. The hospital sector will see positive developments as the hospital and diagnostic segment is in a consolidation phase, focusing on improving profitability. Companies are now increasingly focusing on controlling the costs and have even resorted to business restructurings to counter the challenges in the US market place, which is expected to consolidate sector earnings. However, to ensure a long lasting positive impact on the industry, it might be necessary to bring in further efficiencies. The right time is now, which the companies do realize fortunately. Focusing on improving the doctor-patient ratio, introducing the GPO (“Group Purchasing Organization”) model, improving the quality of medicines are the major addressable concerns to result in the healthy recovery of the sector.
