Pharmacy Retail Market – India July 2015
Executive Summary Market
Drivers & Challenges
Trends
The Indian pharmacy retail market is currently valued at INR x bn and is estimated to reach INR y bn by 2019 The market is distinctly fragmented into organized and unorganized players with ~x% of the market being dominated by the unorganized segment in 2014
Drivers
Challenges
Loyalty Schemes Value Added Services Entry of Government in Pharmacy Retailing Organized Retailers Starting Pharmacy Chains Entry of Private Labels
Rural Expansion Health Insurance Plans made available in pharmacies Tracking of Counterfeit Drugs
Growth in Pharmaceuticals Sector Rising Healthcare Expenditure Changing Disease Profile Growth in OTC Segment Consumer Attitude Attractive Margins
Capital Intensive Business Fragmented Industry Counterfeit Drugs
Key Players
Competitive Landscape
Company A
Company B
Company C
Company D
Company E
Company F
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•Macroeconomic Indicators •Introduction
•Market Overview •Drivers & Challenges •Key Trends •Government Regulations •Industry Association •Technology Adoption •Competitive Landscape •Strategic Insights •Appendix PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Macroeconomic Indicators (3/3) Lending Rate: Annual x
x
x
x
x
Trade Balance: Annual x
x
x
x
x
x
x
% Per Annum INR tn
x
x
2011-12 x
x x x
x
x
x
x
x 2012-13
2011-12 2012-13 N.B.: 2012-13 encompasses figure for Apr2013-14 – Nov 2012
x
2014-15
FDI: Annual x 2013-14 x
INR bn x
x
x
2014-15 x
x
x
x
2012-13
2013-14
x
x Min
Max
Commercial Bank Rates: Key Lending Rates as Prescribed by RBI (All Commercial Banks including SBI) - Minimum Rate General
x 2010-11
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
2011-12
4
Healthcare system in India requires a larger public outlay due to the huge population base Healthcare Industry Overview
Healthcare Sector – Market Size & Growth
• Indian healthcare industry contributes ~x% to the Gross Domestic Product (GDP) and was estimated to be valued at INR x tn in 2014 • Favorable demographics, increase in awareness levels, improvement in medical insurance penetration, better medical care are some factors that are driving the healthcare sector in India • Hospitals form the largest segment of overall healthcare market, followed by pharmacy, medical equipments, diagnostics and thereafter, medical insurance • Gradual penetration of health insurance is stepping up affordability of health services through increased demand for preventive and curative healthcare services • Superior quality healthcare, coupled with low treatment cost in comparison to other countries, is benefitting Indian medical tourism, thereby steering forth Indian healthcare market
tn x x x
x
x
x
x
x
2013
2014
2015e
x x
x
0 2016e
2017e 2018e 2019e
Market Segmentation – Overview (2013) Hospital
x
x
Pharmaceutical Medical Devices
x x
Diagnostics
x
Treatment for major surgeries in India costs approximately x% of that in developed countries
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
Health Insurance Others
x
5
FDI Inflow into Indian Healthcare Segments Several healthcare segments in India have earned good volume of FDI over a 14- year span between Apr 2000 to Feb 2014
Drugs and pharmaceuticals sector
INR x bn
Hospital and diagnostic centers
INR x bn
Medical and surgical appliances
INR x bn
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Disparity in income levels across population strata results in income elasticity of demand for healthcare Healthcare Expenditure of Population by Economic Standard Top 10% Population
Medicine
Doctor/ Surgeon’s Fees
Medical Diagnostics
Hospital/ Nursing Home Fees
x
Middle 40% Population
Bottom 50% Population
x
x
x
x
x
x
x
x
x
x
x
• Private healthcare spending is highly disparate for top x% and bottom x% population strata, which gets even more pronounced in cases of medical diagnostics and hospitalization • According to recent statistics, income elasticity of demand for healthcare is over x N.B.: Data as per NSSO 2011 PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Pharmacy retail has become the fastest growing traditional trade channel for FMCG companies Pharmacy Retail – Market Overview (1/2) • Indian pharmacy retail stands out as a lucrative market that still remains underpenetrated, projecting strong potential • Growth of pharmaceutical sector has a direct impact on pharmacy retail sector which is the major sales format apart from institutional sales • Currently the pharmacy retail market in India has over x pharmacy retail outlets and more than x stockists/distributors • Pharmacy retail chains have become preferred trade partner for consumer product companies and FMCG contributed around 9% to the overall pharmacy retailers revenue in 2014
Market Size and Growth
Market Segments – 2014
INR bn
x
x
x
x
x
x x
x
x
x
x
x x
x
x
0 2013
2014 2015e 2016e 2017e 2018e 2019e
Pharmaceutical Contribution
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
FMCG Contribution
8
Unorganized segment dominates a large volume of the pharmaceutical retail market Pharmacy Retail – Market Overview (2/2) • The unorganized market is huge and is roughly valued at INR x bn occupying x% of the total market size in 2014 The unorganized pharmacy retail market is growing at a CAGR of x% while organized pharmacy retail is expected to grow at a CAGR of x% There should be a significant change in the market segmentation by 2019 when organized retail will capture approximately x% market from the current x% share Health awareness among consumers will result in gradual shift towards the modern pharmacy retailers
• In India, pharmacies are the dominant distribution channels generating ~x % of overall pharmaceutical sales
Organized Market Size and Growth
Unorganized Market Size and Growth
INR bn
INR bn
x
x
x x x
x x
x
x x 0
x
x
x x
x
x
x x
x
x
x
x
x
x
x x
x 0
2013
2014 2015e 2016e 2017e 2018e 2019e
2013
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
2014 2015e 2016e 2017e 2018e 2019e
9
Drivers & Challenges
Drivers Growth in Pharmaceuticals Sector
Challenges
Rising Healthcare Expenditure
Capital Intensive Business
Changing Disease Profile
Fragmented Industry
Growth in OTC Segment
Counterfeit Drugs
Consumer Attitude Attractive Margins
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Growing Indian pharmaceutical industry stimulates the pharmacy retail market Growth in Pharmaceuticals Sector
Impact
• XX • XX • XX • XX • XX
Pharmaceutical Market Size and Growth
INR bn x x x
x
15.7%
x
x
x
2013
2014
2015e
x
x
x
x 0 2016e
2017e
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
2018e
2019e 11
Rise in chronic diseases is driving growth of pharmaceutical sector, thus promoting the pharmacy retailing business Changing Disease Profile
Impact
• The disease profile in India is changing from infectious diseases to lifestyle-based diseases, which requires more intensive care • The incidences of lifestyle-based diseases has increased with changing lifestyle India is home to a large number of heart disease, stroke, cancer, diabetes and respiratory infection affected patients Stress, sedentary lifestyles and unhealthy food habits are key reasons for the growing number of patients who suffer from lifestyle-based ailments that are of long duration and slow progression
• This will entail medication on an ongoing basis, which in turn will make prescription-based medicines mandatory for expansion of the pharmacy retail business in India Diabetes Patient – India
Cancer Patient – India ‘000
mn
x
x x
x
x
x
x
x
x
x x
x
x x
x
0 2012 2013e 2014e 2015e 2016e 2017e 2018e
x
x
x
x
Male Femalee
2013
2020e
• As of Apr 2015, Chronic diseases account for ~x% of all deaths in India • These diseases will cost India ~INR x tn between 2012 and 2030 in terms of economic output PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Pharmacy retail business is a capital intensive proposition that involves strategic location of outlets Capital Intensive Business
Impact
• Pharmacy retailing is a capital intensive business proposition and stands out as a catchment specific business Pharmacy Retail Business – A Catchment Specific Business Success Involves Proximity To
Hospital area
Commercial area
Spells burden on the business operators due to prohibitive real estate cost in such areas • Pharmacy retail in today’s scenario essentially involves store expansion and its multiplication Each store involves an approximate cost of
Each store requires minimum
to set up and start operation
to breakeven PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Key Trends
Loyalty Schemes Value Added Services Entry of Government in Pharmacy Retailing Organized Retailers Starting Pharmacy Chains
Trends ` Entry of Private Labels Rural Expansion Health Insurance Plans Made Available in Pharmacies
Tracking of Counterfeit Drugs
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Introduction of private labels by organized retailers pushes their business Entry of Private Labels • Some retail chains are now getting generic drugs, such as paracetamol, contract-manufactured by licensed third-parties and then marketing them under their own brand-names Private labels to provide low cost alternative medicines
Company A • XX • XX • XX • XX
Company B • XX • XX • XX Attractive Pricing – Private Label Brands X
X
X
Currently, Organized Pharmacy Retailer’s private label portfolio comprises X% of their overall products PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Government Role: Summary
Licence Procurement
Role of Government
Foreign Direct Investment
Ownership Restrictions
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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All India Organization of Chemists and Druggists (AIOCD) •XX •XX Initiatives to Organize the Unorganized Segment of Pharmacy Retail The Organization with its members have decided to go for a common brand name, logo and color code
There are plans to open new shops for members that will be inter-connected electronically, using common branding
• XX • XX • XX • XX
The association has hired brand consulting firm Chlorophyll for ‘Chlorophyll’ forbrand-building brand-buildingexercise exerciseand andproviding providingITIT support to chemists and back-end processes, which is expected to bring down costs significantly
•X
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Technology Adoption: Summary
Customer Relationship Management
Technology Trends
Supply Chain Management
Enterprise Resource Planning
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Porter’s Five Forces Analysis Impact X Threat of New Entrants •X
Impact X
Impact X Impact X
Bargaining Power of Suppliers •X
Competitive Rivalry
Bargaining Power of Buyers •X
•X
Impact X Threat of Substitutes •X
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Competitive Benchmarking (3/3) Key Ratios of Top 3 Companies – Operational Basis (FY 2014) (3/3) Debtors Turnover Ratio 2012
Asset Turnover Ratio
2014
x
x
x
2013
x
x
x
x x
x
x
x x
0
0 Emami Frank Ross Ltd.
RWL Healthworld
x
x x x Emami Frank Ross Ltd.
RWL Healthworld
The Himalaya Drug Company
• XX • XX • XX
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Public: Domestic Company – Company A (1/4) Company Information
Corporate Address
XX
Tel No.
XX
Fax No.
XX
Website
XX
Year of Incorporation
XX
Ticker Symbol
XX
Stock Exchange
XX
Offices and Centres – India
Head Office Chennai
Products and Services Category
Products/Services
XX
XX
XX
XX
Key People Name
Designation
XX
XX
XX
XX
XX
XX
XX
XX
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Public: Domestic Company – Company A (2/4) Financial Snapshot Total Revenue
INR bn 60 40 20
1.84 26.05
2.19 31.48
Key Ratios Net Profit / Loss 3.04
37.99
INR bn
3.17
43.84
0
4 2 0
Particulars
2011
2012
2013
2014
Gross Margin %
30.6%
31.4%
31.7%
31.2%
Net Income Margin %
7.10%
7.00%
8.00%
7.20%
EBITDA Margin %
16.20%
16.50%
17.00%
15.30%
Profitability Ratios
EBITA Margin %
0.13
0.13
0.13
0.12
EBIT Margin %
12.60%
12.70%
13.20%
11.60%
Financial Summary
Return on Assets %
6.00%
6.50%
7.10%
6.20%
• The company earned a net profit of INR 3.17 bn in FY 2014, as compared to net profit of INR 3.04 bn in FY 2013
Return on Working Capital %
7.5%
8.0%
8.7%
7.7%
Return on Equity %
10.1%
9.8%
11.5%
11.0%
Current Ratio
1.39
1.46
2.12
1.88
Cash Ratio
0.96
1.04
1.60
1.20
Total Debt/Equity
0.50
0.32
0.41
0.45
Total Debt/ Working Capital
0.33
0.24
0.29
0.31
Interest Coverage
4.45
4.95
5.51
4.74
2011
2012
2013
2014
• The company reported total revenue of INR 43.84 bn in FY 2014, registering an increase of 15.4 % over FY 2013 • The company earned gross margin of 31.2 % in FY 2014, as compared to 31.7% in 2013 • The company reported debt to equity of 0.45 in FY 2014, as compared to 0.41 in 2013
Financial Summary
Liquidity Ratios
Leverage Ratios
Efficiency Ratios
Indicators
Value (08/07/2015)
Total Asset Turnover
0.76
0.82
0.86
0.86
Market Capitalization (INR mn) Total Enterprise Value (INR mn) EPS (INR) PE Ratio (Absolute)
181,328.8 194,967.9 N.A. N.A.
Fixed Asset Turnover
1.55
1.63
1.64
1.58
Accounts Receivable Turnover
9.95
9.16
8.76
8.83
Inventory Turnover
12.06
12.34
12.65
12.14
Note: Parent Company Financials
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Public: Domestic Company – Company A (3/4) Key Business Segments Healthcare Services
Key Geographic Segments Pharmacy
Others
100% 50% 0%
India 100%
72.7%
70.0%
67.4%
68.9%
50%
25.2% 2.1% 27.1% 2.9% 29.0% 3.6% 31.1%
2011
2012
2013
2014
100%
India is the only geographic segment in which the publicly listed company operates
0% 2014
Business Highlights Description
News
Overview
• XX
Pharmacy Retail
• XX
Acquisition
• XX
Future Plans
• XX PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Public: Domestic Company – Company A (4/4)
•X
•X
S
W
O
T
•X
•X
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Private: Domestic Company – Company B (1/5) Company Information Corporate Address
X
Tel No.
X
Fax No.
X
Website
X
Year of Incorporation
X
Offices and Centres – India
Kolkata
Products and Services Category
Products/Services
X
X
Head Office
Key People
X
X
X
X
Name
Designation
X
X
X
X
X
X
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Private: Domestic Company – Company B (1/5) Shareholders of the Company Name
Ownership Structure No. of Shares held
Bodies corporate Directors or relatives of directors
X
82,739
X
78,400
X
52,500
X
39,000
X
36,000
X
3,449,861 Total
Other top 50 shareholders
26.5%
0.4%
3,738,500 73.1%
Ownership structure corresponds to Date of AGM: 10/09/2014
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Private: Domestic Company – Company B (3/5) Financial Snapshot
Key Ratios
Total Revenue
Net Profit/Loss
INR mn 3000
INR mn 45.0 6.8
2000 1000
Particulars
1582.9
1848.7
1.6 1997.6
-21.4
2513.9
0
50
0
-50 2011
2012
2013
2014
2011
2012
2013
2014
N.A.
N.A
N.A
N.A
Net Income Margin %
2.84%
0.37%
0.08%
-0.85%
EBITDA Margin %
18.25%
15.39%
15.39%
11.36%
N.A.
N.A
N.A
N.A
EBIT Margin %
16.95%
13.94%
13.80%
9.64%
Return on Assets %
5.16%
0.54%
0.13%
-1.44%
Return on Working Capital %
33.90%
NA
61.46%
NA
Return on Equity %
32.51%
10.63%
2.49%
-48.60%
Current Ratio
2.14
0.99
1.28
0.95
Cash Ratio
0.47
0.10
0.25
0.12
Profitability Ratios Gross Margin %
EBITA Margin %
Liquidity Ratios
Financial Summary • Company incurred a net loss of INR 21.4 mn in FY 2014, as compared to net profit of INR 1.6 mn in FY 2013
Leverage Ratios
• It reported total income of INR 2513.9 mn in FY 2014, registering an increase of 25.9 % from FY 2013
Total Debt/Equity
4.29
14.51
14.13
21.99
Total Debt/ Working Capital
1.66
NA
4.45
NA
• The company reported debt to equity of 21.99 in FY 2014, as compared to 14.13 in 2013
Interest Coverage
4.79
2.28
2.19
1.71
Total Asset Turnover
1.97
1.74
1.58
1.82
Fixed Asset Turnover
6.19
5.97
5.86
6.11
Accounts Receivable Turnover
25.69
32.87
32.05
32.63
Inventory Turnover
3.01
2.13
2.63
2.69
Efficiency Ratios
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Private: Domestic Company – Company B (4/5) Business Highlights Description
News
Overview
• XX
Pharmacy Retail
• XX
Future Plans
• XX
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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Private: Domestic Company – Company B (5/5)
• XX
• XX
S
W
O
T
• XX
• XX
PHARMACY RETAIL MARKET IN INDIA 2015.PPT
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