market research report : pharmacy retail market in india 2015 - sample

Pharmacy Retail Market – India

July 2015

2

Executive Summary

PHARMACY RETAIL MARKET IN INDIA 2015.PPT

Market

Drivers & Challenges

Competitive Landscape

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 Growth in Pharmaceuticals Sector Rising Healthcare Expenditure Changing Disease Profile Growth in OTC Segment Consumer Attitude Attractive Margins

Trends

Challenges Capital Intensive Business Fragmented Industry Counterfeit Drugs

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

Key Players

Company A Company B Company C

Company D Company E Company F

3 PHARMACY RETAIL MARKET IN INDIA 2015.PPT

•Macroeconomic Indicators

•Introduction

•Market Overview

•Drivers & Challenges

•Key Trends

•Government Regulations

•Industry Association

•Technology Adoption

•Competitive Landscape

•Strategic Insights

•Appendix


Macroeconomic Indicators (3/3)

Lending Rate: Annual

x x x x x x x x x x x x %

Per Annum

2014-15 x

x

2013-14 x

x

2012-13 x

x

2011-12 x

x

Max Min

Trade Balance: Annual

Commercial Bank Rates: Key Lending Rates as Prescribed by RBI (All Commercial Banks including SBI) - Minimum Rate General

N.B.: 2012-13 encompasses figure for Apr – Nov 2012

FDI: Annual

x

x

x

x

INR

tn

2014-15

x

2013-14

x

2012-13

x

2011-12

x

x

x

x

x

INR bn

2013-14

x

2012-13

x

x

2011-12

x

2010-11

5

Healthcare system in India requires a larger public outlay due to the huge population base


Healthcare Industry Overview

• 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

Treatment for major surgeries in India costs approximately x%

of that in developed countries

Healthcare Sector – Market Size & Growth

Market Segmentation – Overview (2013)

x

x

x

0

tn

x

2019e

x

2018e

x

2017e

x

2016e

x

2015e

x

2014

x

2013

x

x

x x

x

x

x

Others

Diagnostics

Health Insurance

Medical Devices

Pharmaceutical

Hospital

6

INR x bn

INR x bn

INR x bn

Drugs and pharmaceuticals sector

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

Hospital and diagnostic centers

Medical and surgical appliances


7

Disparity in income levels across population strata results in income elasticity of demand for healthcare

Medical Diagnostics x x x

Doctor/ Surgeon’s Fees x

Hospital/ Nursing Home Fees x x x

x x

Medicine x x x

Top 10% Population Bottom 50% Population Middle 40% Population

• 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

Healthcare Expenditure of Population by Economic Standard


N.B.: Data as per NSSO 2011

8

Market Size and Growth Market Segments – 2014


Pharmacy retail has become the fastest growing traditional trade channel for FMCG companies

• 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

Pharmacy Retail – Market Overview (1/2)

x

x

x

x

x

0

x

2019e

x

2018e

x

2017e

INR bn

x

2016e

x

2015e

x

2014

x

2013

x

x

x

FMCG Contribution Pharmaceutical Contribution


Unorganized segment dominates a large volume of the pharmaceutical retail market

• 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

Pharmacy Retail – Market Overview (2/2)

Organized Market Size and Growth Unorganized Market Size and Growth

x

x

x

x

x

x

x

0

INR bn

x

2019e

x

2018e

x

2017e

x

2016e

x

2015e

x

2014

x

2013

x

0

x

x

x

x

2019e

x

2018e

x

2017e

x

2016e

x

2015e

x

2014

INR bn

x

x

2013

x


Drivers & Challenges

Drivers

Growth in Pharmaceuticals Sector

Rising Healthcare Expenditure

Changing Disease Profile

Growth in OTC Segment

Consumer Attitude

Attractive Margins

Challenges

Capital Intensive Business

Fragmented Industry

Counterfeit Drugs


Growing Indian pharmaceutical industry stimulates the pharmacy retail market

Growth in Pharmaceuticals Sector Impact

• XX

• XX

• XX

• XX

• XX

x

x

x

x

0

15.7%

2019e

x

2018e

x

2017e

x

2016e

x

2015e

x

2014

x

2013

x

INR bn

Pharmaceutical Market Size and Growth


Rise in chronic diseases is driving growth of pharmaceutical sector, thus promoting the pharmacy retailing business

• 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

Changing Disease Profile Impact

Diabetes Patient – India

x

x

x

mn x

2018e

x

2017e

x

2016e

x

2015e

x

2014e

x

2013e

x

2012

x

x

x

x

x

0

‘000

2020e

x x

2013

x x Femalee

Male

Cancer Patient – India

• 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 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 in today’s scenario essentially involves store expansion and its multiplication

Each store involves an approximate cost of to set up and start operation

Each store requires minimum to breakeven

Pharmacy Retail Business – A Catchment Specific Business

Hospital area Commercial area

Success Involves Proximity To

Spells burden on the business operators due to prohibitive real estate cost in such areas


Key Trends

` Trends

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


Introduction of private labels by organized retailers pushes their business Entry of Private Labels

Private labels to provide low cost

alternative medicines

• XX

• XX

• XX

• XX

Company A

• XX

• XX

• XX

Company B

Attractive Pricing – Private Label Brands

X X X

Currently, Organized Pharmacy Retailer’s private label portfolio comprises X% of their overall products

• 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

16

Government Role: Summary

Role of

Government

Licence Procurement

Foreign Direct Investment

Ownership Restrictions



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

The association has hired brand consulting firm Chlorophyll for brand-building exercise and providing IT support to chemists and back-end processes, which is expected to bring down costs significantly

• XX • XX • XX • XX

The association has hired brand consulting firm ‘Chlorophyll’ for brand-building exercise and providing IT support to chemists and back-end processes, which is expected to bring down costs significantly

• X


Technology Adoption: Summary

Technology Trends

Customer Relationship Management

Supply Chain Management

Enterprise Resource Planning


Porter’s Five Forces Analysis

Competitive Rivalry • X

Bargaining Power of Suppliers

• X

Bargaining Power of Buyers • X

Threat of Substitutes • X

Threat of New Entrants • X

Impact X

Impact X

Impact X

Impact X

Impact X

20

Key Ratios of Top 3 Companies – Operational Basis (FY 2014) (3/3)

Competitive Benchmarking (3/3)

x

x

x

x

0

The Himalaya Drug Company

x

RWL Healthworld

x

Emami Frank Ross Ltd.

x

Asset Turnover Ratio

• XX

• XX

• XX

x

x

x

0

RWL Healthworld

x x

x

Emami Frank Ross Ltd.

x x x

2014 2012 2013

Debtors Turnover Ratio


21

Public: Domestic Company – Company A (1/4)

Key People Products and Services

Company Information Offices and Centres – India

Corporate Address XX

Tel No. XX

Fax No. XX

Website XX

Year of Incorporation XX

Ticker Symbol XX

Stock Exchange XX

Category Products/Services

XX XX

XX XX

Name Designation

XX XX

XX XX

XX XX

XX XX

Chennai

Head Office


22

Key Ratios

Financial Summary • 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

• 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

Indicators Value (08/07/2015)

Market Capitalization (INR mn) 181,328.8

Total Enterprise Value (INR mn) 194,967.9

EPS (INR) N.A.

PE Ratio (Absolute) N.A.

Particulars 2011 2012 2013 2014

Profitability Ratios

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%

EBITA Margin % 0.13 0.13 0.13 0.12

EBIT Margin % 12.60% 12.70% 13.20% 11.60%

Return on Assets % 6.00% 6.50% 7.10% 6.20%

Return on Working Capital % 7.5% 8.0% 8.7% 7.7%

Return on Equity % 10.1% 9.8% 11.5% 11.0%

Liquidity Ratios

Current Ratio 1.39 1.46 2.12 1.88

Cash Ratio 0.96 1.04 1.60 1.20

Leverage Ratios

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

Efficiency Ratios

Total Asset Turnover 0.76 0.82 0.86 0.86

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

Financial Snapshot

Net Profit / Loss Total Revenue

4

2

0

60

40

20

0

INR bn INR bn

2014

3.17

43.84

2013

3.04

37.99

2012

2.19

31.48

2011

1.84

26.05

Note: Parent Company Financials



23

Key Business Segments Key Geographic Segments

Business Highlights

Description News

Overview • XX

Pharmacy Retail • XX

Acquisition • XX

Future Plans • XX

27.1% 29.0% 31.1%

72.7% 70.0% 67.4% 68.9%

3.6%2.9%2.1%25.2%0%

50%

100%

2014 2013 2012 2011

100%

50%

0%

2014

100%

India is the only geographic segment in which the publicly

listed company operates

Others Pharmacy Healthcare Services India



24

• X • X

• X • X

T O

W S



25

Private: Domestic Company – Company B (1/5)

Key People

Products and Services

Company Information Offices and Centres – India

Corporate Address X

Tel No. X

Fax No. X

Website X

Year of Incorporation X

Name Designation

X X

X X

X X

Category Products/Services

X X

X X

X X

Kolkata

Head Office


26

Shareholders of the Company Ownership Structure

Name No. of Shares held

X 82,739

X 78,400

X 52,500

X 39,000

X 36,000

X 3,449,861

Total 3,738,500


26.5%

0.4%

73.1%

Ownership structure corresponds to Date of AGM: 10/09/2014

Other top 50 shareholders

Directors or relatives of directors

Bodies corporate


27

Financial Snapshot Key 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

• It reported total income of INR 2513.9 mn in FY 2014, registering an increase of 25.9 % from FY 2013

• The company reported debt to equity of 21.99 in FY 2014, as compared to 14.13 in 2013

Net Profit/Loss Total Revenue

3000

-50

0

50

2000

1000

0

INR mn INR mn

2014

-21.4

2513.9

2013

1.6

1997.6

2012

6.8

1848.7

2011

45.0

1582.9

Particulars 2011 2012 2013 2014

Profitability Ratios

Gross Margin % 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%

EBITA Margin % 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%

Liquidity Ratios

Current Ratio 2.14 0.99 1.28 0.95

Cash Ratio 0.47 0.10 0.25 0.12

Leverage Ratios

Total Debt/Equity 4.29 14.51 14.13 21.99

Total Debt/ Working Capital 1.66 NA 4.45 NA

Interest Coverage 4.79 2.28 2.19 1.71

Efficiency Ratios

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



28

Description News

Overview • XX

Pharmacy Retail • XX

Future Plans • XX

Business Highlights



29

• XX • XX

• XX • XX

T O

W S



30

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