Current situation in a nutshell (Based on my discussion with Industry participants):
- Relevance of China in India Pharma context:
- 2/3rd of API and KSM are imported from China (Over the years, share has gone up by 4-5% YoY)
- Therapies where China holds Leadership (in return commands pricing movement)
- Vitamins
- Steroids
- Antibiotics
- For the bulk commodity APIs (High volume, low value), >50% of market share is with China
- Inventory Levels:
- Sufficient Inventory till April (Typically, in API – RM Inventory days (of sales) ~70-90 days)
- Companies with urgent supplies requirement airlifting RM from China (This mode of transport is expensive and requires extensive govt. approvals)
- Example – Granuels India & Cipla
- Pricing:
- Generally, prices across therapies have shot up by 30-40% in China
- In India, the prices of the same APIs have gone further up by 20-30% from Chinese pricing levels
- Challenges:
- Manpower attendance a) Factory Level b) Ports c) In road logistics – 10-20% attendance across segments
- Example – At JNPT, labours have given notice to not work for 10-15 days
- Manufacturing – Overall utilisation Levels are at 30-40% (RM is available but no manpower to run the plant at optimum capacity)
- Manpower attendance a) Factory Level b) Ports c) In road logistics – 10-20% attendance across segments
- Categorisation of APIs:
- High Risk: Dependence on China is High + Manufactured in Infected areas (Vitamins and Steroids)
- Medium Risk: Dependence on China is Medium + Not manufactured in the infected areas
- Low Risk: Alternatives outside China available in ample
- De risking from China
- Upfront Capex + gestation period to achieve scale is a big entry barrier – China to continue holding Leadership position on Manufacturing side
- Ideally, post the crisis, de-risking will happen but very slowly towards – India, Taiwan and South Korea
Stay Safe!
Cheers – Anuj Khandelwal
