Profitability Trends in Select Pharmaceutical Companies In India: A Cross Sectional Analysis

Abstract

The pharmaceutical sector plays a pivotal role in India’s economic landscape, serving as a significant driver of growth and development. As of 2021, the Indian pharmaceutical market was valued at approximately $41 billion, ranking third in terms of volume and 13th in terms of value globally. This sector’s substantial contribution to India’s Gross Domestic Product (GDP) is apparent, with a consistent contribution ranging from approximately 1.5% to 2% of the country’s GDP, as indicated by India Brand Equity Foundation (IBEF’s) reports. Furthermore, the pharmaceutical industry in India is a major employer, directly providing livelihoods to a staggering 2.7 million individuals, with additional indirect employment opportunities spanning various skill levels (PwC India). Remarkably, India’s pharmaceutical sector has made substantial progress in manufacturing affordable generic medications, resulting in improved healthcare accessibility, not only within the nation but also in global markets. This endeavor has earned India the recognition as the “pharmacy of the developing world,” exerting a significant influence on the affordability of healthcare worldwide. Moreover, the sector’s substantial pharmaceutical exports, reaching $24.44 billion in 2020, have played a crucial role in balancing India’s trade, underscoring its positive contribution to the nation’s economic stability. Additionally, the industry’s emphasis on research and development has not only driven innovation but has also attracted foreign investments, bolstering India’s technological capabilities. Therefore, it can be said that the multifaceted contributions of the Indian pharmaceutical sector have been instrumental in advancing India’s economic prosperity and global reputation. Profitability analysis plays a pivotal role for the stakeholders of a company in shaping their decisions, perspectives, and engagements with the company. It acts as a crucial measure of the company’s financial well-being and steadiness, influencing the dynamics between the company and its investors, employees, customers, and management. In essence, it serves as a fundamental yardstick that defines the interconnections and associations among various stakeholders and the company itself. Being so, the present study aims to examine the profitability trends of ten selected companies in India’s pharmaceutical sector from 2004- 05 to 2022-23, encompassing the post-reform era.