Gland Pharma leads drug stocks higher as weak rupee boosts margins, export revenue

India's export-focused pharma sector was a bright spark in an otherwise weak market as a falling rupee added to the allure of dollar-centric revenues and expanding margins.

Investors boosted Gland Pharma 15 per cent higher on Monday as the company gets 95 per cent of its annual revenue from overseas, more than half of it coming from the United States. Among the top 10 drug companies ranked by revenue, shares of Divi's Labs, Aurobindo Pharma and Dr. Reddy Laboratories, Cipla Ltd and Sun Pharma have rallied between 9-16 per cent in the past month.

Indian pharma companies are the direct beneficiaries of a falling rupee. In addition, they are enjoying a rare combination of two tailwinds – a broadening demand for generic anti-obesity drugs globally and it being priced in the rupee, which is the world’s worst-performing currency versus the dollar.

The rupee hit a record low of 96.34 versus the greenback as import-dependent India grapples with rising crude oil prices and surging imports of gold and silver. The rupee has declined more than 8 per cent in the year so far as the West Asian war ravaged through India's macro balance sheet.

Indian pharma companies have been at the forefront of exporting quality generic medicines globally and the country is often referred to as the 'pharmacy of the world'. 

Indian generics are the cornerstone of the Western world and have kept billions away from diseases such as AIDS. Prime Minister Narendra Modi's 'vaccine diplomacy' during the COVID pandemic won plaudits for the country.

Meanwhile, Gland Pharma posted a 94 per cent on-year rise in fourth quarter net profit to Rs 370 crore. Its operating margin expanded to 29.4 per cent in the quarter gone by from 24.3 per cent in the year-ago period. Many of its peers have posted similar numbers.