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Impact on companies in the Pharmaceuticals sector

Issues

• Import duty rationalisation
• Import levy on locally produced life-saving drugs.
• Tax exemption on R&D income
• Duty exemption on R&D tools

Initiatives

• DPCO span of control cut
• Weighted deduction of 150 per cent of R&D expenditure
• 10% customs surcharge removed

Post-budget show - Underperformed

The government's intent to reduce price controls on drugs will augur well for the industry, with MNCs being the major beneficiaries. The weighted deduction on R&D expenditure extended to biotechnology, clinical trials, filing patents will benefit Wockhardt and Sun Pharma. High tax and dividend paying MNCs like Glaxo, Novartis and Hoechst will gain from the reduction of dividend tax removal of corporate surcharge.

Ranbaxy Laboratories

The boost to research and development will aid the company in introducing more products for exports, in line with its target of achieving $1 billion global sales by 2004. The company has a strong research focus and spends around 3.69 per cent of its sales on research. It plans to venture into new segments like anti-AIDS and herbal products.

Glaxo India

India's largest pharma company will be one of the major beneficiaries from the government's decision to reduce price controls on drugs as about 60 per cent of its product portfolio is under DPCO coverage. Being one of the highest tax and dividend paying pharma companies, the removal of corporate surcharge and reduction of dividend tax will augur well for the company.

Dr Reddy's Laboratories

With a strong focus on basic research, the company will gain from the weighted deduction on R&D expenditure. It spend around 2.70% of its turnover on R&D and has seven molecules in several stages of clinical trial. It has managed the transition from a bulk drug manufacturer to a leading formulation player.

Source: Business Standard

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