<div><em>Sixteen of the 55 stocks in the BSE healthcare index delivered more than 1,000 per cent returns to the investors since July 2005 to date, writes<strong> C H Unnikrishnan</strong></em><br><br><br>Pharmaceuticals and healthcare companies have been one of the best wealth creators in India in the last one decade going by the growth in market capitalisation and return on investments of these companies during 2005 to 2015. Growth in stock valuation, which predominantly reflects the financial performance and the fundamental strengths of companies, therefore necessarily indicates that these companies have made better profits. </div><div> </div><div>A recent media analysis of key pharma stocks show that about one out of three companies have appreciated and had a return on investments (ROI) over 1,000 per cent during the period. The BSE healthcare index posted 422.28 per cent gains in the period.</div><div> </div><div>Sixteen of the 55 stocks in the BSE healthcare index delivered more than 1,000 per cent returns to the investors since July 2005 to date.</div><div> </div><div><table align="right" border="1" cellpadding="1" cellspacing="1" style="width: 200px"><tbody><tr><td><img alt="" src="http://bw-image.s3.amazonaws.com/unni-small.jpg" style="width: 200px; height: 200px; float: right; margin: 1px;"></td></tr><tr><td><strong>C H Unnikrishnan</strong></td></tr></tbody></table>According to market analysts, pharmaceutical companies in India have found a very niche model in the generic space, which has been executed very well, and that has boded well in creating shareholder value. The analysts do not expect this trend to change much, as they believe that the confidence in these sectors is strong, based on the projections for economic growth and also the subsequent demand that would be generated in the future.</div><div> </div><div>This is despite the facts that India has the lowest medicine prices in the world and it has been also one of the very few drug markets in the world which has an inherent price regulation imposed by the government. This essentially means the companies, especially the ones which do not have a sizable business in the export markets, have been able to earn good profits in this market. But, an obvious argument that is expected from the industry to defend its stand is that the profit is made from high margin export markets that many are increasingly focusing now. </div><div> </div><div>So let’s look at the companies, which are mainly focusing on the domestic and other low margin markets. </div><div> </div><div>One of the top performed stocks in the analysis was Ajanta Pharma Ltd, which had a return on investment of a whopping 15,393.56 per cent in the period under review. Ajanta Pharma has been mainly focusing on the domestic market and the low margin markets such as neighbouring Asian markets, Africa and Latin America till recently. Similarly, the Indian units of multinational drug makers, who are also part of the BSE Healthcare Index, are focussed totally in the local market. And, most of the leading local drug makers, who have been claiming double digit growth in earnings in the last several years, too can’t deny the fact that at least 20 per cent of their revenue comes from the price controlled local market.</div><div> </div><div>But, price control and the ‘lowest drug prices’ are still the biggest ‘concerns’ for Indian drug industry and the various groups in the sector, who often fight among each other as part of competition, are always one and united while addressing these baseless concerns. </div>
