An Analytical Study Of Impact Of Covid-19 On The Financial Status Of Selected Indian Pharmacy Company

The pandemic COVID-19 has hit the world in a variety of ways. Businesses all over the world have come to almost a standstill as people have stopped moving about and curtailed their activities drastically. They are only performing their most basic tasks and also resorting to purchase of only the most basic items. The COVID-19 has made people very cautious in terms of hygiene and safety measures. People are now buying, in large quantity, the medical equipment, which they had not bought earlier, like masks, hand sanitizers, gloves etc. This has created huge demand in pharmacy sector. In fact, it has been reported in newspapers that many alcohol making companies have converted to hand sanitizer making companies looking at the huge demand for hand sanitizers. In India the pandemic was first sighted in and around January 2020. However, there was a slowness in its spread. With the passage of time the pandemic gained momentum, and its effect was especially felt during the months of April to June 2020. Therefore, all its financial implications are also showing with respect to these months.

This article attempts to look at the financial performances of top 3 Indian private sector pharmacy firms for the quarter ending April-June for various years from 2016 to 2020. In this article we look at the trend of sales, net profit, % of profit to sales, growth rate of sales over previous year and growth rate of profit over previous year. The companies which have been selected are Sun Pharma, Dr Reddy Laboratory and DIVIS laboratories. Various components have been shown in the Table mentioned below:

Table showing different trends of 3 leading Private Pharmacy Indian firms from the year

2016-2020

We read the data of year 2020 as that signifying the impact of COVID-19 on the financial performance of various companies whereas we consider the data of year 2016-2019 as depicting a normal trend over the business cycle since there was no unnatural factor working during the period at that time.

Sun Pharma:  With respect to Sun Pharma, we find that it has registered a regular growth over the years. However, its sales as well as profit declined in the quarter ending June 2020 as compared to previous quarters. Also, the percentage of profit to sales fell in the same year. The percentage growth of sales over preceding years was always positive except in the quarter ending June 2020. However, looking at the percentage growth of profit over previous year we can say it has been highly irregular as Sun Pharma has experienced alternatively positive and negative growth rates.

Dr Reddy Laboratory:  In this case we can say that the firm has registered a regular sales growth over the years as its sales has risen from the 2141 crores in the year 2016 to 3244.40 crores in 2020. In fact, it has experienced the highest ever growth rate in the quarter ending June 2020 for sales. The firm has also shown a steady recovery from a loss-making firm to a profit-making firm from the years 2016 to 2019. However, in the quarter ending 2020 we find that there is huge profit of 950.20 crores. This profit percentage is highest for the firm as it shows a 29.29 percentage against sales for the year 2020.

DIVIS Laboratory:  We find that in this the sales of the firm were showing an increasing trend since June 2018. However, it has jumped tremendously in the quarter ending June 2020 as compared to previous year (50.01%). Furthermore, we find that there is a similar trend in case of profit but of much bigger magnitude. Therefore, we can say that there is positive correlation between the growth rate of sales and profit. The profit has increased from 301.81 to 492.25 crores, registering an average growth rate of 36 crores and an average growth rate of 12% over the years. On the other hand, sales have increased from 1008.cr to 1710 crores registering average growth of 140 crores annually and a growth rate of 14%. Thus, we find that the growth rate of profit is lesser than the sales.

In conclusion we can say that the sales of Pharma Industries are highly volatile and subject to demand by users in a highly variable context. Also, there is a very high degree of correlation ship among the sales and profit. The COVID-19 situation has definitely left a positive impact on the pharma industry as two out of the three firms studied have shown positive trend in the study period and especially with respect to June 2020.

Dr Paritosh Dube

Associate Professor

Department of Commerce & Management

Kalinga University

Naya Raipur  Chhattisgarh