Here’s What To Look For While Investing In Indian Pharma Stocks

Market participants remain bullish on India's pharma sector over prospects of earnings growth in the next two to five years.

But what will be the growth drivers for Indian pharma companies? How do Indian companies fare when compared to their global peers? And what should an investor look for before investing in a drugmaker?

Varinder Bansal, managing partner of Pantomath AMC, and Madhu Kela, founder of MK Ventures, discussed these questions with a panel of experts.

Here are the key takeaways:

“It’s premature to conclude pharma sector has done what it has done. We are nowhere near proper valuation,” Kela said. “Lot of the companies are still available below 10 (times) its price-to-earnings multiple. In my view, this sector won’t stop till it has proper valuations”

Sailesh Raj Bhan, fund manager at Nippon India Mutual Fund, agreed and said the pharma sector is undervalued and under-appreciated. “So clearly we remain bullish. Earnings in the sector will surprise on the upside over next three to five years or even more,” Bhan said. “With that possibility there is a great opportunity here.”

Aditya Khemka, assistant vice president at DSP Mutual Fund, suggested that investors must look for companies with great brand value and good cost leadership. “If you find a company with a match of these two, you have a winner.”

While conceding that there’s money to be made in the sector, Anmol Ganjoo, director at JM Financial Institutional Securities, expects surprises on the upside. Manoj Garg, director at White Oak Capital, said: “We have remained constructive in the past for the sector and would continue to do so.”

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